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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
____________________
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 01-6697
MIRAGE RESORTS, INCORPORATED
(Exact name of Registrant as specified in its charter)
____________________
Nevada 88-0058016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 693-7111
____________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock ($.004 par value per share) New York Stock Exchange
Pacific Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days: YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K: X
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The aggregate market value of the Registrant's Common Stock held by non-
affiliates (all persons other than executive officers or directors) of the
Registrant on March 10, 2000 (based on the closing sale price per share on
the New York Stock Exchange Composite Tape on that date) was
$3,146,511,330.
The Registrant's Common Stock outstanding at March 10, 2000 was
190,380,923 shares.
Portions of the Registrant's definitive Proxy Statement for its 2000
Annual Meeting of Stockholders, which was filed with the Securities
and Exchange Commission on February 23, 2000, are incorporated by
reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
Mirage Resorts, Incorporated (the "Company" or the "Registrant," which
may also be referred to as "we," "us" or "our") was incorporated in Nevada
in 1949 as the successor to a partnership that began business in 1946.
RECENT DEVELOPMENTS
MERGER WITH MGM GRAND, INC.
On March 6, 2000, we signed a definitive merger agreement with MGM
Grand, Inc. under which MGM Grand will acquire all of our outstanding
common stock for $21 per share in cash and we will become a wholly owned
subsidiary of MGM Grand. The merger is subject to the approval of our
stockholders and to the satisfaction of customary closing conditions
contained in the merger agreement, including the receipt of all necessary
regulatory approvals. The merger is not subject to a financing
contingency, and MGM Grand has stated that it has financing commitments to
fund the entire acquisition cost. We currently anticipate that the merger
will close by the fourth quarter of this year.
The merger agreement contains covenants that require us to conduct our
business in the ordinary course and restrict our ability to buy and sell
assets and invest in capital projects pending the merger. These covenants
may affect our future expansion plans and other aspects of our business.
For example, we are no longer planning to expand Bellagio to add a new
hotel tower as previously announced. For more detailed information
concerning these covenants, please refer to the merger agreement, which is
filed as Exhibit 2 to this Form 10-K.
In connection with the execution of the merger agreement, we entered
into a stock option agreement pursuant to which we granted MGM Grand an
option to purchase an amount of the Company's common stock equivalent to up
to 12% of the Company's outstanding common stock at $21 per share. This
option will become exercisable only in certain circumstances if the merger
agreement is terminated. For more detailed information concerning this
option, please refer to the stock option agreement, which is filed as
Exhibit 4.7 to this Form 10-K.
On February 29, 2000, our Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of
common stock, payable on March 20, 2000 to the stockholders of record on
that day. In connection with the merger agreement, we agreed to amend the
terms of the rights agreement pursuant to which the Rights will be issued
in order to permit the merger with MGM Grand to occur without triggering
any adverse consequences to MGM Grand under the Rights. The rights
agreement and the amendment to the agreement are filed as Exhibits 4.8 and
4.9 to this Form 10-K. For more information concerning the Rights, the
rights agreement and the amendment, please see our Registration Statement
on Form 8-A filed with the Securities and Exchange Commission on March
10, 2000.
<PAGE>
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
Prior to the execution of the merger agreement with MGM Grand, we
entered into change of control employment agreements with Stephen A. Wynn,
Robert H. Baldwin, Bruce A. Levin, Kenneth R. Wynn 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 the Company. If a change of con-
trol of the Company occurs during the term of an agreement, then the agree-
ment becomes operative for a fixed three-year period. The agreements pro-
vide 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 the Company 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 that the executive would have received if he had continued to
be employed by the Company for an additional three or two years; and (5)
outplacement benefits. In addition, Stephen A. Wynn's agreement provides
that, within 10 days following a change of control, he has the right to
purchase the Company's Gulfstream III aircraft and/or the Company's New
York City apartment, each at fair market value, and that, during the five-
year period following a change of control, he or his estate can require the
Company to purchase his house at Shadow Creek and its furnishings at cost.
Each agreement provides, with certain limitations, that the executive is
entitled to receive 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 of 1986.
OUR OPERATING PROPERTIES
Through our wholly owned subsidiaries, we own and operate the following
hotel-casinos and resorts:
- - BELLAGIO - an elegant European-style luxury resort located on an
approximately 90-acre site with 1,450 feet of frontage at the center of
the Las Vegas Strip, which opened on October 15, 1998. The resort over-
looks an eight-acre lake inspired by Lake Como in Northern Italy. Each
day, more than 1,000 fountains in the lake come alive at regular inter-
vals in a choreographed ballet of water, music and lights. Bellagio
features a wide variety of casual and gourmet restaurants in both indoor
and outdoor settings (including the world-famous Le Cirque, Olives and
Aqua restaurants), upscale retail boutiques (including those leased to
Armani, Chanel, Gucci, Hermes, Prada, Fred Leighton and Tiffany & Co.)
and extensive meeting, convention and banquet space. Bellagio's special-
ly designed theatre offers luxurious seating overlooking a stage that
rises and falls in sections into what we believe to be one of the
world's largest enclosed bodies of water. The theatre is home to the
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spectacular new show "O" produced and performed by the talented Cirque
du Soleil organization. The Bellagio Gallery of Fine Art features
original masterpieces by van Gogh, Monet, Manet, Renoir, Picasso and
Rembrandt, among others. The surroundings of Bellagio are lushly land-
scaped with classical gardens and European fountains and pools. Inside,
a botanical conservatory is filled with vibrant colors and pleasing
scents that change with the seasons.
- - THE MIRAGE - a luxurious, tropically themed destination resort located
on approximately 100 acres with 2,200 feet of frontage shared with
Treasure Island near the center of the Las Vegas Strip. The exterior of
the resort is landscaped with palm trees, abundant foliage and more than
four acres of lagoons and other water features centered around a 54-
foot volcano and waterfall. Each evening, the volcano erupts at regular
intervals, sending blasts of steam and water 40 feet into the air,
with flames that spectacularly illuminate the front of the resort.
Inside the front entrance is an atrium with a tropical garden and
additional water features capped by a 100-foot-high glass dome. The
atrium has an advanced environmental control system and creative
lighting and other special effects designed to replicate the sights,
sounds and fragrances of the South Seas. Located at the rear of the
hotel, adjacent to the swimming pool area, is a dolphin habitat with
seven Atlantic bottlenose dolphins and The Secret Garden of Siegfried &
Roy, an attraction that allows guests to view the beautiful exotic
animals of Siegfried & Roy, the world-famous illusionists who star in a
spectacular show at The Mirage. In late March 2000, we expect to
complete construction of the Danny Gans Theatre in The Mirage, which
will showcase this talented singer/impersonator beginning in April 2000.
- - TREASURE ISLAND AT THE MIRAGE ("TREASURE ISLAND") - a pirate-themed
hotel-casino resort located next to The Mirage. Treasure Island and The
Mirage are connected by a monorail. The front of Treasure Island, facing
the Las Vegas Strip, is an elaborate pirate village where full-scale
replicas of a pirate ship and a British frigate regularly engage in a
pyrotechnic and special effects sea battle, culminating with the sinking
of the frigate. The showroom at Treasure Island features Mystere, a
unique choreographic mix of magic, special effects and feats of human
prowess produced and performed by Cirque du Soleil. In recognition of
its superior customer service and recently upgraded guestrooms, Treasure
Island was recently awarded the Four Diamond rating by AAA.
- - BEAU RIVAGE - a luxurious new beachfront resort located on a 41-acre
site with 1,400 feet of frontage where Interstate 110 meets the Gulf
Coast in Biloxi, Mississippi. Beau Rivage opened on March 16, 1999. The
graceful driveway leading to Beau Rivage is lined with intricate gardens
and stately oak trees. Large magnolia trees fill the resort's skylit
atrium lobby. Thirteen distinctive restaurants offer a variety of dining
experiences, from a cafe nestled in the atrium gardens to a steak and
seafood restaurant surrounded by tropical fish and coral reefs. Adjoin-
ing its lavish health spa and salon is a lushly landscaped swimming
pool, cafe and special events pavilion overlooking the Gulf of Mexico.
Beau Rivage also offers a state-of-the-art convention center, a
shopping esplanade, a 1,550-seat theatre featuring Alegria, another
spectacular show produced and performed by Cirque du Soleil, and a brew
pub with live entertainment nightly. Adjoining the hotel is a deluxe
marina capable of accommodating yachts of up to 125 feet in length.
We are also considering the development of a world-class golf course on
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approximately 508 acres of land we own in the Biloxi area.
- - THE GOLDEN NUGGET - the largest, in terms of number of guestrooms
(according to the Las Vegas Convention and Visitors Authority) and, we
believe, the most luxurious hotel-casino in downtown Las Vegas. The
Golden Nugget, together with its parking facilities, occupies approx-
imately seven and one-half acres and is located approximately six miles
north of Bellagio and five miles north of The Mirage and Treasure
Island. It has received the AAA Four Diamond Award for 23 consecutive
years. The Golden Nugget has also benefited from the "Fremont Street
Experience," a $70 million entertainment attraction developed by a
coalition of several major downtown Las Vegas hotel-casinos (including
the Golden Nugget) in conjunction with the City of Las Vegas. This
attraction converted Fremont Street into a four-block-long pedestrian
mall, topped with a 90-foot by 1,400-foot special effects canopy.
Within the canopy are 2.1 million computer-controlled, four-color lights
and a 540,000-watt sound system.
- - THE GOLDEN NUGGET-LAUGHLIN - located on approximately 13 acres with 600
feet of Colorado River frontage near the center of the tourist strip in
Laughlin, Nevada, 90 miles south of Las Vegas. The Golden Nugget-
Laughlin features a 32,000-square foot casino offering 13 table
games and approximately 1,185 slot machines, 300 hotel rooms (including
four suites), three restaurants, three bars, an entertainment lounge, a
deli, an ice cream parlor and two gift and retail shops. Other
facilities at the Golden Nugget-Laughlin include a swimming pool, a
parking garage with space for approximately 1,585 vehicles and approx-
imately four and one-half acres of surface parking for recreational
vehicles. We also own and operate a 78- room motel in Bullhead City,
Arizona, across the Colorado River from the Golden Nugget-Laughlin.
- - HOLIDAY INN -REGISTERED TRADEMARK- CASINO BOARDWALK (THE "BOARDWALK")
- located between Bellagio and Monte Carlo on the Las Vegas Strip. This
facility includes 654 hotel rooms and 32,000 square feet of casino space
offering 605 slot machines, 20 table games and a race and sports book.
Other amenities at the Boardwalk include a coffee shop, a buffet,
a snack bar, an entertainment lounge, two bars, a gift shop, 7,300
square feet of interior meeting space, two outdoor swimming pools
and 1,125 garage and surface parking spaces. See the section titled
"Future Expansion" in this Form 10-K for information concerning our
plans for a new hotel-casino resort we expect to ultimately develop on
the Boardwalk site.
- - MONTE CARLO RESORT & CASINO ("MONTE CARLO") - located on approximately
46 acres with 600 feet of frontage on the Las Vegas Strip, approximately
one-half mile south of Bellagio. We own 50% of this resort in a joint
venture with Mandalay Resort Group ("Mandalay"), which manages the
resort. Monte Carlo has a palatial style reminiscent of the Belle
Epoque, the French Victorian architecture of the late 19th century. The
resort has amenities such as a brew pub featuring live entertainment, a
health spa, a beauty salon, a 1,200-seat theatre featuring the world-
renowned magician Lance Burton, a large pool area and lighted tennis
courts. Monte Carlo is connected to Bellagio by a monorail.
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The following table provides certain information, as of December 31,
1999, regarding our major hotel-casino resorts.
<TABLE>
<CAPTION>
BELLAGIO THE MIRAGE TREASURE ISLAND BEAU RIVAGE GOLDEN NUGGET MONTE CARLO (a)
--------- ---------- --------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Opening date..................... Oct. 1998 Nov. 1989 Oct. 1993 Mar. 1999 Aug. 1946 June 1996
Total building square footage.... 4,289,000 3,117,000 2,377,000 2,222,000 1,465,000 2,520,000
Casino
Square footage (including
corridors).................... 155,000 107,200 83,800 80,000 38,000 102,000
Number of gaming tables........ 139 122 83 89 56 71
Number of slots................ 2,485 2,300 1,940 1,995 1,255 2,100
Hotel
Number of guestrooms (including
suites and villas)............ 3,005 3,044 2,885 1,780 1,907 3,002
Square footage of interior
meeting space................. 99,100 66,000 16,000 30,000 21,000 25,000
Restaurants
Number of outlets.............. 16 14 11 13 6 8
Number of seats................ 2,778 2,286 1,715 1,564 1,006 2,200
Retail
Square footage................. 85,700 35,000 17,540 25,500 4,350 28,100
Showroom
Number of seats................ 1,795 1,503 1,525 1,550 386 1,200
</TABLE>
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(a) Our Company owns 50% of Monte Carlo.
FUTURE EXPANSION
ATLANTIC CITY
In January 1998, the City of Atlantic City deeded to our Company
approximately 180 acres (120 acres of which are developable) in the Marina
area of Atlantic City. In exchange, our Company agreed to develop a hotel-
casino on the site and perform certain other obligations. We also entered
into an agreement with two New Jersey State agencies for the construction
and joint funding of road improvements necessary to improve access to the
Marina area. As called for by the agreement, in October 1997, we funded
our $110 million portion and one of the State agencies funded its $125
million portion of the $330 million estimated total cost of the road
improvements. Each party deposited its funds into escrow accounts and the
funds are restricted for construction of the road improvement project. The
other State agency provided the remaining $95 million estimated cost of the
project. There is a fixed-price design/build contract for the road
improvement project. Groundbreaking on the project took place in November
1998, and construction is scheduled for completion in May 2001.
We are progressing with the design and budgeting of our proposed resort
development for the Marina site. Current plans call for construction of
our own wholly owned hotel-casino resort and a second 50%-owned resort in
partnership with Boyd Gaming Corporation ("Boyd"). We are currently
designing and will develop the master plan improvements for the entire
Marina site. In October 1999, we filed an application for the required
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major environmental permit (known as a "CAFRA" permit) for a portion of
these improvements. As part of the agreement with the City to acquire the
land, we are required to remediate environmental contamination at the
Marina site, which was a municipal landfill until 1975. A substantial
portion of the remediation work had been completed at February 1, 2000.
Also as part of our agreement with the City, we have completed demolition
of the City-owned facilities previously located on the site and are in the
process of relocating on-site public utilities.
The design, budget and construction schedule for our wholly owned hotel-
casino on the Marina site have not yet been finalized. We intend to file
an application for the CAFRA permit for our resort in the second quarter of
2000. In July 1998, we entered into an amended and restated 50/50 joint
venture agreement with Boyd for the development of a new hotel-casino
resort with approximately 1,200 guestrooms on a 25-acre portion of the
Marina site. Boyd will oversee the design and construction of the joint
venture hotel-casino to be known as "The Borgata" and operate the resort
upon completion. Under the agreement, subject to the receipt of acceptable
financing as described below, we will contribute the 25 acres of land
(valued at $90 million) and $60 million in cash, of which approximately $5
million had been contributed at February 1, 2000. Boyd will contribute a
minimum of $150 million in cash plus any amounts necessary to fund project
costs in excess of $750 million. The joint venture will attempt to obtain
acceptable financing of approximately $450 million for the remaining cost
of the project that is non-recourse to both our Company and Boyd. We have
recently had discussions with Boyd regarding a possible increase in the
size of The Borgata and each partner's required capital contribution. The
joint venture filed an application for the CAFRA permit for The Borgata in
October 1999 and the application is now pending. If the necessary permits
and financing are obtained, construction of The Borgata could begin by late
summer of 2000.
Both our Company and the joint venture must apply for and receive
numerous other governmental permits and satisfy other conditions before
construction of either hotel-casino can begin. Additionally, a current
Atlantic City hotel-casino operator and others have filed various lawsuits
challenging the validity of our previous agreement with the City of
Atlantic City to acquire the land and seeking to stop the construction of
the road improvements. We have prevailed in all of these lawsuits that
have been finally adjudicated to date, but a number of lawsuits are still
pending in various stages and others could be filed in the future. As a
result of these factors, as well as our pending merger with MGM Grand
discussed under "Recent Developments," we cannot be certain of the ultimate
development or timing of construction of the hotel-casinos planned for the
Marina site.
LAS VEGAS
We acquired the Boardwalk and various related properties on June 30,
1998. Combined with land we own adjacent to the Boardwalk, the acquisition
provides us with an approximately 55-acre site for future development with
over 1,200 feet of frontage on the Las Vegas Strip between Bellagio and
Monte Carlo. We are in the very early design phase for a new hotel-casino
resort we expect to ultimately develop on the site. The design, timing and
cost of any future development, however, are still highly uncertain and
will depend on several factors. These factors include the market's
absorption of the major new hotel-casino resorts on the Las Vegas Strip and
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competition from gaming outside of Nevada. See the section titled
"Competition" in this Form 10-K.
OTHER
We regularly evaluate possible expansion and acquisition opportunities
in both the domestic and international markets. These opportunities may
include the ownership, management and operation of gaming and other
entertainment facilities in states other than Nevada or outside of the
United States, including management of Indian gaming facilities. We may
undertake these opportunities either alone or with joint venture partners.
Development and operation of any gaming facility in a new jurisdiction are
subject to many contingencies. Several of these contingencies are outside
of our control and may include the passage of appropriate gaming
legislation, the issuance of necessary permits, licenses and approvals, the
availability of appropriate financing and the satisfaction of other
conditions. We cannot be sure that we will decide or be able to proceed
with any of these acquisition or expansion opportunities.
MARKETING
All of our hotel-casinos operate 24 hours each day, every day of the
year. We do not consider our business to be particularly seasonal, with
the exception of Beau Rivage, which is busier in the summer than the rest
of the year. We believe that the largest portion of our Nevada customers
live in Southern California, although other geographic areas are also
important.
The level of gaming activity at our casinos is the single largest factor
in determining our revenues and operating profit. We also receive a large
amount of revenues from room, food and beverage, entertainment and retail
operations.
The principal segments of the Nevada and Mississippi gaming markets are
tour and travel, leisure travel, high-level wagerers and conventions
(including small meetings and corporate incentive programs). Both Bellagio
and The Mirage appeal to the upper end of each market segment, balancing
their business by using the convention and tour and travel segments to fill
the mid-week and off-peak periods. Our marketing strategy for Treasure
Island and the Golden Nugget is aimed at attracting middle- to upper-middle-
income wagerers, largely from the leisure travel and, to a lesser extent,
the tour and travel segments. Since we believe that the number of walk-in
customers also affects the success of all of our hotel-casinos, we design
our facilities to maximize their attraction to guests of other hotels.
The Golden Nugget-Laughlin appeals primarily to middle-income customers.
Many of its customers are senior citizens who are attracted by room, food
and beverage and entertainment prices that are lower than those offered by
the major Las Vegas hotel-casinos. A large percentage of the Golden Nugget-
Laughlin's casino revenues comes from slot machine play.
We own and operate an exclusive world-class golf course known as "Shadow
Creek," located approximately five miles north of the Golden Nugget and
approximately 10 miles north of our Las Vegas Strip hotel-casinos. Our
major Las Vegas hotel-casinos offer luxury suite packages that include golf
privileges at Shadow Creek. In connection with our marketing activities,
we also invite our high-end casino customers to play Shadow Creek on a
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complimentary basis. Shadow Creek is located on approximately 240 acres of
an 850-acre site that we own in North Las Vegas.
Beau Rivage opened in Biloxi, Mississippi on March 16, 1999, and we
believe it is the most luxurious hotel-casino on the Mississippi Gulf
Coast. Beau Rivage seeks to attract the most affluent customers in each
market segment, particularly those who live in major cities in the South,
as well as customers residing in the Gulf Coast region. Historically, the
Gulf Coast had only a limited number of scheduled airline flights. In March
1999, we signed an agreement for a regional airline to provide daily
scheduled jet service at reasonable prices between the Gulf Coast and
several major cities based on a guaranteed minimum revenue arrangement.
We advertise on radio, television and billboards and in newspapers and
magazines in selected cities throughout the United States, as well as on
the Internet and by direct mail. We also advertise through our regional
marketing offices located in major United States and foreign cities.
CREDIT
Credit play represents a large portion of the table games volume at
Bellagio and The Mirage. Our other facilities do not emphasize credit play
to the same extent as Bellagio and The Mirage, although we offer credit at
those casinos as well.
We maintain strict controls over the issuance of credit and aggressively
pursue collection of our customer debts. These collection efforts are
similar to those used by most large corporations, including the mailing of
statements and delinquency notices, personal and other contacts, the use of
outside collection agencies and civil litigation. Nevada and Mississippi
gaming debts evidenced by written credit instruments are enforceable under
the laws of Nevada and Mississippi. All other states are required to
enforce a judgment on a gaming debt entered in Nevada or Mississippi
pursuant to the Full Faith and Credit Clause of the United States
Constitution. Gaming debts are not legally enforceable in some foreign
countries, but the United States assets of foreign debtors may be reached
to satisfy judgments entered in the United States. A large portion of our
Company's accounts receivable is owed by major casino customers from the
Far East. The collectibility of customer debts is affected by a number of
factors, including changes in currency exchange rates and economic
conditions in the customers' home countries.
SUPERVISION OF GAMING ACTIVITIES
In connection with the supervision of gaming activities at our casinos,
we maintain stringent controls on the recording of all receipts and
disbursements. These audit and cash controls include:
- - Locked cash boxes on the casino floor;
- - Employees who are independent of casino operations to perform the
daily cash and coin counts;
- - Constant observation and supervision of the gaming area;
- - Observation and recording of gaming and other areas by closed-circuit
television;
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- - Constant computer monitoring of our slot machines;
- - Computer tabulation of receipts and disbursements for each of our
table games; and
- - Timely analysis of deviations from expected performance.
COMPETITION
LAS VEGAS
Our Las Vegas hotel-casinos compete with a large number of other hotel-
casinos in the Las Vegas area. Currently there are approximately 32 major
hotel-casinos located on or near the Las Vegas Strip, 11 major hotel-
casinos located in the downtown area (about five miles from the center of
the Strip) and several major facilities located elsewhere in the Las Vegas
area. As of February 1, 2000, there were approximately 118,000 guestrooms
in Las Vegas, compared to 105,700 at February 1, 1999. Another major new
hotel-casino with 2,600 guestrooms is currently under construction on the
Strip and scheduled to open in August 2000. Other major hotel-casinos and
expansion projects at existing Las Vegas hotel-casinos have also been
proposed. We are unable to determine to what extent the increased
competition will affect our future operating results.
LAUGHLIN, NEVADA
The Golden Nugget-Laughlin competes with nine other casinos in Laughlin,
eight of which offer hotel accommodations, as well as with hotel-casinos in
Las Vegas, Jean and Primm, Nevada. In recent years, the Laughlin market
has been adversely affected by the expansion of casino gaming in Las Vegas
and on Indian reservations, particularly in Southern California and
Arizona, and we expect these difficult market conditions to continue.
BILOXI, MISSISSIPPI
Beau Rivage competes with 11 other casinos in the Mississippi Gulf Coast
market, eight of which offer hotel accommodations. Several of these
competitors completed expansions of their existing facilities during 1999.
Gulf Coast casinos also compete in the regional market with a new land-
based casino in New Orleans that opened in the fourth quarter of 1999 and a
land-based Indian hotel-casino in central Mississippi that recently
announced plans for a major expansion. Casinos in the Gulf Coast also
compete for the south Florida market with casinos in the Bahamas. Gulf
Coast casinos compete to a lesser extent with a number of riverboat casinos
in Mississippi and Louisiana.
OTHER
Our Company's facilities also compete for gaming customers with hotel-
casino operations located in other areas of Nevada, Atlantic City, the
Bahamas and other parts of the world, and for vacationers with non-gaming
tourist destinations such as Hawaii and Florida. Our hotel-casinos compete
to a lesser extent with state-sponsored lotteries, off-track wagering, card
parlors, riverboat and Indian gaming facilities and other forms of
legalized gaming in the United States. In recent years, certain states
have legalized, and several other states have considered legalizing, casino
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gaming. We do not believe that legalization of casino gaming in those
jurisdictions would have a material adverse impact on our operations.
However, we do believe that the legalization of large-scale land-based
casino gaming in or near certain major metropolitan areas, particularly in
California, could have a material adverse effect on the Las Vegas market.
Indian gaming throughout California is likely to increase significantly
following the approval by California voters of an amendment to the
California Constitution on March 7, 2000. A number of California Indian
tribes have already signed gaming compacts with the State of California.
The expansion of California Indian gaming facilities may negatively affect
Nevada gaming markets, although we are unable to assess the magnitude of
the impact on our Company.
HOW WE COMPETE
Our Company's major properties compete on the basis of:
- - Recruiting, training and retaining well-qualified and motivated
employees who provide superior and friendly customer service;
- - Offering high-quality guestrooms and dining, entertainment and retail
options;
- - Providing unique, "must-see" entertainment attractions;
- - Our marketing and promotional programs; and
- - The superior locations and sites of our properties.
The principal negative factors relating to our competitive position are:
- - Our limited geographic diversification (some of our competitors
operate in more gaming markets);
- - There are a number of gaming facilities that are located closer to where
our customers live than our resorts;
- - Our guestroom, dining and entertainment prices are often higher than
those of most of our competitors in each market, although we believe
that the quality of our facilities and services is also higher; and
- - Our hotel-casinos compete to some extent with each other for customers.
Bellagio and The Mirage, in particular, compete for some of the same
high-end customers.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1999, we had approximately 25,565 full-time and 4,375
part-time employees. At that date, we had collective bargaining contracts
with unions covering approximately 11,230 of our Las Vegas employees,
expiring in May 2002. We do not have union contracts at Beau Rivage,
although union organizing efforts are underway at Gulf Coast casinos. We
consider our employee relations to be very good.
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REGULATION AND LICENSING
Our Company is licensed by the gaming authorities in both Nevada and
Mississippi and intends to apply for licensing in New Jersey.
NEVADA
The ownership and operation of casino gaming facilities in Nevada are
subject to the Nevada Gaming Control Act and the regulations promulgated
under that Act (collectively, the "Nevada Act") and various local
ordinances and regulations. Our Nevada gaming operations are subject to
the licensing and regulatory control of:
- - The Nevada Gaming Commission (the "Nevada Commission");
- - The Nevada State Gaming Control Board (the "Nevada Board");
- - The City of Las Vegas; and
- - The Clark County Liquor and Gaming Licensing Board (the "Clark County
Board").
In this Form 10-K, we collectively refer to the Nevada Commission, the
Nevada Board, the City of Las Vegas and the Clark County Board as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are
concerned with, among other things:
- - The prevention of unsavory or unsuitable persons from having a direct or
indirect involvement with gaming at any time or in any capacity;
- - The establishment and maintenance of responsible accounting practices
and procedures;
- - The maintenance of effective controls over the financial practices of
licensees, including the establishment of minimum procedures for
internal fiscal affairs and the safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities;
- - The prevention of cheating and fraudulent practices; and
- - Providing a source of state and local revenues through taxation and
licensing fees.
Change in these laws, regulations and procedures could have an adverse
effect on our gaming operations.
Our direct and indirect subsidiaries that conduct gaming operations are
required to be licensed by the Nevada Gaming Authorities. The gaming
licenses require the periodic payment of fees and taxes and are not
transferable. These subsidiaries are as follows:
- - THE MIRAGE CASINO-HOTEL ("MCH") has been registered as an intermediary
company and has been found suitable to own the stock of Treasure Island
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Corp. ("TI Corp."). MCH has also been licensed to conduct nonrestricted
gaming operations at The Mirage.
- - TI Corp. has been licensed to conduct nonrestricted gaming operations at
Treasure Island.
- - GNLV, CORP. ("GNLV") has been registered as an intermediary company and
has been found suitable to own the stock of Golden Nugget Manufacturing
Corp. ("GNMC"), its subsidiary which is licensed as a manufacturer and
distributor of gaming devices. GNLV has also been licensed to conduct
nonrestricted gaming operations at the Golden Nugget.
- - GNL, CORP. ("GNL") has been licensed to conduct nonrestricted gaming
operations at the Golden Nugget-Laughlin.
- - Bellagio has been registered as an intermediary company and has been
found suitable to own the stock of MRGS Corp. ("MRGS"), which has been
licensed as a 50% general partner of Victoria Partners. Bellagio has
also been licensed to conduct nonrestricted gaming operations at
Bellagio.
- - Boardwalk Casino, Inc. ("BCI") has been licensed to conduct
nonrestricted gaming operations at the Boardwalk.
The Company is registered by the Nevada Commission as a publicly traded
corporation (a "Registered Corporation"). The Company has also been found
suitable to own the stock of MCH, GNLV, Bellagio, GNL and BCI, each of
which, together with TI Corp., MRGS and GNMC, is a corporate licensee
(individually, a "Gaming Subsidiary" and collectively, the "Gaming
Subsidiaries") under the Nevada Act. Victoria Partners has been licensed
to conduct nonrestricted gaming operations at Monte Carlo and certain
subsidiaries of Mandalay have been registered or licensed for their
ownership of Victoria Partners.
As a Registered Corporation, we are required periodically to submit
detailed financial and operating reports to the Nevada Commission and
furnish any other information that the Nevada Commission may require. No
person may become a stockholder of, or receive any percentage of profits
from, our Gaming Subsidiaries without first obtaining licenses and
approvals from the Nevada Gaming Authorities. We and our Gaming
Subsidiaries have obtained from the Nevada Gaming Authorities the various
registrations, findings of suitability, approvals, permits and licenses
required in order to engage in gaming activities in Nevada.
All gaming devices that are manufactured, sold or distributed for use or
play in Nevada, or for distribution outside of Nevada, must be manufactured
by licensed manufacturers and distributed or sold by licensed distributors.
All gaming devices manufactured for use or play in Nevada must be approved
by the Nevada Commission before distribution or exposure for play. The
approval process for gaming devices includes rigorous testing by the Nevada
Board, a field trial and a determination as to whether the gaming device
meets strict technical standards that are set forth in the regulations of
the Nevada Commission. Associated equipment must be administratively
approved by the Chairman of the Nevada Board before it is distributed for
use in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
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material relationship to, or material involvement with, the Company or any
of our Gaming Subsidiaries in order to determine whether the individual is
suitable or should be licensed as a business associate of a gaming
licensee. Officers, directors and certain key employees of our Gaming
Subsidiaries must file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Officers, directors and key employees of the Company who are
actively and directly involved in gaming activities of our Gaming
Subsidiaries may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application
for licensing for any cause that they deem reasonable. A finding of
suitability is comparable to licensing, and both require submission of
detailed personal and financial information followed by a thorough
investigation. The applicant for licensing or a finding of suitability must
pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities, and in addition to their
authority to deny an application for a finding of suitability or licensure,
the Nevada Gaming Authorities have jurisdiction to disapprove a change in a
corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or our Gaming Subsidiaries, the companies
involved would have to sever all relationships with that person. In
addition, the Nevada Commission may require us or our Gaming Subsidiaries
to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
The Company and our Gaming Subsidiaries are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing
transactions entered into by our Gaming Subsidiaries must be reported to or
approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by a Gaming
Subsidiary, the licenses it holds could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, the Company, our Gaming Subsidiaries and the
persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission.
Further, a supervisor could be appointed by the Nevada Commission to
operate Bellagio, The Mirage, Treasure Island, the Golden Nugget, the
Golden Nugget-Laughlin, the Boardwalk or Monte Carlo and, under certain
circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the premises) could be forfeited
to the State of Nevada. Limitation, conditioning or suspension of the
gaming license of a Gaming Subsidiary or the appointment of a supervisor
could (and revocation of any gaming license would) materially adversely
affect our gaming operations.
Any beneficial holder of the voting securities of Mirage Resorts,
Incorporated, regardless of the number of shares owned, may be required to
file an application, be investigated and have his or her suitability as a
beneficial holder of the voting securities determined if the Nevada
Commission has reason to believe that the ownership would be inconsistent
with the declared policies of the State of Nevada. The applicant must pay
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all costs of investigation incurred by the Nevada Gaming Authorities in
conducting any investigation.
The Nevada Act requires any person who acquires beneficial ownership of
more than 5% of a Registered Corporation's voting securities to report the
acquisition to the Nevada Commission. The Nevada Act requires that
beneficial owners of more than 10% of a Registered Corporation's voting
securities apply to the Nevada Commission for a finding of suitability
within 30 days after the Chairman of the Nevada Board mails a written
notice requiring this filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more
than 10%, but not more than 15%, of a Registered Corporation's voting
securities may apply to the Nevada Commission for a waiver of the finding
of suitability requirement if the institutional investor holds the voting
securities for investment purposes only. An institutional investor will not
be deemed to hold voting securities for investment purposes unless it
acquired and holds the voting securities in the ordinary course of business
as an institutional investor and not for the purpose of causing, directly
or indirectly, the election of a majority of the members of the board of
directors of the Registered Corporation, any change in the corporate
charter, bylaws, management, policies or operations of the Registered
Corporation or any of its gaming affiliates or any other action which the
Nevada Commission finds to be inconsistent with holding the Registered
Corporation's voting securities for investment purposes only. Activities
that are not deemed to be inconsistent with holding voting securities for
investment purposes only include:
- - Voting on all matters voted on by stockholders;
- - Making financial and other inquiries of management of the type
normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and
- - Other activities that the Nevada Commission may determine to be
consistent with such investment intent.
The City of Las Vegas and the Clark County Board have the authority to
approve all persons owning or controlling the stock of any corporation
controlling a gaming licensee. If the beneficial holder of voting
securities which must be found suitable is a corporation, partnership or
trust, it must submit detailed business and financial information,
including a list of beneficial owners. The applicant is required to pay all
costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or
a license within 30 days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after
request, fails to identify the beneficial owner. Any stockholder found
unsuitable who holds, directly or indirectly, any beneficial ownership of
the voting securities beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. We are subject
to disciplinary action if, after we receive notice that a person is
unsuitable to be a stockholder or to have any other relationship with us or
our Gaming Subsidiaries, we:
- - Pay the person any dividend or interest on our voting securities;
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- - Allow the person to exercise, directly or indirectly, any voting right
conferred through securities held by the person;
- - Pay remuneration in any form to the person for services rendered or
otherwise; or
- - Fail to pursue all lawful efforts to require the person to relinquish
his voting securities including, if necessary, the immediate purchase of
the voting securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be
investigated and be found suitable to own the debt security if it has
reason to believe that the ownership would be inconsistent with the
declared policies of the State of Nevada. If the Nevada Commission
determines that a person is unsuitable to own a debt security, then
pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the
Nevada Commission, it:
- - Pays to the unsuitable person any dividend, interest or any
distribution whatsoever;
- - Recognizes any voting right by the unsuitable person in connection with
those securities;
- - Pays the unsuitable person remuneration in any form; or
- - Makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction.
We are required to maintain a current stock ledger in Nevada that may be
examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make that disclosure may be grounds for finding
the record holder unsuitable. We are also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require our stock certificates to bear a legend
indicating that the securities are subject to the Nevada Act. To date, the
Nevada Commission has not imposed this requirement on us.
We may not make a public offering of our securities without the prior
approval of the Nevada Commission if the securities or proceeds from their
sale are intended to be used to construct, acquire or finance gaming
facilities in Nevada or to retire or extend obligations incurred for those
purposes. On May 27, 1999, the Nevada Commission granted us prior approval
to make public offerings for a period of two years, subject to certain
conditions (the "Shelf Approval"). However, the Shelf Approval may be
rescinded for good cause without prior notice upon the issuance of an
interlocutory stop order by the Chairman of the Nevada Board. The Shelf
Approval also applies to any affiliated company wholly owned by us (an
"Affiliate") that is a publicly traded corporation or would become a
publicly traded corporation pursuant to a public offering. The Shelf
Approval also includes approval for the Gaming Subsidiaries to guarantee
any security issued by, or to hypothecate their assets to secure the
payment or performance of any obligations issued by, us or an Affiliate in
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a public offering under the Shelf Approval. The Shelf Approval does not
constitute a finding, recommendation or approval by the Nevada Commission
or the Nevada Board as to the accuracy or adequacy of the prospectus or the
investment merits of the securities offered. Any representation to the
contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements or any act or
conduct by a person by which he or she obtains control may not occur
without the prior approval of the Nevada Commission. Entities seeking to
acquire control of a Registered Corporation must satisfy the Nevada Board
and Nevada Commission with respect to a variety of stringent standards
prior to assuming control of the Registered Corporation. The Nevada
Commission may also require controlling stockholders, officers, directors
and other persons having a material relationship or involvement with the
entity proposing to acquire control to be investigated and licensed as part
of the approval process relating to the transaction.
The Nevada Legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate
defensive tactics affecting Nevada corporate gaming licensees, and
Registered Corporations that are affiliated with those operations, may be
injurious to stable and productive corporate gaming. The Nevada Commission
has established a regulatory scheme to ameliorate the potentially adverse
effects of these business practices upon Nevada's gaming industry and to
further Nevada's policy to:
- - Assure the financial stability of corporate gaming licensees and their
affiliates;
- - Preserve the beneficial aspects of conducting business in the
corporate form; and
- - Promote a neutral environment for the orderly governance of corporate
affairs.
Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional
repurchases of voting securities above the current market price and before
a corporate acquisition opposed by management can be completed. The Nevada
Act also requires prior approval of a plan of recapitalization proposed by
the Registered Corporation's board of directors in response to a tender
offer made directly to the Registered Corporation's stockholders for the
purpose of acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type
of gaming or activity involved, are payable to the State of Nevada and to
Clark County and the City of Las Vegas, in which our Gaming Subsidiaries'
respective operations are conducted. Depending upon the particular fee or
tax involved, these fees and taxes are payable monthly, quarterly or
annually and are based upon:
- - A percentage of the gross revenues received;
- - The number of gaming devices operated; or
- - The number of table games operated.
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Casino operations also pay a casino entertainment tax where
entertainment is furnished in connection with the serving or selling of
food or refreshments or the selling of merchandise. Nevada licensees that
hold a manufacturer's or distributor's license, such as GNMC, also pay
certain fees to the State of Nevada.
Any person who is licensed, required to be licensed, registered,
required to be registered or is under common control with those persons
(collectively, "Licensees"), and who proposes to become involved in a
gaming venture outside of Nevada, is required to deposit with the Nevada
Board, and thereafter maintain, a revolving fund in the amount of $10,000
to pay the expenses of investigation by the Nevada Board of its
participation in foreign gaming. The revolving fund is subject to increase
or decrease at the discretion of the Nevada Commission. Thereafter,
Licensees are required to comply with certain reporting requirements
imposed by the Nevada Act. Licensees are also subject to disciplinary
action by the Nevada Commission if they knowingly:
- - Violate any laws of the foreign jurisdiction pertaining to the foreign
gaming operation;
- - Fail to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming operations;
- - Engage in activities or enter into associations that are harmful to
the State of Nevada or its ability to collect gaming taxes and fees; or
- - Employ, contract with or associate with a person in the foreign
operation who has been denied a license or finding of suitability in
Nevada on the ground of personal unsuitability.
The sale of alcoholic beverages at our hotel-casinos on the Las Vegas
Strip and at the Golden Nugget-Laughlin is subject to licensing, control
and regulation by the Clark County Board. The sale of alcoholic beverages
at the Golden Nugget in downtown Las Vegas is subject to licensing, control
and regulation by the City of Las Vegas. All licenses are revocable and
are not transferable. The agencies involved have full power to limit,
condition, suspend or revoke any liquor license, and any disciplinary
action of that type could (and revocation would) have a material adverse
effect on the operations of the affected Gaming Subsidiary.
MISSISSIPPI
The ownership and operation of casino gaming facilities in Mississippi
are subject to the Mississippi Gaming Control Act and the regulations
promulgated under that Act (collectively, the "Mississippi Act"). Our
Mississippi gaming operations are subject to the licensing and regulatory
control of the Mississippi Gaming Commission (the "Mississippi
Commission").
The laws, regulations and supervisory procedures of the Mississippi
Commission are based upon declarations of public policy which are concerned
with, among other things:
- - Keeping gaming free of criminal and corruptive elements; and
- - Maintaining public confidence and trust in gaming by means of strict
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regulation of all persons, locations, practices, associations and
activity related to the operation of licensed gaming establishments
and the manufacture or distribution of gambling devices and equipment.
Changes in these laws, regulations and procedures could have an adverse
effect on our Mississippi gaming operations.
Beau Rivage Resorts, Inc. ("Beau Rivage Resorts"), our indirect
subsidiary that owns and operates Beau Rivage, is required to be licensed
by the Mississippi Commission. The gaming license, which must be renewed
every two years, requires the periodic payment of fees and taxes and is not
transferable. GNLV is registered as an intermediary company and has been
found suitable to own the stock of Beau Rivage Resorts. The Company is
registered by the Mississippi Commission as a publicly traded corporation
(a "Registered Corporation") and has been found suitable to own the stock
of GNLV under the Mississippi Act.
As a Registered Corporation, we are required periodically to submit
detailed financial and operating reports to the Mississippi Commission and
furnish any other information that the Mississippi Commission may require.
No person may become a stockholder of, or receive any percentage of profits
from, Beau Rivage Resorts without first obtaining approval from the
Mississippi Commission. The Company, GNLV and Beau Rivage Resorts have
obtained from the Mississippi Commission the various registrations,
findings of suitability and licenses required to engage in gaming
activities in Mississippi.
All gaming devices that are manufactured, sold or distributed for use or
play in Mississippi, or for distribution outside of Mississippi, must be
manufactured by licensed manufacturers and distributed or sold by licensed
distributors. Beau Rivage Distribution Corp. ("BRDC"), a subsidiary of
Beau Rivage Resorts, is licensed as a distributor of gaming devices. All
gaming devices manufactured for use or play in Mississippi must be approved
by the Mississippi Commission before distribution or exposure for play.
The approval process for gaming devices includes rigorous testing by the
staff of the Mississippi Commission, a field trial and a determination as
to whether the gaming device meets strict technical standards that are set
forth in the regulations of the Mississippi Commission. Associated
equipment must be administratively approved by the Executive Director of
the Mississippi Commission before it is distributed for use in Mississippi.
The Mississippi Commission may investigate any individual who has a
material relationship to, or material involvement with, the Company, GNLV,
Beau Rivage Resorts or BRDC in order to determine whether the individual is
suitable or should be licensed as a business associate of a gaming
licensee. Officers, directors and certain key employees of Beau Rivage
Resorts and BRDC must file applications with the Mississippi Commission and
may be required to be licensed or found suitable. Officers, directors and
key employees of GNLV and the Company who are actively and directly
involved in gaming activities of Beau Rivage Resorts or BRDC may be
required to be licensed or found suitable by the Mississippi Commission.
The Mississippi Commission may deny an application for licensing for any
cause which it deems reasonable. A finding of suitability is comparable to
licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for
licensing or a finding of suitability must pay all the costs of the
investigation. Changes in approval positions must be reported to the
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Mississippi Commission, and in addition to its authority to deny an
application for a finding of suitability or licensure, the Mississippi
Commission has jurisdiction to disapprove a change in a corporate position.
If the Mississippi Commission were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, GNLV, Beau Rivage Resorts or BRDC, the
companies involved would have to sever all relationships with the person.
In addition, the Mississippi Commission may require the Company, GNLV, Beau
Rivage Resorts or BRDC to terminate the employment of any person who
refuses to file appropriate applications. Determinations of suitability
or of questions pertaining to licensing are not subject to judicial review
in Mississippi.
The Company, GNLV, Beau Rivage Resorts and BRDC are required to submit
detailed financial and operating reports to the Mississippi Commission.
All material loans, sales of securities and similar financing transactions
entered into by Beau Rivage Resorts or BRDC must be reported to or approved
by the Mississippi Commission.
If it were determined that the Mississippi Act was violated by Beau
Rivage Resorts or BRDC, the license it holds could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Company, GNLV, Beau Rivage
Resorts, BRDC and the persons involved could be subject to substantial
fines for each separate violation of the Mississippi Act at the discretion
of the Mississippi Commission. Limitation, conditioning or suspension of
the gaming license of Beau Rivage Resorts could (and revocation of the
gaming license would) materially adversely affect our Mississippi gaming
operations.
Any beneficial holder of our voting securities, regardless of the number
of shares owned, may be required to file an application, be investigated
and have his or her suitability as a beneficial holder of our voting
securities determined if the Mississippi Commission has reason to believe
that the ownership may be inconsistent with the declared policies of the
State of Mississippi. The applicant must pay all costs of investigation
incurred by the Mississippi Commission in conducting any investigation.
The Mississippi Act requires any person who acquires more than 5% of a
Registered Corporation's voting securities to report the acquisition to the
Mississippi Commission. The Mississippi Act requires that beneficial
owners of more than 10% of a Registered Corporation's voting securities
apply to the Mississippi Commission for a finding of suitability within 30
days after the Executive Director of the Mississippi Commission requests
the filing. With the exception of certain institutional investors, the
Mississippi Commission has generally exercised its discretion to require a
finding of suitability of any beneficial owner of more than 5% of a
Registered Corporation's voting securities. The Mississippi Commission has
adopted a policy that permits certain institutional investors to own
beneficially up to 10% of a Registered Corporation's voting securities
without a finding of suitability. If a beneficial owner which must be
found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information, including a list of beneficial
owners.
Any person who fails or refuses to apply for a finding of suitability or
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a license within 30 days after being ordered to do so by the Mississippi
Commission or the Executive Director of the Mississippi Commission may be
found unsuitable. The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial owner. Any
stockholder found unsuitable who holds, directly or indirectly, any
beneficial ownership of the voting securities beyond the period of time
that may be prescribed by the Mississippi Commission may be guilty of a
criminal offense.
The Mississippi Commission may, in its discretion, require the holder of
any debt security of a Registered Corporation to file applications, be
investigated and be found suitable to own the debt security if it
determines that this requirement is in the public interest.
We are required to maintain a current stock ledger in Mississippi that
may be examined by the Mississippi Commission at any time. If any
securities are held in trust by an agent or nominee, the record holder may
be required to disclose the identity of the beneficial owner to the
Mississippi Commission. A failure to make the disclosure may be grounds
for finding the record holder unsuitable. We are also required to render
maximum assistance in determining the identity of the beneficial owner.
The Mississippi Commission has the power to require our stock certificates
to bear a legend indicating that the securities are subject to the
Mississippi Act; however, the Mississippi Commission has in the past
routinely waived this requirement.
We may not make a public offering of our securities without the prior
approval of the Mississippi Commission if the securities or proceeds from
their sale are intended to be used to construct, acquire or finance gaming
facilities in Mississippi or to retire or extend obligations incurred for
those purposes. On September 23, 1999, the Mississippi Commission granted
us prior approval to make public offerings for a period of two years,
subject to certain conditions (the "Mississippi Shelf Approval"). However,
the Mississippi Shelf Approval may be rescinded for good cause without
prior notice upon the issuance of a stop order by the Executive Director of
the Mississippi Commission. The Mississippi Shelf Approval does not
constitute a finding, recommendation or approval by the Mississippi
Commission as to the accuracy or adequacy of the prospectus or the
investment merits of the securities offered. Any representation to the
contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock
or asset acquisitions, management or consulting agreements or any act or
conduct by a person by which he or she obtains control may not occur
without the prior approval of the Mississippi Commission. Entities seeking
to acquire control of a Registered Corporation must satisfy the Mississippi
Commission with respect to a variety of stringent standards prior to
assuming control of the Registered Corporation. The Mississippi Commission
may also require controlling stockholders, officers, directors and other
persons having a material relationship or involvement with the entity
proposing to acquire control to be investigated and licensed as part of the
approval process relating to the transaction.
The Mississippi Legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting securities and
corporate defensive tactics affecting Mississippi corporate gaming
licensees, and Registered Corporations that are affiliated with those
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operations, may be injurious to stable and productive corporate gaming.
The Mississippi Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices
upon Mississippi's gaming industry and to further Mississippi's policy to:
- - Assure the financial stability of corporate gaming licensees and their
affiliates;
- - Preserve the beneficial aspects of conducting business in the
corporate form; and
- - Promote a neutral environment for the orderly governance of corporate
affairs.
Approvals are, in certain circumstances, required from the Mississippi
Commission before the Registered Corporation can make exceptional
repurchases of voting securities above the current market price and before
a corporate acquisition opposed by management can be completed. The
Mississippi Act also requires prior approval of a plan of recapitalization
proposed by the Registered Corporation's board of directors in response to
a tender offer made directly to the Registered Corporation's stockholders
for the purpose of acquiring control of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type
of gaming or activity involved, are payable to the State of Mississippi,
and to the City of Biloxi, where Beau Rivage Resorts' operations are
conducted. Depending upon the particular fee or tax involved, these fees
and taxes are payable monthly, quarterly or annually and are based upon:
- - A percentage of the gross revenues received;
- - The number of gaming devices operated; or
- - The number of table games operated.
BRDC, as a licensed distributor, also pays certain fees to the State of
Mississippi.
Any person who is licensed, required to be licensed, registered,
required to be registered or is under common control with those persons
(collectively, "Licensees"), and who proposes to become involved in a
gaming venture outside of Mississippi, is required to receive the approval
of the Mississippi Commission with respect to foreign gaming activities.
Licensees are also subject to disciplinary action by the Mississippi
Commission if they knowingly:
- - Violate any laws of the foreign jurisdiction pertaining to the foreign
gaming operation;
- - Fail to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Mississippi gaming
operations;
- - Engage in activities that are harmful to the State of Mississippi or its
ability to collect gaming taxes and fees; or
- - Employ a person in the foreign operation who has been denied a license
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or finding of suitability in Mississippi on the ground of personal
unsuitability.
The sale of alcoholic beverages at Beau Rivage is subject to licensing,
control and regulation by the Mississippi State Tax Commission. All
licenses are revocable and are not transferable. The Mississippi State Tax
Commission has full power to limit, condition, suspend or revoke any liquor
license, and any disciplinary action of that type could (and revocation
would) have a material adverse effect on the operations of Beau Rivage
Resorts. Beau Rivage Resorts has received approval from the United States
Department of the Treasury to operate the brew pub at Beau Rivage.
FACTORS THAT MAY AFFECT OUR FUTURE RESULTS
(Cautionary Statements Under the Private Securities Litigation Reform Act
of 1995)
This Form 10-K and our 1999 Annual Report to Stockholders contain some
forward-looking statements. Forward-looking statements give our current
expectations or forecasts of future events. You can identify these
statements by the fact that they do not relate strictly to historical or
current facts. They contain words such as "anticipate," "estimate,"
"expect," "project," "intend," "plan," "believe," "may," "could," "might"
and other words or phrases of similar meaning in connection with any
discussion of future operating or financial performance. In particular,
these include statements relating to future actions, new projects, future
performance, the outcome of contingencies such as legal proceedings and
future financial results. From time to time, we also provide oral or
written forward-looking statements in our Forms 10-Q and 8-K, press
releases and other materials we release to the public.
Any or all of our forward-looking statements in this Form 10-K, in our
1999 Annual Report to Stockholders and in any other public statements we
make may turn out to be wrong. They can be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties.
Many factors mentioned in this Form 10-K - for example, government
regulation and the competitive environment - will be important in
determining our future results. Consequently, no forward-looking statement
can be guaranteed. Our actual future results may differ materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise. You are advised, however, to consult any further disclosures we
make on related subjects in our Form 10-K, 10-Q and 8-K reports to the
Securities and Exchange Commission. Also note that we provide the
following cautionary discussion of risks, uncertainties and possible
inaccurate assumptions relevant to our business. These are factors that we
think could cause our actual results to differ materially from expected and
historical results. Other factors in addition to those listed here could
also adversely affect us. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995.
- - As described under "Competition," we operate in a very competitive
environment, particularly in Las Vegas. The growth in guestroom
inventory in Las Vegas, which increased sharply in 1999, and the spread
of legalized gaming in other states and countries, particularly on
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California Indian reservations, could negatively affect our operating
results.
- - As discussed under "Regulation and Licensing," our casinos are highly
regulated by governmental authorities in Nevada and Mississippi. We will
also be subject to regulation, which may or may not be similar to that
in Nevada and Mississippi, by the authorities in New Jersey and any
other jurisdiction where we may conduct gaming activities in the future.
Changes in applicable laws or regulations could have a significant
effect on our operations. In June 1999, the National Gambling Impact
Study Commission, which conducted a two-year study of the gaming
industry in the United States, reported its findings and recommendations
to Congress. Some of the recommendations made in its report, if
implemented, might result in additional regulation of the gaming
industry. In March 1999, a proposed initiative was submitted to the
Mississippi Secretary of State that would repeal legalized gaming in
Mississippi and impose a two-year period for all gaming operations to
terminate. In May 1999, a Mississippi circuit court ruled that the
proposal violated provisions of the Mississippi Constitution governing
initiatives. Proponents of the initiative have appealed to the
Mississippi Supreme Court. If the appeal is successful and the
initiative process is allowed to go forward, the earliest date the
measure could be placed on the ballot would be November 2002. In order
for the initiative to be included on the November 2002 ballot, it must
be approved by the Secretary of State and the signatures of
approximately 98,000 registered voters must be gathered and certified by
October 2001. If this or any similar initiative is ultimately adopted,
it could have a material adverse effect on our Company.
- - Our business is affected by changes in local, national and
international general economic and market conditions in the locations
where we operate and where our customers live. Bellagio and The Mirage
are particularly affected by the economic situation in the Far East and
all of our Nevada properties are affected by economic conditions in
California.
- - A large portion of our customers travel by air. As a result, the cost
and availability of air service can affect our business. Additionally,
there is one principal interstate highway between Las Vegas and Southern
California, where a large number of our customers reside. Capacity
constraints of that highway or any other traffic disruptions may affect
the number of customers who visit our facilities.
- - Our plans for future construction can be affected by a number of
factors, including time delays in obtaining necessary governmental
permits and approvals and legal challenges. We may make changes in
project scope, budgets and schedules for competitive, aesthetic or other
reasons, and these changes may also result from circumstances beyond our
control. These circumstances include weather interference, shortages of
materials and labor, work stoppages, labor disputes, unforeseen
engineering, environmental or geological problems and unanticipated cost
increases. Any of these circumstances could give rise to delays or cost
overruns. Major expansion projects at our existing resorts can also
result in disruption of our business during the construction period.
- - The gaming industry represents a significant source of tax revenues,
particularly to the State of Nevada and its counties and cities. From
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time to time, various state and federal legislators and officials have
proposed changes in tax law, or in the administration of the law,
affecting the gaming industry. In January 2000, a Nevada state
senator filed an initiative petition seeking to increase the state gross
gaming tax rate from 6-1/4% to 11-1/4%. We believe that our recorded
tax balances are adequate. However, it is not possible to determine with
certainty the likelihood of possible changes in tax law or its
administration. These changes, if adopted, could have a material
negative effect on our operating results.
- - Our debt has increased significantly in the past three years,
primarily due to the construction of Bellagio and Beau Rivage. The
interest rate on a large portion of our long-term debt is subject to
fluctuation based on changes in short-term interest rates and the
ratings which national rating agencies assign to our outstanding debt
securities. Our interest expense could increase as a result of these
factors.
- - Claims have been brought against us and our subsidiaries in various
legal proceedings, and additional legal and tax claims arise from time
to time. It is possible that our cash flows and results of operations
could be affected by the resolution of these claims. We believe that
the ultimate disposition of current matters will not have a material
impact on our financial condition or results of operations. Please see
the further discussion under "Legal Proceedings" in Item 3 of this Form
10-K.
- - There is intense competition to attract and retain qualified
management and other employees in the gaming industry. Our inability to
recruit or retain personnel could adversely affect our business.
You should also be aware that while we from time to time communicate
with securities analysts, we do not disclose to them any material non-
public information, internal forecasts or other confidential business
information. Therefore, you should not assume that we agree with any state-
ment or report issued by any analyst, irrespective of the content of the
statement or report. To the extent that reports issued by securities
analysts contain projections, forecasts or opinions, those reports
are not our responsibility.
ITEM 2. PROPERTIES
Bellagio occupies an approximately 90-acre site. We own the entire site
except for one acre which we lease under a ground lease that expires
(giving effect to our options to renew) in 2073.
The Mirage and Treasure Island share an approximately 100-acre site
which we own.
The Boardwalk occupies an approximately nine-acre site which we own. We
also own approximately 45 acres of property adjacent to the Boardwalk.
Beau Rivage occupies approximately 41 acres (including 10 acres of
tidelands) in Biloxi, Mississippi. We own the land and we lease the
tidelands from the State of Mississippi under a lease that expires (giving
effect to our option to renew) in 2049. We also own approximately 508
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acres in the Biloxi area for the potential development of a world-class
golf course.
The Golden Nugget occupies approximately seven and one-half acres. We
own the buildings and approximately 90% of the land. We lease the
remaining land under three ground leases that expire (giving effect to our
options to renew) on dates from 2025 to 2046.
The Golden Nugget-Laughlin, including approximately two acres where the
motel in Bullhead City, Arizona is located, occupies approximately
15-1/2 acres. We own all of the property.
Monte Carlo occupies approximately 46 acres owned by Victoria Partners
(the joint venture that owns and operates Monte Carlo). At December 31,
1999, Monte Carlo was subject to mortgages approximating $87.0 million.
We own approximately 850 acres of land in North Las Vegas, including 240
acres occupied by Shadow Creek.
We own approximately 200 acres in Atlantic City, consisting principally
of three different parcels in casino-zoned areas. We are currently
designing a major new hotel-casino resort complex on the largest of these
parcels as described under "Future Expansion - Atlantic City" in Item 1 of
this Form 10-K.
We also own or lease various other improved and unimproved property in
Las Vegas and other locations in the United States and some foreign
countries.
ITEM 3. LEGAL PROCEEDINGS
On April 26, 1994, an individual filed a complaint in a class action
lawsuit in the United States District Court for the Middle District of
Florida against 41 manufacturers, distributors and casino operators of
video poker and electronic slot machines, including the Company. On May
10, 1994, another plaintiff filed a complaint in a class action lawsuit
alleging substantially the same claims in the same court against 48
defendants, including the Company. On September 26, 1995, another
plaintiff filed a complaint in a class action lawsuit alleging
substantially the same claims in the United States District Court for the
District of Nevada against 45 defendants, including the Company. The court
consolidated the three cases in the United States District Court for the
District of Nevada. The consolidated complaint claims that we and the
other defendants have engaged in a course of fraudulent and misleading
conduct intended to induce people to play video poker and electronic slot
machines based on a false belief concerning how the gaming machines
operate, as well as the chances of winning. Specifically, the plaintiffs
allege that the gaming machines are not truly random as advertised to the
public, but are pre-programmed in a predictable and manipulative manner.
The complaint alleges violations of the Racketeer Influenced and Corrupt
Organizations Act, as well as claims of common law fraud, unjust enrichment
and negligent misrepresentation, and asks for unspecified compensatory and
punitive damages. In December 1997, the court granted in part and denied
in part the defendants' motions to dismiss the complaint for failure to
state a claim and ordered the plaintiffs to file an amended complaint,
which was filed in February 1998. The Company, along with most other
defendants, has answered the amended complaint and continues to deny the
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allegations contained in the amended complaint. The parties have fully
briefed the issues regarding class certification, which are currently
pending before the court. The court has stayed discovery pending
resolution of these issues.
In December 1997, the trustee of the bankruptcy estate of Ken Mizuno
("Mizuno") filed a complaint against us in the United States Bankruptcy
Court for the Central District of California, which was amended in February
1998. The amended complaint claims that Mizuno, a Japanese national,
repaid various debts to our casinos prior to the commencement of Mizuno's
bankruptcy case in June 1992 for which Mizuno was not legally liable and
which were not legally collectible under Japanese law. The amended
complaint alleges that these repayments constituted fraudulent transfers
under federal and state law and seeks to require us to pay the value of the
transfers, totaling at least $61,418,250, plus interest, to the bankruptcy
trustee. In August 1998, the Bankruptcy Court granted our motion to
dismiss the complaint based on the statute of limitations. The plaintiff
appealed to the United States District Court for the Central District of
California, which reversed the dismissal in January 1999. We have appealed
the District Court's ruling. The appeal is now pending. The case has been
transferred to the United States District Court for the District of Nevada.
On February 23, 2000, the District Court granted our motion to dismiss
several counts of the complaint. We intend to continue to defend the case
vigorously.
On September 28, 1999, a former stockholder of our Boardwalk subsidiary
filed a first amended complaint in a purported class action lawsuit in
District Court for Clark County, Nevada against us and certain former
directors and principal stockholders of that subsidiary. The complaint
alleges that we induced the other defendants to breach their fiduciary
duties to Boardwalk's minority stockholders by devising and implementing a
scheme by which we acquired Boardwalk at significantly less than the true
value of its shares. The complaint seeks an unspecified amount of
compensatory damages from the Company and punitive damages from the other
defendants, whom we are required to defend and indemnify. We believe that
the claims in the complaint are without merit and intend to defend the case
vigorously. We filed a motion to dismiss the complaint in December 1999,
which is now pending with the court.
On February 23, 2000, five separate stockholder class action complaints
were filed against us and each of our directors in District Court for Clark
County, Nevada. Two additional class action complaints were filed by
stockholders against us and our directors in the same court on February 25,
2000 and additional complaints were filed on March 1, 2000 and March 3,
2000. These complaints arise out of an unsolicited proposal which we
received on February 23, 2000 from MGM Grand to acquire all of our stock at
$17 per share and our rejection of that proposal on February 29, 2000.
Some of the complaints seek an order requiring us to adequately consider
the proposal and others seek to enjoin a proposed merger with MGM Grand.
The complaints also seek to enjoin our directors from failing to adhere to
their fiduciary duties and request unspecified damages and attorneys' fees.
Most of the complaints were filed before we had announced any position on
the MGM Grand proposal, and all of them were filed before our merger with
MGM Grand was announced on March 6, 2000 (see "Recent Developments" in Item
1 of this Form 10-K). We believe that the claims in the complaints are
without merit.
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We and our subsidiaries are also defendants in various other lawsuits,
most of which relate to routine matters incidental to our business. We do
not believe that the outcome of this other pending litigation, considered
in the aggregate, will have a material adverse effect on our Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of our security holders during
the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is traded on the New York Stock Exchange and the
Pacific Exchange under the symbol "MIR." The following table sets forth,
for the calendar quarters indicated, the high and low sale prices of our
common stock on the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------
HIGH LOW HIGH LOW
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
First quarter................... $22 5/8 $13 3/16 $26 3/4 $20 13/16
Second quarter.................. 26 3/8 16 5/16 25 1/8 20
Third quarter................... 17 3/8 11 3/4 22 1/4 13 3/4
Fourth quarter.................. 15 15/16 11 1/2 18 15/16 13 3/16
</TABLE>
There were approximately 12,700 record holders of our common stock as of
January 20, 2000. We paid no cash dividends in 1999 or 1998 and do not
expect to do so in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------
1999 (a) 1998 (b) 1997 1996 (c) 1995
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS (d)
Gross revenues..................................... $2,649.9 $1,649.7 $1,516.4 $1,487.1 $1,453.7
Promotional allowances............................. (247.2) (153.1) (127.4) (128.8) (123.0)
Net revenues....................................... 2,402.7 1,496.6 1,389.0 1,358.3 1,330.7
Preopening and related promotional expense......... 42.1 88.3 - - -
Operating income................................... 305.0 152.1 326.0 312.7 284.1
Income before extraordinary item and cumulative
effect of change in accounting principle (e)...... 141.0 85.2 209.8 206.0 169.9
Net income......................................... 110.4 81.7 207.6 206.0 163.2
Income per share before extraordinary item
and cumulative effect of change in accounting
principle (e)
Basic........................................... $ 0.74 $ 0.47 $ 1.17 $ 1.13 $ 0.93
Diluted......................................... $ 0.70 $ 0.45 $ 1.09 $ 1.05 $ 0.88
Net income per share
Basic........................................... $ 0.58 $ 0.45 $ 1.16 $ 1.13 $ 0.89
Diluted......................................... $ 0.55 $ 0.43 $ 1.08 $ 1.05 $ 0.85
OTHER DATA
Interest expense, net of
amounts capitalized............................... $ 117.5 $ 32.7 $ 7.7 $ 6.8 $ 23.2
Net cash provided by operating
activities........................................ 429.2 279.9 294.0 331.9 327.0
Capital expenditures............................... 509.4 1,158.5 1,058.9 407.3 183.0
YEAR-END STATUS
Construction in progress........................... $ 124.3 $ 539.5 $1,261.1 $ 355.9 $ 84.5
Total assets....................................... 4,804.3 4,530.2 3,347.4 2,143.5 1,791.7
Long-term debt, net of current maturities.......... 2,210.0 2,378.5 1,396.7 468.1 248.5
Stockholders' equity (f)........................... 2,023.9 1,601.8 1,512.5 1,290.9 1,209.3
Shares outstanding................................. 190.0 180.1 179.4 178.3 183.3
</TABLE>
- ----------------------------------------------------
(a) Beau Rivage opened on March 16, 1999.
(b) Bellagio opened on October 15, 1998.
(c) Monte Carlo opened on June 21, 1996.
(d) The Boardwalk is being accounted for as an incidental operation. Under
this method, its operating results are excluded from our consolidated
operating results, and its net income, as well as rental income from
the adjacent land, is recorded as a reduction in the carrying value of
the land.
(e) Before extraordinary losses on early retirements of debt, and in 1999
before the cumulative effect of a change in method of accounting for
preopening costs.
(f) We paid no cash dividends during the five-year period ended December
31, 1999.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OUR OPERATING RESULTS
COMPANY-WIDE
Our two new resorts had a major impact on our operating results during
1999. Bellagio opened on October 15, 1998 and Beau Rivage opened on March
16, 1999.
Reflecting the contribution from these two new resorts, our total
revenues grew by $1.00 billion, or 61%, over 1998. Casino revenues
increased by $421.7 million, or 51%, and non-casino revenues were up by
$578.5 million, or 70%. Table games revenue increased by $223.9 million, or
53%, and slot revenue rose by $183.4 million, or 50%. Our Company-wide
table games win percentage was 19.8%, compared with 19.4% in 1998. Company-
wide occupancy of our available standard guestrooms was 96% in 1999 at an
average daily rate of approximately $105. This compares with 98% and $93
in 1998. The decline in occupancy reflects the effect of a substantial
increase in room inventory on the Las Vegas Strip during 1999 and the
lower occupancy experienced at Beau Rivage. The increase in the average
daily room rate principally reflects Bellagio's room rates, which are
generally higher than those of our other resorts.
BELLAGIO
Bellagio generated total revenues of $1.10 billion and an operating
profit of $168.6 million during its first full year of operation in 1999.
Bellagio's depreciation expense for 1999 was $91.6 million. Casino
revenues totaled $507.3 million and non-casino revenues were $589.4
million. Table games revenue for the year was $354.0 million and slot
revenue accounted for $131.4 million. Bellagio's table games win
percentage in 1999 averaged 22.6%. Standard guestroom occupancy was 98% at
an average daily rate of approximately $153.
During its first 77 days of operation in 1998, Bellagio achieved total
revenues of $244.1 million and an operating profit of $34.1 million before
preopening expense. Its depreciation expense for the period was $18.9
million. Casino revenues were $127.8 million and non-casino revenues
totaled $116.3 million. Table games contributed $87.4 million and slots
added another $35.3 million. The table games win percentage for this
abbreviated period was 21.5%. Standard guestroom occupancy was 96% at an
average daily rate of approximately $147.
BEAU RIVAGE
During nine and one-half months of operation in 1999, Beau Rivage
generated total revenues of $278.1 million and an operating profit of $16.2
million before preopening expense. Its depreciation charge for the period
was $28.9 million. Casino revenues totaled $146.9 million and non-casino
revenues were $131.2 million. Casino revenues principally include slot
revenue of $97.9 million and table games revenue of $47.9 million. Beau
Rivage's table games win percentage for the period was 17.0%. Standard
guestroom occupancy was 85% at an average daily rate of approximately $90.
Beau Rivage's operating results in 1999 include approximately $12.0 million
of pre-tax income from the settlement of a business interruption insurance
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claim associated with a major hurricane that struck the Biloxi area in
September 1998.
We designed Beau Rivage as a luxurious facility in anticipation of the
Gulf Coast developing into a major destination resort market. Our efforts
to establish Beau Rivage as the long-term leader in the Gulf Coast
market resulted in additional payroll, promotional, advertising and other
costs that have constrained the resort's operating income contribution
since opening. Additionally, high staffing levels and other
inefficiencies associated with the opening periods of new resorts have
hindered Beau Rivage's initial operating results.
The March 16, 1999 opening of Beau Rivage spurred significant growth
in gaming revenues in the Gulf Coast market. For the nine months ended
December 31, 1999, gross gaming revenues grew by 31.3% over the same period
in 1998. Excluding Beau Rivage's contribution, gross gaming revenues for
the period were up 8.4%. We believe that Beau Rivage's earnings will
improve as we intensify our efforts toward gaining a larger share of the
growing Gulf Coast market and becoming more efficient in our operations.
However, until we are successful in these efforts, Beau Rivage will
continue to have a negative impact on our operating margins.
SAME-STORE (EXCLUDING BELLAGIO AND BEAU RIVAGE)
Our same-store revenues totaled $1.27 billion in 1999, versus $1.41
billion in 1998 and $1.52 billion in 1997. On a same-store basis, our
wholly owned resorts generated an operating profit of $182.9 million in
1999, $228.1 million in 1998 and $325.6 million in 1997. Same-store
depreciation expense was $84.7 million in 1999, versus $86.4 million in
1998 and $88.0 million in 1997. Same-store casino revenues were $589.4
million, compared with $694.2 million in 1998 and $784.5 million in 1997.
The decline in both 1999 and 1998 principally reflects lower table games
revenue. Same-store table games revenue was down by 27% in 1999 and 22%
in 1998. We attribute these declines to increased competitive pressures
in the Las Vegas market, including from Bellagio, and economic
difficulties experienced by certain Asian countries affecting our inter-
national business. A lower win percentage was also a factor. Our same-
store table games win percentage was 17.3% in 1999, versus 18.9% in 1998
and 21.5% in 1997. Historically, our table games win percentage has
averaged approximately 20%. Following a 2% increase in 1998, same-store
slot revenue was down by 3% in 1999.
Our non-casino revenues have also been impacted by the increased
competition in Las Vegas. Same-store non-casino revenues totaled $685.7
million in 1999, $711.4 million in 1998 and $731.9 million in 1997. In
addition to the opening of Bellagio in October 1998, three major new
competing resorts opened on the Las Vegas Strip during 1999, adding
approximately 9,700 guestrooms to the market. Despite this additional
capacity, our occupancy levels have remained strong. Same-store occupancy
of available standard guestrooms averaged 97% in 1999, versus 98% in both
1998 and 1997. The additional inventory, however, has put pressure on room
rates. Guestroom refurbishment programs at both Treasure Island and the
Golden Nugget in Laughlin also impacted our operating results during 1999.
Both projects were completed by the end of the third quarter and
significantly upgraded the furnishings of the guestrooms. Principally due
to these two projects, we experienced approximately 2% fewer available same-
store room nights during 1999 versus 1998. As a result of these factors,
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same-store room revenues were down by approximately 3% in both 1999 and
1998. During 1997, we completed the refurbishment of 1,382 guestrooms at
our Golden Nugget facility in downtown Las Vegas, principally accounting
for a 1% reduction in our Company-wide available room nights for that year.
We continue to develop and implement strategies to enhance our competi-
tive position in Las Vegas. Some of these strategies include introducing
new entertainment attractions and restaurants, refurbishing our guestrooms,
constructing additional meeting and convention facilities and introducing
new advertising and marketing programs. We believe that some of our
greatest strengths for dealing with new competition are the superior
design, condition and locations of our resorts and the friendliness and
professionalism of our employees.
Same-store operating costs and expenses at our hotel-casinos declined
by $75.9 million, or 7%, in 1999 and $15.6 million, or 1%, in 1998. These
declines generally follow the decline in same-store revenues. The decline
in 1998 was partially offset by the costs of additional staffing efforts
necessary to prepare for the opening of Bellagio and Beau Rivage. The
opening of these two new resorts increased our staffing levels from 17,000
to almost 30,000 employees. Many of these new positions were filled
through promotion or transfer of employees from our other resorts. In
order to ensure a smooth transition, we hired replacement employees prior
to the departure of transferring employees. These additional staffing
efforts resulted in considerably higher payroll and training costs in 1998.
OTHER FACTORS AFFECTING OUR EARNINGS
Corporate expense was relatively flat in 1999, after increasing
significantly in 1998. The increase in 1998 reflects expenses related to
the potential legalization of gaming in new jurisdictions, the growth in
the size of our Company and expanded activities in pursuit of entertainment
attractions for our resorts. Additionally, corporate expense in 1998 and
1997 was reduced by gains from the sale of corporate aircraft.
On January 1, 1999, we adopted a new accounting standard that requires
preopening and other start-up costs to be expensed as incurred rather than
capitalized and charged to expense subsequent to opening the related
facility. As a result, we recorded an after-tax cumulative effect charge
in 1999 of $30.6 million ($0.16 per share basic and $0.15 per share
diluted) for the write-off of all previously capitalized preopening costs
associated with Beau Rivage and our development activities in Atlantic
City, New Jersey. During 1999, we also incurred and expensed additional
preopening and related promotional costs related to these projects of $42.1
million. After tax, these additional preopening costs reduced our 1999
earnings by $27.6 million, or $0.14 per share basic and diluted. We
expensed all $88.3 million of Bellagio's previously capitalized preopening
costs in the 1998 fourth quarter. After tax, the write-off reduced our
1998 earnings by $57.5 million, or $0.32 per share basic and $0.30 per
share diluted.
Reflecting our investment in Bellagio and Beau Rivage, our debt levels
and associated interest cost have risen significantly. Our long-term debt
increased from $468.1 million at December 31, 1996 to $2.21 billion at
December 31, 1999. With Bellagio and Beau Rivage now complete, we are
capitalizing a smaller portion of our interest cost, resulting in a much
higher charge for interest expense. Net interest expense in 1999 totaled
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$117.5 million, compared with $32.7 million in 1998 and $7.7 million in
1997.
In April 1999, we evaluated the possible acquisition of the gaming
operations of a major competitor. As part of the negotiations, it was
agreed that we would receive a fee as compensation for our efforts should
the operations be sold to another bidder. In late December 1999, a
competing bidder completed the acquisition of the operations and we
recorded income of $24.5 million after deducting the related costs. After
tax, this transaction increased our 1999 earnings by $15.9 million, or
$0.08 per share basic and diluted.
We recorded other non-operating income in 1999 of $6.1 million, compared
with $15.8 million in 1998 and $6.7 million in 1997. The 1998 amount
includes earnings on debt securities we acquired late in 1997 in connection
with the purchase of the Boardwalk hotel-casino. We recorded interest
income on the securities until the purchase was completed on June 30, 1998.
The 1998 amount also reflects additional earnings on an escrow account
established late in 1997 to fund our portion of the cost of road
improvements in the Marina area of Atlantic City. Earnings on the account
were lower in 1999 as the funds were being used for construction of the
road improvements.
We incurred debt-related extraordinary charges in both 1998 and 1997.
The $3.5 million ($0.02 per share basic and diluted) after-tax charge in
1998 is associated with the redemption of all $100 million principal amount
of our 9-1/4% notes. The notes were scheduled to mature in March 2003 and
were redeemed at 104.11% of the principal amount. It was economically
advantageous for us to repay the notes with less expensive funds borrowed
under our bank credit facility and commercial paper program, even after
considering the prepayment penalty that accounted for most of the
extraordinary charge. In 1997, we incurred an after-tax extraordinary
charge of $2.2 million ($0.01 per share basic and diluted) in connection
with amending our bank credit facility to, among other things, increase its
size and extend its maturity. We incurred no extraordinary charges in
1999.
Our effective income tax rate approximated the 35% statutory rate in
both 1999 and 1997. Our effective income tax rate in 1998 was approximately
37%, mainly due to the non-deductibility of certain expenses related to the
potential legalization of gaming in new jurisdictions.
OUR CAPITAL RESOURCES, CAPITAL SPENDING AND LIQUIDITY
Net cash provided by operating activities (as shown in our Consolidated
Statements of Cash Flows) totaled $429.2 million in 1999, versus $279.9
million in 1998 and $294.0 million in 1997. The increase in our operating
cash flow in 1999 principally represents the contribution from Bellagio and
Beau Rivage and additional cash distributions from Monte Carlo of $13.1
million. The decline in 1998 generally reflects the decline in our
operating income, offset in part by cash distributions from Monte Carlo of
$20.9 million. We received no cash distributions from Monte Carlo prior to
1998, as the joint venture was using its free cash flow to reduce
outstanding debt.
The majority of our operating cash flow during the past three years was
effectively used for the completion of Bellagio and Beau Rivage. After
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giving effect to the change in associated deposit and payable amounts,
capital expenditures and preopening and related promotional costs required
net cash of $558.8 million in 1999, $1.29 billion in 1998 and $1.17 billion
in 1997. Capital expenditures in 1999 also include expenditures associated
with the room refurbishment programs at Treasure Island and the Golden
Nugget-Laughlin.
We completed the purchase of the Boardwalk on June 30, 1998. The
purchase required total cash outlays of approximately $112.0 million. We
spent approximately $51.9 million of this amount in 1997, primarily to
acquire certain of Boardwalk's previously issued debt securities. We also
incurred $118.8 million in 1998 and $27.6 million in 1997 to acquire
additional adjacent land on the Strip. This land, combined with the
Boardwalk site and other land we purchased in 1993, provides us with
approximately 55 acres for future development with over 1,200 feet of
frontage on the Las Vegas Strip between Bellagio and Monte Carlo. We are
in the very early design phase for a new hotel-casino resort we expect to
ultimately develop on the site. The design, timing and cost of any new
resort are still highly uncertain and will depend on several factors.
Among these factors is the market's absorption of the new resorts on the
Las Vegas Strip and competition from gaming outside of Nevada. Because we
acquired the Boardwalk and adjacent land for development of a new resort,
interest cost is being capitalized on the funds used for such purchases. In
the interim, Boardwalk is being accounted for as an incidental operation.
Under this method, Boardwalk's operations are excluded from our
consolidated operating results, and its net income, as well as rental
income from the adjacent land, is recorded as a reduction in the carrying
value of the land.
We are currently converting existing meeting space at The Mirage into
the new 1,260-seat Danny Gans Theatre. This popular singer/impersonator
will begin performing in the new theatre in April 2000. We are also
currently adding extensive meeting, convention and exhibit space at The
Mirage, including a new 90,000-square foot exhibit hall. The meeting
and convention space is scheduled to be completed in June of this year, and
the exhibit hall is expected to open in May 2001. The total cost of these
projects is anticipated to be approximately $100 million. At December 31,
1999, we had incurred approximately $23 million of this amount. We are
also considering the construction of a 1,500-seat theatre at The Mirage for
the presentation of a new Broadway-style musical. The design, budget and
construction schedule for the new theatre have not yet been finalized.
In Atlantic City, we are progressing with the design and budgeting of
our proposed resort development in the Marina area. Current plans for our
120-acre site call for construction of our own wholly owned hotel-casino
resort and a second 50%-owned resort in partnership with Boyd. We are
currently designing and will develop the master plan improvements for the
entire Marina site. We previously filed an application for the major
environmental permit necessary to construct a portion of these
improvements, which is currently pending. As part of our agreement with the
City of Atlantic City to acquire the land, we are required to remediate
environmental contamination at the Marina site, which was a municipal
landfill until 1975. A substantial portion of the remediation work had
been completed at February 1, 2000. Also as part of our agreement with the
City, we have completed demolition of the City-owned facilities previously
located on the site and are in the process of relocating on-site public
utilities. Construction is also continuing on the previously funded joint
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venture road improvement project with the State of New Jersey to improve
access to the Marina area. The road improvement project is scheduled for
completion in May 2001.
The design, budget and construction schedule for our wholly owned hotel-
casino on the Marina site have not yet been finalized. We intend to apply
for the major environmental permit that is required to develop our resort
in the second quarter of this year. Our joint venture agreement with Boyd
calls for the development of a new hotel-casino resort with approximately
1,200 guestrooms on a 25-acre portion of the Marina site. Boyd will
oversee the design and construction of the joint venture hotel-casino to be
known as "The Borgata" and operate the resort upon completion. Under the
agreement, subject to the receipt of acceptable financing as described
below, we will contribute the 25 acres of land (valued at $90 million) and
$60 million in cash, of which approximately $5 million had been contributed
at February 1, 2000. Boyd will contribute a minimum of $150 million in
cash plus any amounts necessary to fund project costs in excess of $750
million. The joint venture will attempt to obtain acceptable financing of
approximately $450 million for the remaining cost of the project that is
non-recourse to both our Company and Boyd. We have recently had discussions
with Boyd regarding a possible increase in the size of The Borgata and
each partner's required capital contribution. The joint venture has an
application currently pending for the required major environmental permit.
If the necessary permits and financing are obtained, construction of The
Borgata could begin by late summer of this year.
Both our Company and the joint venture must apply for and receive
numerous other governmental permits and satisfy other conditions before
construction of either hotel-casino can begin. Additionally, a current
Atlantic City hotel-casino operator and others have filed various lawsuits
challenging the validity of our previous agreement with the City of
Atlantic City to acquire the land and seeking to stop the construction of
the road improvements. We have prevailed in all of these lawsuits that
have been finally adjudicated to date, but a number of lawsuits are still
pending in various stages and others could be filed in the future. As a
result of these factors, as well as our pending merger with MGM Grand, we
cannot be certain of the ultimate development or timing of construction of
the hotel-casinos planned for the Marina site.
In 1998, we received net proceeds of $394.7 million from the issuance of
$200 million principal amount of 6-5/8% notes due in 2005 and an equal
principal amount of 6-3/4% notes due in 2008. We also issued debt
securities in 1997 and received net proceeds of approximately $296.1
million. The debt securities issued in 1997 consisted of $200 million
principal amount of 6-3/4% notes due in 2007 and $100 million principal
amount of 7-1/4% debentures due in 2017.
During 1998, we repaid the $133 million principal amount of our zero
coupon notes upon maturity and retired early all $100 million principal
amount of our 9-1/4% notes due in 2003. These debt retirements required
total cash of approximately $237.1 million, which was provided principally
by borrowings under our bank credit facility and commercial paper program.
On May 11, 1999, we issued 16,633,663 shares of our common stock in a
public offering at $25.00 per share. The $415.6 million net proceeds from
the offering were used to reduce borrowings outstanding under our $1.75
billion bank credit facility and commercial paper program. During 1999, we
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also repurchased a total of 9,020,809 shares of our common stock in the
open market and in a privately negotiated transaction. The total cost of
the repurchases was approximately $130.3 million, or an average of $14.45
per share. In December 1999, our Board of Directors approved a program to
repurchase up to 5,000,000 additional shares of our common stock. At
February 1, 2000, no shares had been repurchased under this program. The
timing and amount of future share repurchases, if any, will depend on
various factors, including market conditions, available alternative
investments and our financial position. Pending the merger with MGM Grand,
we are not permitted to repurchase shares without their approval.
We believe our existing cash balances, future operating cash flow and
available borrowing capacity will provide us with sufficient resources to
meet our existing debt obligations and foreseeable capital expenditure
requirements.
MARKET RISK
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates
and commodity prices. Our primary exposure to market risk is interest rate
risk associated with our long-term debt. To date, we have not invested in
derivative- or foreign currency-based financial instruments. We attempt to
limit our exposure to interest rate risk by managing the mix of our long-
term fixed-rate borrowings and short-term borrowings under our revolving
bank credit facility and commercial paper program.
The following table provides information about our long-term debt at
December 31, 1999.
<TABLE>
<CAPTION>
MATURITY FACE CARRYING ESTIMATED
DATE AMOUNT VALUE FAIR VALUE
---------- -------- -------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
LIBOR-based bank credit facility borrowings, at a
weighted average interest rate of approximately Various to
6.68%............................................... Feb. 2000 $1,155.0 $1,155.0 $1,155.0
Commercial paper notes, at a weighted
average effective interest rate of Various to
approximately 6.59%................................. Jan. 2000 107.4 106.6 106.6
6-5/8% notes......................................... Feb. 2005 200.0 199.2 183.6
7-1/4% notes......................................... Oct. 2006 250.0 249.7 230.2
6-3/4% notes......................................... Aug. 2007 200.0 199.3 176.6
6-3/4% notes......................................... Feb. 2008 200.0 199.1 174.0
7-1/4% debentures.................................... Aug. 2017 100.0 99.7 83.5
Other notes, at a weighted average Various to
interest rate of approximately 8.7%................. Aug. 2010 1.7 1.7 1.7
-------- -------- --------
$2,214.1 $2,210.3 $2,111.2
======== ======== ========
</TABLE>
There are no principal payments due on our debt securities prior to their
maturity.
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At December 31, 1998, the face amount, carrying value and estimated fair
value of our long-term debt was approximately $2.4 billion. Our fixed-rate
debt at that date consisted of the notes and debentures listed above, and
our bank credit facility borrowings totaled $1.43 billion at a weighted
average interest rate of approximately 5.75%. No borrowings were
outstanding under our commercial paper program.
Borrowings under our $1.75 billion bank credit facility are unsecured and
bear interest, at our option, at the prime rate or at a specified premium
over the one-, two-, three- or six-month London Interbank Offered Rate, a
rate that fluctuates daily. The premium is based on the credit rating of
our 7-1/4% notes due October 2006 and our Leverage Ratio (as defined). At
February 1, 2000, the premium was 0.50% per annum. Alternatively, we may
request interest rate bids from the participating banks. Outstanding
borrowings under our $500 million commercial paper program count against
the availability under our bank credit facility. Borrowings under our bank
credit facility and commercial paper program are classified as long-term
debt because we intend to replace these borrowings as they come due and to
have these borrowings outstanding for longer than one year. However, the
amount of our outstanding borrowings is expected to fluctuate and may be
reduced from time to time. The bank credit facility matures in March 2002.
If the merger with MGM Grand is consummated, the bank credit facility will
terminate and all outstanding borrowings will become due.
YEAR 2000 READINESS
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result, date-
sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the "Year
2000 issue." If this situation occurs, the potential exists for computer
system failures or miscalculations by computer programs, which could
disrupt operations.
We completed an extensive program to ensure that our computer systems
are Year 2000 compliant and have experienced no significant problems to
date associated with the Year 2000 issue. Additionally, there are no claims
pending or, to our knowledge, threatened against us arising out of the Year
2000 issue.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We incorporate by reference the information appearing under "Market
Risk" in Item 7 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and Notes to Consolidated Financial
Statements, referred to in Item 14(a)(1) of this Form 10-K, are included at
pages 47 to 67 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
We incorporate by reference the information appearing under "Directors
and Executive Officers" in our definitive Proxy Statement for our 2000
Annual Meeting of Stockholders, which we filed with the Securities and
Exchange Commission on February 23, 2000 (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
We incorporate by reference the information appearing under "Executive
Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We incorporate by reference the information appearing under "Stock
Ownership of Major Stockholders and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We incorporate by reference the information appearing under
"Compensation Committee Interlocks and Insider Participation" in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1). FINANCIAL STATEMENTS.
Included in Part II of this Report:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1999 and 1998
Years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2). FINANCIAL STATEMENT SCHEDULES.
Included in Part IV of this Report:
Years ended December 31, 1999, 1998 and 1997
Schedule II - Valuation and Qualifying Accounts
We have omitted schedules other than the one listed above because they
are not required or are not applicable, or the required information is
shown in the financial statements or notes to the financial statements.
(a)(3). EXHIBITS.
2 Agreement and Plan of Merger, dated as of March 6, 2000,
among the Company, MGM Grand, Inc. ("MGM Grand") and a
wholly owned subsidiary of MGM Grand (without schedules,
which the Company will furnish to the Securities and
Exchange Commission supplementally upon request).
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<PAGE>
3.1 Restated Articles of Incorporation of the Company.
Incorporated by reference to Exhibit 3(i) to the Com-
pany's Quarterly Report on Form 10-Q for the fiscal quar-
ter ended June 30, 1993.
3.2 Amended and Restated Certificate of Division of Shares
into Smaller Denominations Pursuant to N.R.S. Section
78.207 of the Company, filed October 14, 1993. Incorpor-
ated by reference to Exhibit 2.2 to Amendment No. 3 to
the Company's Registration Statement on Form 8-A dated
October 19, 1993.
3.3 Certificate of Division of Shares into Smaller Denomina-
tions Pursuant to N.R.S. Section 78.207 of the Company,
filed June 5, 1996. Incorporated by reference to Exhibit
1 to Amendment No.4 to the Company's Registration State-
ment on Form 8-A dated June 18, 1996.
3.4 Certificate of Amendment of Articles of Incorporation of
the Company, filed June 28, 1999. Incorporated by refer-
ence to Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1999 (the
"June 1999 Form 10-Q").
3.5 Bylaws of the Company.
4.1 Indenture, dated as of October 15, 1996, between the Com-
pany and Firstar Bank of Minnesota, N.A., as trustee (the
"1996 Shelf Indenture"). Incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1996 (the
"September 1996 Form 10-Q").
4.2 Supplemental Indenture, dated as of October 15, 1996, to
the 1996 Shelf Indenture, with respect to the Company's
7.25% Senior Notes Due October 15, 2006. Incorporated by
reference to Exhibit 4.2 to the September 1996 Form 10-Q.
4.3 Indenture, dated as of August 1, 1997, between the Com-
pany and First Security Bank, National Association, as
trustee (the "1997 Shelf Indenture"). Incorporated by
reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30,
1997 (the "June 1997 Form 10-Q").
4.4 Supplemental Indenture, dated as of August 1, 1997, to
the 1997 Shelf Indenture, with respect to the Company's
6.75% Notes Due August 1, 2007 and 7.25% Debentures Due
August 1, 2017. Incorporated by reference to Exhibit 4.2
to the June 1997 Form 10-Q.
4.5 Indenture, dated as of February 4, 1998, between the Com-
pany and PNC Bank, National Association, as trustee (the
"1998 Shelf Indenture"). Incorporated by reference to
Exhibit 4(e) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "1997
Form 10-K").
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4.6 Supplemental Indenture, dated as of February 4, 1998 to
the 1998 Shelf Indenture, with respect to the Company's
6.625% Notes Due February 1, 2005 and 6.75% Notes Due
February 1, 2008. Incorporated by reference to Exhibit
4(f) to the 1997 Form 10-K.
4.7 Stock Option Agreement, dated as of March 6, 2000,
between the Company and MGM Grand.
4.8 Rights Agreement, dated as of March 6, 2000, between the
Company and American Stock Transfer & Trust Company
("AST"), as Rights Agent (with exhibits). Incorporated by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form 8-A, dated March 9, 2000 (the "Form
8-A").
4.9 Amendment No. 1 to Rights Agreement, dated as of March
6, 2000, between the Company and AST. Incorporated by
reference to Exhibit 4.2 to the Form 8-A.
10.1* Forms of Incentive Stock Option Agreement and Non-
Qualified Stock Option Agreement. Incorporated by refer-
ence to Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989.
10.2* 1984 Stock Option and Stock Appreciation Rights Plan, as
amended. Incorporated by reference to Exhibit 4.2 to the
Registration Statement filed by the Company on Form S-8
under the Securities Act of 1933 (No. 33-16037) (the
"Form S-8").
10.3* 1986 Stock Option and Stock Appreciation Rights Plan, as
amended. Incorporated by reference to Exhibit 4.1 to the
Form S-8.
10.4* 1992 Stock Option and Stock Appreciation Rights Plan.
Incorporated by reference to Exhibit 10(n) to the Com-
pany's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991.
10.5* 1993 Stock Option and Stock Appreciation Rights Plan.
Incorporated by reference to Exhibit 10(m) to the Com-
pany's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992 (the "1992 Form 10-K").
10.6* Amended and Restated 1992 Non-Employee Director Stock
Option Plan. Incorporated by reference to Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1996.
10.7 Easement, dated December 28, 1990, from MH, INC. in favor
of Stephen A. Wynn. Incorporated by reference to Exhibit
10(ll) to Amendment No. 1 to the Registration Statement
filed by GNS FINANCE CORP. and MCH on Form S-1 under
the Securities Act of 1933 (No. 33-38496).
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<PAGE>
10.8* Employment Agreement, dated as of August 18, 1992,
between the Company and Frank Visconti. Incorporated by
reference to Exhibit 19.4 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended Septem-
ber 30, 1992.
10.9* Employment Agreement, dated December 16, 1992, between
the Company and Stephen A. Wynn. Incorporated by refer-
ence to Exhibit 10(zz) to the 1992 Form 10-K.
10.10 Lease, dated September 4, 1962, and Agreement, dated
March 25, 1975, between the Trustees of the Fraternal
Order of Eagles, Las Vegas Aerie 1213, and the Company.
Incorporated by reference to Exhibit 10(c) to the Regis-
tration Statement filed by GNLV FINANCE CORP. and GNLV
on Form S-1 under the Securities Act of 1933 (No. 33-
5694) (the "GNLV Form S-1").
10.11 Lease Agreement, dated July 1, 1973, and Amendment to
Lease, dated February 27, 1979, between First National
Bank of Nevada, Trustee under Private Trust No. 87, and
the Company. Incorporated by reference to Exhibit 10(d)
to the GNLV Form S-1.
10.12 Lease, dated April 30, 1976, between Elizabeth Properties
Trust, Elizabeth Zahn, Trustee, and the Company. Incorpo-
rated by reference to Exhibit 10(e) to the GNLV Form S-1.
10.13 Joint Venture Agreement of Victoria Partners, dated as of
December 9, 1994, among MRGS, Gold Strike L.V. and the
Company (without exhibit) (the "Joint Venture Agree-
ment"). Incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated December 9,
1994.
10.14* 1995 Stock Option and Stock Appreciation Rights Plan.
Incorporated by reference to Exhibit A to the Company's
definitive Proxy Statement filed on April 18, 1995 under
cover of Schedule 14A.
10.15 Amendment No. 1 to the Joint Venture Agreement, dated as
of April 17, 1995. Incorporated by reference to Exhibit
10(c) to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1995 (the "March 1995
Form 10-Q").
10.16 Amended and Restated Lease, dated as of April 26, 1995,
between MKB Company and Beau Rivage (without exhibits).
Incorporated by reference to Exhibit 10(e) to the March
1995 Form 10-Q.
10.17 Amendment No. 2 to the Joint Venture Agreement, dated as
of September 25, 1995. Incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1995.
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10.18* Executive Medical Reimbursement Plan. Incorporated by
reference to Exhibit 10(hhh) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1995 (the "1995 Form 10-K").
10.19 Amendment No. 3 to the Joint Venture Agreement, dated as
of February 28, 1996. Incorporated by reference to Exhib-
it 10(nnn) to the 1995 Form 10-K.
10.20 An Agreement Between the City of Atlantic City and Mirage
Resorts, Incorporated for the Development of the Huron
North Redevelopment Area, dated May 3, 1996 (without ex-
hibits). Incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996 (the "March 1996 Form
10-Q").
10.21 Completion Guaranty by the Company in favor of the City
of Atlantic City, dated as of May 3, 1996. Incorporated
by reference to Exhibit 10.2 to the March 1996 Form 10-Q.
10.22 Amendment No. 4 to the Joint Venture Agreement, dated as
of May 29, 1996. Incorporated by reference to Exhibit
10(b) to the Quarterly Report on Form 10-Q of Mandalay
(Commission File No. 01-8570) for the fiscal quarter end-
ed April 30, 1996.
10.23 Road Development Agreement, dated as of January 10, 1997,
among the Company, the State of New Jersey (the "State")
and South Jersey Transportation Authority ("SJTA") (with-
out schedules or exhibits), and Assignment and Assumption
Agreement, dated as of January 10, 1997, between the Com-
pany and Atlandia Design and Furnishings Inc.
("Atlandia"). Incorporated by reference to Exhibit 99 to
the Company's Current Report on Form 8-K dated January
10, 1997.
10.24* Non-Qualified Deferred Compensation Plan, dated as of
February 1, 1997. Incorporated by reference to Exhibit
10(ccc) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (the "1996 Form
10-K").
10.25* Directors' Deferred Fee Plan, dated as of February 1,
1997. Incorporated by reference to Exhibit 10(ddd) to the
1996 Form 10-K.
10.26* First Amendment to Non-Qualified Deferred Compensation
Plan, dated February 28, 1997. Incorporated by reference
to Exhibit 10(eee) to the 1996 Form 10-K.
10.27* First Amendment to Directors' Deferred Fee Plan, dated
February 28, 1997. Incorporated by reference to Exhibit
10(fff) to the 1996 Form 10-K.
10.28 Amended and Restated Loan Agreement, dated as of March 7,
1997, among the Company, the Banks named therein,
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BancAmerica Securities, Inc., CIBC Wood Gundy Securities
Corp., J.P. Morgan Securities Inc. and Societe
Generale, as Co-Arrangers, Bankers Trust Company, The
Bank of New York, The Bank of Nova Scotia, Commerzbank
Aktiengesellschaft, Credit Lyonnais, The Long-Term Credit
Bank of Japan, Ltd., Los Angeles Agency, PNC Bank,
National Association and Westdeutsche Landesbank
Girozentrale, as Co-Agents, Bank of America National
Trust and Savings Association, as Administrative Agent,
and Morgan Guaranty Trust Company of New York, as Doc-
umentation Agent (without schedules or exhibits) (the
"Amended and Restated Loan Agreement"). Incorporated by
reference to Exhibit 10(ggg) to the 1996 Form 10-K.
10.29 Issuing and Paying Agency Agreement, dated July 24, 1997,
between the Company and First Trust of New York, National
Association (without exhibit). Incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1997
(the "September1997 Form 10-Q").
10.30 Form of Series A Commercial Paper Note of the Company.
Incorporated by reference to Exhibit 10.2 to the Septem-
ber 1997 Form 10-Q.
10.31 First Amendment to Road Development Agreement, dated as
of July 31, 1997, among the State, SJTA and Atlandia.
Incorporated by reference to Exhibit 10.7 to the Septem-
ber 1997 Form 10-Q.
10.32* Letter agreement, dated September 16, 1997, between the
Company and Frank Visconti. Incorporated by reference to
Exhibit 10.8 to the September 1997 Form 10-Q.
10.33 Amendment No. 1 to Amended and Restated Loan Agreement,
dated as of September 19, 1997. Incorporated by reference
to Exhibit 10.9 to the September 1997 Form 10-Q.
10.34 Second Amendment to Road Development Agreement, dated as
of October 10, 1997, among the State, SJTA and Atlandia
(without schedules or exhibits). Incorporated by refer-
ence to Exhibit 10.10 to the September 1997 Form 10-Q.
10.35 Letter agreement, dated March 12, 1998, between Bellagio
and Stephen A. Wynn (with exhibit). Incorporated by ref-
erence to Exhibit 10(ccc) to the 1997 Form 10-K.
10.36 Design/Build Contract, dated September 8, 1997, between
Atlandia and Yonkers Contracting Company, Inc./Granite
Construction Company, a Joint Venture (with appendices).
Incorporated by reference to Exhibit 10.13 to the Septem-
ber 1997 Form 10-Q.
10.37 Escrow Fund Agreement, dated as of October 10, 1997,
among CoreStates Bank, N.A., as Escrow Agent, Atlandia,
the State and SJTA (without schedules). Incorporated by
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reference to Exhibit 10.14 to the September 1997 Form
10-Q.
10.38 Bond Purchase Agreement, dated October 10, 1997, between
the Company and SJTA (without exhibit). Incorporated by
reference to Exhibit 10.15 to the September 1997 Form
10-Q.
10.39 Donation Agreement, dated as of October 10, 1997, between
the Casino Reinvestment Development Authority and MAC,
CORP. (without exhibits). Incorporated by reference to
Exhibit 10.16 to the September 1997 Form 10-Q.
10.40 An Amendment to the May 3, 1996 Agreement Between the
City of Atlantic City and Mirage Resorts, Incorporated
for the Development of the Huron North Redevelopment
Area, dated January 8, 1998 (without exhibits). Incorpo-
rated by reference to Exhibit 10(nnn) to the 1997 Form
10-K.
10.41 Letter agreement, dated January 14, 1998, between
Bellagio and Stephen A. Wynn (with exhibits). Incorporat-
ed by reference to Exhibit 10(ooo) to the 1997 Form 10-K.
10.42* Second Amendment to Non-Qualified Deferred Compensation
Plan, dated as of February 1, 1998. Incorporated by ref-
erence to Exhibit 10(ppp) to the 1997 Form 10-K.
10.43* Second Amendment to Directors' Deferred Fee Plan, dated
as of February 1, 1998. Incorporated by reference to
Exhibit 10(qqq) to the 1997 Form 10-K.
10.44* 1998 Stock Option and Stock Appreciation Rights Plan.
Incorporated by reference to Exhibit 10(rrr) to the 1997
Form 10-K.
10.45 Second Amendment to Jansen Agreement, dated as of March
13, 1998, between the Company and Avis P. Jansen,
individually, as Executrix and as Trustee. Incorporated
by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March
31, 1998.
10.46 Letter agreement, dated April 21, 1998, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1998 (the "June 1998
Form 10-Q").
10.47 Amendment No. 2 to Amended and Restated Loan Agreement,
dated as of June 19, 1998. Incorporated by reference to
Exhibit 10.2 to the June 1998 Form 10-Q.
10.48 Agreement Between Owner and Construction Manager for Con-
struction Management Services, dated as of November 1,
1997, between Tishman Construction Corporation of New
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Jersey and MAC, CORP. Construction. Incorporated by
reference to Exhibit 10.3 to the June 1998 Form 10-Q.
10.49 Amended and Restated Joint Venture Agreement of Stardust
A.C., dated as of July 14, 1998, between MAC, CORP. and
Boyd Atlantic City, Inc. Incorporated by reference to
Exhibit 10.55 to the Quarterly Report on Form 10-Q of
Boyd (Commission File No. 01-12168) for the fiscal quar-
ter ended June 30, 1998.
10.50 Letter agreement, dated July 31, 1998, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1998 (the "Septem-
ber 1998 Form 10-Q").
10.51 Letter agreement, dated August 17, 1998, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.2 to the September 1998 Form 10-Q.
10.52 Letter agreement, dated September 1, 1998, between
Bellagio and Stephen A. Wynn. Incorporated by reference
to Exhibit 10.3 to the September 1998 Form 10-Q.
10.53 Letter agreement, dated January 7, 1999, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.73 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "1998 Form
10-K").
10.54* 1999 Cash Bonus Plan. Incorporated by reference to Exhib-
it 10.74 to the 1998 Form 10-K.
10.55 Amendment No. 3 to Amended and Restated Loan Agreement,
dated as of December 17, 1998. Incorporated by reference
to Exhibit 10.75 to the 1998 Form 10-K.
10.56 Amended and Restated Third Amendment to Road Development
Agreement, dated as of February 1, 1999, among the State,
SJTA and AC Holding Corp. Incorporated by reference to
Exhibit 10.76 to the 1998 Form 10-K.
10.57 A Second Amendment to the May 3, 1996 Agreement Between
the City of Atlantic City and Mirage Resorts, Incorpo-
rated for the Development of the Huron North Redevelop-
ment Area, dated December 15, 1998. Incorporated by ref-
erence to Exhibit 10.77 to the 1998 Form 10-K.
10.58* Third Amendment to Non-Qualified Deferred Compensation
Plan, dated as of February 15, 1999. Incorporated by ref-
erence to Exhibit 10.78 to the 1998 Form 10-K.
10.59* Third Amendment to Directors' Deferred Fee Plan, dated as
of February 15, 1999. Incorporated by reference to
Exhibit 10.79 to the 1998 Form 10-K.
-44-
<PAGE>
10.60 A Third Amendment to the May 3, 1996 Agreement Between
the City of Atlantic City and Mirage Resorts, Incorpo-
rated for the Development of the Huron North Redevelop-
ment Area, dated January 13, 1999 (without exhibits).
Incorporated by reference to Exhibit 10.80 to the 1998
Form 10-K.
10.61 First Amendment to Amended and Restated Joint Venture
Agreement, dated as of September 10, 1998, between MAC,
CORP. and Boyd Atlantic City, Inc. Incorporated by ref-
erence to Exhibit 10.81 to the 1998 Form 10-K.
10.62* Employment Agreement, dated as of May 20, 1999, among the
Company, GNLV and Barry A. Shier. Incorporated by refer-
ence to Exhibit 10.1 to the June 1999 Form 10-Q.
10.63 Letter agreement, dated May 19, 1999, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.2 to the June 1999 Form 10-Q.
10.64 Letter agreement, dated June 16, 1999, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.3 to the June 1999 Form 10-Q.
10.65 Letter agreement, dated June 29, 1999, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.4 to the June 1999 Form 10-Q.
10.66 Amendment No. 4 to Amended and Restated Loan Agreement,
dated as of June 29, 1999, among the Company, the Banks,
Co-Arrangers, Co-Agents and Documentation Agent referred
to therein and Bank of America National Trust and Savings
Association, as Administrative Agent. Incorporated by
reference to Exhibit 10.5 to the June 1999 Form 10-Q.
10.67 Letter agreement, dated December 31, 1998, between
Bellagio and Stephen A. Wynn (with exhibit). Incorporated
by reference to Exhibit 10.6 to the June 1999 Form 10-Q.
10.68 Letter agreement, dated August 1, 1999, between Bellagio
and Stephen A. Wynn. Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1999 (the "Septem-
ber 1999 Form 10-Q").
10.69 Letter agreement, dated September 1, 1999, between
Bellagio and Stephen A. Wynn. Incorporated by reference
to Exhibit 10.2 to the September 1999 Form 10-Q.
10.70* Employment Termination and Settlement Agreement, dated as
of September 7, 1999, between the Company and Daniel R.
Lee (without exhibit). Incorporated by reference to Ex-
hibit 10.3 to the September 1999 Form 10-Q.
10.71 Letter agreement, dated December 1, 1999, between
Bellagio and Stephen A. Wynn.
-45-
<PAGE>
10.72 Fourth Amendment to Road Development Agreement, dated as
of October 30, 1999, among the State, SJTA and AC
Holding Corp.
10.73 Public Trust Tidelands Lease, dated February 4, 1999,
between the State of Mississippi and Beau Rivage Resorts
(without exhibits).
10.74* Employment Agreement, dated as of February 29, 2000,
between the Company and Stephen A. Wynn.
10.75* Employment Agreement, dated as of February 29, 2000,
between the Company and Robert H. Baldwin (substantially
identical agreement with Marc Schorr not filed herewith).
10.76* Employment Agreement, dated as of February 29, 2000,
between the Company and Bruce A. Levin (substantially
identical agreements with Kenneth R. Wynn, Frank P.
Visconti and Richard D. Bronson not filed herewith).
21 List of subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
- ----------------------------
* Constitutes a management contract or compensatory plan or arrangement.
(b). REPORTS ON FORM 8-K.
We filed no reports on Form 8-K during the three-month period
ended December 31, 1999.
-46-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Directors and Stockholders
of Mirage Resorts, Incorporated
We have audited the accompanying consolidated balance sheets of Mirage
Resorts, Incorporated (a Nevada corporation) and subsidiaries (the
"Company") as of December 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity and cash flows for the years
ended December 31, 1999, 1998 and 1997. These consolidated financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Mirage Resorts, Incorporated and subsidiaries as of December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows
for the years ended December 31, 1999, 1998 and 1997 in conformity with
generally accepted accounting principles.
As explained in Note 2 of the Notes to Consolidated Financial Statements,
effective January 1, 1999, the Company changed its method of accounting for
start-up activities.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule of
Valuation and Qualifying Accounts for the years ended December 31, 1999,
1998 and 1997 is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a required part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
January 24, 2000
-47-
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
AT DECEMBER 31
------------------------
1999 1998
---------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents..................................................... $ 139,488 $ 74,814
Trade receivables, net of allowance for doubtful accounts of $46,869
and $40,480................................................................. 147,445 118,125
Other receivables............................................................. 33,912 41,111
Inventories................................................................... 94,351 74,195
Preopening costs.............................................................. - 24,718
Deferred income taxes......................................................... 24,558 23,180
Prepaid expenses and other.................................................... 35,948 42,334
--------- ---------
Total current assets...................................................... 475,702 398,477
Property and equipment, net.................................................... 3,970,875 3,290,189
Construction in progress....................................................... 124,342 539,530
Other assets, net.............................................................. 233,387 302,006
---------- ----------
$4,804,306 $4,530,202
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable........................................................ $ 39,369 $ 51,220
Construction payables......................................................... 12,063 42,859
Accrued liabilities........................................................... 272,819 234,047
Current maturities of long-term debt.......................................... 246 404
---------- ----------
Total current liabilities................................................. 324,497 328,530
Long-term debt, net of current maturities...................................... 2,210,033 2,378,507
Other liabilities, including deferred income taxes of $232,570 and $207,063.... 245,874 221,328
---------- ----------
Total liabilities......................................................... 2,780,404 2,928,365
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.004: authorized 1,125,000,000 shares; issued
235,147,650 shares; outstanding 189,994,297 and 180,119,931 shares........... 940 940
Additional paid-in capital.................................................... 1,083,459 738,665
Retained earnings............................................................. 1,255,888 1,145,497
Treasury stock, at cost: 45,153,353 and 55,027,719 shares..................... (316,385) (283,265)
---------- ----------
Total stockholders' equity................................................ 2,023,902 1,601,837
---------- ----------
$4,804,306 $4,530,202
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTON>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31
----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Casino........................................... $1,243,625 $ 821,964 $ 784,512
Rooms............................................ 522,566 329,873 297,885
Food and beverage................................ 456,811 257,373 218,974
Entertainment.................................... 184,355 106,803 97,924
Retail........................................... 141,632 76,313 65,703
Other............................................ 100,863 57,391 51,450
---------- ---------- ----------
2,649,852 1,649,717 1,516,448
Less - promotional allowances.................... (247,179) (153,167) (127,498)
---------- ---------- ----------
2,402,673 1,496,550 1,388,950
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Casino........................................... 690,179 453,691 414,482
Rooms............................................ 164,610 105,459 88,705
Food and beverage................................ 314,689 177,696 143,069
Entertainment.................................... 146,741 88,739 77,377
Retail........................................... 100,604 53,437 44,068
Other............................................ 52,707 30,984 26,487
Provision for losses on receivables.............. 31,911 27,677 19,213
General and administrative....................... 328,390 191,377 161,960
Depreciation and amortization.................... 205,163 105,298 87,956
---------- ---------- ----------
2,034,994 1,234,358 1,063,317
---------- ---------- ----------
OPERATING PROFIT.................................. 367,679 262,192 325,633
Corporate expense................................. (49,686) (48,953) (29,193)
Preopening and related promotional expense........ (42,130) (88,313) -
Equity in earnings of Monte Carlo................. 29,164 27,179 29,601
---------- ---------- ----------
INCOME FROM OPERATIONS............................ 305,027 152,105 326,041
Interest cost..................................... (147,359) (130,598) (70,350)
Interest capitalized.............................. 29,834 97,870 62,673
Income from terminated acquisition effort......... 24,462 - -
Other, including interest income.................. 6,126 15,801 6,715
---------- ---------- ----------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE............................. 218,090 135,178 325,079
Provision for income taxes........................ (77,122) (49,953) (115,276)
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......... 140,968 85,225 209,803
Extraordinary item - loss on early
retirements of debt, net of applicable
income tax benefit............................... - (3,521) (2,225)
Cumulative effect (to January 1, 1999) of change
in method of accounting for preopening costs,
net of applicable income tax benefit............. (30,577) - -
---------- ---------- ----------
NET INCOME........................................ $ 110,391 $ 81,704 $ 207,578
========== ========== ==========
INCOME PER SHARE OF COMMON STOCK
Income before extraordinary item and cumulative
effect of change in accounting principle
Basic......................................... $ 0.74 $ 0.47 $ 1.17
Diluted....................................... 0.70 0.45 1.09
Net income
Basic......................................... $ 0.58 $ 0.45 $ 1.16
Diluted....................................... 0.55 0.43 1.08
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-49-
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
COMMON STOCK
--------------------- ADDITIONAL
SHARES PAR PAID-IN RETAINED TREASURY
OUTSTANDING VALUE CAPITAL EARNINGS STOCK TOTAL
----------- ----- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1997...... 178,335,915 $ 940 $ 725,240 $ 856,215 $(291,512) $1,290,883
Exercise of common
stock options................ 1,136,888 - 369 - 5,842 6,211
Tax benefit from stock
option exercises............. - - 6,580 - - 6,580
Repurchases of common
stock........................ (50,981) - - - (1,126) (1,126)
Other......................... - - 2,358 - - 2,358
Net income.................... - - - 207,578 - 207,578
----------- ----- ---------- ---------- --------- ----------
BALANCES, DECEMBER 31, 1997.... 179,421,822 940 734,547 1,063,793 (286,796) 1,512,484
Exercise of common
stock options................ 701,500 - 629 - 3,605 4,234
Tax benefit from stock
option exercises............. - - 3,258 - - 3,258
Repurchases of common
stock........................ (3,391) - - - (74) (74)
Other......................... - - 231 - - 231
Net income.................... - - - 81,704 - 81,704
----------- ----- ---------- ---------- --------- ----------
BALANCES, DECEMBER 31, 1998.... 180,119,931 940 738,665 1,145,497 (283,265) 1,601,837
Exercise of common
stock options................ 2,261,512 - 4,120 - 11,716 15,836
Tax benefit from stock
option exercises............. - - 10,602 - - 10,602
Issuance of common stock..... 16,633,663 - 330,072 - 85,490 415,562
Repurchases of common
stock........................ (9,020,809) - - - (130,326) (130,326)
Net income.................... - - - 110,391 - 110,391
----------- ----- ---------- ---------- --------- ----------
BALANCES, DECEMBER 31, 1999.... 189,994,297 $ 940 $1,083,459 $1,255,888 $(316,385) $2,023,902
=========== ===== ========== ========== ========= ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-50-
<PAGE>
<TABLE>
<CAPTION>
MIRAGE RESORTS, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31
-----------------------------------------
1999 1998 1997
--------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................................... $ 110,391 $ 81,704 $ 207,578
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for losses on receivables............................ 31,911 27,677 19,213
Depreciation and amortization of property and equipment,
including amounts reported as corporate expense............... 216,778 118,004 97,533
Expensed preopening and related promotional costs.............. 42,130 88,313 -
Equity in earnings of Monte Carlo.............................. (29,164) (27,179) (29,601)
Distributions from Monte Carlo................................. 34,000 20,900 -
Non-recurring charges, before related income tax benefit
Loss on early retirements of debt............................. - 5,418 3,422
Cumulative effect of change in method of accounting for
preopening costs............................................. 46,967 - -
Deferred income taxes.......................................... 24,129 4,851 15,076
Changes in components of working capital pertaining to
operating activities
Increase in trade receivables................................ (61,231) (43,330) (50,652)
Increase in inventories...................................... (20,156) (45,016) (1,625)
(Increase) decrease in other current assets.................. 1,654 (31,680) 4,729
Increase in trade accounts payable and accrued liabilities... 33,933 78,163 12,193
Other adjustments.............................................. (2,176) 2,030 16,091
--------- ----------- -----------
Net cash provided by operating activities................ 429,166 279,855 293,957
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Preopening and related promotional costs......................... (42,130) (102,306) (22,220)
Capital expenditures............................................. (509,399) (1,158,497) (1,058,900)
(Increase) decrease in construction deposits..................... 30,323 (19,375) (111,665)
Increase (decrease) in preopening and construction payables...... (37,544) (10,608) 26,255
Proceeds from sales of property and equipment.................... 43,018 99,077 30,825
Boardwalk acquisition costs, net of cash acquired................ - (55,562) (51,917)
Joint venture and other investments.............................. (6,250) (14,510) (2,490)
Other investing activities....................................... 14,768 (18,623) (6,309)
--------- ----------- -----------
Net cash used for investing activities................... (507,214) (1,280,404) (1,196,421)
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in bank credit facility and commercial
paper borrowings................................................ (168,391) 817,205 612,795
Issuance of long-term debt....................................... - 394,728 296,052
Retirement of long-term debt..................................... - (237,110) -
Issuance of common stock......................................... 415,562 - -
Repurchases of common stock...................................... (130,326) (74) (1,126)
Exercise of common stock options, including related income
tax benefit..................................................... 26,438 7,492 12,791
Other financing activities....................................... (561) (6,215) (619)
--------- ----------- -----------
Net cash provided by financing activities................ 142,722 976,026 919,893
--------- ----------- -----------
CASH AND CASH EQUIVALENTS
Increase (decrease) for the year................................. 64,674 (24,523) 17,429
Balance, beginning of year....................................... 74,814 99,337 81,908
--------- ----------- -----------
Balance, end of year............................................. $ 139,488 $ 74,814 $ 99,337
========= =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid, net of amounts capitalized........................ $ 123,211 $ 6,223 $ -
Income taxes paid, net of refunds................................ 16,000 41,000 72,000
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<PAGE>
MIRAGE RESORTS, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. Mirage Resorts, Incorporated (the "Company") was
incorporated in Nevada in 1949 as the successor to a partnership that began
business in 1946. The Company, through wholly owned subsidiaries, owns and
operates casino-based entertainment resorts. These resorts include
Bellagio (which opened on October 15, 1998), The Mirage, Treasure Island
and the Holiday Inn -Registered Trademark- Casino Boardwalk (the
"Boardwalk"), all located on the Las Vegas Strip. See Note 3 for informa-
tion concerning the Company's June 1998 acquisition of the Boardwalk.
The Company also owns the Golden Nugget, located in downtown Las Vegas,
and the Golden Nugget-Laughlin, located along the Colorado River in
Laughlin, Nevada. The Company's newest resort, Beau Rivage, opened on
March 16, 1999. Beau Rivage is a 1,780-guestroom beachfront resort located
on an approximately 41-acre site where Interstate 110 meets the Gulf Coast
in Biloxi, Mississippi. In addition, the Company is a 50% partner in a
joint venture that owns and operates the Monte Carlo Resort & Casino on the
Las Vegas Strip ("Monte Carlo").
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of the Company and its subsidiaries. Significant
intercompany balances and transactions have been eliminated. Investments
in 50% or less owned entities over which the Company has the ability to
exercise significant influence, including joint ventures such as Monte
Carlo, are accounted for using the equity method.
REVENUES AND PROMOTIONAL ALLOWANCES. Casino revenues represent the net
win from gaming activities, which is the difference between gaming wins and
losses. Non-casino revenues include the estimated retail value of rooms,
food and beverage and other goods and services provided to customers on a
complimentary basis as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Rooms........................... $105,168 $ 65,399 $ 55,153
Food and beverage............... 127,167 79,629 64,575
Other........................... 14,844 8,139 7,770
-------- -------- --------
$247,179 $153,167 $127,498
======== ======== ========
</TABLE>
Such amounts are then deducted as promotional allowances. The estimated
costs of providing these promotional allowances, totaling $178.1 million in
1999, $112.9 million in 1998 and $90.2 million in 1997, have been
classified primarily as casino costs and expenses.
-52-
<PAGE>
CASH AND CASH EQUIVALENTS. The Company classifies as cash equivalents
all highly liquid debt instruments with a maturity of three months or less
when purchased. Cash equivalents are carried at cost, which approximates
fair value.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
short-term investments and receivables.
The Company's short-term investments typically consist of U.S. Government-
backed repurchase agreements with maturities of 30 days or less. Such
investments are made with financial institutions having a high credit
quality and the Company limits the amount of its credit exposure to any one
financial institution. Due to the short-term nature of the instruments,
the Company does not take possession of the securities, which are instead
held in a custodial account.
The Company extends credit to approved casino customers following
background checks and investigations of creditworthiness. At December 31,
1999, a substantial portion of the Company's receivables was due from
customers residing in foreign countries. Business or economic conditions
or other significant events in these countries could affect the
collectibility of such receivables.
An estimated allowance for doubtful accounts is maintained to reduce the
Company's receivables to their carrying amount, which approximates fair
value. Management believes that as of December 31, 1999, no significant
concentrations of credit risk existed for which an allowance had not
already been determined and recorded.
INVENTORIES. Inventories are stated at the lower of cost or market
value. Cost is determined by the first-in, first-out and specific
identification methods.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the assets
using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes.
The costs of significant improvements are capitalized. Costs of normal
repairs are charged to expense as incurred. The cost and accumulated
depreciation of property and equipment retired or otherwise disposed of are
eliminated from the respective accounts and any resulting gain or loss is
included in income.
CAPITALIZED INTEREST. The interest cost associated with a major
construction project is capitalized and included in the cost of the
project. When no debt is incurred specifically for a project, interest is
capitalized on amounts expended on the project using the weighted-average
cost of the Company's outstanding borrowings. Capitalization of interest
ceases when the project is substantially complete.
DEBT DISCOUNT AND ISSUANCE COSTS. Debt discount and issuance costs are
capitalized and amortized to interest cost using the effective interest
method.
-53-
<PAGE>
INCOME PER SHARE OF COMMON STOCK. The weighted-average number of common
and common equivalent shares used in the calculation of basic and diluted
earnings per share consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Weighted-average common shares outstanding (used in
the calculation of basic earnings per share)........... 190,714,631 179,679,123 178,816,348
Potential dilution from the assumed exercise of common
stock options.......................................... 9,524,884 11,285,181 13,719,527
----------- ----------- -----------
Weighted-average common and common equivalent
shares (used in the calculation of diluted earnings
per share)............................................. 200,239,515 190,964,304 192,535,875
=========== =========== ===========
</TABLE>
Stock options with an exercise price higher than the average market price
of the common stock during the period are excluded from the calculation of
diluted earnings per share. As a result, the calculation excluded a
weighted average of 7,391,497 stock options for 1999 and 7,259,547 for
1998. The number of stock options excluded from the calculation for 1997
was not material.
RECLASSIFICATIONS. Certain amounts in the 1998 and 1997 consolidated
financial statements have been reclassified to conform to the 1999
presentation. These reclassifications had no effect on the Company's net
income.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and notes to consolidated financial
statements. Actual results could differ from those estimates.
NOTE 2 - ACCOUNTING CHANGE
Effective January 1, 1999, the Company adopted Statement of Position No.
98-5 - Reporting on the Costs of Start-Up Activities ("SOP 98-5"). The
provisions of SOP 98-5 are effective for fiscal years beginning after
December 15, 1998 and require the costs associated with start-up activities
(including preopening costs of casinos) to be expensed as incurred. The
Company previously capitalized preopening costs and amortized them to
expense over the 60-day period following opening of the related facility.
As required by SOP 98-5, the Company wrote off all capitalized preopening
costs as of January 1, 1999 associated with Beau Rivage and its development
activities in Atlantic City, New Jersey. The write-off resulted in a
charge of $30.6 million ($0.16 per share basic and $0.15 per share
diluted), net of income tax benefit of $16.4 million. During 1999, the
Company also incurred and expensed an additional $42.1 million ($27.6
million, $0.14 per share basic and diluted, net of income tax benefit) of
-54-
<PAGE>
preopening and related promotional costs associated with these projects.
Under the Company's previous accounting method, all $55.1 million ($36.0
million, $0.19 per share basic and $0.18 per share diluted, net of income
tax benefit) of Beau Rivage's preopening and related promotional costs
would have been amortized to expense during 1999.
NOTE 3 - ACQUISITION OF BOARDWALK CASINO, INC.
On June 30, 1998, the Company completed the acquisition of Boardwalk
Casino, Inc. (the company that owns and operates the Boardwalk) and certain
related assets for a total purchase price of approximately $112.0 million
in cash. Approximately $51.9 million of this amount was expended in 1997.
The acquisition was accounted for pursuant to the purchase method, with
approximately $145.9 million allocated to the assets acquired and
approximately $33.9 million to the liabilities assumed based upon their
respective estimated fair values.
Combined with adjacent land owned by the Company, the Boardwalk
acquisition provides an approximately 55-acre site for future development
with over 1,200 feet of frontage on the Las Vegas Strip between Bellagio
and Monte Carlo. The Company is in the very early design phase for a new
hotel-casino resort expected to be ultimately developed on the site. The
design, timing and cost of any such future development, however, are still
highly uncertain. Because the Boardwalk and adjacent land were acquired
for development of a new resort, interest cost is being capitalized on the
funds used for such purchases. In the interim, the Boardwalk is being
accounted for as an incidental operation. Under this method, the
Boardwalk's operations are excluded from the Company's consolidated
operating results and its net income, as well as rental income from the
adjacent land, is recorded as a reduction in the carrying value of the
land.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Land................................... $ 632,330 $ 607,318
Land improvements...................... 252,527 236,441
Buildings.............................. 2,078,147 1,679,262
Furniture, fixtures and equipment...... 1,932,462 1,500,200
---------- ----------
4,895,466 4,023,221
Less accumulated depreciation.......... (924,591) (733,032)
---------- ----------
$3,970,875 $3,290,189
========== ==========
</TABLE>
-55-
<PAGE>
NOTE 5 - OTHER ASSETS, NET
Other assets, net consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Construction and other deposits........ $ 73,568 $ 135,390
Joint venture and other investments.... 118,221 101,613
Other, net............................. 41,598 65,003
---------- ----------
$ 233,387 $ 302,006
========== ==========
NOTE 6 - ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31
----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Customer deposits........................ $ 66,664 $ 46,354
Payroll and related...................... 61,820 55,200
Outstanding gaming chips and tokens...... 37,281 32,018
Interest................................. 32,615 39,842
Other.................................... 74,439 60,633
---------- ----------
$ 272,819 $ 234,047
========== ==========
</TABLE>
-56-
<PAGE>
NOTE 7 - LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revolving bank credit facility, at a weighted average
interest rate of 6.68% and 5.75%......................... $1,155,000 $1,430,000
Commercial paper notes, at a weighted average effective
interest rate of 6.59%................................... 106,609 -
6-5/8% notes, due February 2005, net of unamortized
original issue discount of $817 and $947................. 199,183 199,053
7-1/4% notes, due October 2006, net of unamortized
original issue discount of $247 and $274................. 249,753 249,726
6-3/4% notes, due August 2007, net of unamortized
original issue discount of $739 and $811................. 199,261 199,189
6-3/4% notes, due February 2008, net of unamortized
original issue discount of $909 and $991................. 199,091 199,009
7-1/4% debentures, due August 2017, net of unamortized
original issue discount of $287 and $295................. 99,713 99,705
Other notes............................................... 1,669 2,229
---------- ----------
2,210,279 2,378,911
Less current maturities................................... (246) (404)
---------- ----------
$2,210,033 $2,378,507
========== ==========
</TABLE>
Borrowings under the Company's $1.75 billion revolving bank credit
facility (the "Bank Facility") are uncollateralized and bear interest, at
the Company's option, at the prime rate or at a specified premium over the
one-, two-, three- or six-month London Interbank Offered Rate ("LIBOR").
The premium is based on the credit rating of the 7-1/4% notes due October
2006 and the Company's Leverage Ratio (as defined). Alternatively, the
Company may request interest rate bids from the participating banks. The
Company incurs an annual commitment fee on the unused portion of the Bank
Facility, which is also based on the rating of the 7-1/4% notes. At Decem-
ber 31, 1999, the interest rate premium was 0.50% per annum and the commit-
ment fee was 0.15% per annum.
The loan agreement governing the Bank Facility contains a covenant that
the Company will not permit its Leverage Ratio to exceed a specified
amount. The loan agreement also provides that, with certain limited
exceptions, the Company and its subsidiaries will not further encumber
their assets or dispose of their Core Assets (as defined).
The Company has a commercial paper program that provides for the
issuance, on a revolving basis, of up to $500 million outstanding principal
amount of uncollateralized short-term notes. The Company is required to
maintain credit availability under the Bank Facility equal to the
outstanding principal amount of commercial paper borrowings.
-57-
<PAGE>
Bank Facility borrowings and commercial paper notes are classified as
long-term debt because management intends to replace such borrowings as
they come due and to have such borrowings outstanding for a period greater
than one year. However, the amount of outstanding borrowings is expected
to fluctuate and may be reduced from time to time.
All of the outstanding notes and debentures issued by the Company are
redeemable, in whole or in part, at the option of the Company at any time
at a redemption price equal to the greater of:
- 100% of the principal amount, or
- The sum of the present values of the remaining scheduled interest and
principal payments discounted to the date of redemption on a semiannual
basis at the Adjusted Treasury Rate (as defined),
plus, in either case, accrued interest to the redemption date.
At December 31, 1999, maturities of the Company's long-term debt during
the next five years totaled $1.3 billion. This amount principally
represents amounts borrowed under or backed by the Bank Facility, which
matures in March 2002.
The estimated fair value of the Company's long-term debt at December 31,
1999 was approximately $2,111,000, versus its book value of $2,210,279. At
December 31, 1998, the estimated fair value of the Company's long-term debt
was approximately $2,367,000, versus its book value of $2,378,911. The
estimated fair value of the Company's outstanding Bank Facility borrowings
and commercial paper notes was assumed to approximate book value due to the
short-term nature of the borrowings. The estimated fair value of the
Company's debt securities that are traded was based on quoted market prices
on or about December 31, 1999 and 1998. The fair value of the Company's
other debt was estimated based on discounted cash flows using current rates
offered to the Company for debt securities having similar remaining
maturities.
NOTE 8 - INCOME TAXES
The provision for income taxes for financial reporting purposes consisted
of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income from continuing operations..... $ 77,122 $ 49,953 $115,276
Tax benefit from cumulative effect
of change in accounting principle.... (16,390) - -
Tax benefit from extraordinary losses
on early retirements of debt......... - (1,897) (1,198)
-------- -------- --------
$ 60,732 $ 48,056 $114,078
======== ======== ========
</TABLE>
-58-
<PAGE>
The provision for income taxes attributable to income from continuing
operations consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CURRENT
Federal.............................. $ 36,059 $ 45,051 $ 90,185
State................................ 544 51 15
-------- -------- --------
36,603 45,102 90,200
DEFERRED
Federal.............................. 40,519 4,851 25,076
-------- -------- --------
$ 77,122 $ 49,953 $115,276
======== ======== ========
</TABLE>
The provision for income taxes attributable to income from continuing
operations differs from the amount computed at the 35% federal income tax
statutory rate as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Amount at statutory rate.............. $ 76,332 $ 47,312 $113,778
Nondeductible contributions........... 383 3,033 76
Other................................. 407 (392) 1,422
-------- -------- --------
$ 77,122 $ 49,953 $115,276
======== ======== ========
</TABLE>
The Internal Revenue Service has completed examinations of the Company's
federal income tax returns for the years 1991 and 1992 and an examination
of the years 1993 and 1994 is currently in process. A number of
adjustments have been proposed but no settlement has been reached. In the
opinion of management, any tax liability arising from these examinations
will not have a material adverse effect on the Company's financial position
or results of operations.
-59-
<PAGE>
The components of the deferred tax liability consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31
-------------------
1999 1998
-------- --------
<S> <C> <C>
DEFERRED TAX LIABILITIES
Temporary differences related to
property and equipment........................... $304,575 $220,143
Other temporary differences....................... 23,949 22,374
-------- --------
Gross deferred tax liabilities.................. 328,524 242,517
-------- --------
DEFERRED TAX ASSETS
Preopening costs.................................. 42,456 25,142
Alternative minimum tax credit.................... 34,784 -
Temporary differences related to receivables...... 22,153 17,625
Other temporary differences....................... 21,119 15,867
-------- --------
Gross deferred tax assets....................... 120,512 58,634
-------- --------
Net deferred tax liabilities.................... $208,012 $183,883
======== ========
</TABLE>
NOTE 9 - EMPLOYEE BENEFIT PLANS
Employees of the Company who are members of various unions are covered by
union-sponsored, collectively bargained, multi-employer health and welfare
and defined benefit pension plans. The Company recorded an expense of
$47.1 million in 1999, $33.9 million in 1998 and $29.8 million in 1997
under such plans. The plans' sponsors have not provided sufficient
information to permit the Company to determine its share of unfunded vested
benefits, if any.
The Company has a retirement savings plan under Section 401(k) of the
Internal Revenue Code covering its non-union employees. The plan allows
employees to defer, within prescribed limits, up to 15% of their income on
a pre-tax basis through contributions to the plan. The Company matches,
within prescribed limits, 50% of eligible employees' contributions up to 4%
of their individual earnings. The Company recorded charges for matching
contributions of $5.5 million in 1999, $4.8 million in 1998 and $4.3
million in 1997.
The Company also has deferred compensation and retirement arrangements
with certain of its executives and directors. Benefits payable under the
arrangements represent unfunded and unsecured liabilities of the Company.
The expense for these arrangements was not material for the periods
presented. At December 31, 1999 and 1998, the liability for the
arrangements was $12.1 million and $12.9 million, respectively.
-60-
<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
LEASES. The Company leases real estate and various equipment under
operating lease arrangements. Certain real estate leases provide for
escalation of rent based upon a specified price index. Future minimum
payments for lease commitments in effect at December 31, 1999 total $95.0
million. Of this amount, $36.3 million is payable during the five-year
period subsequent to December 31, 1999. Aggregate rent cost was $17.9
million in 1999, $14.4 million in 1998 and $5.6 million in 1997.
ENTERTAINMENT SERVICES. The Company has entered into long-term
agreements for entertainment productions appearing in the showrooms at its
major hotel-casinos. Under the agreements, the producers of the shows
generally receive a percentage of show and related revenues and/or a
percentage of show profits. Producers of certain of the productions also
receive a specified payment per show. The producers are responsible for
paying the talent and most other costs of presenting the shows. Generally,
the Company may terminate the agreements without material financial
obligation under certain conditions, including failure of the respective
show to achieve specified financial results.
LITIGATION. The Company is a party to various legal proceedings, most of
which relate to routine matters incidental to its business. Management
does not believe that the outcome of such proceedings will have a material
adverse effect on the Company's financial position or results of
operations.
NOTE 11 - STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The Company has various fixed stock option plans under which options are
granted to employees and directors of the Company. Options granted under
the plans typically have an exercise price equal to the market price of the
Company's common stock on the date of grant and a term of 10 years.
Certain of the plans also permit the grant of stock appreciation rights
("SARs"). At December 31, 1999, no SARs had been granted under the plans.
-61-
<PAGE>
Summarized information for the stock option plans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------------
1999 1998 1997
--------------------------- -------------------------- ---------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
---------- --------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year..................... 37,447,206 $ 9.62 36,578,562 $ 10.66 34,842,950 $ 9.47
Granted...................... 4,452,500 13.83 19,895,255 15.91 2,872,500 23.00
Exercised.................... (2,261,512) 7.00 (701,500) 6.04 (1,136,888) 5.46
Terminated................... (3,133,988) 14.53 (18,325,111) 18.65 - -
---------- ----------- ----------
Outstanding at end
of year..................... 36,504,206 9.87 37,447,206 9.62 36,578,562 10.66
========== =========== ==========
Options exercisable at end
of year..................... 20,457,404 $ 7.43 21,002,682 $ 6.97 19,218,730 $ 6.44
Options and SARs available
for grant at end of year.... 2,906,012 4,224,524 794,668
</TABLE>
In December 1998, a total of 18,235,111 outstanding stock options with a
weighted-average exercise price of $18.66 were terminated in exchange for
the grant of 15,592,144 stock options with an exercise price of $14.38, the
closing sale price of the Company's common stock on the date of the
exchange. The options granted in the exchange were intended to have the
same theoretical value to each option holder as the terminated options,
determined using an option-pricing model. Other than the exercise price,
the options granted in the exchange have the same terms as the terminated
options, including the respective vesting dates and remaining contractual
lives.
-62-
<PAGE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------- ----------------------------
WEIGHTED-
AVERAGE
RANGE OF REMAINING WEIGHTED- WEIGHTED-
EXERCISE NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.80 to $ 5.98.... 10,568,700 1.8 years $ 4.72 8,568,700 $ 4.77
6.55 to 13.63.... 11,536,000 4.8 8.92 8,816,000 7.60
14.00 to 14.38.... 13,700,506 6.3 14.34 3,034,404 14.38
14.56 to 22.06.... 699,000 9.5 15.94 38,300 16.05
---------- ----------
36,504,206 4.6 9.87 20,457,404 7.43
========== ==========
</TABLE>
The accounting standard that applies to stock options provides, among
other things, that stock options granted to employees may be accounted for
using either the fair value or intrinsic value-based method. Under the
fair value-based method, compensation cost is measured at the date of grant
based on the estimated value of the options determined using an option-
pricing model. The model takes into account the stock price at the grant
date, the exercise price and expected life of the option, the volatility of
the stock, expected dividends on the stock and the risk-free interest rate
over the expected life of the option.
The intrinsic value-based method measures compensation cost by the
excess, if any, of the market price of the stock at the date of grant over
the exercise price of the options. Under both methods, compensation cost
is charged to earnings over the period that the options become exercisable.
The Company uses the intrinsic value-based method to account for employee
stock options. Accordingly, no material compensation cost has been
recognized.
The following table discloses the Company's pro forma net income and net
income per share assuming compensation cost for employee stock options had
been determined using the fair value-based method. The table also
discloses the weighted-average assumptions used in estimating the fair
value of each option grant on the date of grant and the estimated weighted-
average fair value of the options granted. The option-pricing model used
in the calculations assumes no expected future dividend payments on the
Company's common stock. The model also implicitly assumes that the price
of the Company's stock will appreciate from the price at the time that the
options were granted.
-63-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
As reported......................................... $ 140,968 $ 85,225 $ 209,803
Pro forma........................................... 122,275 67,730 197,290
NET INCOME
As reported......................................... $ 110,391 $ 81,704 $ 207,578
Pro forma........................................... 91,698 64,209 195,065
INCOME PER SHARE BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE
Basic
As reported....................................... $ 0.74 $ 0.47 $ 1.17
Pro forma......................................... 0.64 0.38 1.10
Diluted
As reported....................................... $ 0.70 $ 0.45 $ 1.09
Pro forma......................................... 0.63 0.36 1.04
NET INCOME PER SHARE
Basic
As reported....................................... $ 0.58 $ 0.45 $ 1.16
Pro forma......................................... 0.48 0.36 1.09
Diluted
As reported....................................... $ 0.55 $ 0.43 $ 1.08
Pro forma......................................... 0.47 0.35 1.03
WEIGHTED-AVERAGE ASSUMPTIONS
Expected stock price volatility...................... 37.57% 35.00% 35.14%
Risk-free interest rate.............................. 5.88% 4.72% 6.49%
Expected option life................................. 6.6 years 5.8 years 6.2 years
Estimated fair value of options granted.............. $ 6.69 $ 6.69 $ 11.05
WEIGHTED-AVERAGE VESTING PERIOD OF OPTIONS GRANTED.... 4.8 years 4.9 years 5.3 years
</TABLE>
NOTE 12 - CAPITAL STOCK
On May 11, 1999, the Company issued 16,633,663 shares of its common
stock in a public offering at $25.00 per share. The net proceeds from the
offering of approximately $415.6 million were used to reduce the Company's
outstanding Bank Facility and commercial paper borrowings.
During 1999, the Company repurchased a total of 9,020,809 shares of its
common stock in the open market and in a privately negotiated transaction.
The total cost of the repurchases was approximately $130.3 million, or an
average of $14.45 per share.
In December 1999, the Board of Directors approved a program to repur-
chase up to 5,000,000 additional shares of the Company's common stock. At
December 31, 1999, no shares had been repurchased pursuant to this program.
The timing and amount of future share repurchases, if any, will depend on
various factors, including market conditions, available alternative
investments and the Company's financial position.
-64-
<PAGE>
The Company's Articles of Incorporation authorize 5,000,000 shares of
preferred stock, none of which has been issued.
NOTE 13 - EXTRAORDINARY LOSS AND OTHER NON-RECURRING ITEMS
BUSINESS INTERRUPTION INSURANCE PROCEEDS. The "Other" revenue caption
in 1999 includes approximately $12.0 million associated with the settlement
of a business interruption insurance claim at Beau Rivage related to a
major hurricane that struck the Biloxi, Mississippi area in September 1998.
INCOME FROM TERMINATED ACQUISITION EFFORT. In April 1999, the Company
evaluated the possible acquisition of the gaming operations of a major
competitor. As part of the negotiations, it was agreed that the Company
would receive a fee as compensation for its evaluation efforts should the
operations be sold to another bidder. In late December 1999, a competing
bidder completed the acquisition of the operations and in early January
2000 the Company received the agreed-upon fee. After deducting the related
costs, the Company recorded income in 1999 of approximately $24.5 million
associated with the transaction.
EXTRAORDINARY LOSS ON EARLY RETIREMENTS OF DEBT. In March 1998, the
Company redeemed all $100.0 million principal amount of its 9-1/4% senior
subordinated notes. The notes were scheduled to mature in March 2003 and
were redeemed at 104.11% of the principal amount. The call premium and
write-off of the unamortized debt issuance costs resulted in an
extraordinary loss of $3.5 million ($0.02 per share basic and diluted), net
of income tax benefit of $1.9 million.
In March 1997, the Bank Facility was amended to, among other things,
increase the total availability from $1.0 billion to $1.75 billion and
extend the maturity date from May 1999 to March 2002. In connection with
the amendment, the Company wrote off the unamortized up-front costs and
fees associated with the original $1.0 billion facility, resulting in an
extraordinary charge of $2.2 million ($0.01 per share basic and diluted),
net of income tax benefit of $1.2 million.
-65-
<PAGE>
NOTE 14 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1999
Gross revenues......................................... $639,205 $634,031 $669,984 $706,632 $2,649,852
Promotional allowances................................. (58,492) (58,862) (63,502) (66,323) (247,179)
Net revenues........................................... 580,713 575,169 606,482 640,309 2,402,673
Operating profit....................................... 108,984 66,087 80,375 112,233 367,679
Preopening and related promotional expense............. 31,455 4,120 3,415 3,140 42,130
Income from operations................................. 75,129 57,837 69,014 103,047 305,027
Income before cumulative effect of change in
accounting principle.................................. 32,070 18,462 27,029 63,407 140,968
Cumulative effect of change in method of accounting
for preopening costs.................................. (30,577) - - - (30,577)
Net income............................................. 1,493 18,462 27,029 63,407 110,391
Income per share before cumulative effect of
change in accounting principle
Basic................................................ $ 0.18 $ 0.10 $ 0.14 $ 0.33 $ 0.74
Diluted.............................................. 0.17 0.09 0.13 0.32 0.70
Net income per share
Basic................................................ $ 0.01 $ 0.10 $ 0.14 $ 0.33 $ 0.58
Diluted.............................................. 0.01 0.09 0.13 0.32 0.55
1998
Gross revenues......................................... $370,493 $346,810 $366,625 $565,789 $1,649,717
Promotional allowances................................. (35,328) (31,222) (34,031) (52,586) (153,167)
Net revenues........................................... 335,165 315,588 332,594 513,203 1,496,550
Operating profit....................................... 66,954 54,824 59,394 81,020 262,192
Preopening and related promotional expense............. - - - 88,313 88,313
Income (loss) from operations.......................... 65,908 52,564 48,225 (14,592) 152,105
Income (loss) before extraordinary item................ 41,600 33,619 30,104 (20,098) 85,225
Extraordinary loss on early retirement of debt......... (3,521) - - - (3,521)
Net income (loss)...................................... 38,079 33,619 30,104 (20,098) 81,704
Income (loss) per share before extraordinary item
Basic................................................ $ 0.23 $ 0.19 $ 0.17 $ (0.11) $ 0.47
Diluted.............................................. 0.22 0.18 0.16 (0.11) 0.45
Net income (loss) per share
Basic................................................ $ 0.21 $ 0.19 $ 0.17 $ (0.11) $ 0.45
Diluted.............................................. 0.20 0.18 0.16 (0.11) 0.43
</TABLE>
NOTE 15 - SUBSEQUENT EVENT (UNAUDITED)
On March 6, 2000, the Company signed a definitive merger agreement with
MGM Grand, Inc. ("MGM Grand") under which MGM Grand will acquire all of the
Company's outstanding common stock for $21 per share in cash and the
Company will become a wholly owned subsidiary of MGM Grand. The merger is
subject to the approval of the Company's stockholders and to the satisfac-
tion of customary closing conditions contained in the merger agreement,
including the receipt of all necessary regulatory approvals. The merger
is not subject to a financing contingency, and MGM Grand has stated that it
has financing commitments to fund the entire acquisition cost. The merger
is currently expected to close by the fourth quarter of 2000.
-66-
<PAGE>
In connection with the execution of the merger agreement, the Company
entered into a stock option agreement under which MGM Grand was granted an
option to purchase an amount of the Company's common stock equivalent to up
to 12% of the outstanding shares at the date of exercise at $21 per share.
The option will become exercisable only in certain circumstances if the
merger agreement is terminated.
On February 29, 2000, the Company's Board of Directors declared a
dividend of one preferred share purchase right (a "Right") for each
outstanding share of common stock, payable on March 20, 2000 to the
stockholders of record on that day. In connection with the merger
agreement, the Company agreed to amend the terms of the rights agreement
pursuant to which the Rights will be issued in order to permit the merger
with MGM Grand to occur without triggering the exercisability of the
Rights.
-67-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MIRAGE RESORTS, INCORPORATED
By: STEPHEN A. WYNN
------------------------------
Stephen A. Wynn, Chairman of
the Board, President and Chief
Executive Officer
Dated: March 10, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
STEPHEN A. WYNN Chairman of the Board, President March 10, 2000
- -------------------- and Chief Executive Officer
Stephen A. Wynn (Principal Executive Officer)
ROBERT H. BALDWIN Chief Financial Officer and March 10, 2000
- -------------------- Treasurer (Principal Financial
Robert H. Baldwin and Accounting Officer)
ELAINE P. WYNN Director March 10, 2000
- --------------------
Elaine P. Wynn
GEORGE J. MASON Director March 10, 2000
- --------------------
George J. Mason
MELVIN B. WOLZINGER Director March 10, 2000
- --------------------
Melvin B. Wolzinger
RONALD M. POPEIL Director March 10, 2000
- --------------------
Ronald M. Popeil
DANIEL B. WAYSON Director March 10, 2000
- --------------------
Daniel B. Wayson
RICHARD D. BRONSON Director March 10, 2000
- --------------------
Richard D. Bronson
-68-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
MIRAGE RESORTS, INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
----------------------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER DEDUCTIONS AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (a) (b) OF YEAR
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Year Ended December 31, 1999...... $ 40,480 $ 31,911 $ 1,946 $ 27,468 $ 46,869
Year Ended December 31, 1998...... $ 42,477 $ 27,677 $ 1,904 $ 31,578 $ 40,480
Year Ended December 31, 1997...... $ 38,674 $ 19,213 $ 711 $ 16,121 $ 42,477
</TABLE>
- ------------------------------------
(a) Recoveries of accounts previously charged off.
(b) Accounts charged off.
S-1
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.
EXHIBIT 2
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER; CLOSING
SECTION 1.01. The Merger.................................................1
SECTION 1.02. Effective Time.............................................1
SECTION 1.03. Effects of the Merger......................................1
SECTION 1.04. Conversion of Shares.......................................2
SECTION 1.05. Payment of Shares..........................................2
SECTION 1.06. Stock Options..............................................4
SECTION 1.07. The Closing................................................4
ARTICLE II
THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS
SECTION 2.01. Articles of Incorporation..................................4
SECTION 2.02. Bylaws.....................................................5
SECTION 2.03. Directors and Officers.....................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
SECTION 3.01. Organization and Qualification.............................5
SECTION 3.02. Authority; Non-Contravention; Approvals....................6
SECTION 3.03. Proxy Statement............................................7
SECTION 3.04. Ownership of Company Common Stock..........................8
SECTION 3.05. Financing..................................................8
SECTION 3.06. Reports, Financial Statements, etc.........................8
SECTION 3.07. Brokers and Finders........................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Organization and Qualification.............................9
SECTION 4.02. Capitalization............................................10
SECTION 4.03. Subsidiaries..............................................11
SECTION 4.04. Authority; Non-Contravention; Approvals...................11
SECTION 4.05. Reports and Financial Statements..........................13
SECTION 4.06. Absence of Undisclosed Liabilities........................13
SECTION 4.07. Absence of Certain Changes or Events......................14
SECTION 4.08. Litigation................................................14
SECTION 4.09. Proxy Statement...........................................14
SECTION 4.10. No Violation of Law.......................................14
SECTION 4.11. Compliance with Agreements................................15
SECTION 4.12. Taxes.....................................................15
SECTION 4.13. Employee Benefit Plans; ERISA.............................16
SECTION 4.14. Labor Controversies.......................................17
SECTION 4.15. Environmental Matters.....................................18
SECTION 4.16. Title to Assets...........................................19
SECTION 4.17. Company Stockholders' Approval............................20
SECTION 4.18. Brokers and Finders.......................................20
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TABLE OF CONTENTS
(continued)
Page
ARTICLE V ----
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Merger.....20
SECTION 5.02. Control of the Company's Operations.......................22
SECTION 5.03. Acquisition Transactions..................................23
SECTION 5.04. Access to Information.....................................24
SECTION 5.05. Notices of Certain Events.................................24
SECTION 5.06. Merger Subsidiary.........................................25
SECTION 5.07. Employee Benefits.........................................25
SECTION 5.08. Meeting of the Company's Stockholders.....................26
SECTION 5.09. Proxy Statement...........................................27
SECTION 5.10. Public Announcements......................................27
SECTION 5.11. Expenses and Fees.........................................27
SECTION 5.12. Agreement to Cooperate....................................28
SECTION 5.13. Directors' and Officers' Indemnification..................30
SECTION 5.14. Company Securities........................................32
SECTION 5.15. Continuing Directors......................................32
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to the Obligations of Each Party...............32
SECTION 6.02. Conditions to Obligation of the Company to Effect
the Merger................................................32
SECTION 6.03. Conditions to Obligations of Parent and Subsidiary
to Effect the Merger......................................33
ARTICLE VII
TERMINATION
SECTION 7.01. Termination...............................................34
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Effect of Termination.....................................35
SECTION 8.02. Non-Survival of Representations and Warranties............36
SECTION 8.03. Notices...................................................36
SECTION 8.04. Interpretation............................................37
SECTION 8.05. Miscellaneous.............................................37
SECTION 8.06. Counterparts..............................................37
SECTION 8.07. Amendments; No Waivers....................................37
SECTION 8.08. Entire Agreement..........................................37
SECTION 8.09. Severability..............................................38
SECTION 8.10. Specific Performance......................................38
SECTION 8.11. Non-Involvement of Tracinda...............................38
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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.
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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 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.
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(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 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
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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
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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:
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
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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 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
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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
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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 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
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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:
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"
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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 Agreement
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(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
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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'
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
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"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.
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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,
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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.
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.
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(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
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"
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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
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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, 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
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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 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.
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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
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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 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;
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(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 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).
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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
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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 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
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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.
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
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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
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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 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)
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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 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
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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
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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
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
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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.
(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
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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
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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 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,
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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 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
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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 shall be no liability or further
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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.
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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 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
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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 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.
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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
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AMENDED AND RESTATED BYLAWS
OF
MIRAGE RESORTS, INCORPORATED
(a Nevada Corporation)
ARTICLE I
Offices
Section 1. Principal Executive Office. The principal executive
office of the corporation shall be located at 3600 Las Vegas Boulevard
South, Las Vegas, Clark County, Nevada 89109. The board of directors is
hereby granted full power and authority to change said principal executive
office from one location to another. Any such change shall be noted on
the by-laws by the secretary, opposite this Section, or this Section may
be amended to state the new location.
Section 2. Other Offices. Other business offices may at any time be
established by the board of directors at such other places both within and
without the State of Nevada as the board of directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meetings. All annual or other meetings of
stockholders shall be held at the principal executive office of the
corporation, or at any other place within or without the State of Nevada
which may be designated by the board of directors and stated in the notice
of the meeting.
Section 2. Annual Meetings. Annual meetings shall be held at such
date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting. At such meetings,
directors shall be elected, reports of the affairs of the corporation
shall be considered and any other business may be transacted which is
within the powers of the stockholders.
Section 3. Special Meetings. Subject to the rights of the holders
of any series of stock having a preference over the common stock of the
corporation as to dividends or upon liquidation ("Preferred Stock") with
respect to such series of Preferred Stock, special meetings of the
stockholders may be called only by the chairman of the board, or by the
board of directors pursuant to a resolution adopted by a majority of the
total number of directors which the corporation would have if there were
no vacancies.
Section 4. Notice of Meetings of Stockholders and Delivery of
Reports to Stockholders. Written notice of any meeting of stockholders
shall be given to each stockholder entitled to vote and a copy of each
report to the stockholders shall be given to each stockholder, in each
EXHIBIT 3.5
<PAGE>
case either personally or by mail or other means of written communication,
charges prepaid, addressed to such stockholder at his address appearing on
the books of the corporation or given by him to the corporation for the
purpose of notice. If any notice or report addressed to the stockholder
at the address of such stockholder appearing on the books of the
corporation is returned to the corporation by the United States Postal
Service marked to indicate that the United States Postal Service is unable
to deliver the notice or report to the stockholder at such address, all
future notices or reports shall be deemed to have been duly given without
further mailing if such notice or report shall be available for the
stockholder upon written demand of the stockholder at the principal
executive office of the corporation for a period of one year from the date
of the giving of the notice or report to all other stockholders. If a
stockholder gives no address, notice or a report shall be deemed to have
been given to such stockholder if sent by mail or other means of written
communication addressed to the place where the principal executive office
of the corporation is situated, or if published at least once in a
newspaper of general circulation in the county in which the principal
executive office is located.
All such notices of meetings shall be given to each stockholder
entitled thereto not less than 10 days nor more than 60 days before each
meeting, and all such reports shall be given to each stockholder entitled
thereto at the times provided in Section 3 of Article VII of the bylaws or
as otherwise provided by applicable law. Any such notice or report shall
be deemed to have been given at the time when delivered personally or
deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any such notice or report in accordance with the
provisions of this Section, executed by a responsible employee or any
agent of the corporation, shall be prima facie evidence of the giving of
the notice or report.
Each such notice shall specify:
(a) the place, the date and the hour of the meeting;
(b) in the case of special meetings, the nature of the business
to be transacted (and no other business may be transacted at such
meeting);
(c) in the case of annual meetings, those matters which the
board of directors, at the time of the mailing of the notice, intends to
present for action by the stockholders;
(d) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by the board of
directors or management for election; and
(e) such other matters, if any, as may be expressly required by
applicable law.
Section 5. Quorum and Adjournment. Except as otherwise provided by
law or by the articles of incorporation, the holders of a majority of the
outstanding shares of the corporation entitled to vote generally in the
election of directors, represented in person or by proxy, shall constitute
a quorum at a meeting of stockholders, except that when specified business
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is to be voted on by a class or series of stock voting as a class, the
holders of a majority of the shares of such class or series shall
constitute a quorum of such class or series for the transaction of such
business. The chairman of the meeting or a majority of the shares so
represented may adjourn the meeting from time to time, whether or not there
is such a quorum. No notice of the time and place of adjourned meetings
need be given except as required by law. The stockholders present at a
duly called meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 6. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (a) Nominations of persons for
election to the board of directors and the proposal of business to be
considered by the stockholders may be made at an annual meeting of
stockholders (i) pursuant to the corporation's notice of meeting, (ii) by
or at the direction of the board of directors or (iii) by any stockholder
who was a stockholder of record at the time of giving of notice provided
for in this bylaw, who is entitled to vote at the meeting and who complies
with the notice procedures set forth in this bylaw.
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (A)(a)of this bylaw, the stockholder must have given timely
notice thereof in writing to the secretary of the corporation and such
other business must otherwise be a proper matter for stockholder action.
To be timely, a stockholder's notice shall be received by the secretary at
the principal executive office of the corporation not less than 120
calendar days prior to the day and month corresponding to the day and month
on which the corporation's proxy statement was first released to
stockholders in connection with the previous year's annual meeting of
stockholders; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after the
day and month corresponding to the day and month of the previous year's
annual meeting, notice by the stockholder to be timely must be so received
not later than the close of businesss on the later of 120 calendar days
prior to such annual meeting or 10 calendar days following the date on
which public announcement of the date of such annual meeting is first made
by the corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving
of a stockholder's notice as described above. Such stockholder's notice
shall set forth (i) as to each person who the stockholder proposes to
nominate for election or reelection as a director, all information relating
to such person that is required to be disclosed in solicitations of proxies
for election of directors in an election contest, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended, and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected), (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of
the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made and (iii) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
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proposal is made (I) the name and address of such stockholder as they
appear on the corporation's books, and of such beneficial owner and (II)
the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of paragraph
(A)(b) of this bylaw to the contrary, in the event that the number of
directors to be elected to the board of directors is increased and there is
no public announcement by the corporation naming all of the nominees for
director or specifying the size of the increased board of directors at
least 70 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this bylaw shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive office of the corporation not later than the close of
business on the 10th day following the day on which such public
announcement is first made by the corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the corporation's notice of meeting.
Nominations of persons for election to the board of directors may be made
at a special meeting of stockholders at which directors are to be elected
(i) pursuant to the corporation's notice of meeting, (ii) by or at the
direction of the board of directors or (iii) provided that the board of
directors has determined that directors shall be elected at such meeting,
by any stockholder of the corporation who is a stockholder of record at
the time of giving of notice provided for in this bylaw, who shall be
entitled to vote at the meeting and who complies with the notice
procedures set forth in this bylaw. In the event that the corporation
calls a special meeting of stockholders for the purpose of electing one or
more directors to the board of directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(b) of this by-law shall be
received by the secretary at the principal executive office of the
corporation not later than the close of business on the later of 120
calendar days prior to such special meeting or 10 calendar days following
the date on which public announcement is first made by the corporation of
the date of such special meeting and of the nominee(s) proposed by the
board of directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a new
time period for the giving of a stockholder's notice as described above.
Section 7. Voting. Pursuant to Section 1 of Article VI of the
bylaws, the board of directors may fix a record date for the determination
of the stockholders entitled to vote at any meeting of stockholders.
Unless the articles of incorporation provide for more or less than
one vote per share, each outstanding share, regardless of class, shall be
entitled to one vote on each matter on which such share is entitled to be
voted. Any holder of shares entitled to vote on any matter may vote part
of his shares in favor of the proposal and refrain from voting the
remaining shares or (except in voting upon election of directors) vote
them against the proposal, but, if the stockholder fails to specify the
number of shares such stockholder is voting affirmatively, it will be
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conclusively presumed that the stockholder's approving vote is with
respect to all shares such stockholder is entitled to vote. Voting by the
stockholders may be a voice vote or by ballot; provided, however, that all
elections for directors must be by ballot upon demand made by a
stockholder at the meeting and before the voting begins.
Except as otherwise provided in the last two sentences of Section 5
of this Article II:
(a) the affirmative vote of a majority of the shares actually
voted for or against a matter at a duly held meeting at which a quorum is
present (without giving effect to abstentions and broker non-votes) shall
be the act of the stockholders, unless the vote of a greater number or
voting by classes is required for such act by applicable law, the articles
of incorporation or the bylaws; and
(b) in the election of directors, subject to the rights of the
holders of any series of Preferred Stock to elect directors under
specified circumstances, the candidates receiving the highest number of
affirmative votes of shares entitled to be voted, up to the number of
directors to be elected by such shares, shall be elected. Votes against a
candidate for director and votes withheld shall have no legal effect.
If the articles of incorporation provide for more or less than one
vote for any share on any matter, the references in this Section and in
Section 5 of this Article II to a majority or other proportion of shares
means, as to such matter, a majority or other proportion of the votes
entitled to be cast by such shares.
Section 8. Validation of Defectively Called or Noticed Meetings.
The transactions of any meeting of stockholders, annual or special,
however called and noticed and wherever held, shall be as valid as though
had at a meeting duly held after regular call and notice, if a quorum is
present pursuant to Section 5 of this Article II, either in person or by
proxy, and if, either before or after the meeting, each of the following
persons signs a written waiver of notice, a consent to the holding of such
meeting or an approval of the minutes thereof:
(a) any person entitled to vote at the meeting not present at
the meeting in person or by proxy;
(b) any person who, though present, has, at the beginning of
the meeting, properly objected to the transaction of any business because
the meeting was not lawfully called or convened; or
(c) any person who, though present, during the meeting has
properly objected to the consideration of particular matters of business
required by the Nevada General Corporation Law or the bylaws or otherwise
to be included in the notice of the meeting, but not so included.
Except as otherwise provided in the articles of incorporation, neither the
business to be transacted at, nor the purpose of, any annual or special
meeting of stockholders need be specified in any written waiver of notice,
consent to the holding of the meeting or approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
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Section 9. Action Without Meeting.
(a) Subject to the rights of the holders of any series of
Preferred Stock with respect to such series of Preferred Stock, any action
required or permitted to be taken by the stockholders must be effected at
an annual or special meeting of stockholders of the corporation and may not
be effected by any consent in writing by such stockholders.
(b) Stockholders may not participate in a meeting of
stockholders by means of a telephone conference or any similar method of
communication by which all persons participating in the meeting can hear
each other. Participation in a meeting must be in person or by proxy.
Section 10. Proxies.
(a) At any meeting of stockholders, any stockholder may
designate another person or persons to act as a proxy or proxies. If any
stockholder designates two or more persons to act as proxies, a majority
of those persons present at the meeting or, if only one is present, then
that one, has and may exercise all of the powers conferred by the
stockholder upon all of the persons so designated unless the stockholder
provides otherwise.
(b) Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy pursuant to
subsection (a), the following constitute valid means by which a
stockholder may grant such authority:
(i) a stockholder may execute a writing authorizing
another person or persons to act for him as proxy. Execution may be
accomplished by the signing of the writing by the stockholder or his
authorized officer, director, employee or agent or by causing the
signature of the stockholder to be affixed to the writing by any
reasonable means, including, but not limited to, a facsimile
signature; or
(ii) a stockholder may authorize another person or persons
to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic
transmission to the person who will be the holder of the proxy or to
a firm which solicits proxies or like agent who is authorized by the
person who will be the holder of the proxy to receive the
transmission. Any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that the telegram, cablegram or
other electronic transmission is valid, the persons appointed by the
corporation to count the votes of stockholders and determine the
validity of proxies and ballots or other persons making those
determinations must specify the information upon which they relied.
(c) Any copy, communication by telecopier or other reliable
reproduction of the writing or transmission created pursuant to subsection
(b) may be substituted for the original writing or transmission for any
purpose for which the original writing or transmission could be used, if
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the copy, communication by telecopier or other reproduction is a complete
reproduction of the entire original writing or transmission.
(d) No such proxy is valid after the expiration of six months
from the date of its creation, unless it is coupled with an interest, or
unless the stockholder specifies in it the length of time for which it is
to continue in force, which may not exceed seven years from the date of
its creation. Subject to these restrictions, any proxy properly created
is not revoked and continues in full force and effect until another
instrument or transmission revoking it or a properly created proxy bearing
a later date is filed with or transmitted to the secretary of the
corporation or another person or persons appointed by the corporation to
count the votes of stockholders and determine the validity of proxies and
ballots.
Section 11. Inspectors of Election. In advance of any meeting of
stockholders, the board of directors may appoint any persons other than
nominees for office as inspectors of election to act at such meeting or
any adjournment thereof. If inspectors of election are not so appointed,
the chairman of any such meeting may, and on the request of any
stockholder or his proxy shall, make such appointment at the meeting. The
number of inspectors shall be either one or three. If appointed at a
meeting on the request of one or more stockholders or their respective
proxies, the majority of shares entitled to vote represented in person or
by proxy shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or
fails or refuses to act, the vacancy may, and on the request of any
stockholder or a proxy of any stockholder entitled to vote shall, be
filled by appointment by the board of directors in advance of the meeting,
or at the meeting by the chairman of the meeting.
The duties of such inspectors shall include: determining the number
of shares outstanding and the voting power of each; the shares represented
at the meeting; the existence of a quorum; the authenticity, validity and
effect of proxies; receiving votes, ballots or consents; hearing and
determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining when the polls shall close; determining the result; and such
acts as may be proper to conduct the election or vote with fairness to all
stockholders. In the determination of the validity and effect of proxies,
the dates contained on the forms of proxy shall presumptively determine
the order of execution of the proxies, regardless of the postmark dates on
the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is
practical. If there are three inspectors of election, the decision, act
or certificate of a majority is effective in all respects as the decision,
act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated
therein.
Section 12. Presiding Officer; Order of Business; Conduct
of Meeting.
(a) Meetings of the stockholders shall be presided over by such
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persons as shall be designated by the board of directors or, if no
designation is made, then by the chairman of the board of directors, or if
there is no chairman of the board of directors, then the president. The
secretary of the corporation, or in his absence, an assistant secretary,
shall act as secretary of the meeting.
(b) Subject to the following, meetings of stockholders shall
generally follow accepted rules of parliamentary procedure.
(i) The chairman of the meeting shall have absolute
authority over matters of procedure and there shall be no appeal from
the ruling of the chairman. If the chairman, in his absolute
discretion, deems it advisable to dispense with the rules of
parliamentary procedure as to any one meeting of stockholders or a
part thereof, the chairman shall so state and shall clearly state the
rules under which the meeting or appropriate part thereof shall be
conducted.
(ii) The chairman may ask or require that anyone not a bona
fide stockholder or proxyholder leave the meeting.
ARTICLE III
Directors
Section 1. Powers. Subject to the limitations of the Nevada General
Corporation Law and any limitations in the articles of incorporation
relating to action required to be authorized or approved by the
stockholders, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of
the board of directors. Without prejudice to such general powers, but
subject to the same limitations, it is hereby expressly declared that the
directors shall have the following powers:
First - To select and remove all the officers, agents and
employees of the corporation; prescribe such powers and duties for them as
may not be inconsistent with applicable law, the articles of incorporation
or the bylaws; fix their compensation and require from them security for
faithful service.
Second - To conduct, manage and control the affairs and business
of the corporation, and to make such rules and regulations therefor, not
inconsistent with applicable law, the articles of incorporation or the
bylaws, as they may deem appropriate.
Third - To change the principal executive office of the
corporation from one location to another as provided in Section 1 of
Article I of the bylaws; to fix and locate from time to time one or more
subsidiary offices of the corporation within or without the State of
Nevada, as provided in Section 2 of Article I of the bylaws; to designate
any place within or without the State of Nevada for the holding of any
stockholders' meeting or meetings; and to adopt, make and use a corporate
seal, and to prescribe the forms of certificates of stock and to alter the
form of such seal and of such certificates from time to time, as in their
judgment they may deem appropriate, provided such seal and such
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certificates shall at all times comply with the provisions of applicable
law.
Fourth - To authorize the issue of shares of stock of the
corporation from time to time, upon such terms as may be lawful.
Fifth - To borrow money and incur indebtedness for the purposes
of the corporation, and to cause to be executed and delivered therefor, in
the corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and security
therefor.
Section 2. Number and Qualification of Directors. The number of
directors of the corporation shall not be less than three nor more than 11
until changed by amendment of the articles of incorporation and by a bylaw
amending this Section. The exact number of directors shall be fixed from
time to time, within the limits specified in the articles of incorporation
and in this Section, by a resolution adopted by the board of directors.
Subject to the foregoing provisions for changing the number of
directors, the number of directors of this corporation has been fixed at
eight.
Section 3. Election and Term of Office. The board of directors
shall be divided into three classes, as nearly as equal in numbers as the
then total number of directors constituting the entire board permits, with
the term of office of one class expiring each year. At the first regular
election of directors following the effectiveness of this Section 3,
(i) directors of the first class shall be elected to hold office until the
next succeeding annual meeting of stockholders, and until their respective
successors have been elected and qualified, (ii) directors of the second
class shall be elected to hold office until the second succeeding annual
meeting of stockholders, and until their respective successors have been
elected and qualified and (iii) directors of the third class shall be
elected to hold office until the third succeeding annual meeting of
stockholders, and until their respective successors have been elected and
qualified. Directors shall be elected at each annual meeting of
stockholders, but if any such annual meeting is not held or directors are
not elected thereat, directors may be elected at any special meeting of
stockholders held for that purpose. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the
term for which such director was elected, and until a successor has been
elected and qualified, subject to the Nevada General Corporation Law and
the provisions of the bylaws with respect to vacancies on the board of
directors.
Section 4. Vacancies.
(a) A vacancy on the board of directors shall be deemed to
exist in case of the death, resignation or removal of any director, if the
authorized number of directors is increased or if the stockholders fail,
at any annual or special meeting of stockholders at which any director or
directors are to be elected, to elect the full authorized number of
directors to be voted for at that meeting.
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(b) Except as otherwise provided in the articles of
incorporation, any or all of the directors may be removed with or without
cause if such removal is approved by the affirmative vote of at least two-
thirds of the outstanding shares entitled to vote on the election of
directors, provided that when by the provisions of the articles of
incorporation the holders of the shares of any class or series, voting as
a class or series, are entitled to elect one or more directors, any
director so elected may be removed only by the applicable vote of the
holders of the shares of that class or series.
No reduction in the authorized number or classes of directors shall
have the effect of removing any director prior to the expiration of his
term of office.
(c) Any director may resign effective upon giving written
notice to the chairman of the board, the president, the secretary or the
board of directors of the corporation, unless the notice specifies a later
time for the effectiveness of such resignation. If the board of directors
accepts the resignation of a director tendered to take effect at a future
time, the board of directors shall have power to elect a successor to take
office when the resignation is to become effective.
(d) Vacancies in the board of directors may be filled (i) by
the affirmative vote of a majority of the directors then in office present
at a duly held meeting at which a quorum is present or the unanimous
written consent of the directors then in office or (ii) if the number of
directors then in office is less than a quorum, by the unanimous written
consent of the directors then in office, or the affirmative vote of a
majority of the directors then in office at a duly held meeting of such
directors or a sole remaining director; and each director so elected shall
hold office until his successor is elected and qualified. The
stockholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. Any such election shall
require the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote for the election of such director or
directors.
Section 5. Annual Meeting. Immediately following each annual
meeting of stockholders, the board of directors shall hold a regular
meeting at the place of said annual meeting, or at such other place as
shall be fixed by the board of directors, for the purpose of organization,
election of officers and the transaction of other business. Call and
notice of such meetings are hereby dispensed with.
Section 6. Other Regular Meetings. Other regular meetings of the
board of directors shall be held during each year, at such times and
places as the board of directors may from time to time provide by
resolution, either within or without the State of Nevada, without other
notice than such resolution.
Section 7. Special Meetings. Special meetings of the board of
directors for the purpose of taking any action permitted by the directors
under the Nevada General Corporation Law and the articles of incorporation
may be called at any time by the chairman of the board, the president, the
secretary or any two directors. Notice of the date, hour and place of
special meetings shall be given to each director (a) personally or by
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telephone, telegraph or facsimile transmission, in each case at least 24
hours prior to the holding of the meeting or (b) by first class mail,
charges prepaid, addressed to him at his address as it is shown upon the
records of the corporation or, if it is not so shown on such records and
is not readily ascertainable, at the place at which the meetings of the
directors are regularly held, at least two days prior to the holding of
the meeting. Notice by mail shall be deemed to have been given at the
time a written notice is deposited in the United States mail, postage
prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a
common carrier for transmission, or actually transmitted by the person
giving the notice by electronic means to the recipient. Oral notice shall
be deemed to have been given at the time it is communicated, in person or
by telephone, to the recipient or to a person at the office of the
recipient who the person giving the notice has reason to believe will
promptly communicate it to the recipient. Any notice shall state the
date, place and hour of the meeting and may, but shall not be required to,
state the general nature of the business to be transacted.
Section 8. Waiver of Defectively Called or Noticed Meetings. Notice
of a meeting need not be given to a director who signs a waiver of notice,
or a consent to holding the meeting or an approval of the minutes thereof,
whether before or after the meeting, or who attends the meeting without
protesting, prior to or at the commencement of the meeting, the lack of
proper notice to him. Any such waiver or consent shall state the date,
place and hour of the meeting, but need not specify the purpose of the
meeting. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 9. Place of Meeting. Regular and special meetings of the
board of directors shall be held at any place within or without the State
of Nevada which has been designated from time to time by resolution of the
board of directors. In the absence of such designation, regular and
special meetings shall be held at the principal executive office of the
corporation.
Section 10. Action at a Meeting: Quorum and Required Vote.
Presence in person of a majority of the authorized number of directors at
a meeting of the board of directors constitutes a quorum for the
transaction of business, except as hereinafter provided. Members of the
board may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in
such meeting can hear one another. Participation in a meeting as
permitted by the preceding sentence constitutes presence in person at such
meeting. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present
shall be regarded as the act of the board of directors, unless a greater
number, or the same number after disqualifying one or more directors from
voting, is required by the Nevada General Corporation Law, the articles of
incorporation or the bylaws. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal
of a director, provided that any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 11. Adjournment. A majority of the directors present at any
meeting, whether or not a quorum is present, may adjourn any meeting of
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the board of directors to meet again at a stated date, hour and place. If
any meeting is adjourned for more than 48 hours, notice of any adjournment
to another date, hour or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of
adjournment. Otherwise, notice of the date, hour and place of holding an
adjourned meeting need not be given to absent directors if the date, hour
and place are fixed at the meeting adjourned.
Section 12. Action Without Meeting. Any action by the board of
directors may be taken without a meeting if all members of the board of
directors shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes
of the proceedings of the board of directors and shall have the same force
and effect as a unanimous vote of the directors.
Section 13. Committees of the Board. By resolution adopted by the
board of directors, the board of directors may designate an executive
committee, an audit committee and such other committees as it shall
determine, each consisting of at least one director and which may include
one or more other persons who need not be directors, to serve at the
pleasure of the board of directors, and prescribe the manner in which
proceedings of such committees shall be conducted. The appointment of
members or alternate members of a committee shall be made by a majority
vote of the board of directors. For purposes of the bylaws, the term
"audit committee" shall mean any committee of the board of directors to
which is delegated the function of periodically reviewing the financial
condition, and the results of audit examinations, of the corporation with
the corporation's independent public accountants. The audit committee, if
appointed, shall not include any officer or employee of the corporation or
its subsidiaries unless the board of directors shall specifically
designate an officer or employee to serve on such committee. Unless the
board of directors shall otherwise prescribe the manner of proceedings of
any such committee, meetings of such committee may be scheduled in
advance, in which case call and notice of any such meetings are hereby
dispensed with, and may be called at any time by any member thereof;
otherwise, the provisions of the bylaws with respect to notice and conduct
of meetings of the board of directors shall govern. Any such committee,
to the extent provided in a resolution of the board of directors, may have
all of the authority of the board of directors, except with respect to:
(a) the approval of any action for which the Nevada General
Corporation Law, the articles of incorporation or the bylaws also requires
approval of the stockholders;
(b) the filling of vacancies on the board of directors or on
any committee;
(c) the fixing of compensation of the directors for serving on
the board of directors or on any committee;
(d) the adoption, amendment or repeal of bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) any distribution to the stockholders, except at a rate or
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in a periodic amount or within a range determined by the board of
directors; and
(g) the appointment of other committees of the board of
directors or the members thereof.
Section 14. Compensation. Directors, and members of any committee
of the board of directors, shall be entitled to such compensation for
their services as directors and members of any such committee as shall be
fixed from time to time by resolution of the board of directors and shall
also be entitled to reimbursement for any reasonable expenses incurred in
attending such meetings. Any director receiving compensation under these
provisions shall not be barred from serving the corporation in any other
capacity and receiving compensation for such other services.
Section 15. Transfer Agents and Registrars. The board of directors
may appoint one or more transfer agents and one or more registrars, either
domestic or foreign, at such times and places as the requirements of the
corporation may necessitate.
ARTICLE IV
Officers
Section 1. Officers. The officers of the corporation shall be a
president, a secretary and a treasurer. The corporation may also have, at
the discretion of the board of directors, a chairman of the board, a chief
financial officer, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers and such other officers as
may be appointed in accordance with the provisions of Section 3 of this
Article IV. One person may hold any two or more offices.
Section 2. Election. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section
3 or Section 5 of this Article IV, shall be chosen annually by the board
of directors; provided, however, that each officer of the corporation
shall hold his office at the pleasure of the board of directors, or until
he shall resign or shall become disqualified to serve, or until his
successor shall be elected and qualified, subject, in each case, to the
rights, if any, of the corporation and any such officer under any contract
of employment between the corporation and the officer.
Section 3. Subordinate Officers, Etc. The board of directors may
appoint, and may empower the chairman of the board, the president or any
vice president to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as provided in the bylaws or
as the board of directors may from time to time determine.
Section 4. Removal and Resignation.
(a) Any officer may be removed, either with or without cause,
by the board of directors, at any regular or special meeting thereof, or,
except in case of an officer chosen by the board of directors, by any
officer upon whom such power of removal may be conferred by the board of
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directors, subject, in each case, to the rights, if any, of an officer
under any contract of employment with the corporation.
(b) Any officer may resign at any time by giving written notice
to the board of directors, the president or the secretary of the
corporation, without prejudice, however, to the rights, if any, of the
corporation under any contract to which such officer is a party. Any such
resignation shall take effect at the date of the receipt of such notice or
at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make
it effective.
Section 5. Vacancies. A vacancy in any office as a result of any
cause shall be filled in the manner prescribed in the bylaws for regular
appointments to such office.
Section 6. Chairman of the Board. The chairman of the board, if
there shall be such an officer, shall be elected from among the directors
and shall, if present, preside at all meetings of the board of directors
and exercise and perform such other powers and duties as may be from time
to time assigned to him by the board of directors or prescribed by the
bylaws.
Section 7. President. Subject to such supervisory powers, if any,
as may be given by the board of directors to the chairman of the board, if
there be such an officer, the president shall be the chief executive
officer of the corporation and shall, subject to the control of the board
of directors, have general supervision, direction and control of the
business and officers of the corporation. He shall preside at all
meetings of the stockholders and, in the absence of the chairman of the
board, or if there be none, at all meetings of the board of directors. He
shall have the general powers and duties of management usually vested in
the office of president of a corporation, and shall have such other powers
and duties as may be prescribed by the board of directors or the bylaws.
Section 8. Vice President(s). In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the
board of directors or, if not ranked, the vice president designated by the
board of directors, shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such
other powers and perform such other duties as are incident to the office
of corporate vice president and as from time to time may be prescribed for
them respectively by the board of directors or the bylaws.
Section 9. Secretary. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive
office and such other place or places as the board of directors may order,
a book of minutes of actions taken at all meetings of, and by all written
consents of, directors and stockholders, together with, in the case of
meetings, the time and place of holding, whether regular or special and,
if special, how authorized, the notice thereof given, the names of those
present at meetings of the board of directors, the number of shares
present or represented at meetings of stockholders and the proceedings
thereof. The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
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registrar, a stock ledger, or a duplicate stock ledger, showing the names
of the stockholders, alphabetically arranged, and their addresses, the
number and classes of shares held by each, the number and date of
certificates issued for such shares and the number and date of
cancellation of every certificate surrendered for cancellation. If the
stock ledger or duplicate stock ledger is kept at the office of the
corporation's transfer agent or registrar, a statement containing the name
and address of the custodian of the stock ledger or duplicate stock ledger
shall be kept at the corporation's principal executive office. The
secretary shall give, or cause to be given, notice of all the meetings of
the stockholders and of the board of directors required by the bylaws or
by law to be given, and shall keep the seal of the corporation in safe
custody, and shall have such other powers and perform such other duties as
are incident to the office of corporate secretary and as may be prescribed
by the board of directors or the bylaws.
Section 10. Treasurer. The treasurer shall keep and maintain, or
cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. The books of account shall at all
reasonable times be open to inspection by any director. The treasurer
shall deposit all moneys and other valuables in the name and to the credit
of the corporation with such depositories as may be designated by the
board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
the board of directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the
corporation and shall have such other powers and perform such other duties
as are incident to the office of corporate treasurer and as may be
prescribed by the board of directors or the bylaws.
Section 11. Compensation. The salaries and other compensation for
the principal officers of the corporation shall be fixed, from time to
time, by the board of directors. No officer shall be disqualified from
receiving a salary or such other compensation by reason of his also being
a director of the corporation.
ARTICLE V
Indemnification of Corporate Agents;
Purchase of Liability Insurance
Section 1. Indemnification of Agents of the Corporation; Purchase of
Liability Insurance.
(a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines
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and amounts paid in settlement, actually and reasonably incurred by him in
connection with the action, suit or proceeding, if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including amounts paid in settlement
and attorneys' fees, actually and reasonably incurred by him in connection
with the defense or settlement of the action or suit, if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. However, indemnification shall
not be made for any claim, issue or matter as to which such a person has
been adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable to the corporation or for amounts paid
in settlement to the corporation, unless and only to the extent that the
court in which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
(c) To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsection (a) or
(b), or in defense of any claim, issue or matter therein, he shall be
indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the
defense.
(d) Any indemnification under subsection (a) or (b), unless
ordered by a court or advanced pursuant to subsection (e), shall be made
by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or
agent is proper in the circumstances. The determination shall be made:
(i) by the stockholders; (ii) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to the action,
suit or proceeding; (iii) if a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding so
orders, by independent legal counsel in a written opinion; or (iv) if a
quorum consisting of directors who were not parties to the action, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
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(e) The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding shall be paid by
the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by the corporation. The provisions
of this subsection (e) do not affect any rights to advancement of expenses
to which corporate personnel other than directors or officers may be
entitled under any contract or otherwise by law.
(f) The indemnification and advancement of expenses authorized
in or ordered by a court pursuant to this Article V (i) does not exclude
any other rights to which a person seeking indemnification or advancement
of expenses may be entitled under the articles of incorporation, the
bylaws or any agreement, vote of stockholders or disinterested directors
or otherwise, for either an action in his official capacity or an action
in another capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to subsection (b) or for the
advancement of expenses made pursuant to subsection (e), shall not be made
to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and were material to the cause of
action and (ii) continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
(g) The corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise, for any liability asserted against him and liability and
expenses incurred by him in his capacity as a director, officer, employee
or agent, or arising out of his status as such, whether or not the
corporation has the authority to indemnify him against such liability and
expenses. The other financial arrangements made by the corporation may
include any now or hereafter permitted by applicable law.
(h) In the event that the Nevada General Corporation Law shall
hereafter permit or authorize indemnification by the corporation of the
directors, officers, employees or agents of the corporation for any reason
or purpose or in any manner not otherwise provided for in this Article V,
then such directors, officers, employees and agents shall be entitled to
such indemnification by making written demand therefor upon the
corporation, it being the intention of this Article V at all times to
provide the most comprehensive indemnification coverage to the
corporation's directors, officers, employees and agents as may now or
hereafter be permitted by the Nevada General Corporation Law.
(i) The foregoing indemnification provisions shall inure to the
benefit of all present and future directors, officers, employees and
agents of the corporation and all persons now or hereafter serving at the
request of the corporation as directors, officers, employees or agents of
another corporation, partnership, joint venture, trust or other enterprise
and their heirs, executors and administrators, and shall be applicable to
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all acts or omissions to act of any such persons, whether such acts or
omissions to act are alleged to have or actually occurred prior to or
subsequent to the adoption of this Article V.
Section 2. Vested Rights. Neither the amendment nor repeal of this
Article V, nor the adoption of any provision of the articles of
incorporation or the bylaws or of any statute inconsistent with this
Article V, shall adversely affect any right or protection of a director,
officer, employee or agent of the corporation existing at the time of such
amendment, repeal or adoption of such inconsistent provision.
ARTICLE VI
Shares and Share Certificates
Section 1. Record Date.
(a) The board of directors may fix a time in the future as a
record date for the determination of the stockholders entitled to notice
of and to vote at any meeting of stockholders or entitled to give consent
to corporate action in writing without a meeting, to receive any report,
to receive any dividend or distribution or any allotment of rights or to
exercise any rights in respect of any other lawful action. The record
date so fixed shall be not more than 60 days nor less than 10 days prior
to the date of any meeting, nor more than 60 days prior to any other event
for the purposes of which it is fixed.
(b) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the board of directors fixes a new
record date for the adjourned meeting, but the board of directors shall
fix a new record date if the meeting is adjourned for more than 30 days
from the date set for the original meeting.
(c) When a record date is fixed, only stockholders of record on
the close of business on that date are entitled to notice of and to vote
at any such meeting, to give consent without a meeting, to receive any
report, to receive a dividend, distribution or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of
any shares on the books of the corporation after the record date, except
as otherwise provided in the articles of incorporation, by agreement, by
the Nevada General Corporation Law or in Section 4 of this Article VI.
Section 2. Certificate for Shares. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of
the corporation by the chairman of the board or the president or a vice
president and by the treasurer or an assistant treasurer or the secretary
or an assistant secretary, certifying the number of shares and the class
or series of shares owned by the stockholder. Any of the signatures on
the certificate may be by facsimile. In case any officer, transfer agent
or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer,
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transfer agent or registrar at the date of issue.
Any certificate for shares shall contain such legend or other
statement as may be required by the Nevada General Corporation Law,
applicable federal or state securities laws, other applicable law or
regulation or any agreement between the corporation and the issuee
thereof.
Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the board of directors or the
bylaws may provide; provided, however, that any such certificate so issued
prior to full payment shall state on the face thereof the amount
theretofore paid, the amount remaining unpaid and the terms of payment
thereof.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and cancelled at the same
time; provided, however, that a new certificate shall be issued without
the surrender and cancellation of the old certificate if: (i) the old
certificate is lost, apparently destroyed or wrongfully taken; (ii) the
request for the issuance of the new certificate is made within a
reasonable time after the owner of the old certificate has notice of its
loss, destruction or theft; (iii) the request for the issuance of a new
certificate is made prior to the receipt of notice by the corporation that
the old certificate has been acquired by a bona fide purchaser; (iv) if
required by the corporation, the owner of the old certificate furnishes
sufficient indemnity to or provides other adequate security to the
corporation; and (v) the owner of the old certificate satisfies any other
reasonable requirements imposed by the corporation. In the event of the
issuance of a new certificate, the rights and liabilities of the
corporation, and of the holders of the old and new certificates, shall be
governed by the provisions of the Nevada Uniform Commercial Code.
When the articles of incorporation are amended in any way affecting
the statements contained in the certificates for outstanding shares, or it
becomes desirable for any reason, in the discretion of the board of
directors, to cancel any outstanding certificate for shares and issue a
new certificate therefor conforming to the rights of the holder, the board
of directors may order any holders of outstanding certificates for shares
to surrender and exchange them for new certificates within a reasonable
time to be fixed by the board of directors. The order may provide that a
holder of any certificates so ordered to be surrendered is not entitled to
vote or to receive dividends or exercise any of the other rights of
stockholders until the holder has complied with the order, but such order
operates to suspend such rights only after notice and until compliance.
The duty of surrender of any outstanding certificates may also be enforced
by civil action.
Section 3. Transfer of Shares. Upon surrender to the secretary or
transfer agent or registrar of the corporation of a certificate for shares
fully endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the corporation to issue
a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books, unless under
applicable federal or state securities laws or otherwise such transfer
would be adverse to the best interests of the corporation or unless the
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corporation has notice of an adverse claim, which may be an adverse claim
of the corporation, to the certificate.
Section 4. Stockholders of Record. Voting by stockholders shall in
all cases be subject to the following provisions:
(a) Subject to subsection (h) of this Section 4, shares held by
an administrator, executor, guardian, conservator or custodian may be
voted by such holder either in person or by proxy, without a transfer of
such shares into the holder's name, and shares standing in the name of a
trustee may be voted by the trustee, either in person or by proxy, but no
trustee shall be entitled to vote shares held by such trustee without a
transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may
be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which
such receiver was appointed.
(c) Except where otherwise agreed in writing between the
parties, a stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares
so transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the corporation has notice,
actual or constructive, of the nonage, unless a guardian of the minor's
property has been appointed and written notice of such appointment given
to the corporation.
(e) If authorized to vote the shares by the power of attorney
by which the attorney-in-fact was appointed, shares held by or under
control of an attorney-in-fact may be voted and the corporation may treat
all rights incident thereto as exercisable by the attorney-in-fact, in
person or by proxy, without transfer of the shares into the name of the
attorney-in-fact.
(f) Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxyholder as
the articles of incorporation or the bylaws of such other corporation may
prescribe or, in the absence of such provision, as the board of directors
of such other corporation may determine or, in the absence of such
determination, by the chairman of the board, president or any vice
president of such other corporation, or by any other person authorized to
do so by the board of directors, president or any vice president of such
other corporation. Shares which are purported to be voted or any proxy
purported to be executed in the name of a corporation (whether or not any
title of the person signing is indicated) shall be presumed to be voted or
the proxy executed in accordance with the provisions of this subsection,
unless the contrary is shown.
(g) Subject to subsection (h) below, shares of the corporation
owned by the corporation or any subsidiary shall not be entitled to vote
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on any matter and shall not be counted in determining the total number of
outstanding shares. Solely for purposes of this subsection and subsection
(h) below, a "subsidiary" of the corporation shall mean a corporation,
shares of which possessing a majority of the power to vote for the
election of directors at the time determination of such voting power is
made, are owned directly, or indirectly through one or more subsidiaries,
by the corporation.
(h) Shares held by the corporation in a fiduciary capacity, and
shares of the corporation held in a fiduciary capacity by any subsidiary,
shall not be entitled to vote on any matter, except to the extent that the
settlor or beneficial owner possesses and exercises a right to vote or to
give the corporation binding instructions as to how to vote such shares.
(i) If shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a stockholder
voting agreement or otherwise, or if two or more persons (including
proxyholders) have the same fiduciary relationship respecting the same
shares, unless the secretary of the corporation is given written notice to
the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so
voting binds all; and
(iii) If more than one vote, but the vote is evenly
split on any particular matter, each faction may vote the securities
in question proportionately.
If the instrument so filed or the registration of the shares shows that
any such tenancy is held in unequal interests, a majority or even split
for the purpose of this Section shall mean a majority or even split in
interest.
ARTICLE VII
Records and Reports
Section 1. Maintenance of Books and Records. The corporation shall
keep adequate and correct books and records of account and shall keep
minutes of the proceedings of its stockholders, board of directors and
committees of the board of directors and shall keep at its principal
executive office, or at the office of its transfer agent or registrar, a
record of its stockholders, giving the names and addresses of all
stockholders and the number and class of shares held by each stockholder.
Such minutes shall be kept in written form. Such other books and records
may be kept either in written form or in any other form capable of being
converted into written form within a reasonable time. The corporation
shall keep at its principal executive office, or if its principal
executive office is not in Nevada, then at its principal business office,
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if any, in Nevada, a copy of the articles of incorporation, as amended to
date, certified by the Secretary of State, and the original or a copy of
the bylaws, as amended to date, certified by an officer of the
corporation.
Section 2. Inspection of Corporate Records. Every director shall
have the absolute right at any reasonable time to inspect and copy all
books, records and documents of every kind and to inspect the physical
properties of the corporation and its subsidiaries. Such inspection by a
director may be made in person or by agent or attorney and the right of
inspection includes the right to copy and make extracts.
Section 3. Annual Reports.
(a) So long as the corporation is subject to the Securities
Exchange Act of 1934, as amended, the board of directors shall cause an
annual report to be sent to the stockholders not later than 120 days after
the close of the fiscal year; provided that such report shall be sent to
the stockholders at least 10 days prior to the annual meeting of
stockholders. Such report shall contain all matters required by the
Securities Exchange Act of 1934, as amended and other applicable laws.
(b) Any report required by this Section shall be given in the
manner and shall be deemed to have been given by the corporation as
provided in Section 4 of Article I of the bylaws.
Section 4. Annual Statement of Information. The corporation shall
file annually with the Secretary of State of the State of Nevada, on the
prescribed form, a statement in compliance with Section 78.150 of the
Nevada General Corporation Law.
ARTICLE VIII
Miscellaneous
Section 1. Checks, Drafts, Etc. All checks, drafts or other orders
for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the corporation, shall be signed or endorsed by
such person or persons and in such manner as, from time to time, shall be
determined by resolution of the board of directors.
Section 2. Contracts, Etc., How Executed. The board of directors,
except as otherwise provided in the bylaws, may authorize any officer or
officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized by the board of directors, no officer, agent or employee shall
have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose
or for any amount. Subject to the provisions of applicable law, any note,
mortgage, evidence of indebtedness, contract, share certificate,
conveyance or other document or instrument in writing and any assignment
or endorsements thereof executed or entered into between the corporation
and any other person, when signed by the chairman of the board, the
president, any vice president, the chief financial officer, the treasurer
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or any assistant treasurer of the corporation shall be valid and binding
on the corporation in the absence of actual knowledge on the part of the
other person that the signing officers had no authority to execute the
same.
Section 3. Representation of Shares of Other Corporations. Any
officer of the corporation is authorized to vote, represent and exercise
on behalf of the corporation all rights incident to any and all shares of
any other corporation or corporations standing in the name of the
corporation. The authority herein granted to such officers to vote or
represent on behalf of the corporation any and all shares held by the
corporation in any other corporation or corporations may be exercised
either by such officers in person or by any other person authorized so to
do by proxy or power of attorney duly executed by such officers.
Section 4. Seal. The corporation shall adopt and may, but shall not
be required to, use a corporate seal consisting of a circle setting forth
on its circumference the name of the corporation and showing the state and
date of incorporation.
Section 5. Fiscal Year. Unless changed by resolution of the board
of directors, the fiscal year of the corporation shall end on the last day
of December.
Section 6. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the board of directors, which
authority may be general or confined to specific instances.
Section 7. Deposits. The board of directors shall select banks,
trust companies or other depositories in which all funds of the
corporation not otherwise employed shall, from time to time, be deposited
to the credit of the corporation.
Section 8. Construction and Definitions. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the Nevada General Corporation Law shall govern
the construction of the bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the
singular number includes the plural and the plural number includes the
singular and the term "person" includes a corporation or other entity as
well as a natural person.
Section 9. Inapplicability of Nevada Revised Statutes 78.378 to
78.3793, Inclusive. The provisions of Nevada Revised Statutes 78.378 to
78.3793, inclusive (entitled "Acquisition of a Controlling Interest"),
shall not apply to any "acquisition" of a "controlling interest" (each as
defined therein) in the corporation.
ARTICLE IX
Amendments
Section 1. Power of Stockholders. New bylaws may be adopted or the
bylaws may be amended or repealed by the affirmative vote of a majority of
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the outstanding shares entitled to vote, except as otherwise expressly
provided by applicable law, the articles of incorporation or elsewhere in
the bylaws.
Section 2. Power of Directors. Subject to the right of the
stockholders as provided in Section 1 of this Article IX to adopt, amend
or repeal bylaws, bylaws may be adopted, amended or repealed by the board
of directors.
CERTIFICATE OF ASSISTANT SECRETARY
The undersigned hereby certifies:
1. That the undersigned is the duly elected and acting assistant
secretary of Mirage Resorts, Incorporated, a Nevada corporation; and
2. That the foregoing Amended and Restated Bylaws, comprising 24
pages, constitute the bylaws of said corporation as most recently amended
by action of the board of directors of the corporation duly taken on
February 29, 2000.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name
and affixed the seal of the corporation this 1 day of March, 2000.
/s/ Bruce A. Levin
-----------------------------------
BRUCE A. LEVIN, Assistant Secretary
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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 mean-
ings 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.
EXHIBIT 4.7
<PAGE>
(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 (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 applica-
tion 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:
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<PAGE>
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 pur-
chase 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 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 thereto-
fore 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 relat-
ing 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
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<PAGE>
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 Un-
exercised 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 Agree-
ment 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 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
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<PAGE>
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 Agree-
ment, 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
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<PAGE>
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 registra-
tion 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, 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 sub-
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<PAGE>
sequent 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 destruc-
tion) 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 supple-
mented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(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 re-
ferred 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.
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<PAGE>
(e) Governing Law. This Agreement shall be governed by, and con-
strued in accordance with, the Laws of the State of Nevada, regardless of
the Laws that might otherwise govern under applicable principles of con-
flicts of law.
(f) Descriptive Headings. The descriptive headings contained here-
in 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.
(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.
-8-
<PAGE>
(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 Agree-
ment 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 perform-
ance 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.
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<PAGE>
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
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<PAGE>
ANNEX A
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.
A-1
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"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.
"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
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<PAGE>
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.
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<PAGE>
"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.
A-4
B E L L A G I O
Robert H. Baldwin
President
December 1, 1999
Mr. Stephen A. Wynn
Chairman of the Board and
Chief Executive Officer
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Amendment No. 6 to Fine Art Rental Agreement
Dear Steve:
Pursuant to Paragraph 3 of the letter agreement dated
December 31, 1998 between Bellagio and you (the "Rental
Agreement"), this letter confirms our agreement that,
effective this date, the following work of fine art shall be
added to Exhibit A to the Rental Agreement for the following
monthly rent:
Work Monthly Rent
"Head of a Woman (Tete de Femme)" $ 706
by Henri Matisse (1950, brush and
black ink on ivory wove arches
paper, 20-3/4 x 16 inches)
Please sign below to confirm your agreement to the foregoing.
My signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO I hereby agree to the foregoing.
By: ROBERT H. BALDWIN STEPHEN A. WYNN
------------------- ---------------------------
President and Chief STEPHEN A. WYNN
Executive Officer
cc: Bruce A. Levin James E. Pettis
Peter C. Walsh George J. Panek
P.O. BOX 7700, LAS VEGAS, NEVADA 89117-7700
Exhibit 10.71
EXECUTION COPY
FOURTH AMENDMENT
made as of the 30th day of October, 1999
to
ROAD DEVELOPMENT AGREEMENT
made as of the 10th day of January, 1997
by and among
STATE OF NEW JERSEY
AND
SOUTH JERSEY TRANSPORTATION AUTHORITY
AND
AC HOLDING CORP.
Exhibit 10.72
<PAGE>
FOURTH AMENDMENT TO ROAD DEVELOPMENT AGREEMENT ("Fourth
Amendment") made as of the 30th day of October, 1999, by and
among the STATE OF NEW JERSEY, acting through the Department
of Transportation, 1035 Parkway Avenue, CN 600, Trenton, New
Jersey 08625-0600 (the "State"), the SOUTH JERSEY
TRANSPORTATION AUTHORITY, a public body having an office at
Farley Service Plaza, P.O. Box 351, Hammonton, New Jersey
08037 ("SJTA") and AC HOLDING CORP., a Nevada corporation,
having an office and place of business at 3260 South
Industrial Road, Las Vegas, Nevada 89109 ("Developer").
W I T N E S S E T H:
WHEREAS, as of January 10, 1997 the State, SJTA and
Mirage Resorts, Incorporated ("MRI"), as "Developer",
executed and delivered a Road Development Agreement which
agreement (the "Original Agreement") was, by a first
amendment thereto made as of July 31, 1997, a Second
Amendment thereto made as of October 10, 1997 and an Amended
and Restated Third Amendment thereto made as of February 1,
1999 thereafter amended (said Original Agreement, as so
amended, the "Agreement"); and
WHEREAS, concurrently with the execution and delivery
of the Original Agreement, pursuant to Section 13.1 thereof,
MRI assigned all of its right, title and interest in and to
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the Original Agreement to Atlandia Design and Furnishings
Inc. ("Atlandia"), which assumed the obligations of the
assignor thereunder; and
WHEREAS, as of December 1, 1998, pursuant to Section
13.1 of the Agreement, Atlandia assigned all of its right,
title and interest in and to the Agreement to Developer,
which assumed the obligations of assignor thereunder; and
WHEREAS, the State, SJTA and Developer have determined
that it is necessary and, pursuant to the provisions of
N.J.S.A. 27:1A-5, 27:7-21 and 27:25A-23 that it is in the
public interest, to amend further the Agreement as
hereinafter provided.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Definitions.
1.1 All terms, the initial letters of which are
capitalized and not otherwise defined in this Fourth
Amendment, shall have the respective meanings ascribed to
them in the Agreement.
2. Amendment of Article 12 (Termination).
2.1 Sections 12.1.10 and 12.2.8 of Article 12
(Termination) of the Agreement are each hereby amended by
deleting the date "October 31, 1999" and replacing it with
the date "October 31, 2000".
2
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3. Miscellaneous.
3.1 This Fourth Amendment may not be modified, except
by an instrument in writing signed by the State, SJTA and
the Developer, and shall be binding on the parties, their
successors and assigns, but shall not enure to the benefit
of any other Person.
3.2 This Fourth Amendment may be executed in any
number of counterparts, by manual or by facsimile signature,
all of which counterparts together shall constitute a single
instrument.
3.3 Except as amended by this Fourth Amendment, all of
the terms, covenants and conditions of the Agreement shall
continue in full force and effect.
[SIGNATURE PAGE FOLLOWS]
3
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IN WITNESS WHEREOF, the parties hereto have caused this
Fourth Amendment to be executed as of the date first set
forth above by their duly authorized representatives.
STATE OF NEW JERSEY
BY: DEPARTMENT OF TRANSPORTATION
LAURIE B. GUTSHAW
By: ____________________________
Laurie B. Gutshaw
Chief of Staff
SOUTH JERSEY TRANSPORTATION
AUTHORITY
JAMES A. CRAWFORD
By: ____________________________
James A. Crawford
Executive Director
AC HOLDING CORP.
KENNETH R. WYNN
By: ____________________________
Kenneth R. Wynn
Secretary
THIS DOCUMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM.
JOHN J. FARMER, JR.
ATTORNEY GENERAL OF NEW JERSEY
SUSAN R. ROOP
By: ___________________________
Assistant Attorney General
4
PUBLIC TRUST TIDELANDS LEASE
STATE OF MISSISSIPPI
COUNTY OF HINDS
THIS AGREEMENT, made and entered into this the 4th day of
February, 1999, by and between the SECRETARY OF STATE, with the
approval of the GOVERNOR, for and on behalf of the STATE OF
MISSISSIPPI, hereinafter referred to as "LESSOR," and the BEAU
RIVAGE RESORTS, INC., a Mississippi Corporation registered to do
and doing business in the State of Mississippi, hereinafter
referred to as "LESSEE."
WITNESSETH:
THAT FOR THE TERM and in consideration of the rentals
hereinafter set forth, and covenants, conditions, and obligations
to be observed and performed by LESSEE, LESSOR does hereby lease
and rent unto LESSEE, pursuant to the authority of MISS. CODE ANN.
29-1-107, the following described submerged land or tideland,
hereinafter referred to as SAID PROPERTY, to-wit:
A parcel of land situated in the City of Biloxi, Second Judicial
District, Harrison County, Mississippi, being more particularly
described as follows, to wit:
Commence at a concrete monument denoting the intersection of the
north margin of U.S. Highway 90 with the East margin of I-110 Loop;
thence run South 07 degrees 06'47" East, for a distance of 148.69
feet to a point; thence run South 01 degree 29'12" East, for a
distance of 369.79 feet to the POINT OF BEGINNING; thence run South
60 degrees 54'54" East, for a distance of 32.09 feet to a point;
thence run South 77 degrees 05'04" East, for a distance of 14.68
feet to a point; thence run South 0 degrees 00'00" East, for a
distance of 136.77 feet to a point; thence run North 89 degrees
33'38" East, for a distance of 359.69 feet to a point; thence run
South 0 degrees 23'14" West for a distance of 90.0 feet to a point;
thence run South 89 degrees 36'46" East, for a distance of 803.37
feet to a point; thence run North 89 degrees 32'32" East, for a
distance of 36.95 feet to a point; thence South 0 degrees 22'47"
West, for a distance of 343.89 feet to a point; thence run North
89 degrees 36'46" West, for a distance of 732.82 feet to a point;
thence run North 83 degrees 38'45" West, for a distance of 495.89
feet to a point; thence run North 01 degrees 29'12" West, for a
distance of 532.25 feet to the POINT OF BEGINNING, containing
450,000 Square Feet, or 10.33 acres, approximately.
1. TERM.
The primary term of this lease shall be for thirty (30)
years, beginning on the date of the opening of the casino or
March 31, 1999, whichever occurs sooner. If LESSEE has complied
Exhibit 10.73
<PAGE>
with all material terms, covenants, conditions, and obligations of
this lease, as of the expiration of the primary term, LESSEE shall
have the option to extend this lease for a renewal term of twenty
(20) years on terms and provisions as may be agreed to by LESSOR
and LESSEE, and thereafter as described in Section 6 below.
2. CONSIDERATION.
The parties hereto agree that SAID PROPERTY contains
approximately 450,000 square feet of submerged lands or tidelands.
During the first five (5) year period, LESSEE covenants and agrees
to pay annual rental to LESSOR in the sum of $1,100,000. The
parties agree that consideration for this lease is in part
predicated on LESSEE developing and operating a single dockside
gaming facility licensed by the State of Mississippi which will
contain up to 2,228 games, tables and slot machines and up to
71,669 square feet of gaming space as reported to the Gaming
Commission. Should LESSEE desire to expand the gaming area within
its casino beyond 2,228 games, tables and slot machines, or 71,669
square feet of gaming space, notice shall first be given to LESSOR
and a corresponding adjustment to the annual rent shall be made in
the event such expansion results in a material increase in the
fair market rental value. Payment of the first year's rent shall
be made in four (4) installments, with one payment of $275,000 to
be made on or before March 31, 1999, and the remaining balance of
$825,000 to be paid in three (3) equal installments on or before
April 30, 1999, May 31, 1999, and June 30, 1999.
3. RENT ADJUSTMENT.
LESSOR shall, at the end of each five year period of the
primary and renewal lease terms, determine the annual rental for
the following five year period in accordance with MISS. CODE ANN.
Sec. 29-I-107(2) or as amended by subsequent legislation. The
initial appraisal required by MISS. CODE ANN. Sec. 29-1-107(2)
shall be conducted by an appraiser chosen by LESSOR and shall be
completed at least six (6) months prior to the end of the current
five year period. If LESSEE provides written notice to LESSOR
within thirty (30) days after receipt of LESSOR'S appraisal that
LESSEE does not agree with the fair market rental value determined
by LESSOR'S appraiser, LESSEE shall have the right to select an
appraiser to conduct an appraisal of the fair market rental value
of SAID PROPERTY. LESSEE'S appraisal shall be completed within
sixty (60) days after LESSEE provides the foregoing written notice
to LESSOR. If LESSOR'S appraiser and LESSEE'S appraiser cannot
agree on the appraised fair market rental value of SAID PROPERTY
within thirty (30) days after the completion of LESSEE'S
appraisal, LESSOR'S appraiser and LESSEE'S appraiser shall select
a third appraiser to conduct an appraisal of the fair market
rental value of SAID PROPERTY. The third appraisal shall be
completed within sixty (60) days after the third appraiser is
selected. The appraised fair market rental value determined by the
agreement of any two of the three appraisers shall constitute the
appraised fair market rental value for purposes of determining the
annual rental for the following five year period in accordance
with the MISS. CODE ANN. Sec. 29-1-107(2).
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LESSOR and LESSEE each agree to use all reasonable efforts to
complete the foregoing appraisal process prior to the beginning of
the following five year period. If for any reason the foregoing
appraisal process is not completed prior to the beginning of the
following five year period, LESSOR and LESSEE agree that the
interim annual rental for the following five year period shall be
the annual rental for the preceding five year period adjusted by
the All Urban Consumer Price Index-All Items (CPI) pursuant to
Miss. Code Ann. Sec. 29-I-107(2). Upon completion of this
appraisal process, if this appraisal process results in an
appraised fair market rental in excess of the interim annual
rental, LESSEE shall pay to LESSOR such excess within thirty (30)
days after the completion of this appraisal process. In the event
such appraised fair market rental is less than the interim annual
rental, the interim annual rental shall be the annual rental for
such five year period.
LESSOR and LESSEE acknowledge and agree: (a) that SAID
PROPERTY is comprised of parcels devoted to three separate uses,
(1) as a gaming vessel, (2) as a marina and garage overhang, and
(3) as open water; and (b) that, if and when value is assigned
based upon use as a part of the appraisal process required by
statute, such separate uses shall be recognized.
LESSOR and LESSEE further acknowledge and agree that any fair
market rental value appraisal which may be used to determine
rental amounts will deduct the value of any improvements by the
LESSEE which substantially enhance the value of SAID PROPERTY.
LESSOR and LESSEE further acknowledge and agree that the
appraisal of SAID PROPERTY by Jorgenson & Mann, Inc., dated
January 20, 1999, shall not be used for any purpose (whether as
precedence, support or otherwise) by any appraiser in connection
with any subsequent appraisal of SAID PROPERTY.
Any appraiser selected by LESSOR or by LESSEE shall be a
Member of the Appraisal Institute (MAI designation), shall be
disinterested and shall have no personal interest or bias with
respect to LESSOR or to LESSEE, and shall not be compensated on
any basis that is contingent on an action or event resulting from
any analysis, opinions or conclusions contained in such
appraiser's appraisal.
LESSOR shall pay for its appraiser, LESSEE shall pay for its
appraiser, and LESSOR and LESSEE shall share the cost of the third
appraiser equally.
In the event LESSOR and LESSEE cannot agree on an adjusted
rental amount, the lease may be canceled at the option of LESSOR.
4. PLACE AND TIME OF PAYMENT.
Subject to Article 2 above, rent shall be payable to the
STATE OF MISSISSIPPI and shall be payable annually on or before
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March 31 of each year to the STATE OF MISSISSIPPI and shall be
submitted to the SECRETARY OF STATE or his successor in office,
through the Public Lands Division, 401 Mississippi Street, Post
Office Box 136, Jackson, Mississippi 39205.
5. INTEREST PENALTY FOR PAST DUE RENT BALANCES.
LESSEE shall pay a late charge equal to interest at the rate
of twelve percent (12%) per annum from the date due until paid on
any lease rentals, fees, or other charges due and payable
hereunder, which are not paid within thirty (30) days of their due
date.
6. RIGHT TO RE-LEASE.
Pursuant to MISS. CODE ANN. 29-1-107, LESSEE is hereby
granted the prior right, exclusive of all other persons, to
release at the expiration of this lease, as may be agreed upon
between LESSEE and LESSOR, so long as LESSEE continues to present
satisfactory evidence of LESSEE'S right to occupy the adjacent
uplands.
7. TAXES, SURVEY COSTS, RECORDING FEES.
LESSEE covenants and agrees to pay any and all ad valorem
taxes and special assessments levied by any county or
municipality, if ever any there be, applicable to SAID PROPERTY
and LESSEE'S interest therein and improvements thereon; further,
LESSEE covenants and agrees to pay any and all survey costs and
recording fees in connection with this lease or any other
reasonable fees so determined by law.
8. TRANSFERABILITY OF LEASE.
LESSEE shall NOT sublease, assign, or transfer SAID PROPERTY
without the prior written permission of the Secretary of State or
his successor, which permission shall not arbitrarily or
unreasonably be withheld.
This restriction shall not apply to any future assignment by
LESSEE to a successor organization in a merger, consolidation or
similar reorganization, nor shall it apply to an assignment or
other transfer to an entity that controls, is controlled by or is
under common control with LESSEE. LESSEE agrees to notify LESSOR
of any such future assignment or transfer within thirty (30) days
of same pursuant to MISS. CODE ANN. 29-1-107(2).
9. PUBLIC ACCESS ASSURED.
As a condition of this lease, LESSOR has required that SAID
PROPERTY include significant open water which will not be occupied
by LESSEE and which is not necessary for LESSEE'S development or
operation of a single dockside gaming facility. As a further
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<PAGE>
condition of this lease, LESSOR has required that free public
access be maintained with respect to portions of SAID PROPERTY.
Accordingly, LESSEE agrees to maintain free public access to the
open water portion of SAID PROPERTY during the term of the lease
for passage of boats over and across such open water and for
surface fishing around the vessel, with no anchoring to the vessel
or its moorings permitted. This provision does not grant or permit
public access to enter the casino and does not grant or permit
public access beneath the vessel or beneath the parking garage.
Further, this provision does not grant or permit public access to
the marina except with respect to those portions of the marina, if
any, designated for use by the public.
By LESSEE'S entering into this Section 9 and agreeing to
maintain the free public access described above, LESSOR
acknowledges and understands that LESSEE is not agreeing to assume
or accept any responsibility or liability with respect to any such
public access afforded hereunder.
10. DEFAULT.
The parties herein expressly agree that if DEFAULT shall be
made in the payment of any tax, assessment or rent due pursuant to
this LEASE, after thirty (30) days notice to pay the same, then
and in any such event of DEFAULT it shall be lawful for LESSOR to
enter upon SAID PROPERTY, or any part thereon, upon LESSOR'S
thirty (30) day written notice to LESSEE, either with or without
process of law, to reenter and repossess the same, and to distrain
for any rent or assessment that may be due thereon, at the
election of LESSOR, but nothing herein is to be construed to mean
that LESSOR is not permitted to hold LESSEE liable for any unpaid
rent or assessment to that time. As to all other conditions,
covenants, and obligations imposed on LESSEE herein, enforcement
shall be by proceeding at law or in equity against any person
violating or attempting to violate said conditions, covenants, and
obligations, to restrain violation and to recover damages, if any,
including reasonable expenses of litigation and reasonable
attorney's fees, as may be awarded by the Court. Such enforcement
by proceedings at law or in equity may be instituted at any time
after thirty (30) days written notice to LESSEE if the default or
violation has not been corrected within that thirty (30) day
period. Invalidation of any material provision of this lease by
judgment or court order shall, unless agreed otherwise by the
parties, operate as an approved cancellation of this lease.
11. FORFEITURE, DEFAULT OR CANCELLATION.
LESSEE'S FAILURE to comply with the material provisions of
this lease shall result, at the option of LESSOR, in the
cancellation of this lease within thirty (30) days after written
notice of default is given; provided, however, that if at the end
of said 30-day period LESSEE is undertaking a diligent, good faith
effort to cure or has notified LESSOR in writing that it is
presenting a good faith challenge regarding its failure to comply
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(other than failure to pay rent when due), the 30-day period may
be extended as agreed between the parties. In the event of any
FORFEITURE, DEFAULT OR CANCELLATION of this lease or termination
of the term, said LESSEE shall quit, deliver up and surrender
possession of SAID PROPERTY, and thereupon this lease and all
agreements and covenants on LESSOR'S behalf to be performed and
kept, shall cease, terminate and be utterly void, the same as if
the lease had not been made. In addition thereof, LESSOR shall be
entitled to whatever remedies it may have at law or equity.
Immediately upon the termination of this lease, whether by
FORFEITURE, DEFAULT, or CANCELLATION, LESSOR shall be entitled to
take possession of SAID PROPERTY, custom and usage to the contrary
notwithstanding. If LESSEE declines or fails to remove the
improvements, structures and equipment occupying and erected upon
the leased premises within one hundred eighty (180) days after
expiration or termination of this lease, such structures and
equipment will be deemed forfeited by LESSEE, and may be removed
and/or sold by LESSOR after ten (10) days written notice by
certified mail addressed to LESSEE. Any costs incurred by LESSOR
in the removal of such improvements, structures and equipment
shall be paid for from the proceeds of sale of such improvements,
structures and equipment. If funds derived from the sale of such
improvements, structures and equipment are insufficient to pay
costs of removal, LESSOR shall have, and is hereby granted, a lien
upon the interest, if any, of LESSEE in adjacent uplands,
enforceable in proceedings as provided by law.
12. RENT NOT REFUNDABLE.
LESSOR and LESSEE agree that any rent paid during the term of
this lease is nonrefundable and LESSEE waives any right or claim
it may have to refund of rents paid under the term of this lease.
13. IMPROVEMENTS.
LESSEE will construct and maintain all improvements on SAID
PROPERTY as shown on Exhibit 1 attached hereto, and LESSEE shall
own such improvements, and LESSOR acknowledges that the
improvements which presently exist and which are to be constructed
on SAID PROPERTY are not the property of LESSOR. LESSEE shall not
construct under the terms of this lease any building or pier of
any type on adjoining State property.
14. RESTRICTIONS ON USE.
LESSEE shall comply with any and all applicable federal,
state, county or city laws, statutes, regulations, building codes,
building requirements, safety or conservation regulations, fire
codes, ordinances, pollution standards, or zoning regulations.
LESSEE specifically agrees to comply with the ordinances of the
City of Biloxi or to obtain appropriate variances, copies of which
will be provided to LESSOR. LESSEE further agrees not to fill or
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cover more than 66.7% of the surface area of SAID PROPERTY with
structures or other improvements of any kind in order to maintain
at least one third of the surface area of SAID PROPERTY as open
water.
If LESSEE fails to make permitted use of SAID PROPERTY or
abandons SAID PROPERTY, or uses SAID PROPERTY in violation of any
applicable law or regulation as aforesaid, this lease may be
terminated or canceled by LESSOR after thirty (30) days written
notice to LESSEE; provided, however, that if at the end of said 30-
day period LESSEE is undertaking a diligent, good faith effort to
cure or has notified LESSOR in writing that it is presenting a
good faith challenge regarding any such violation or non-permitted
use, the 30-day period may be extended as agreed between the
parties.
15. CANCELLATION OF LICENSE.
Should the Gaming Commission cancel the gaming license
pursuant to which the "dockside casino" contemplated by this lease
is operated due to LESSEE'S violation of any applicable statute or
regulation, said cancellation shall, at the option of the LESSOR,
be sufficient grounds for immediate termination of the lease and
removal of the casino vessel at the sole expense of LESSEE;
provided, however, in the event LESSEE voluntarily surrenders its
gaming license and LESSOR and LESSEE mutually agree to a different
use, to an appropriate rental and to such other terms as may be
appropriate under the circumstances, then this lease will not
terminate.
16. NO CLAIM OF TITLE OR INTEREST.
LESSEE, in accepting this lease, does hereby agree that no
claim of title or interest to SAID PROPERTY shall be made by
reason of the occupancy or use thereof, that all title and
interest to SAID PROPERTY is vested in the LESSOR. LESSEE further
acknowledges and agrees that it is entitled to no rights to
adjoining submerged lands or tidelands as a result of this lease.
17. CATASTROPHIC DESTRUCTION.
In the event of catastrophic destruction by natural causes of
LESSEE'S improvements on SAID PROPERTY, LESSEE may terminate this
lease at its option, provided SAID PROPERTY is surrendered in a
condition at least equal to that at the inception of this lease;
provided that LESSEE shall not be obligated to restore or replace
any portion of SAID PROPERTY lost or damaged as a result of the
catastrophic destruction by natural causes. LESSOR agrees that it
shall interpose no objection should LESSEE decide to rebuild those
improvements demolished in such a catastrophe. In such event,
LESSEE shall not be required to pay any rent for the period of
time between such catastrophic destruction and the commencement of
construction. For the period of time after the commencement of
construction and until the improvements are rebuilt and the casino
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reopens, LESSEE shall be required to pay as rent the lowest
appraised amount per square foot for open water in effect at the
time of such catastrophic destruction. Such lowest appraised
amount is currently seven (7) cents per square foot.
18. DUE DILIGENCE.
LESSEE shall be responsible for any damages that may be
caused to SAID PROPERTY by the activities of LESSEE under this
lease, and shall exercise due diligence in the protection of other
property of LESSOR in the vicinity thereof against damage or waste
from any and all conditions created by LESSEE. LESSEE shall not
deposit any refuse on any State property adjoining SAID PROPERTY.
Disposition of refuse and waste shall be consistent with local and
State health regulations.
19. INDEMNITY AND HOLD HARMLESS.
LESSEE agrees to hold and save harmless, protect and
indemnify LESSOR, the Secretary of State and his successors,
employees, officers and agents, from and against any and all loss,
damages, claims, suits or actions at law or equity, judgments and
costs, including reasonable attorney's fees, which may arise or
grow out of any injury or death of persons or loss or damage to
property connected with LESSEE'S exercise of any right granted or
conferred hereby, or LESSEE'S use, maintenance, operation or
condition of the property herein leased or the activities thereon
conducted by LESSEE, whether sustained by LESSEE, his respective
agents or employees, or by any other persons, or corporations
which seek to hold LESSOR liable.
In executing this Lease, LESSOR is relying on a survey and/or
legal description (see Exhibit 1) provided by the LESSEE. LESSEE
expressly assumes all liability for the correctness thereof and
expressly agrees to indemnify and save harmless LESSOR, its
employees, officers and agents, for all liability, damages
(including damages to land, aquatic life and other natural
resources), expenses, causes of actions, suits, claims, costs,
fees, including reasonable attorneys' fees and costs, penalties
(civil and criminal) or judgments arising out of State's reliance
on LESSEE's survey.
20. QUIET AND PEACEFUL POSSESSION.
LESSEE shall have quiet and peaceful possession of SAID
PROPERTY so long as compliance is made by LESSEE with the terms of
this agreement. LESSEE agrees to deliver possession of SAID
PROPERTY peaceably and promptly within ten (10) days after the
expiration or termination of this lease.
21. RIGHT OF ENTRY.
LESSOR reserves the right to enter onto SAID PROPERTY to
inspect the premises to determine compliance with the lease terms
herein.
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22. PERMITTED USE; CANCELLATION BY LESSEE.
All property of LESSEE shall be maintained by LESSEE at
LESSEE'S expense and in a clean, orderly, healthful, and
attractive condition, subject to inspection by LESSOR or his
representative at any time. LESSEE shall, at its sole cost and
expense, make any and all additions to, repairs, alterations,
maintenance, replacements, or changes about and to the LESSEE'S
improvements on SAID PROPERTY, which may be required by any public
authority affecting the property and its use. It is expressly
agreed by and between the parties that LESSEE will not occupy or
use, nor permit to be occupied or used, SAID PROPERTY for any
unlawful purposes.
It is specifically agreed that LESSEE will use SAID PROPERTY
for a marina and for the docking of a single gaming vessel, as
shown on the attached Exhibit 1, to be operated under a
Mississippi Gaming License issued to LESSEE as shown in Exhibit 2
attached hereto. LESSEE shall commence permitted use on or before
June 30, 1999.
In the event LESSEE's right to SAID PROPERTY for the
operation of a casino is restrained or enjoined by a court of
competent jurisdiction, or otherwise legally abrogated or
interrupted due to a challenge to the legality of the Mississippi
gaming statutes under which the casino is operated or by act of
the Mississippi Legislature or the United States Congress, LESSEE
shall be entitled to pay reduced rent at the lower appraised value
for open water as provided for in Article 17, or LESSEE may, in
its sole discretion, terminate this lease immediately, and in the
event of such termination, LESSEE's obligation to pay rent shall
cease immediately.
In the event LESSEE voluntarily ceases to use SAID PROPERTY
for the permitted use, LESSEE may, at its option, cancel this
lease upon one hundred eighty (180) days written notice to LESSOR.
In such event LESSEE shall not be obligated to pre-pay rent beyond
such 180 day period.
23. LESSOR NOT RESPONSIBLE.
LESSEE assumes full responsibility for the condition of the
premises and LESSOR shall not be liable or responsible for any
damages or injuries caused by any vices or defects therein to
LESSEE or to any occupant or to anyone in or on SAID PROPERTY who
derives his right to be thereon from LESSEE. LESSEE agrees to
maintain the leased premises in good condition, keeping the
structures and equipment located thereon in a good state of repair
in the interests of public health and safety.
24. LIABILITY INSURANCE.
LESSEE shall secure and maintain throughout the term of the
lease a liability insurance policy providing coverage in a
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commercially reasonable amount to be determined by LESSEE, but in
no event less than $5,000,000, against accidents, death or bodily
injury or loss or damage to property occurring on or in connection
to SAID PROPERTY, or LESSEE'S vessel, or arising out of or
associated with any activity of LESSEE on SAID PROPERTY. LESSEE
shall annually supply a certificate evidencing said insurance to
LESSOR.
25. RESERVATION OF MINERAL RIGHTS.
LESSEE further covenants and agrees that this lease and
interest of LESSEE SHALL NOT include any mineral, oil or gas,
coal, lignite, or other subterranean rights WHATSOEVER.
26. RIGHT TO CANCEL UPON INSOLVENCY OF LESSEE.
LESSEE covenants and agrees that if an execution or process
is levied upon SAID PROPERTY and is not removed within ninety (90)
days or if a Petition in Bankruptcy be filed by or against LESSEE
in any court of competent jurisdiction, LESSOR shall have the
right at its option, to cancel this lease; provided, however, that
if a Petition in Bankruptcy is filed by a person other than
LESSEE, and payment of rent remains current, LESSOR shall not have
the right to cancel this lease under this Section 26 until an
Order for Relief has been entered by the bankruptcy court in
connection with such petition. LESSEE covenants and agrees that
this lease and the interest of LESSEE hereunder shall not, without
the written consent of the Secretary of State or his successor
first obtained, be subject to garnishment or sale under execution
or otherwise in any suit or proceeding which may be brought by or
against LESSEE.
27. WAIVER NOT A DISCHARGE.
No failure, or successive failures, on the part of LESSOR to
enforce any provisions, nor any waiver or successive waivers on
its part of any provision herein, shall operate as a discharge
thereof or render the same inoperative or impair the right of
LESSOR to enforce the same upon any renewal thereof or in the
event of subsequent breach or breaches.
28. CANCELLATION UPON FAILURE TO COMPLY.
LESSEE'S failure to comply with the provisions of this lease
shall result, at the option of LESSOR, in the termination or
cancellation of this lease within thirty (30) days after written
notice of default is given, unless such default is cured within
thirty (30) days of receipt of such notice.
29. NOTICE.
All notifications required under the terms of this lease
shall be made by U.S. mail, return receipt requested, to the
parties at the following addresses:
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Secretary of State: 401 Mississippi Street
Post Office Box 136
Jackson, Mississippi 39205
Beau Rivage Resorts, Inc.: Attn: Vice President & General Counsel
875 Beach Blvd.
Biloxi, Mississippi 39530
30. LAWS OF MISSISSIPPI TO GOVERN.
This agreement is to be governed by the laws of the STATE OF
MISSISSIPPI, both as to interpretation and performance.
31. PERMITTED TRANSFERS.
LESSEE may, without the consent of LESSOR, transfer ownership
of the vessel to any affiliated or related entity. LESSEE will
provide written notice to LESSOR of any such transfer within
thirty (30) days after such transfer.
32. LEASEHOLD MORTGAGEE PROTECTIONS.
This Section 32 is included to give additional rights to the
Leasehold Mortgagee, as defined herein. Unless specifically so
stated, the additional rights herein shall not amend the remaining
provisions of the lease with regard to the LESSEE, and may not be
exercised, claimed or used in any manner by the LESSEE.
(a) LESSOR does hereby consent to a Leasehold Mortgage. The
Leasehold Mortgage will be a lien on the public trust tideland
leasehold property interest described herein. The Leasehold
Mortgage will not be an encumbrance on the fee interest in the
public trust tidelands real property leased from the State of
Mississippi, but is limited strictly to a leasehold interest only.
Furthermore, it is understood and agreed that in the event the
Leasehold Mortgage holder should foreclose, it shall have the
right to make a one time assignment of SAID PROPERTY to any
financially responsible person licensed by the Mississippi Gaming
Commission.
(b) When a notice of default or termination is to be given to
the LESSEE under the terms of this lease, such notice shall also
be given to the Leasehold Mortgagee at the address designated by
the Leasehold Mortgagee. Leasehold Mortgagee shall designate in
writing delivered to LESSOR by United States Mail, postage
prepaid, certified mail, an address for notice purposes within
thirty (30) days of execution of any such mortgage. Any address so
designated shall remain the address for purposes of notice to
Leasehold Mortgagee or Mortgagees until Leasehold Mortgagee, in
the same manner and by the same means, designates a change in such
address. Should there be more than one (1) Leasehold Mortgagee,
only one address shall be designated.
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<PAGE>
(c) For purposes of this lease, "Leasehold Mortgage" means
the deed of trust, mortgage or lien consented to in paragraph (a)
above, on this Lease Agreement and/or the LESSEE's leasehold
interest under this lease, which shall include facilities
constructed or placed on SAID PROPERTY including any vessels, and
"Leasehold Mortgagee" shall mean the beneficiary or beneficiaries
under the Leasehold Mortgage. Any Leasehold Mortgagee may exercise
any of its right hereunder through a designee, nominee, or wholly
owned subsidiary.
(d) Notwithstanding anything to the contrary in this Section
or elsewhere in this lease: (1) LESSOR consents to the execution,
delivery and recording or filing of the Leasehold Mortgage and the
collateral assignment of such Leasehold Mortgage; (2) LESSOR
acknowledges that any beneficiary of the Leasehold Mortgage
(and/or their representatives or assignees) are Leasehold
Mortgagee(s) for all purposes of this lease and no further
conditions need to be satisfied for such holder (and/or their
representatives or assignees) to be Leasehold Mortgagee.
(e) If the Leasehold Mortgagee, as such term is hereinabove
defined, shall forward to LESSOR a copy of the Leasehold Mortgage
together with a written notice setting forth its name and address,
then any such copy of said mortgage and any such notice shall be
deemed also to have been forwarded to any successor to LESSOR's
interest in SAID PROPERTY and until the time, if any, that said
mortgage shall be satisfied of record or said Leasehold Mortgagee
shall give LESSOR written notice that said mortgage has been
satisfied, and further, LESSOR agrees and acknowledges as follows
for the benefit of the Leasehold Mortgagee (all of which
agreements and covenants shall be cumulative, so that if a
Leasehold Mortgagee exercises rights or remedies under any one of
the following paragraphs the same shall not be deemed an election
of remedies and the Leasehold Mortgagee shall continue to have all
other rights and remedies provided for below):
(1) LESSOR shall not accept any voluntary cancellation,
surrender, termination or abandonment of this lease by LESSEE and
no modification or amendment of this lease shall be binding upon
the Leasehold Mortgagee or affect the lien of the Leasehold
Mortgage if done without the written consent of the Leasehold
Mortgagee.
(2) If LESSOR shall give any notice, demand or election
(hereafter in this paragraph collectively referred to as
"notices") to LESSEE hereunder, LESSOR shall at the same time send
a copy of such notice by United States Mail, postage prepaid,
certified mail, to the Leasehold Mortgagee, and the giving of such
notice shall be deemed complete upon the date the United States
mail certifies that notice was delivered to the Leasehold
Mortgagee. No notice given by LESSOR to LESSEE shall be binding
upon or affect the Leasehold Mortgagee unless a copy of said
notice shall be delivered as provided herein to said Leasehold
Mortgagee. In the case of any assignment of the mortgage or
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<PAGE>
mortgages held by it or change in address of any Leasehold
Mortgagee, said assignee of Leasehold Mortgagee, by written notice
by United States Mail, postage prepaid, certified mail, to LESSOR,
may change the name of said Leasehold Mortgagee and/or the address
to which such copies of notices are to be sent by notice to
LESSOR.
(3) Notwithstanding anything to the contrary herein, the
Leasehold Mortgagee shall have the right to perform any term,
covenant, condition or agreement of this lease to be performed by
LESSEE (excluding any covenant, condition or term in which the
performance thereof would require a gaming license) and to remedy
any default by LESSEE hereunder, and LESSOR shall accept such
performance by the Leasehold Mortgagee with the same force and
effect as if furnished by LESSEE. However, should Leasehold
Mortgagee exercise its rights under this provision, it will
indemnify and hold LESSOR harmless from and against any and all
loss, costs, liability and expense (including reasonable
attorneys' fees) resulting from such action to the extent and so
long as LESSOR's actions are pursuant to and in compliance with
instructions from the Leasehold Mortgagee.
(4) If LESSOR shall give a notice by United States Mail,
postage prepaid, certified mail, of a default by LESSEE under this
lease and if such default shall not be remedied within any
applicable grace period and LESSOR shall become entitled to re-
enter SAID PROPERTY or terminate this lease, then, before re-
entering SAID PROPERTY or terminating this lease, LESSOR shall
give the Leasehold Mortgagee not less than thirty (30) days
additional written notice of the default and shall allow the
Leasehold Mortgagee such additional thirty (30) days within which
to cure the default, or, in the case of a default (other than a
default in the payment of any rent or other sum of money under
this lease) which cannot in the exercise of diligence be cured
within said thirty (30) day period, shall allow the Leasehold
Mortgagee such additional thirty (30) days to commence the curing
of the default, in which event LESSOR shall not re-enter SAID
PROPERTY or terminate this lease, so long as the Leasehold
Mortgagee, or LESSEE, is diligently and in good faith engaged in
curing default, so long as all payments under this lease remain
current as described in this lease during the additional time to
cure.
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<PAGE>
(5) LESSEE may delegate irrevocably to the Leasehold
Mortgagee the authority to exercise any or all of LESSEE's rights
hereunder (including without limitation the authority to exercise
any option to extend or renew the term hereof), but no such
delegation shall be binding upon LESSOR unless and until either
LESSEE or the Leasehold Mortgagee shall give to LESSOR a true copy
by United States Mail, postage prepaid, certified mail, of a
written instrument effecting such delegation and indemnifying
LESSOR for any dispute between LESSOR and Leasehold Mortgagee
relating to such delegation or any conflicting claims as between
LESSEE and Leasehold Mortgagee so long as LESSOR's actions are in
compliance with and pursuant to instructions from the Leasehold
Mortgagee. For the purpose of exercising such rights, Leasehold
Mortgagee shall, for the purposes of this lease, be deemed to be
the LESSEE. However, LESSEE shall remain entitled to receive the
notices provided for under this lease.
(f) If LESSOR terminates this lease, then LESSOR will notify
the Leasehold Mortgagee of such termination (a "Termination
Notice"), which notice shall set forth all sums due to LESSOR
under this lease, and upon the written request of the Leasehold
Mortgagee, LESSOR will enter into a new lease of SAID PROPERTY
with the Leasehold Mortgagee for the remainder of this lease term,
effective as of the date of such termination, at the rent and
additional rent and upon the terms, provisions, covenants and
agreements herein contained (including, without limitation, all
rights, options, or privileges to extend or renew the term hereof)
provided:
(1) the Leasehold Mortgagee shall request LESSOR for such a
new lease within thirty (30) days after the date of the
Termination Notice and such written request by United States Mail,
postage prepaid, certified mail, is accompanied by payment to
LESSOR of all sums then due to LESSOR under this lease as
described in the Termination Notice;
(2) the Leasehold Mortgagee shall pay to LESSOR, at the time
of the execution and delivery of said new lease, any and all
reasonable expenses, including legal and attorneys' fees, to which
the LESSOR shall have been subjected by reason of such
termination; and
(3) the Leasehold Mortgagee shall, on or before execution and
delivery of said new lease, perform and observe all the other
covenants and conditions on LESSEE's part to be performed and
observed to the extent that LESSEE shall have failed to perform
and observe the same, except that (a) with respect to any default
which cannot be cured by the Leasehold Mortgagee until it obtains
possession of SAID PROPERTY, the Leasehold Mortgagee shall have a
reasonable time after the Leasehold Mortgagee obtains possession,
to cure such default, provided the Leasehold Mortgagee shall first
agree in writing to proceed diligently to remedy said default
after it obtains possession of SAID PROPERTY and shall in fact
proceed diligently and in good faith to do so and shall in fact so
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<PAGE>
do, and (b) in no event shall the Leasehold Mortgagee be required
to cure a default related to bankruptcy, insolvency, a prohibited
transfer, failure to deliver financial information relating to
LESSEE (to the extent, if any, that any of the foregoing actually
constitute(s) a non-monetary default under this lease), and any
other non-monetary default that by its nature relates only to
LESSEE or its affiliates or can reasonably be performed only by
LESSEE or its affiliates. Upon execution and delivery of such new
lease, any subleases which may have theretofore been assigned and
transferred to LESSOR shall thereupon be assigned and transferred
by LESSOR to the new lessee. During the period from the date of
the termination of this lease until the date the term of the new
lease commences, LESSOR shall not terminate any sublease or seek
to recover possession of any sublet space without permission of
the Leasehold Mortgagee, except that LESSOR may elect to do so by
reason of a default (beyond any applicable notice or grace
periods) by any subtenant under the terms, covenants or conditions
on such subtenant's part to be performed or complied with pursuant
to such sublease.
(g) Any new lease entered into pursuant to this lease shall
be in recordable form. Notice is hereby given to any intervening
claimants that such new lease shall be superior to all rights,
liens and interests intervening between the date of this lease and
the date of such new lease period. Such new lease shall be free of
all rights of the originally named LESSEE hereunder. The
provisions of the immediately preceding sentence shall be self-
executing. LESSOR, however, does not in any way assure, guarantee
or warrant that said new lease shall be superior under applicable
law and therein granted a priority status.
(h) Upon written request of LESSEE or of the Leasehold
Mortgagee, LESSOR will:
(1) deliver to them or any of them a separate written
instrument signed and acknowledged by LESSOR setting forth and
confirming the provisions of this lease;
(2) acknowledge to them or any of them in writing the receipt
by LESSOR of any notice or instrument received by the LESSOR
pursuant to the provisions of this lease.
(i) To the best of the ability of the LESSOR, when a new
lease is entered into with the Leasehold Mortgagee or its designee
(such holder or designee being herein called the "Acquiring
Holder" and the leasehold mortgage of such Acquiring Holder being
herein called the "Acquiring Holder's Leasehold Mortgage"), the
liens on and estates and other interests in SAID PROPERTY or this
lease of all persons holding directly or indirectly under or
through LESSEE (including the Acquiring Holder's Leasehold
Mortgage), other than liens, estates and interests which are
subordinate to the Acquiring Holders Leasehold Mortgage, shall
immediately and without documentation continue in effect, attach
to the new lease and be reinstated as to each other to the same
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<PAGE>
extent, and in the same manner, order and priority, as if (1) the
new lease were this lease, (2) this lease had not been terminated
and (3) the Acquiring Holder had acquired the leasehold estate
under this lease by assignment on the date the term of the new
lease commences. For the purposes of the preceding sentences, each
lien, estate or interest which could have been extinguished by the
foreclosure of the Acquiring Holder's Leasehold Mortgage shall be
deemed to be subordinate to the Acquiring Holder's Leasehold
Mortgage.
(j) Notwithstanding anything in this lease to the contrary,
the Leasehold Mortgagee shall be entitled to participate in any
proceedings relating to any condemnation of all or part of this
lease or the leasehold interest created by this lease. In both a
partial and total taking, any award paid with respect to this
lease or the Leasehold Interest created by this lease shall first
be applied to pay off in full, the indebtedness secured by the
Leasehold Mortgage. Notwithstanding the foregoing, in the event of
a partial condemnation, and with the consent of the Leasehold
Mortgagee, any condemnation proceeds may be applied instead to
restore the portion of SAID PROPERTY not condemned pursuant to
disbursement procedures deemed appropriate by the Leasehold
Mortgagee.
(k) Notwithstanding anything in this lease to the contrary,
all proceeds of fire and other hazard insurance policies shall be
delivered to the Leasehold Mortgagee, if any. Such insurance
proceeds shall be applied flat to pay off in full, in order of
priority, the indebtedness secured by the Leasehold Mortgage, or
as otherwise provided in the senior Leasehold Mortgage. The
Leasehold Mortgagees are hereby empowered to participate in any
settlement, arbitration or proceeding involving such a casualty.
(1) The Leasehold Mortgagee shall have the right, by giving
notice in writing by United States Mail, postage prepaid,
certified mail, to LESSOR, to irrevocably and exclusively delegate
any rights and remedies granted by this lease to the Leasehold
Mortgage to any collateral assignee of the Leasehold Mortgagee's
Leasehold Mortgage. Such collateral assignee shall be entitled to
all the same rights, benefits, privileges, protections and notices
as would apply to the Leasehold Mortgagee. In the event of any
conflicting claims between the Leasehold Mortgagee and a
collateral assignee of such Leasehold Mortgagee's Leasehold
Mortgage, LESSOR shall honor the claims of the collateral assignee
(to the exclusion of the claims of the Leasehold Mortgagee),
provided that such collateral assignee agrees to indemnify LESSOR
and hold LESSOR harmless from and against any and all loss, cost,
liability and expense (including reasonable attorneys' fees)
arising from any litigation or other dispute between such
collateral assignee and the Leasehold Mortgagee from which its
rights derive.
(m) Within fifteen days after written request therefor from
the Leasehold Mortgagee, LESSOR shall deliver to the Leasehold
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<PAGE>
Mortgagee a certificate signed by LESSOR in form reasonably
designated by the Leasehold Mortgagee, certifying as to: (1) the
rent payable under this lease; (2) the term of this lease and the
status of LESSEE's extension rights, if any, (3) the nature of any
known defaults by LESSEE alleged by LESSOR; and (4) any other
matters reasonably requested by the Leasehold Mortgagee.
(n) Should Leasehold Mortgagee for any reason take possession
of SAID PROPERTY, it shall be subject to and comply fully with all
of the provisions and conditions of this lease which would bind
the LESSEE, but only for so long as the Leasehold Mortgagee has
not assigned its interest under the lease or abandoned SAID
PROPERTY.
(o) The LESSOR agrees that the rights hereunder of Leasehold
Mortgagee shall be exercisable by such Leasehold Mortgagee in the
order of the priority of lien or other security interest of their
respective Leasehold Mortgage, but it shall not be the duty or
obligation of the LESSOR to assure compliance with this provision.
(p) LESSOR consents to any exercise of remedies by any
Leasehold Mortgagee including acceptance of an assignment, deed or
other conveyance in lieu of foreclosure.
(q) Any notice which LESSOR is required to give to any
Leasehold Mortgagee hereunder shall be deemed to have been given
when the United States Postal Service certifies that such notice
was delivered to the Leasehold Mortgagee at the address specified
in this lease or at such other address as may be specified from
time to time by the Leasehold Mortgagee.
IN WITNESS WHEREOF, this lease is executed by LESSOR and
LESSEE, this the 4th day of February, 1999.
LESSOR:
STATE OF MISSISSIPPI
ERIC CLARK
SECRETARY OF STATE
BY: GERALD McWHORTER
GERALD McWHORTER
ASSISTANT SECRETARY OF
STATE FOR PUBLIC LANDS
LESSEE:
BEAU RIVAGE RESORTS, INC.
BY: BARRY A. SHIER
TITLE: CHIEF EXECUTIVE OFFICER
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<PAGE>
APPROVED BY THE GOVERNOR of the State of Mississippi on the 11th
day of February, 1999.
KIRK FORDICE
GOVERNOR
STATE OF MISSISSIPPI
COUNTY OF HINDS
PERSONALLY APPEARED BEFORE ME, the undersigned authority in
and for said county and state, on this 11th day of February, 1999,
within my jurisdiction the within named KIRK FORDICE, personally
known to me to be the GOVERNOR of the STATE OF MISSISSIPPI, who
acknowledged that he executed the above and foregoing LEASE
AGREEMENT as the act and deed of said GOVERNOR for and on behalf
of the STATE OF MISSISSIPPI, on the date and for the purposes
therein stated, being first duly authorized to so do.
BETHANY J. BRYANT
NOTARY PUBLIC
My Commission Expires:
Notary Public State of Mississippi At Large
My Commission Expires May 14, 2000
Bonded Thru Heiden Marchetti, Inc.
STATE OF MISSISSIPPI
COUNTY OF HINDS
PERSONALLY APPEARED BEFORE ME, the undersigned authority in
and for said county and state, on this 8th day of February, 1999,
within my jurisdiction the within named GERALD McWHORTER,
personally known to me to be the ASSISTANT SECRETARY OF STATE FOR
PUBLIC LANDS of the STATE OF MISSISSIPPI, who acknowledged that he
executed the above and foregoing LEASE AGREEMENT as the act and
deed of said ASSISTANT SECRETARY OF STATE for and on behalf of the
STATE OF MISSISSIPPI, on the date and for the purposes therein
stated, being first duly authorized to so do.
LINDA A. SMITH
NOTARY PUBLIC
My Commission Expires:
Mississippi Statewide Notary Public
My Commission Expires May 28, 1999
Bonded Thru Stegall Notary Service
STATE OF MISSISSIPPI
COUNTY OF HARRISON
PERSONALLY APPEARED BEFORE ME, the undersigned authority in
and for the said county and state, on this 4th day of February,
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<PAGE>
1999, within my jurisdiction, the within named Barry Shier, who
acknowledged that he/she is Chief Executive Officer of BEAU RIVAGE
RESORTS, INC., a Mississippi corporation, and that for and on
behalf of said corporation, and as its act and deed he/she
executed the above and foregoing instrument, after first having
been duly authorized by said corporation so to do.
My Commission Expires: SHELIA M. ALEXANDER
2-24-99 NOTARY PUBLIC
-19-
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 29th day of February, 2000
(this "Agreement"), by and between Mirage Resorts, Incorporated,
a Nevada corporation (the "Company"), and Stephen A. Wynn (the
"Executive").
WHEREAS, the Board of Directors of the Company (the
"Board"), has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's
full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements
upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that
are competitive with those of other corporations. Therefore, in
order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means
the first date during the Change of Control Period (as defined
herein) on which a Change of Control occurs. Notwithstanding
anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (1) was at the request of a
third party that has taken steps reasonably calculated to effect
a Change of Control or (2) otherwise arose in connection with or
anticipation of a Change of Control, then "Effective Date" means
the date immediately prior to the date of such termination of
employment.
(b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that, commencing on the date one year
after the date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof, the "Renewal
Date"), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless, at least 60 days prior to
the Renewal Date, the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
EXHIBIT 10.74
<PAGE>
(c) "affiliated company" means any company controlled by,
controlling or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then-outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any affiliated company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C); or
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of the then-outstanding shares of common stock and
the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company
-2-
<PAGE>
Common Stock and the Outstanding Company Voting Securities, as
the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then-outstanding voting securities of such corporation,
except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company, subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of the
Effective Date (the "Employment Period").
Section 3. Terms of Employment. (a) Position and Duties.
(1) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office where the
Executive was employed immediately preceding the Effective Date
or at any other location less than 10 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period, it shall
not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement. It is expressly
understood and agreed that, to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's
-3-
<PAGE>
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary (the
"Annual Base Salary"), which Annual Base Salary shall be paid at
a monthly rate at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary that has
been earned but deferred, to the Executive by the Company and the
affiliated companies in respect of the 12-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually, beginning no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date. Any increase in the Annual Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during
the Employment Period, an annual bonus (the "Annual Bonus") in
cash at least equal to the Executive's highest bonus under the
Company's applicable annual cash bonus plans, or any comparable
bonus under any predecessor or successor plan, for the last three
full fiscal years prior to the Effective Date (annualized, in the
event that the Executive was not employed by the Company for the
whole of such fiscal year) (the "Recent Annual Bonus"). Each
such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(3) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices,
policies, and programs applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and the affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the
affiliated companies.
(4) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and the affiliated companies
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(including, without limitation, medical, prescription, dental,
disability, employee life, group life, split-dollar life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and the affiliated companies.
(5) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and
the affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and the affiliated companies.
(6) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile with a
driver and company aircraft and payment of related expenses, in
accordance with the most favorable plans, practices, programs and
policies of the Company and the affiliated companies in effect
for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the
affiliated companies.
(7) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the
Company and the affiliated companies at any time during the 120-
day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company
and the affiliated companies.
(8) Vacation. During the Employment Period, the Executive shall
be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company
and the affiliated companies as in effect for the Executive at
any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies.
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(c) Purchase and Sale Rights. Within ten days following the
Effective Date, the Executive shall have the right to elect, by
written notice to the Company, to purchase any or all of the
following: (i) the Gulfstream III aircraft owned by the Company
(or an affiliated company) as of the date hereof, at a price
equal to its fair market value as of the date of notice, as
determined by an appraiser selected by the Executive in his sole
discretion, and/or (ii) the Company's (or an affiliated
company's) New York City apartment located on Fifth Avenue, at a
price equal to its fair market value as of the date of notice, as
determined by an appraiser from Sotheby's in New York
(collectively, the "Purchase Right"). Upon the exercise of the
Purchase Right with respect to any of the items in clauses (i) or
(ii), the Executive shall have 120 days following the date of
notice to make payment or secure financing for any such purchase.
During the five-year period following the Effective Date (without
regard to the earlier expiration of the Employment Period or the
Executive's termination of employment), at the written request of
the Executive or his estate or beneficiary (as applicable), the
Company shall be required and have the obligation to purchase for
cash, payable in a lump sum within thirty days following the date
of the Executive's request, the Executive's house located at
Shadow Creek in North Las Vegas, Nevada and the furnishings,
artwork and personal effects therein (to the extent requested by
the Executive), at a price equal to the Executive's cost,
including the cost of all additions and improvements thereto,
with the costs communicated to the Company by the Executive to be
determinative of the actual costs (the "Put Right").
Section 4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically if the Executive dies during the Employment Period.
If the Company determines in good faith that the Disability (as
defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"),
it may give to the Executive written notice in accordance with
Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the
Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness that is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative; provided, however, that any
handicap resulting from the Executive's condition commonly known
as "retinitis pigmentosa" shall not be considered a legitimate
basis for the termination of the Executive's employment due to
Disability.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
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(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
any affiliated company (other than any such failure resulting
from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the
Company that specifically identifies the manner in which the
Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's
duties, or
(2) the willful engaging by the Executive in illegal conduct or
gross misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this Section 4(b), no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it
is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer of the Company or a senior officer of the
Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
with counsel for the Executive, to be heard before the Board),
finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in Section 4(b)(1)
or 4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a), or any other
action by the Company that results in a diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and that is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
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(3) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 3(a)(1)(B)
or the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c).
For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason
for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 11(b). "Notice of Termination" means a
written notice that (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (3)
if the Date of Termination (as defined herein) is other than the
date of receipt of such notice, specifies the Date of Termination
(which Date of Termination shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's respective rights
hereunder.
(e) Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or
by the Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified in the Notice
of Termination, as the case may be, (2) if the Executive's
employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, and (3)
if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
Section 5. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company terminates the
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Executive's employment other than for Cause, death or Disability
or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate
of the following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii)
the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof that has been earned but deferred (and annualized
for any fiscal year consisting of less than 12 full months or
during which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount, the "Highest
Annual Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination and the denominator of which is 365, and (iii) any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case, to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii) and
(iii), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
(C) an amount equal to the additional Company matching
contributions that would have been made on the Executive's behalf
in the Company's Retirement Savings Voluntary Plan or any
successor plan (the "401(k) Plan") (assuming continued
participation on the same basis as immediately prior to the
Effective Date), plus the additional amount of any benefit the
Executive would have accrued under any excess or supplemental
plans (the "SERP") as a result of contribution limitations in the
401(k) Plan that the Executive would receive if the Executive's
employment continued for three years after the Date of
Termination, assuming for this purpose that the Executive's
compensation in each of the three years is that required by
Section 3(b)(1) and Section 3(b)(2) and that the Company's
matching contributions are determined pursuant to the applicable
provisions of the 401(k) Plan and the SERP, as in effect during
the 12-month period immediately prior to the Effective Date; and
(2) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family
at least equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies and
their families, provided, however, that, if the Executive becomes
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reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until three years after the
Date of Termination and to have retired on the last day of such
period; and
(3) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider
of which shall be selected by the Executive in the Executive's
sole discretion; and
(4) the Executive shall have the right to exercise the Put Right
for the remainder of the period set forth in Section 3(c); and
(5) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or that the Executive is
eligible to receive under any plan, program, policy or practice
or contract or agreement of the Company and the affiliated
companies (such other amounts and benefits, the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of the Other Benefits. The Accrued Obligations shall
be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include,
without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and
the affiliated companies to the estates and beneficiaries of peer
executives of the Company and the affiliated companies under such
plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the
affiliated companies and their beneficiaries. In addition, the
Executive's estate or beneficiary, as applicable, shall have the
right to exercise the Put Right for the remainder of the period
set forth in Section 3(c).
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment
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Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 6(c) shall include,
and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the
Company and the affiliated companies to disabled executives
and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time
thereafter generally with respect to other peer executives of the
Company and the affiliated companies and their families. In
addition, the Executive shall have the right to exercise the Put
Right for the remainder of the period set forth in Section 3(c).
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1)
the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously
deferred by the Executive, and (3) the Other Benefits, in each
case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other
than for the Accrued Obligations and the timely payment or
provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. In addition, the
Executive shall have the right to exercise the Put Right for the
remainder of the period set forth in Section 3(c).
Section 6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or the affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested
benefits or that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or
agreement with the Company or the affiliated companies at or
subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or
contract or agreement, except as explicitly modified by this
Agreement.
Section 7. Full Settlement. The Company's obligation to make
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the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense, or other claim, right
or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement, and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest
on any delayed payment at the applicable federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
Section 8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be
determined that any payment, right or distribution by or from the
Company or the affiliated companies to or for the benefit of the
Executive (whether paid or payable, exercised or exercisable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any
additional payments required under this Section 8) (the
"Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (the "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. Notwithstanding the foregoing provisions of
this Section 8(a), if it shall be determined that the Executive
is entitled to the Gross-Up Payment, but that the Payments do not
exceed 110% of the greatest amount that could be paid to the
Executive such that the receipt of the Payments would not give
rise to any Excise Tax (the "Reduced Amount"), then no Gross-Up
Payment shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
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Arthur Andersen LLP or such other certified public accounting
firm as may be designated by the Executive (the "Accounting
Firm") that shall provide detailed supporting calculations both
to the Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a
Payment or such earlier time as is requested by the Company. In
the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-
Up Payment, as determined pursuant to this Section 8, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by
the Company should have been made (the "Underpayment"),
consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than 10 business days after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest
such claim, the Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
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(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest, and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the
Company shall control all proceedings taken in connection with
such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and
conferences with the applicable taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that, if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which the
Gross-Up Payment would be payable hereunder, and the Executive
shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 8(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company
pursuant to Section 8(c), a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
Section 9. Confidential Information. The Executive shall
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hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or the affiliated companies, and their respective
businesses, which information, knowledge or data shall have been
obtained by the Executive during the Executive's employment by
the Company or the affiliated companies and which information,
knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In
no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
Section 10. Successors. (a) This Agreement is personal to
the Executive, and, without the prior written consent of the
Company, shall not be assignable by the Executive other than by
will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
"Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes
and agrees to perform this Agreement by operation of law or
otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Nevada, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
if to the Executive:
At the most recent address on
file for the Executive at the Company
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if to the Company:
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the
Executive by the Company is "at will" and, subject to Section
1(a), prior to the Effective Date, the Executive's employment may
be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall
have no further rights under this Agreement; provided that this
Agreement may not be terminated by the Company if it is
reasonably demonstrated by the Executive that such termination
(1) was at the request of a third party that has taken steps
reasonably calculated to effect a Change of Control or (2)
otherwise arose in connection with or anticipation of a Change of
Control. From and after the Effective Date, this Agreement shall
supersede any other agreement between the parties with respect to
the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the Board,
the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
/s/ Stephen A. Wynn
---------------------------------------------
STEPHEN A. WYNN
MIRAGE RESORTS, INCORPORATED
By /s/ Robert H. Baldwin
-------------------------------------------
Name: Robert H. Baldwin
Title: Chief Financial Officer and Treasurer
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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 29th day of February, 2000
(this "Agreement"), by and between Mirage Resorts, Incorporated,
a Nevada corporation (the "Company"), and Robert H. Baldwin (the
"Executive").
WHEREAS, the Board of Directors of the Company (the
"Board"), has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's
full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements
upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that
are competitive with those of other corporations. Therefore, in
order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means
the first date during the Change of Control Period (as defined
herein) on which a Change of Control occurs. Notwithstanding
anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (1) was at the request of a
third party that has taken steps reasonably calculated to effect
a Change of Control or (2) otherwise arose in connection with or
anticipation of a Change of Control, then "Effective Date" means
the date immediately prior to the date of such termination of
employment.
(b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that, commencing on the date one year
after the date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof, the "Renewal
Date"), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless, at least 60 days prior to
the Renewal Date, the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
EXHIBIT 10.75
<PAGE>
(c) "affiliated company" means any company controlled by,
controlling or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then-outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any affiliated company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C); or
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of the then-outstanding shares of common stock and
the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as
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the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then-outstanding voting securities of such corporation,
except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company, subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of the
Effective Date (the "Employment Period").
Section 3. Terms of Employment. (a) Position and Duties.
(1) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office where the
Executive was employed immediately preceding the Effective Date
or at any other location less than 10 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period, it shall
not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement. It is expressly
understood and agreed that, to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's
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responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary (the
"Annual Base Salary"), which Annual Base Salary shall be paid at
a monthly rate at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary that has
been earned but deferred, to the Executive by the Company and the
affiliated companies in respect of the 12-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually, beginning no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date. Any increase in the Annual Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during
the Employment Period, an annual bonus (the "Annual Bonus") in
cash at least equal to the Executive's highest bonus under the
Company's applicable annual cash bonus plans, or any comparable
bonus under any predecessor or successor plan, for the last three
full fiscal years prior to the Effective Date (annualized, in the
event that the Executive was not employed by the Company for the
whole of such fiscal year) (the "Recent Annual Bonus"). Each
such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(3) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices,
policies, and programs applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and the affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the
affiliated companies.
(4) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and the affiliated companies
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(including, without limitation, medical, prescription, dental,
disability, employee life, group life, split-dollar life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and the affiliated companies.
(5) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and
the affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and the affiliated companies.
(6) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and the affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies.
(7) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the
Company and the affiliated companies at any time during the 120-
day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company
and the affiliated companies.
(8) Vacation. During the Employment Period, the Executive shall
be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company
and the affiliated companies as in effect for the Executive at
any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies.
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Section 4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically if the Executive dies during the Employment Period.
If the Company determines in good faith that the Disability (as
defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"),
it may give to the Executive written notice in accordance with
Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the
Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness that is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
any affiliated company (other than any such failure resulting
from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the
Company that specifically identifies the manner in which the
Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's
duties, or
(2) the willful engaging by the Executive in illegal conduct or
gross misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this Section 4(b), no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it
is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer of the Company or a senior officer of the
Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
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with counsel for the Executive, to be heard before the Board),
finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in Section 4(b)(1)
or 4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a), or any other
action by the Company that results in a diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and that is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(3) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 3(a)(1)(B)
or the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c).
For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason
for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 11(b). "Notice of Termination" means a
written notice that (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (3)
if the Date of Termination (as defined herein) is other than the
date of receipt of such notice, specifies the Date of Termination
(which Date of Termination shall be not more than 30 days after
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the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's respective rights
hereunder.
(e) Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or
by the Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified in the Notice
of Termination, as the case may be, (2) if the Executive's
employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, and (3)
if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
Section 5. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company terminates the
Executive's employment other than for Cause, death or Disability
or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate
of the following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii)
the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof that has been earned but deferred (and annualized
for any fiscal year consisting of less than 12 full months or
during which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount, the "Highest
Annual Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination and the denominator of which is 365, and (iii) any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case, to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii) and
(iii), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
(C) an amount equal to the additional Company matching
contributions that would have been made on the Executive's behalf
in the Company's Retirement Savings Voluntary Plan or any
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successor plan (the "401(k) Plan") (assuming continued
participation on the same basis as immediately prior to the
Effective Date), plus the additional amount of any benefit the
Executive would have accrued under any excess or supplemental
plans (the "SERP") as a result of contribution limitations in the
401(k) Plan that the Executive would receive if the Executive's
employment continued for three years after the Date of
Termination, assuming for this purpose that the Executive's
compensation in each of the three years is that required by
Section 3(b)(1) and Section 3(b)(2) and that the Company's
matching contributions are determined pursuant to the applicable
provisions of the 401(k) Plan and the SERP, as in effect during
the 12-month period immediately prior to the Effective Date; and
(2) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family
at least equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies and
their families, provided, however, that, if the Executive becomes
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until three years after the
Date of Termination and to have retired on the last day of such
period; and
(3) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider
of which shall be selected by the Executive in the Executive's
sole discretion; and
(4) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or that the Executive is
eligible to receive under any plan, program, policy or practice
or contract or agreement of the Company and the affiliated
companies (such other amounts and benefits, the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of the Other Benefits. The Accrued Obligations shall
be paid to the Executive's estate or beneficiary, as applicable,
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in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 5(b) shall include,
without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and
the affiliated companies to the estates and beneficiaries of peer
executives of the Company and the affiliated companies under such
plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the
affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 6(c) shall include,
and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the
Company and the affiliated companies to disabled executives
and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time
thereafter generally with respect to other peer executives of the
Company and the affiliated companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1)
the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously
deferred by the Executive, and (3) the Other Benefits, in each
case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other
than for the Accrued Obligations and the timely payment or
provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
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future participation in any plan, program, policy or practice
provided by the Company or the affiliated companies and for which
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested
benefits or that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or
agreement with the Company or the affiliated companies at or
subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or
contract or agreement, except as explicitly modified by this
Agreement.
Section 7. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense, or other claim, right
or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement, and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest
on any delayed payment at the applicable federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
Section 8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be
determined that any payment, right or distribution by or from the
Company or the affiliated companies to or for the benefit of the
Executive (whether paid or payable, exercised or exercisable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any
additional payments required under this Section 8) (the
"Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (the "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
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amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. Notwithstanding the foregoing provisions of
this Section 8(a), if it shall be determined that the Executive
is entitled to the Gross-Up Payment, but that the Payments do not
exceed 110% of the greatest amount that could be paid to the
Executive such that the receipt of the Payments would not give
rise to any Excise Tax (the "Reduced Amount"), then no Gross-Up
Payment shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
Arthur Andersen LLP or such other certified public accounting
firm as may be designated by the Executive (the "Accounting
Firm") that shall provide detailed supporting calculations both
to the Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a
Payment or such earlier time as is requested by the Company. In
the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-
Up Payment, as determined pursuant to this Section 8, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by
the Company should have been made (the "Underpayment"),
consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than 10 business days after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
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the expiration of such period that the Company desires to contest
such claim, the Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest, and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the
Company shall control all proceedings taken in connection with
such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and
conferences with the applicable taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that, if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which the
Gross-Up Payment would be payable hereunder, and the Executive
shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 8(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
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Executive shall (subject to the Company's complying with the
requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company
pursuant to Section 8(c), a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
Section 9. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or the affiliated companies, and their respective
businesses, which information, knowledge or data shall have been
obtained by the Executive during the Executive's employment by
the Company or the affiliated companies and which information,
knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In
no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
Section 10. Successors. (a) This Agreement is personal to
the Executive, and, without the prior written consent of the
Company, shall not be assignable by the Executive other than by
will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
"Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes
and agrees to perform this Agreement by operation of law or
otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Nevada, without reference to principles of conflict of
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laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
if to the Executive:
At the most recent address on
file for the Executive at the Company
if to the Company:
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the
Executive by the Company is "at will" and, subject to Section
1(a), prior to the Effective Date, the Executive's employment may
be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall
have no further rights under this Agreement; provided that this
Agreement may not be terminated by the Company if it is
reasonably demonstrated by the Executive that such termination
(1) was at the request of a third party that has taken steps
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reasonably calculated to effect a Change of Control or (2)
otherwise arose in connection with or anticipation of a Change of
Control. From and after the Effective Date, this Agreement shall
supersede any other agreement between the parties with respect to
the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the Board,
the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
/s/ Robert H. Baldwin
--------------------------------------
ROBERT H. BALDWIN
MIRAGE RESORTS, INCORPORATED
By /s/ Stephen A. Wynn
------------------------------------
Name: Stephen A. Wynn
Title: Chairman, President and
Chief Executive Officer
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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 29th day of February, 2000
(this "Agreement"), by and between Mirage Resorts, Incorporated,
a Nevada corporation (the "Company"), and Bruce A. Levin (the
"Executive").
WHEREAS, the Board of Directors of the Company (the
"Board"), has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have
the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined herein). The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control and to encourage the Executive's
full attention and dedication to the current Company and in the
event of any threatened or pending Change of Control, and to
provide the Executive with compensation and benefits arrangements
upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that
are competitive with those of other corporations. Therefore, in
order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means
the first date during the Change of Control Period (as defined
herein) on which a Change of Control occurs. Notwithstanding
anything in this Agreement to the contrary, if a Change of
Control occurs and if the Executive's employment with the Company
is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment (1) was at the request of a
third party that has taken steps reasonably calculated to effect
a Change of Control or (2) otherwise arose in connection with or
anticipation of a Change of Control, then "Effective Date" means
the date immediately prior to the date of such termination of
employment.
(b) "Change of Control Period" means the period commencing on
the date hereof and ending on the third anniversary of the date
hereof; provided, however, that, commencing on the date one year
after the date hereof, and on each annual anniversary of such
date (such date and each annual anniversary thereof, the "Renewal
Date"), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless, at least 60 days prior to
the Renewal Date, the Company shall give notice to the Executive
that the Change of Control Period shall not be so extended.
EXHIBIT 10.76
<PAGE>
(c) "affiliated company" means any company controlled by,
controlling or under common control with the Company.
(d) "Change of Control" means:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then-outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section 1(d), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any affiliated company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C); or
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Consummation of a reorganization, merger, consolidation or
sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or
substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 60% of the then-outstanding shares of common stock and
the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as
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the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then-outstanding voting securities of such corporation,
except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement or of the action
of the Board providing for such Business Combination; or
(4) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company, subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of the
Effective Date (the "Employment Period").
Section 3. Terms of Employment. (a) Position and Duties.
(1) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-
day period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the office where the
Executive was employed immediately preceding the Effective Date
or at any other location less than 10 miles from such office.
(2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period, it shall
not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement. It is expressly
understood and agreed that, to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed
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to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (1) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary (the
"Annual Base Salary"), which Annual Base Salary shall be paid at
a monthly rate at least equal to 12 times the highest monthly
base salary paid or payable, including any base salary that has
been earned but deferred, to the Executive by the Company and the
affiliated companies in respect of the 12-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually, beginning no more than 12
months after the last salary increase awarded to the Executive
prior to the Effective Date. Any increase in the Annual Base
Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base
Salary" shall refer to the Annual Base Salary as so increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during
the Employment Period, an annual bonus (the "Annual Bonus") in
cash at least equal to the Executive's highest bonus under the
Company's applicable annual cash bonus plans, or any comparable
bonus under any predecessor or successor plan, for the last three
full fiscal years prior to the Effective Date (annualized, in the
event that the Executive was not employed by the Company for the
whole of such fiscal year) (the "Recent Annual Bonus"). Each
such Annual Bonus shall be paid no later than the end of the
third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall
elect to defer the receipt of such Annual Bonus.
(3) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices,
policies, and programs applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and the affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the
affiliated companies.
(4) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
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programs provided by the Company and the affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, split-dollar life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the
aggregate, than the most favorable of such plans, practices,
policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer
executives of the Company and the affiliated companies.
(5) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and
the affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer
executives of the Company and the affiliated companies.
(6) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and the affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies.
(7) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to the
most favorable of the foregoing provided to the Executive by the
Company and the affiliated companies at any time during the 120-
day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company
and the affiliated companies.
(8) Vacation. During the Employment Period, the Executive shall
be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company
and the affiliated companies as in effect for the Executive at
any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies.
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Section 4. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically if the Executive dies during the Employment Period.
If the Company determines in good faith that the Disability (as
defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"),
it may give to the Executive written notice in accordance with
Section 11(b) of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the
Executive's duties. "Disability" means the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness that is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
any affiliated company (other than any such failure resulting
from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the
Company that specifically identifies the manner in which the
Board or the Chief Executive Officer of the Company believes that
the Executive has not substantially performed the Executive's
duties, or
(2) the willful engaging by the Executive in illegal conduct or
gross misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this Section 4(b), no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it
is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive's action or omission
was in the best interests of the Company. Any act, or failure to
act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief
Executive Officer of the Company or a senior officer of the
Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together
-6-
<PAGE>
with counsel for the Executive, to be heard before the Board),
finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in Section 4(b)(1)
or 4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. "Good Reason" means:
(1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a), or any other
action by the Company that results in a diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action
not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and that is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(3) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 3(a)(1)(B)
or the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Effective Date;
(4) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this
Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 10(c).
For purposes of this Section 4(c), any good faith
determination of Good Reason made by the Executive shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason
for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party hereto given in
accordance with Section 11(b). "Notice of Termination" means a
written notice that (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (3)
if the Date of Termination (as defined herein) is other than the
date of receipt of such notice, specifies the Date of Termination
(which Date of Termination shall be not more than 30 days after
the giving of such notice). The failure by the Executive or the
-7-
<PAGE>
Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's respective rights
hereunder.
(e) Date of Termination. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or
by the Executive for Good Reason, the date of receipt of the
Notice of Termination or any later date specified in the Notice
of Termination, as the case may be, (2) if the Executive's
employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, and (3)
if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
Section 5. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company terminates the
Executive's employment other than for Cause, death or Disability
or the Executive terminates employment for Good Reason:
(1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate
of the following amounts:
(A) the sum of (i) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (ii)
the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof that has been earned but deferred (and annualized
for any fiscal year consisting of less than 12 full months or
during which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount, the "Highest
Annual Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination and the denominator of which is 365, and (iii) any
compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon) and any accrued
vacation pay, in each case, to the extent not theretofore paid
(the sum of the amounts described in subclauses (i), (ii) and
(iii), the "Accrued Obligations"); and
(B) the amount equal to the product of (i) two and (ii) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest
Annual Bonus; and
(C) an amount equal to the additional Company matching
contributions that would have been made on the Executive's behalf
in the Company's Retirement Savings Voluntary Plan or any
successor plan (the "401(k) Plan") (assuming continued
participation on the same basis as immediately prior to the
-8-
<PAGE>
Effective Date), plus the additional amount of any benefit the
Executive would have accrued under any excess or supplemental
plans (the "SERP") as a result of contribution limitations in the
401(k) Plan that the Executive would receive if the Executive's
employment continued for two years after the Date of Termination,
assuming for this purpose that the Executive's compensation in
each of the two years is that required by Section 3(b)(1) and
Section 3(b)(2) and that the Company's matching contributions are
determined pursuant to the applicable provisions of the 401(k)
Plan and the SERP, as in effect during the 12-month period
immediately prior to the Effective Date; and
(2) for two years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family
at least equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies
described in Section 3(b)(4) if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and the affiliated companies and
their families, provided, however, that, if the Executive becomes
reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be
considered to have remained employed until two years after the
Date of Termination and to have retired on the last day of such
period; and
(3) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider
of which shall be selected by the Executive in the Executive's
sole discretion; and
(4) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or that the Executive is
eligible to receive under any plan, program, policy or practice
or contract or agreement of the Company and the affiliated
companies (such other amounts and benefits, the "Other
Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement, other
than for payment of Accrued Obligations and the timely payment or
provision of the Other Benefits. The Accrued Obligations shall
be paid to the Executive's estate or beneficiary, as applicable,
in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term
-9-
<PAGE>
"Other Benefits" as utilized in this Section 5(b) shall include,
without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and
the affiliated companies to the estates and beneficiaries of peer
executives of the Company and the affiliated companies under such
plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and the
affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of the Other
Benefits. The Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of the Other Benefits, the term
"Other Benefits" as utilized in this Section 6(c) shall include,
and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the
Company and the affiliated companies to disabled executives
and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time
thereafter generally with respect to other peer executives of the
Company and the affiliated companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (1)
the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously
deferred by the Executive, and (3) the Other Benefits, in each
case, to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other
than for the Accrued Obligations and the timely payment or
provision of the Other Benefits. In such case, all the Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or the affiliated companies and for which
-10-
<PAGE>
the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the
Company or the affiliated companies. Amounts that are vested
benefits or that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or
agreement with the Company or the affiliated companies at or
subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or
contract or agreement, except as explicitly modified by this
Agreement.
Section 7. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense, or other claim, right
or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement, and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest
on any delayed payment at the applicable federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
Section 8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be
determined that any payment, right or distribution by or from the
Company or the affiliated companies to or for the benefit of the
Executive (whether paid or payable, exercised or exercisable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise but determined without regard to any
additional payments required under this Section 8) (the
"Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment (the "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. Notwithstanding the foregoing provisions of
-11-
<PAGE>
this Section 8(a), if it shall be determined that the Executive
is entitled to the Gross-Up Payment, but that the Payments do not
exceed 110% of the greatest amount that could be paid to the
Executive such that the receipt of the Payments would not give
rise to any Excise Tax (the "Reduced Amount"), then no Gross-Up
Payment shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
Arthur Andersen LLP or such other certified public accounting
firm as may be designated by the Executive (the "Accounting
Firm") that shall provide detailed supporting calculations both
to the Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a
Payment or such earlier time as is requested by the Company. In
the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-
Up Payment, as determined pursuant to this Section 8, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by
the Company should have been made (the "Underpayment"),
consistent with the calculations required to be made hereunder.
In the event the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than 10 business days after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest
such claim, the Executive shall:
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<PAGE>
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest, and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c), the
Company shall control all proceedings taken in connection with
such contest, and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and
conferences with the applicable taxing authority in respect of
such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall determine;
provided, however, that, if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with
respect to such advance; and provided, further, that any
extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which the
Gross-Up Payment would be payable hereunder, and the Executive
shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 8(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or
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<PAGE>
credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company
pursuant to Section 8(c), a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
Section 9. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or the affiliated companies, and their respective
businesses, which information, knowledge or data shall have been
obtained by the Executive during the Executive's employment by
the Company or the affiliated companies and which information,
knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive
in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other
than the Company and those persons designated by the Company. In
no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
Section 10. Successors. (a) This Agreement is personal to
the Executive, and, without the prior written consent of the
Company, shall not be assignable by the Executive other than by
will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
"Company" means the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that assumes
and agrees to perform this Agreement by operation of law or
otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Nevada, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written
-14-
<PAGE>
agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
if to the Executive:
At the most recent address on
file for the Executive at the Company
if to the Company:
Mirage Resorts, Incorporated
3600 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a
waiver of such provision or right or any other provision or right
of this Agreement.
(f) The Executive and the Company acknowledge that, except as
may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the
Executive by the Company is "at will" and, subject to Section
1(a), prior to the Effective Date, the Executive's employment may
be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall
have no further rights under this Agreement; provided that this
Agreement may not be terminated by the Company if it is
reasonably demonstrated by the Executive that such termination
(1) was at the request of a third party that has taken steps
reasonably calculated to effect a Change of Control or (2)
otherwise arose in connection with or anticipation of a Change of
Control. From and after the Effective Date, this Agreement shall
-15-
<PAGE>
supersede any other agreement between the parties with respect to
the subject matter hereof.
-16-
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from the Board,
the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
/s/ Bruce A. Levin
---------------------------------------------
BRUCE A. LEVIN
MIRAGE RESORTS, INCORPORATED
By /s/ Robert H. Baldwin
-------------------------------------------
Name: Robert H. Baldwin
Title: Chief Financial Officer and Treasurer
-17-
EXHIBIT 21
SUBSIDIARIES OF MIRAGE RESORTS, INCORPORATED
- - AC HOLDING CORP.
a Nevada corporation
- - AC HOLDING CORP. II
a Nevada corporation
- - THE APRIL COOK COMPANIES
a Nevada corporation
- - ATLANDIA DESIGN AND FURNISHINGS, INC.
a Nevada corporation
- - BEAU RIVAGE DISTRIBUTION CORP. (1)
a Mississippi corporation
- - BEAU RIVAGE RESORTS, INC. (2)
a Mississippi corporation
d.b.a. Beau Rivage
- - BELLAGIO
a Nevada corporation
- - BOARDWALK CASINO, INC.
a Nevada corporation
d.b.a. Holiday Inn -Registered Trademark- Casino Boardwalk
- - GNL, CORP.
a Nevada corporation
d.b.a. Golden Nugget-Laughlin
- - GNLV, CORP.
a Nevada corporation
d.b.a. Golden Nugget
- - GOLDEN NUGGET AVIATION CORP.
a Nevada corporation
- - GOLDEN NUGGET MANUFACTURING CORP. (2)
a Nevada corporation
- - LV CONCRETE CORP.
a Nevada corporation
- - MAC, CORP.
a New Jersey corporation
- - MH, INC. (3)
a Nevada corporation
d.b.a. Shadow Creek
- - THE MIRAGE CASINO-HOTEL
a Nevada corporation
d.b.a. The Mirage
- - MIRAGE LEASING CORP.
a Nevada corporation
- - MRGS CORP. (4)
a Nevada corporation
- - RESTAURANT VENTURES OF NEVADA, INC.
a Nevada corporation
- - TREASURE ISLAND CORP. (3)
a Nevada corporation
d.b.a. Treasure Island at The Mirage
______________________________
(1) 100% of the voting securities are owned by Beau Rivage Resorts, Inc.
(2) 100% of the voting securities are owned by GNLV, CORP.
(3) 100% of the voting securities are owned by THE MIRAGE CASINO-HOTEL.
(4) 100% of the voting securities are owned by Bellagio.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our report dated January 24, 2000, included in this Form
10-K, into Mirage Resorts, Incorporated's previously filed registration
statements on Form S-8 (File No. 33-16037), on Form S-8 (File No. 33-
48394), on Form S-8 (File No. 33-63804), on Form S-8 (File No. 33-60183)
and on Form S-8 (File No. 333-59455).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE
RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31,
1999 AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 139,488
<SECURITIES> 0
<RECEIVABLES> 194,314
<ALLOWANCES> 46,869
<INVENTORY> 94,351
<CURRENT-ASSETS> 475,702
<PP&E> 5,019,808
<DEPRECIATION> 924,591
<TOTAL-ASSETS> 4,804,306
<CURRENT-LIABILITIES> 324,497
<BONDS> 2,210,033
0
0
<COMMON> 940
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<TOTAL-LIABILITY-AND-EQUITY> 4,804,306
<SALES> 471,276
<TOTAL-REVENUES> 2,402,673
<CGS> 415,293
<TOTAL-COSTS> 1,469,530
<OTHER-EXPENSES> 205,163
<LOSS-PROVISION> 31,911
<INTEREST-EXPENSE> 117,525
<INCOME-PRETAX> 218,090
<INCOME-TAX> 77,122
<INCOME-CONTINUING> 140,968
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (30,577)
<NET-INCOME> 110,391
<EPS-BASIC> 0.58
<EPS-DILUTED> 0.55
</TABLE>
