MGM GRAND INC, PRE 14A, 1996-02-20

MGM GRAND INC
PRE 14A, 1996-02-20
AIR TRANSPORTATION, NONSCHEDULED

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

MGM GRAND INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

-------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

-------------------------------------------------------------------------

(5) Total fee paid:

-------------------------------------------------------------------------

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>
PRELIMINARY COPY

MGM GRAND, INC.
3799 LAS VEGAS BLVD. SOUTH, LAS VEGAS, NEVADA 89109

----------------

NOTICE OF ANNUAL MEETING TO BE HELD ON
MAY 7, 1996

----------------

To the Stockholders:

The Annual Meeting of Stockholders of MGM Grand, Inc., a Delaware
corporation (the "Company"), will be held at the MGM Grand Hotel, 3799 Las
Vegas Boulevard South, Las Vegas, Nevada, on May 7, 1996; at 10:00 a.m., for
the following purposes:

1. To elect a Board of Directors.

2. To consider and act upon an amendment to the Company's Stock Option
Plans.

3. To consider and act upon an amendment and restatement of the Company's
Certificate of Incorporation.

4. To consider and act upon the ratification of the selection of
independent auditors.

5. To transact such other business as may properly come before the
meeting or any adjournments thereof.

Stockholders of record at the close of business on March 14, 1996 are
entitled to notice of and to vote at the meeting. A list of such stockholders
will be available for examination by any stockholder, for any purpose germane
to the meeting, during ordinary business hours, at the Company's executive
offices, located at 3799 Las Vegas Blvd. South, Las Vegas, Nevada 89109, for a
period of 10 days prior to the meeting date.

By Order of the Board of Directors,

/s/ J. TERRENCE LANNI /s/ ALEX YEMENIDJIAN
- --------------------------- ----------------------------------
J. Terrence Lanni Alex Yemenidjian
Chairman and Chief President, Chief Operating Officer
Executive Officer and Chief Financial Officer

March 29, 1996

PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY.
USE THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE FOR MAILING IN THE UNITED
STATES.

MGM GRAND, INC.
STOCKHOLDER MEETING ADMISSION TICKET NOTE: PLEASE CLIP AND
==================================== BRING THE STOCKHOLDER
MEETING ADMISSION
TIME: 10:00 A.M. TICKET. NO ADMISSION
DATE: May 7, 1996 WILL BE ALLOWED WITHOUT
LOCATION: MGM GRAND HOTEL & CASINO THIS TICKET.
3799 Las Vegas Blvd. South
Las Vegas, Nevada 89109

(PLEASE PRINT) [_] WITH SPOUSE
STOCKHOLDER NAME: ________________ [_] WITHOUT SPOUSE
STOCKHOLDER ADDRESS: ________________________________
________________________________

<PAGE>

MGM GRAND, INC.
3799 LAS VEGAS BLVD. SOUTH
LAS VEGAS, NEVADA 89109

----------------

PROXY STATEMENT

MARCH 29, 1996

----------------

The form of proxy accompanying this Proxy Statement and the persons named
therein as proxies have been approved by the Board of Directors of the
Company, and this solicitation is made on behalf of the Board of Directors of
the Company. Any proxy given pursuant to this solicitation is revocable by the
communication of such revocation in writing to the Secretary of the Company at
any time prior to the exercise thereof, and any person executing a proxy, if
in attendance at the meeting, may vote in person instead of by proxy. All the
shares represented by properly executed proxies will, unless such proxies have
previously been revoked, be voted at the meeting in accordance with the
directions on the proxies. A properly executed proxy marked "ABSTAIN" although
counted for purposes of determining whether there is a quorum, will not be
voted. With respect to each matter submitted for a vote of stockholders, an
abstention or broker non-vote will have the same effect as a vote cast against
the matter. If no direction is indicated, the shares will be voted in favor of
the nominees for the Board of Directors listed in this Proxy Statement and in
favor of Proposals 2, 3 and 4 as described herein.

Matters to be considered and acted upon at the meeting are set forth in the
Notice of Annual Meeting accompanying this Proxy Statement and are more fully
outlined herein. This Proxy Statement was first mailed to stockholders on or
about March 29, 1996.

The authorized capital stock of the Company presently consists of 75,000,000
shares of Common Stock, $.01 par value per share. At the close of business on
March 14, 1996, the record date for determining stockholders entitled to vote
at the meeting, shares of Common Stock were outstanding and
entitled to vote at the meeting. Each stockholder is entitled to one vote for
each share held of record on that date on all matters which may come before
the meeting.

Shown below is certain information as of March 14, 1996 with respect to
beneficial ownership (as that term is defined in the federal securities laws)
of shares of Common Stock by the only person or entity known to the Company to
be the beneficial owner of more than five percent of the outstanding shares of
Common Stock and by all directors and executive officers of the Company as a
group who held office as of the date of this Proxy Statement.

<TABLE>
<CAPTION>
AMOUNT NATURE OF
BENEFICIALLY BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNED OWNERSHIP(2) CLASS
---------------- ------------ ------------ ----------
<S> <C> <C> <C>
Kirk Kerkorian 35,621,265(1) Sole voting and investment power 72.9%
4835 Koval Lane
Las Vegas, Nevada 89109
All directors and 35,896,914(1)(2) Sole voting and investment power 73.4%
executive
officers as a group
(13 persons)
</TABLE>
- --------
(1) Of these shares, 31,726,859 are held by Tracinda Corporation, a Nevada
corporation wholly owned by Mr. Kerkorian ("Tracinda").
(2) Included in this amount are 123,727 shares of common stock subject to
vested options and 907 shares held in the accounts of such persons in a
401K Savings Plan.

As indicated above, Kirk Kerkorian beneficially owns over 50% of the
currently outstanding shares of Common Stock. Mr. Kerkorian intends to vote
his shares of Common Stock in favor of the nominees for the Board of Directors
listed in the Proxy Statement. Since the holders of Common Stock do not

1
<PAGE>

have cumulative voting rights and since Mr. Kerkorian's shares represent more
than 50% of the shares to be voted at the meeting, Mr. Kerkorian will be able
to elect the entire Board of Directors. Mr. Kerkorian also intends to vote his
shares in favor of Proposals 2, 3 and 4, and Mr. Kerkorian's vote will be
sufficient to cause adoption of Proposals 2,3 and 4.

ELECTION OF DIRECTORS

PROPOSAL NO. 1

INFORMATION CONCERNING THE NOMINEES

One of the purposes of the meeting is to elect 12 directors, each of whom
will serve until the next annual meeting of stockholders or until his or her
respective successor shall have been elected and qualified or until his
earlier resignation or removal.

The shares represented by the proxies solicited hereunder will be voted in
favor of the election of the persons named below unless authorization to do so
is withheld in the proxy. In the event any of said nominees should be
unavailable to serve as director, which contingency is not presently
anticipated, it is the intention of the persons named in the proxies to select
and cast their votes for the election of such other person or persons as the
Board of Directors may designate.

The table set forth below names each nominee for director and gives
information concerning his principal occupation for at least the past five
years, beneficial ownership of Common Stock and age as of March 14, 1996 and
certain other matters.

<TABLE>
<CAPTION>
SHARES OF
FIRST COMMON STOCK
PRINCIPAL OCCUPATION BECAME BENEFICIALLY
NAME (AGE) AND OTHER DIRECTORSHIPS A DIRECTOR OWNED(1)
---------- ----------------------- ---------- ------------
<S> <C> <C> <C>
James D. Aljian (63) Executive of Tracinda since October 1988 10,400(2)
1987. Director of Chrysler Corporation
("Chrysler") since February 1996.
Fred Benninger (79) Vice Chairman of the Board of the 1986 21,014(2)(3)(4)
Company since April 1995. Chairman of
the Board of the Company from August
1987 to April 1995. President of the
Company from August 1987 to March
1990.
Terry Christensen (55) Partner, Christensen, White, Miller, 1987 2,000(2)
Fink, Jacobs, Glaser & Shapiro, LLP,
attorneys, Los Angeles, California
since May 1988. Director of GIANT
GROUP, LTD.
Glenn A. Cramer (74) Director of Transamerica Corporation 1992 5,033(2)
from 1968 to April 1994, and Chairman
of the Executive Committee of
Transamerica Airlines from 1983 to
April 1994.
Willie D. Davis (61) President and Director of All-Pro 1989 500(2)(4)
Broadcasting, Inc., an AM and FM radio
broadcasting company. Director of Sara
Lee Corporation, K-Mart Corporation,
Johnson Controls, Inc., Alliance Bank,
WICOR, Dow Chemical Company, Rally's
Hamburgers, Inc. and LA Gear, Inc.
</TABLE>

2
<PAGE>

<TABLE>
<CAPTION>
SHARES OF
FIRST COMMON STOCK
PRINCIPAL OCCUPATION BECAME BENEFICIALLY
NAME (AGE) AND OTHER DIRECTORSHIPS A DIRECTOR OWNED(1)
---------- ----------------------- ---------- ------------
<S> <C> <C> <C>
Alexander M. Haig, Jr. Chairman of Worldwide Associates, 1990 --
(72) Inc., an international business
advisory firm. Director of America
Online, Inc. and Interneuron
Pharmaceuticals, Inc. Consultant to
the Company since May 1990.
Lee A. Iacocca (71) From November 1978 to September 1983, 1993 --
Director of Chrysler. Served as
Chairman of the Board of Chrysler from
September 1979 until his retirement on
December 31, 1992. President of
Chrysler from November 1978 to
September 1979. Mr. Iacocca is
Chairman Emeritus of the Statue of
Liberty/Ellis Island Foundation, Inc.,
Chairman of the Committee for
Corporate Support for the Joslin
Diabetes Foundation, Founder and
Chairman of the Advisory Board to the
Iacocca Institute at Lehigh
University, Chairman of the Iacocca
Foundation, a member of the Advisory
Board of Reading is Fundamental,
honorary Chairman of the National PTA
since 1991, and an honorary trustee of
Lehigh University. Director of New
World Communications Group, Inc. and
New World Television, Inc.
Kirk Kerkorian (78) Chief Executive Officer, President and 1987 35,621,265(5)
sole director and stockholder of
Tracinda.
J. Terrence Lanni (52) Chairman of the Company since July 1995 40,000(2)(4)
1995. Chairman of the Executive
Committee and Chief Executive Officer
of the Company since June 1995.
President of the Company from June
1995 to July 1995. President and Chief
Operating Officer of Caesars World,
Inc. from April 1981 to February 1995.
Director of Santa Anita Realty, Inc.
and Santa Anita Operating Company.
Walter M. Sharp (79) President of Walter M. Sharp Company 1986 29,482(2)
(financial consultants) and a
consultant to Tracinda.
</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
SHARES OF
FIRST COMMON STOCK
PRINCIPAL OCCUPATION BECAME BENEFICIALLY
NAME (AGE) AND OTHER DIRECTORSHIPS A DIRECTOR OWNED(1)
---------- ----------------------- ---------- ------------
<S> <C> <C> <C>
Alex Yemenidjian (40) President of the Company since July 1989 125,028(2)(3)
1995. Chief Operating Officer of the
Company since June 1995. Executive
Vice President of the Company from
June 1992 to July 1995, and Chief
Financial Officer of the Company since
May 1994. Chairman of the Executive
Committee of the Company from January
1991 to June 1992. President and Chief
Operating Officer of the Company from
March 1990 to January 1991. Executive
of Tracinda from January 1990 to
August 1995.
Jerome B. York (57) Vice Chairman of Tracinda since 1995 --
September 1995. Senior Vice President
and Chief Financial Officer of IBM
Corporation from May 1993 to September
1995, and Director of IBM Corporation
from January 1995 to September 1995.
Executive Vice President Finance and
Chief Financial Officer of Chrysler
from May 1990 to May 1993. Director of
Chrysler Corporation from April 1992
to May 1993.
</TABLE>

4
<PAGE>

- --------
(1) Except as otherwise indicated and subject to applicable community property
and similar laws, the persons listed as beneficial owners of the shares
have sole voting and investment power with respect to such shares.
(2) The number of shares shown as beneficially owned represents less than 1%
of the outstanding shares.
(3) Included in this amount are 11,014 shares subject to vested stock options
for Mr. Benninger, and 85,028 shares subject to vested stock options for
Mr. Yemenidjian.
(4) Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors to file reports of
ownership of the Common Stock with the Securities and Exchange Commission.
Executive officers and directors are required to furnish the Company with
copies of all Section 16(a) forms that they file. Based upon a review of
these filings and representations from the Company's directors and
executive officers that no other reports were required, the Company notes
that J. Terrence Lanni filed his initial report (approximately 10 days)
late, Fred Benninger filed one report (approximately 9 days) late with
respect to two transactions and Willie D. Davis filed a Form 5 with
respect to one transaction for which he did not file a Form 4.
(5) Of this amount, 31,726,859 shares are owned by Tracinda.

INFORMATION REGARDING
BOARD AND COMMITTEES

CERTAIN COMMITTEES: FUNCTIONS, MEMBERSHIPS AND MEETINGS. The following is a
brief description of the functions of certain committees of the Board of
Directors and the identity of their members.

The Executive Committee--During intervals between the meetings of the Board
of Directors, the Executive Committee exercises all the powers of the Board
(except those powers specifically reserved by Delaware law to the full Board
of Directors) in the management and direction of the Company's business and
conduct of the Company's affairs in all cases in which specific directions
have not been given by the Board. This Committee's current members are J.
Terrence Lanni (Chairman), Fred Benninger, Kirk Kerkorian, Walter M. Sharp,
and Alex Yemenidjian. The Executive Committee held fifteen meetings during
fiscal 1995, and acted by written consent once.

The Audit Committee--The functions of the Audit Committee are to recommend
an accounting firm to conduct an annual audit of the Company's consolidated
financial statements and to review with such firm the plan, scope and results
of such audit, and the fees for the services performed. The Audit Committee
also reviews with the independent and internal auditors the adequacy of
internal control systems, receives internal audit reports and reports its
findings to the full Board of Directors. The Audit Committee is composed
exclusively of directors who are not salaried employees of the Company and who
are, in the opinion of the Board of Directors, free from any relationship
which would interfere with the exercise of independent judgment as a Committee
member. The current members of the Audit Committee are Walter M. Sharp
(Chairman), James D. Aljian, Willie D. Davis, Glenn A. Cramer, and Jerome B.
York. The Audit Committee held three meetings during fiscal 1995.

The Compensation and Stock Option Committee--The functions of the
Compensation and Stock Option Committee are to ensure that the compensation
program for executives of the Company (1) is effective in attracting and
retaining key officers, (2) links pay to business strategy and performance,
and (3) is administered in a fair and equitable fashion in the stockholders'
interests. The Committee recommends executive compensation policy to the
Board, determines compensation of senior executives of the Company, and
administers and approves granting of Company stock options. The Committee's
authority and oversight extends to total compensation, including base
salaries, stock options, and other forms of compensation. The Compensation and
Stock Option Committee is

5
<PAGE>

comprised exclusively of directors who are not salaried employees of the
Company and who are, in the opinion of the Board of Directors, free from any
relationship which would interfere with the exercise of independent judgment
as a Committee member. The current members of the Committee are James D.
Aljian (Chairman), Walter M. Sharp, and . The Committee held eleven
meetings during fiscal 1995. E. Parry Thomas, formerly a member of the
Committee, resigned as a Director of the Company on , 1996.

BOARD MEETINGS. The Board of Directors held four meetings during 1995. The
work of the Company's directors is performed not only at meetings of the Board
of Directors and its committees, but also in consideration of the Company's
matters and documents, and in numerous communications among Board members and
others wholly apart from meetings. During 1995, all directors attended at
least 86% of the aggregate of all meetings of the Board of Directors and
committees on which they served (held during the period for which they
served).

FEES FOR BOARD AND COMMITTEE SERVICE. Directors who are compensated as full-
time employees of the Company receive no additional compensation for service
on the Board of Directors or its committees. Each director who is not a full
time employee of the Company is paid $26,000 per annum, plus $750 per meeting
of each Executive Committee attended, if such Director is a member of the
Executive Committee of the Board of Directors. Each member of the Audit
Committee receives $1,500 for each meeting attended (subject to a $6,000
maximum), and each member of the Compensation and Stock Option Committee
receives $750 per quarter. Directors are also reimbursed expenses for
attendance at Board and Committee meetings.

During 1993, 1994 and 1995, Alexander M. Haig, Jr., a member of the Board of
Directors of the Company, rendered consulting services to the Company, for
which he received fees at the rate of $50,000 per annum.

6
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to the Company for the years
ended December 31, 1995, 1994, and 1993, of those persons who were, at
December 31, 1995, (1) the Chief Executive Officer and (2) the other most
highly compensated executive officers of the Company who have received in
excess of $100,000, as well as Robert R. Maxey and K. Eugene Shutler, who
relinquished their positions of President and Chief Executive Officer, and
Executive Vice President and General Counsel, respectively, on July 13, 1995
and November 1, 1995, respectively (the "Named Executives").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------
SHARES
NAME AND OTHER UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS ANNUAL(C) OPTION(A) COMPENSATION(B)
------------------ ---- -------- -------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrence Lanni 1995 $583,333(F) $ -- $ -- 1,000,000 $85,000
Chairman and Chief 1994 -- -- -- -- --
Executive Officer 1993 -- -- -- -- --

Fred Benninger 1995 401,666 -- -- 50,000 --
Vice-Chairman of 1994 610,000 165,000 -- -- --
the Board 1993 610,000 -- -- 50,000 --

Alex Yemenidjian 1995 410,416 -- -- 425,000 --
President, Chief 1994 275,000 100,000 -- -- --
Operating Officer, 1993 275,000 -- -- 25,000 67,862
and Chief Financial
Officer

Scott Langsner 1995 160,000 25,000(G) -- -- --
Secretary/Treasurer 1994 149,583 25,000 -- 15,000 9,990
1993 135,000 -- -- -- 43,776

Robert R. Maxey(D) 1995 525,000 -- -- -- --
President and Chief 1994 525,000 250,000 -- -- --
Executive Officer 1993 525,000 -- -- 65,000 --

K. Eugene Shutler(E) 1995 334,062 -- 161,250 -- --
Executive Vice 1994 325,000 50,000 231,250 -- 25,480
President and General 1993 325,000 -- -- -- 41,645
Counsel
</TABLE>
- --------
(A) During the years indicated, the only long term compensation was pursuant
to the Company Nonqualified Employee Stock Option Plan. No grants have
been made under the Company Incentive Stock Option Plan.
(B) The amounts in this column represent a moving allowance and reimbursement
of moving costs incurred by employees related to relocation to Company
offices in Las Vegas, Nevada.
(C) Represents payments pursuant to long term incentive agreements as detailed
herein--see page 9.
(D) Mr. Maxey resigned from the Company on July 13, 1995, with a severance
agreement which calls for continuation of salary to July 13, 1996, vesting
of stock options to February 15, 1996, exercisability of vested stock
options to October 15, 1996, and payment pursuant to a long term incentive
agreement on February 1, 1996.
(E) Mr. Shutler resigned from the Company on November 1, 1995, with a
severance agreement which calls for continuation of salary to May 1, 1996,
vesting of stock options to February 1, 1996, exercisability of vested
stock options to August 1, 1996, and payment pursuant to a long term
incentive agreement on February 1, 1996.
(F) Pursuant to the terms of his employment, Mr. Lanni's salary is $1,000,000
per year.
(G) Represents payment from the MGM Grand-Ballys Limited Liability Company of
which the Company is a 50% owner.

7
<PAGE>

The table below sets forth certain information regarding options granted
during 1995 to the Named Executives.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING OPTIONS GRANTED
----------------------------------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
GRANTED RATES OF STOCK PRICE
TO EXERCISE APPRECIATION FOR OPTION
EMPLOYEES PRICE TERM(B)
OPTIONS IN FISCAL PER EXPIRATION -----------------------
NAME GRANTED(A) YEAR SHARE DATE 5% 10%
---- ---------- --------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Terrence Lanni....... 1,000,000 50.4% $29.125 4/18/05 $16,350,000 $41,440,000
Alex Yemenidjian........ 400,000 20.1% 26.00 12/4/05 6,540,000 16,576,000
</TABLE>

- --------
(A) The options were granted on April 18, 1995 and December 4, 1995,
respectively. All options have a ten year term, are exercisable commencing
on the third anniversary date of the grant date, with 20% of the options
then becoming exercisable, with an additional 20% of the options becoming
exercisable on each of the two successive anniversary dates, and with full
vesting occurring on the sixth anniversary date.
(B) These amounts represent certain assumed rates of appreciation only, and in
the case of Mr. Lanni, such amounts are based on the re-priced option
value of $26.00 as described below. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future
performance of the Common Stock and overall stock market conditions.

The following table sets forth option exercises and year end value tables
for the Named Executives.

AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995 DECEMBER 31, 1995(A)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrence Lanni....... -- $ -- -- 1,000,000 $ -- $ --
Fred Benninger.......... 150,000 3,093,750 -- 50,000 -- --
Alex Yemenidjian........ -- -- 74,521 450,479 912,882 618,368
Scott Langsner.......... -- -- 28,425 21,575 303,341 30,409
Robert R. Maxey......... -- -- 86,619 29,575 1,061,083 198,683
K. Eugene Shutler....... -- -- 36,603 23,397 466,688 298,312
</TABLE>
- --------
(A) Based upon the market value of the underlying securities at December 31,
1995 of $23.00, minus the exercise price of "in-the-money" options.

The following table sets forth information concerning the repricing of
options held by any executive officer of the Company since January 29, 1986,
the date the Company was incorporated. An aggregate of 1,252,050 options
previously granted to employees of the Company, including the Named Executives
noted herein, were amended during December 1995 to reduce the per share
exercise price to $26.00 (the market price on the date of the amendment) from
exercise prices ranging from $32.50 to $26.25.

TEN-YEAR OPTION/SAR REPRICINGS

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF MARKET PRICE
SECURITIES OF STOCK AT LENGTH OF ORIGINAL
UNDERLYING TIME OF EXERCISE PRICE NEW OPTION TERM
OPTIONS/SARS REPRICING OR AT TIME OF EXERCISE REMAINING AT DATE
NAME AND REPRICED OR AMENDMENT REPRICING OR PRICE OF REPRICING OR
POSITION DATE AMENDED (#) ($) AMENDMENT ($) ($) AMENDMENT
-------- ------- ------------ ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrence Lanni/
Chairman and CEO....... 12/4/95 1,000,000 $26.00 $29.125 $26.00 112.5 months
Fred Benninger/Vice-
Chairman............... 12/4/95 50,000 26.00 26.25 26.00 86 months
Alex Yemenidjian/
President, COO and CFO.. 12/4/95 25,000 26.00 26.25 26.00 86 months
</TABLE>

8
<PAGE>

LONG TERM INCENTIVE AGREEMENTS

As part of its overall compensation packages for certain of its senior
executives, in February 1993 the Company entered into long term incentive
agreements, on a case by case basis, with Messrs. Maxey, Benninger,
Yemenidjian and Shutler. Messrs. Maxey and Shutler resigned from their
positions with the Company on July 13, 1995 and November 1, 1995,
respectively, and the terms of their severance agreements limited payments due
herein as described below. Such agreements are keyed to demonstrable
enhancements to stockholder values, i.e. market price of the Company's Common
Stock. Because such agreements were entered into in connection with prior
services to the Company, or in the case of Mr. Shutler, to induce him to
terminate a consultant agreement with Tracinda in order to provide full-time
services to the Company, the Company does not intend to take such agreements
into account when it determines such executives' salary, performance bonuses
and grants of stock options.

The Company has agreed to pay to Messrs. Maxey, Benninger and Yemenidjian,
on each of February 1, 1996, 1997 and 1998, cash amounts equal to 13,000,
10,000 and 5,000, respectively, and on February 1, 1999, cash amounts equal to
26,000, 20,000 and 10,000, respectively, multiplied by the excess, if any (the
"Spread"), between the closing price of the Company's Common Stock on the New
York Stock Exchange (the "NYSE") (or if the Common Stock is not then traded on
the NYSE, the principal stock exchange or securities market on which the
Common Stock is then traded) on such date (the "Measuring Price") and $16.50,
provided that for purposes of such determination, the Spread shall not exceed
$9.75. As of the date of such agreements, the Measuring Price was
approximately $9.75 below the market price of the Company's Common Stock. Such
amounts, if any, would be paid only if the executive were employed by the
Company on the applicable date, subject to proration in the event such
employment terminated after February 1, 1996. Messrs. Benninger and
Yemenidjian were paid $97,500 and $48,750, respectively, in February 1996.
Pursuant to the terms of Mr. Maxey's severance agreement, $126,750 was paid in
February 1996, and no further payments will be made pursuant to his incentive
agreement.

The Company has agreed to pay to Mr. Shutler on each of February 1, 1994,
1995 and 1996, cash amounts equal to 10,000, and on February 1, 1997 and 1998,
cash amounts equal to 20,000, multiplied by the Spread between the Measuring
Price and $10.25, which was the price used in Mr. Shutler's agreement with
Tracinda, which was replaced by the agreement with the Company. There is no
limitation on the amount of the Spread. Such amounts would be payable only if
Mr. Shutler were employed by the Company on the applicable date, subject to
proration in the event of a termination of his employment. Mr. Shutler was
paid $231,250 in February 1994, $161,250 in February 1995 and $185,000 in
February 1996, pursuant to this agreement. No further payments will be made to
Mr. Shutler, pursuant to the terms of his severance agreement.

9
<PAGE>

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

COMPENSATION POLICIES

The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") is responsible for establishing, monitoring and implementing the
policies governing the compensation of the Company's executives. The Committee
is comprised of the three independent directors whose names appear at the
bottom of this report. These policies may be summarized as follows:

1. The Company's compensation programs should be effective in attracting,
motivating and retaining key executives;

2. There should be a correlation between the compensation awarded to an
executive, the performance of the Company as a whole, and the executive's
individual performance; and

3. The Company's compensation programs should provide the executives with
a financial interest in the Company similar to the interests of the
Company's stockholders.

The Company's executives are compensated through a combination of salary,
performance bonuses and long-term incentive arrangements (where appropriate),
and grants of stock options under the Company's Nonqualified Stock Option Plan
and Incentive Stock Option Plan. The annual salaries of the executives are
reviewed from time to time and adjustments are made where necessary in order
for the salaries of the Company's executives to be competitive with the
salaries paid by companies included in the Dow Jones Entertainment and
Leisure-Casinos Industry Group (the "Casinos Group"). Performance bonuses,
where appropriate, are usually determined after the end of the Company's
fiscal year based on an assessment of the Company's results and the level of
an individual's particular performance for that year. Long-term incentive
arrangements, on a case by case basis, may be determined as part of an overall
compensation package in conjunction with demonstrable enhancements to
stockholder values. The Company did not enter into any long-term incentive
arrangement with any executives in 1995. Stock option grants are considered by
the Committee from time to time.

The Committee believes that the return earned by the Company's stockholders
should be an important factor in determining compensation of the Company's
executives. In considering bonuses for the Company's executives for 1995, the
Committee considered, in order of importance, the following: the financial
performance of the Company for 1995, including profitability, return on equity
and cash flow; the executives' levels of responsibility and performance, based
upon evaluations and recommendations of the Chairman of the Board and Chief
Executive Officer as to proposed bonuses for executives other than himself;
and the other components of their compensation attributable to 1995. Based
upon the foregoing, the Committee determined not to grant any bonuses to the
Named Executives for 1995.

The Committee believes that a significant component of the compensation paid
to the Company's executives over the long term should be derived from stock
options. The Committee strongly believes that stock ownership in the Company
is valuable incentive to executives and that the grant of stock options to
them serves to align their interests with the interests of the shareholders as
a whole and encourages them to manage the Company for the long term. The
Committee determines whether to grant stock options, as well as the amount of
the grants, by taking into account, in the following order of importance, the
individual's past and prospective value to the Company, the performance of the
proposed recipient (based upon evaluations by the executive's superior or the
Board of Directors) and the amount of stock options previously granted. In
1995, the Committee granted the Named Executives options to purchase shares of
Common Stock in the following amounts: J. Terrence Lanni, 1,000,000 shares;
and Alex Yemenidjian, 400,000 shares. The Committee determined that the other
Named Executives had adequate stock incentives at this time. The Committee
anticipates that it will grant additional options to the Company's senior
executive officers in the future.

10
<PAGE>

The Company's stock option plans have been utilized to provide executives
and other key employees with increased motivation and incentive to exert their
best efforts on behalf of the Company through the opportunity to benefit from
appreciation in the value of the Common Stock. Due to a decline in the price
of the Common Stock in 1995, certain options outstanding under the Company's
Nonqualified Stock Option Plan held by the Named Executives were exercisable
at prices which exceeded the current market value of the Common Stock. In
December 1995, the Committee concluded that such options were not providing
the intended incentive value. In order to restore the incentive value to such
options, the Committee approved the repricing of options held by certain of
the Named Executives to $26.00 per share, the closing price of the Common
Stock on the New York Stock Exchange on the repricing date, as follows: Mr.
Lanni, options for 1,000,000 shares with the price reduced from $29.125 per
share; Mr. Benninger, options for 50,000 shares with the price reduced from
$26.25 per share; and Mr. Yemenidjian, options for 25,000 shares with the rice
reduced from $26.25 per share. See "Ten-Year Option/SAR Pricings."

Effective November 1, 1995, the Committee increased Mr. Yemenidjian's base
salary to $750,000, based upon his additional responsibilities as President
and Chief Operating Officer of the Company. The Committee intends to review
the compensation arrangements of its senior executives from time to time and
make adjustments where appropriate. The Committee believes that the Company's
annual executive compensation levels are below the median of the compensation
levels at the companies included in the Casinos Group.

COMPENSATION AWARDED TO THE CHIEF EXECUTIVE OFFICER

J. Terrence Lanni became President and Chief Executive Officer of the
Company effective June 1, 1995, and was named Chairman of the Board and Chief
Executive Officer on July 13, 1995. Mr. Lanni is eligible to participate in
the same executive compensation plans available to the Company's other senior
executives. Pursuant to the terms of his employment, Mr. Lanni's salary is
$1,000,000 per year. In determining Mr. Lanni's compensation for 1995 the
Committee applied the policies described above and determined to grant him
options to purchase 1,000,000 shares of Common Stock pursuant to the Company's
Nonqualified Stock Option Plan.

Effective June 1, 1995, Robert F. Maxey resigned his position as President
and Chief Executive Officer of the Company, and on July 13, 1995, Mr. Maxey
resigned as Chairman of the Board of the Company. Payments that Mr. Maxey has
received and will receive in connection with his resignation are described
under the Summary Compensation Table. The Committee's actions taken with
respect to Mr. Maxey's resignation reflect the Committee's reasonable judgment
of Mr. Maxey's service and position with the Company since January 1991.

/s/ James D. Aljian
-------------------------------------
JAMES D. ALJIAN

/s/ Walter M. Sharp
-------------------------------------
WALTER M. SHARP

/s/ E. Parry Thomas
-------------------------------------
E. PARRY THOMAS

11
<PAGE>

STOCKHOLDER RETURN PERFORMANCE PRESENTATION

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's common stock against
the cumulative total return of the Dow Jones Equity Market Index and the Dow
Jones Casinos Group for the period of five years commencing January 1, 1991
and ended December 31, 1995.

The Company does not believe that comparison to any of the Dow Jones indices
or any other company for periods prior to December 1993 is meaningful, since
the Company, through its wholly-owned subsidiary, MGM Grand Hotel, Inc., did
not commence operations until completion of construction of the MGM Grand
Hotel, a hotel/casino and entertainment complex located in Las Vegas, Nevada,
which opened on December 18, 1993. However, the Company believes that the
selected index provides meaningful comparison for subsequent periods.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG THE COMPANY, DOW JONES
EQUITY MARKET INDEX, AND THE DOW JONES CASINOS GROUP

[PLACE GRAPH HERE]

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<C> <S> <C> <C> <C> <C> <C> <C>
(Triangle) MGM Grand Inc........................... 100 117 196 401 247 236
. Dow Jones Equity Market Index........... 100 132 144 158 159 221
(Square) Dow Jones Casinos Group................. 100 153 237 362 278 368
</TABLE>
- --------
* Assumes $100 invested on December 31, 1990 in each of Company stock, the
Dow Jones Equity Market Index, and the Dow Jones Industry Index.

12
<PAGE>

BENEFIT PLANS

MGM Grand Hotel, Inc. ("MGM Grand Hotel"), a wholly-owned subsidiary of the
Company, separately adopted a Section 401(k) employee savings plan (the "Hotel
Savings Plan") for employees not a part of a collective bargaining unit. The
Hotel Savings Plan allows participants to defer, on a pretax basis, a portion
of their salary and accumulate tax deferred earnings as a retirement fund. All
deferred amounts vest immediately and are invested in either an equity,
balanced income, money market, or short term bond fund as directed by the
participant. After commencement of hotel/casino operations, to the extent of a
participant's contributions up to an annual limit of 4% of a participant's
salary, MGM Grand Hotel will make matching contributions of 25% of the
participant's contribution, and annual bonus contributions up to a maximum of
$500 based on years of participant employment. The full amount vested in a
participant's account will be distributed to a participant following
termination of employment, normal retirement or in the event of disability or
death. A participant may also make a request for withdrawal of the
participant's vested account balance under the Hotel Savings Plan based on
financial hardship. A participant is entitled to borrow up to 50% of the
vested portion of his account, but no more than $50,000. The Company's
employees are eligible to participate under the Hotel Savings Plan.

Effective November 1994, the Company, and MGM Grand Hotel adopted a
Nonqualified Deferred Retirement Plan for Certain Key Employees not a part of
a collective bargaining unit. The Nonqualified Deferred Retirement Plan allows
participants to defer, on a pretax basis, a portion of their salary and
accumulate tax deferred earnings, plus interest, as a retirement fund. These
deferrals are in addition to those allowed under the Hotel Savings Plan. All
deferred amounts vest immediately. There are no employer matching
contributions made under this plan. The full amount vested in a participant's
account will be distributed to a participant following termination of
employment, normal retirement or in the event of disability or death.

Effective with the September 1995 acquisition of the Diamond Beach Hotel and
Casino by MGM Grand Australia Pty., Ltd., an Australian employee retirement
fund was acquired. The plan is subject to the Superannuation Industry
(Supervision) Act 1993 imposing a legal obligation on MGM Grand Australia to
contribute to all employees. MGM Grand Australia maintains two categories for
the plan, depending on employment status: category (A) for executive employees
and category (B) for staff. Death and Disablement benefits are provided for
all members, however, category (A) members receive increased coverages under
both benefits. The company contributes 6% of salary to satisfy the
Superannuation Guarantee Legislation, and allows participants to defer, on a
pretax basis, a portion of their salary (minimum 3%) and accumulate tax
deferred earnings as a retirement fund. The full amount vested in members
retirement accounts is payable to the member following termination of
employment or normal retirement.

The Company's Board of Directors may adopt other benefit plans, including an
employee stock ownership plan and an employee retirement plan. The terms and
benefit levels of any such plans have not yet been determined. In addition,
the Company's Board of Directors may adopt a profit-sharing plan which will
provide for a percentage of the Company's annual pre-tax operating profits to
be available for distribution on a discretionary basis.

13
<PAGE>

CERTAIN TRANSACTIONS

Christensen, White, Miller, Fink, Jacobs, Glaser & Shapiro, LLP, a law firm
of which Terry Christensen, a director, is a partner (see "Election of
Directors"), has performed extensive legal services for the Company. Such
services relate to litigation, sales of securities, acquisitions and
dispositions of certain assets and operations, tax matters and other business
transactions, contracts and agreements.

In November 1992, the Company was granted a no cost two-year option from
Tracinda to purchase approximately 18 acres of undeveloped land across the Las
Vegas Strip from the MGM Grand Hotel. Effective September 1, 1994, the option
was extended to September 1, 1995. The option, which gave the Company the
right to acquire the property at Tracinda's purchase cost of $31.5 million,
together with its actual cost incurred in connection with the ownership of the
property, and interest, was exercised on January 5, 1995, for a total cost of
approximately $36.5 million. On January 6, 1995, the Company contributed the
property to New York-New York Hotel, LLC, its joint venture with Primadonna
Resorts, Inc, as its share of capital contribution to the hotel/casino
construction project.

During 1995, the Company and its subsidiaries leased aircraft from Tracinda
for various business purposes. The aggregate amount of rentals was $210,000,
and the rentals were at rates generally comparable to those offered by third
parties. Also during 1995, MGM Grand Hotel chartered Tracinda aircraft through
a third party lessor, under an arrangement which resulted in $243,000 of
charter fees being remitted to the leasing agent. Also during 1995, Tracinda
purchased fuel and aircraft parts from MGM Grand Air, at its cost, in amounts
that are not material.

Pursuant to an agreement between MGM Grand Hotel and Tracinda, MGM Grand
Hotel provided account receivable collection services to Tracinda in
connection with the accounts of The Stars' Desert Inn during 1995, in exchange
for 20% of the net collections of The Stars' Desert Inn. MGM Grand Hotel
received total commissions of approximately $76,000 during 1995.

The Company and Tracinda have entered into various other transactions and
arrangements which, individually and in the aggregate, are not material.

14
<PAGE>

APPROVAL OF AMENDMENT OF THE COMPANY'S STOCK OPTION PLANS

PROPOSAL NO. 2

DESCRIPTION OF THE AMENDMENT

Subject to the approval of the stockholders, the Board of Directors, on the
recommendation of the Compensation and Stock Option Committee, has amended the
Company's Nonqualified Stock Option Plan and Incentive Stock Option Plan
(collectively, the "Option Plans") to increase the number of shares of Common
Stock subject to such plans by 2,500,000. The Board of Directors is of the
opinion that the Option Plans have helped the Company compete for, motivate
and retain high caliber executive, administrative and professional employees,
and that it is in the best interests of the Company and its stockholders to
amend the Option Plans as proposed. Consistent with the Company's compensation
objectives, rewards under the Option Plans are dependent on those factors
which directly benefit the Company's stockholders and appreciation in the
market value of the Common Stock.

The affirmative vote of the holders of at least a majority of the shares of
Common Stock voted at the Annual Meeting is required to approve the amendment
to the Option Plans.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE OPTION PLANS

DESCRIPTION OF THE OPTION PLANS

The Option Plans, as amended, will cover up to an aggregate of 5,000,000
shares of Common Stock, and each has a ten-year duration. The Option Plans are
administered by the Compensation and Stock Option Committee, whose members are
appointed by the Board of Directors. All employees of the Company and its
subsidiaries (other than an employee owning more than 10% of the combined
voting power of all classes of stock of the Company and its subsidiaries) are
eligible to receive options. As of March , 1996, there were approximately
employees currently eligible to participate in the option plans and
employees holding outstanding options under the Option Plans. The exercise
price in each instance is 100% of the fair market value of the Common Stock on
the date of grant, subject to any repricing at the option of the Compensation
and Stock Option Committee, and is payable in cash or shares of previously
acquired Common Stock having a fair market value equal to the option exercise
price. All outstanding options have a ten-year term and are exercisable in
four annual installments of varying amounts. Generally, outstanding options
terminate three months after termination of the optionee's employment for any
reason other than the optionee's death and one year after termination of the
optionee's employment due to death. Options are non-transferable by the holder
other than by will or laws of descent and distribution.

In the event any change is made in the Company's capitalization that results
from a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares or any similar
change affecting the Common Stock, appropriate adjustment, as determined by
the Compensation and Stock Option Committee, will be made in the exercise
price and in the number and class of shares subject to the option.

In the event of a sale of all or substantially all of the assets of the
Company or the merger of the Company with or into another corporation, holders
of outstanding options will have the right to receive, upon exercise of the
option and payment of the exercise price, the same consideration which the
stockholders of the Company received pursuant to such transaction.

The Board of Directors may amend or terminate the Option Plans from time to
time in such respects as the Board may deem advisable; provided that the Board
may not (i) increase the number of shares subject to the Option Plans without
stockholder approval, (ii) permit the grant of an option with an exercise
price that is less than the fair market value of the Common Stock, (iii)
permit the grant of an option with a term beyond that provided in the Option
Plans or (iv) make a material change in the class of eligible employees.

15
<PAGE>

The Company has agreed that certain options granted to Messrs. Lanni and
Yemenidjian (i.e., options for 1,000,000 shares for Mr. Lanni and 150,000
shares for Mr. Yemenidjian) will, to the extent not already vested, become
fully vested upon a change in control of the Company as a result of a sale or
exchange of outstanding Common Stock. In addition, an option for 400,000
shares granted to Mr. Yemenidjian in December 1995 will become fully vested
upon a change in control of the Company, but only in the event of termination
or diminution of Mr. Yemenidjian's employment status within the first 12
months following the change in control.

An optionee who is granted an incentive stock option generally will not
recognize taxable income either upon the grant or the exercise of an incentive
option, although the exercise may be subject to the alternative minimum tax.
No deduction will ordinarily be available to the Company as a result of the
grant or exercise of incentive options. Upon the sale or exchange of the
shares underlying an incentive option more than two years after the date of
grant and one year after the date of exercise, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares of the date of exercise or (ii) the
sale price of the shares. A different rule for measuring ordinary income on
such a premature disposition may apply if the optionee is also an officer,
director or 10% stockholder of the Company. Any gain or loss recognized on
such a premature disposition of shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital gain
or loss, depending on the holding period. An optionee granted nonqualified
stock options will not recognize any taxable income at the grant of the
option, but will generally realize ordinary income for federal income tax
purposes at the time of exercise of such options equal to the difference
between the fair market value of the Common Stock on the date of exercise and
the exercise price. Any taxable income recognized in connection with an option
exercise by an optionee who is an employee of the Company will be subject to
tax withholding by the Company. Upon resale of such shares by the optionee,
any difference between the sale price and the optionee's exercise price, to
the extent not recognized as taxable income as described above, will be
treated as long-term or short-term capital gain or loss, depending upon on the
holding period. The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to
shares acquired upon exercise of a nonstatutory option. However, Section
162(m) of the Internal Revenue Code of 1986, as amended, provides that a
company may not deduct taxable compensation in excess of $1,000,000 paid in
any calendar year to certain executive officers unless such excess
compensation is "performance-based."

The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Option Plans, does not purport to be complete
and does not discuss the tax consequences of the optionee's death or the
income tax laws of any local, state or foreign jurisdiction in which any
optionee may reside.

The following table sets forth certain information with respect to stock
options granted pursuant to the Nonstatutory Stock Option Plan during 1995 to
(i) the Named Executives, (ii) all current executive officers as a group,
(iii) [all current directors who are not executive officers as a group and
(iv)] all other employees as a group. The options shown below are not
necessarily indicative of the number of options that may be granted in the
future.

16
<PAGE>

AMENDED PLAN BENEFITS
NONQUALIFIED STOCK OPTION PLAN

<TABLE>
<CAPTION>
NAME & POSITION DOLLAR VALUE ($)(1) NUMBER OF OPTIONS
--------------- ------------------- -----------------
<S> <C> <C>
J. Terrence Lanni $ 1,000,000
Chairman and Chief
Executive Officer
Alex Yemenidjian
President, Chief Option Officer
and Chief Financial Officer 400,000
All Executive Officers
as a group ( persons)
Non-Executive Officer
Employees as a group
( persons)
</TABLE>
- --------
(1) Based on the closing price of the Common Stock of $ as reported on
the New York Stock Exchange Composite Tape on March , 1996.

17
<PAGE>

PROPOSED AMENDMENT AND RESTATEMENT
OF CERTIFICATE OF INCORPORATION

PROPOSAL NO. 3

The Board of Directors of the Company has approved, and recommends that the
stockholders approve, an amendment to and restatement of the Company's
Certificate of Incorporation to insert in the Certificate of Incorporation
provisions regarding stockholders who are found by governmental authorities to
be not licensable, suitable or qualified to be stockholders of the Company, or
who are required to apply for licensing or to be found suitable or qualified,
but fail to do so. A copy of the proposed amendment is attached as Exhibit I
to this Proxy Statement. Attached as Exhibit II for information purposes is a
copy of the Restated Certificate of Incorporation.

PROPOSED AMENDMENT REGARDING STOCKHOLDERS WHO ARE FOUND NOT TO BE SUITABLE
OR ARE REQUIRED TO APPLY FOR LICENSING OR TO BE FOUND SUITABLE OR QUALIFIED,
BUT FAIL TO DO SO.

The Board of Directors recommends that the stockholders approve the
insertion of a new Article 11 in the Company's Restated Certificate of
Incorporation which (a) provides that while any stockholder (a "Non-Authorized
Stockholder") who is found by a governmental authority to be unlicensable,
unsuitable or disqualified to be a stockholder of the Company, or who is
required by a governmental authority to apply for licensing or to be found
suitable or qualified, but fails to do so, holds stock of the Company, that
Non-Authorized Stockholder will not be entitled to receive dividends with
regard to the stock, to vote the stock or to exercise any other rights of a
holder of the stock, and the Non-Authorized Stockholder's stock will not be
counted in determining the number of outstanding shares entitled to vote, (b)
requires any Non-Authorized Stockholder to dispose of all that stockholder's
stock of the Company within 30 days after notice from the Company of the
determination made by the governmental authority, and (c) gives the Company
the option, beginning 120 days after the Company notifies a Non-Authorized
Stockholder of the determination made by the governmental authority, to redeem
any stock held by the Non-Authorized Stockholder at any time for the lesser of
(i) the fair market value of the Company's stock of the class held by the Non-
Authorized Stockholder on the day the Company notifies the Non-Authorized
Stockholder of the action taken by the governmental authority or (ii) the fair
market value of the Company's stock of that class on the day the notice of
redemption is given. For the purposes of the foregoing, the fair market value
of stock is the last sale price of such stock in the principal market on which
stock of that class is traded (whether a stock exchange, an automated
quotation system or another organized trading market), or, if stock of that
class is not traded on an organized trading market, the fair market value will
be that determined in good faith by the Board of Directors of the Company,
based upon an evaluation by an investment banking firm or other experts in
valuing securities. Article 11 specifically authorizes the Company to obtain
injunctive relief to enforce its provisions and provides that every
stockholder by acquiring or retaining stock of the Company acknowledges that
the Company might suffer irreparable injury if Article 11 were violated for
which the Company would not have an adequate remedy at law and that the
Company would be entitled to injunctive relief to enforce Article 11.
Notwithstanding the foregoing, the Company's ultimate right to injunctive
relief rests in the discretion of the court in which the relief is sought.

The most significant activities of the Company and its subsidiaries are the
operation of hotel-casinos in Nevada. In addition, the Company's subsidiary
MGM Grand Hotel, Inc. has applied for a gaming license in New Jersey. Both
those states have strict laws regarding ownership of stock of companies, such
as the Company, which control holders of gaming licenses. Although the
proposed Article 11 would apply to determinations by any governmental
authorities, it is intended particularly to help the Company comply with
requirements of gaming authorities in Nevada and New Jersey.

The Nevada gaming laws require any person who acquires 5% or more of any
class of the Company's voting securities to apply for a finding of a
beneficial owner of 10% or more of any class of

18
<PAGE>

the Company's voting securities to apply for a finding of suitability of the
Nevada Gaming Commission. The Nevada Gaming Commission and the Clark County
Liquor and Gaming Licensing Board may also require other stockholders to be
found suitable. If an owner of the Company's securities is found unsuitable by
the Nevada Gaming Commission, it becomes unlawful for the security owner to
(a) receive interest or dividends with regard to the securities, (b) directly
or indirectly exercise any voting right of the securities, (c) receive
remuneration in any form from the Company, or (d) hold directly or indirectly
the beneficial ownership of any voting securities of the Company. Nevada law
requires a person found unsuitable to offer his securities to the Company, and
the Company to purchase them within ten days, for cash at their fair market
value. The Company must use its best efforts to terminate all its
relationships with a person found to be unsuitable. The same provisions which
relate to stockholders found to be unsuitable apply to (i) a beneficial owner
of the Company's securities if the record owner, after request, fails to
identify the benefical owner, and (ii) any owner of the Company' securities
who refuses to apply for licensing or a finding of suitability after the
Nevada Gaming Commission determines that such an application is required.

Under the New Jersey Casino Control Act, any 5% stockholder of the Company
will have to be found qualified unless there is an express finding by the New
Jersey Casino Control Commission with the consent of the Director of the
Division of Gaming Enforcement that the stockholder does not have the power to
exercise control. The Casino Control Commission can find any security holder
of the Company (including a holder of less than 5% of the Company's stock) not
qualified to own securities issued by the Company. If a security holder of the
Company is found not qualified, it will be unlawful for the security holder to
(i) receive any dividends or interest with regard to any securities of the
Company or (ii) exercise, directly or indirectly, any rights conferred by the
securities. The New Jersey Casino Control Act requires that the By-laws or the
Certificate of Incorporation of a company, such as the Company, which control
a gaming licensee provide that securities of that company are held subject to
the condition that if a holder is found to be disqualified by the Casino
Control Commission, the holder must dispose of his securities of the company.
If a security holder of the Company is found disqualified but does not dispose
of his securities, any New Jersey gaming subsidiary of the Company could be
subjected to fines, or its license could be suspended or revoked.

The proposed new Section of the Restated Certificate of Incorporation could
discourage someone who might want to solicit tenders of, or otherwise acquire,
a substantial portion of the Company's stock from doing so and, therefore,
might deprive stockholders of an opportunity to sell their stock at a premium
above the market price of the stock. However, the Company's Board of Directors
believes the potential harm to the Company and its stockholders from have a
significant amount of its stock held by a person who is found not licensable,
suitable or qualified to be a stockholder of the Company, or who refuses to
file a required application to be licensed or found suitable or qualified, is
substantially more significant than the possibility that the proposed new
Section would deter someone from seeking to acquire a large portion of the
Company's stock.

The amendment contained in the Restated Certificate of Incorporation will be
adopted only if it receives the affirmative vote of holders of a majority of
the outstanding Common Stock of the Company entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
AMENDMENT.

19
<PAGE>

SELECTION OF AUDITORS

PROPOSAL NO. 4

The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed, subject to ratification by the stockholders, the
firm of Arthur Andersen LLP, independent certified public accountants, to
audit the consolidated financial statements of the Company and its
subsidiaries for the year ending December 31, 1996. This firm acted as
auditors for the Company during the year ended December 31, 1995.

Representatives of Arthur Andersen LLP will be present at the stockholders'
meeting with the opportunity to make a statement if they desire to do so and
to respond to appropriate questions.

The Board of Directors recommends a vote FOR adoption of this proposal.

OTHER BUSINESS

Management knows of no other business to be transacted, but if any other
matters do come before the meeting, the persons named as proxies or their
substitutes will vote or act with respect to such other matters in accordance
with their best judgment.

NOTICE CONCERNING STOCKHOLDER PROPOSALS

Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders must be received by the Company on or before November
30, 1996 in order to be included in the form of proxy and proxy statement to
be issued by the Board of Directors for that meeting.

OTHER INFORMATION

The Company will bear all costs in connection with the management
solicitation of proxies. The Company intends to reimburse brokerage houses,
custodians, nominees and others for their out-of-pocket expenses and
reasonable clerical expenses related thereto. Officers and regular employees
of the Company and its subsidiaries may request the return of proxies by
telephone, telegraph or in person, for which no additional compensation will
be paid them.

The Company's Annual Report to Stockholders for the year ended December 31,
1995 accompanies this Proxy Statement.

By Order of the Board of Directors,

/s/ J. TERRENCE LANNI /s/ ALEX YEMENIDJIAN

J. Terrence Lanni Alex Yemenidjian
Chairman and Chief President, Chief Operating Officer
Executive Officer and Chief Financial Officer

20
<PAGE>

EXHIBIT I

PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION

11. a. Except as is otherwise expressly provided in this Restated
Certificate of Incorporation or in instruments containing the terms of the
Corporation's securities, which instruments have been approved by the Nevada
Gaming Commission ("Nevada Commission"), if required, and the New Jersey
Casino Control Commission ("New Jersey Commission"), and so long as the
Corporation remains either a "holding company" or an "intermediary company"
(as those terms or equivalent terms are or may be defined under the Nevada
Gaming Control Act ("Nevada Act") and the New Jersey Casino Control Act ("New
Jersey Act"), of the holder of a gaming or casino license in either Nevada or
New Jersey, all securities of the Corporation shall be held subject to the
requirement of the Nevada Act and the New Jersey Act that if a holder thereof
is found to be unsuitable pursuant to the Nevada Act by the Nevada Commission
or is found to be disqualified pursuant to the New Jersey Act by the New
Jersey Commission, such holder shall dispose of his securities in the
Corporation promptly after such holder's receipt of written notice of his
unsuitability or disqualification. Promptly following its receipt of notice
from the Nevada Commission or the New Jersey Commission (the "Notice Date"),
the Corporation shall either deliver such written notice personally to the
unsuitable or disqualified holder or shall mail it to such holder by certified
mail, return receipt requested, to the address shown on the Corporation's
books and records. If any unsuitable or disqualified holder fails to dispose
of his securities within 120 days following such holder's receipt of written
notice of his unsuitability or disqualification, (i) such securities shall
always be subject to redemption by the Corporation, by action of the Board of
Directors, if in the judgment of the Board of Directors such action should be
taken, pursuant to Section 141(b) of the General Corporation Law of Delaware
or any other applicable provision of law, to the extent necessary to prevent
the loss or secure the reinstatement of any government-issued license or
franchise held by the Corporation or any Subsidiary to conduct any portion of
the business of the Corporation or such Subsidiary, which license or franchise
is conditioned upon some or all of the holders of the Corporation's securities
possessing prescribed qualifications, and (ii) such unsuitable or disqualified
holder shall indemnify the Corporation for any and all direct or indirect
costs, including attorneys' fees, incurred by the Corporation as a result of
such holder's continuing ownership or failure to divest promptly.

b. Commencing on the date the Nevada Commission or the New Jersey Commission
serves notice upon the Corporation of the determination of unsuitability or
disqualification, it shall be unlawful pursuant to the Nevada Act and the New
Jersey Act for the unsuitable or disqualified holder (i) to receive any
dividends or interest upon his securities in the Corporation; (ii) to
exercise, directly or through any trustee or nominee, any right conferred by
such securities; or (iii) to receive any remuneration in any form from the
Corporation for services rendered or otherwise.

c. The redemption price of any securities to be redeemed pursuant to this
Article 11 shall be equal to the lesser of (i) the holder's original purchase
price for the securities, or (ii) the lowest closing sale price of the
securities between the Notice Date and the date 120 days after the Notice
Date.

d. For purposes of this Article 11, the term "Subsidiary" means any entity
of which this Corporation is deemed to be a "holding company" or an
"intermediary company" as those terms or equivalent terms are or may be
defined under the Nevada Act and the New Jersey Act.

A-1
<PAGE>

EXHIBIT II

RESTATED CERTIFICATE OF INCORPORATION OF MGM GRAND, INC.

J. Terrence Lanni, Chairman of the Board and Chief Executive Officer, and
Scott Langsner, Secretary/Treasurer, of MGM GRAND, INC., a Corporation
organized and existing under the laws of the State of Delaware, hereby certify
as follows:

1. The name of this Corporation is:

MGM GRAND, INC.

The name under which the Corporation was originally incorporated was GRAND
NAME CO., and the original Certificate of Incorporation was filed on January
25, 1986.

2. The address of its registered office in the State of Delaware is
Corporation Trust Center, No. 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.

3. The nature of the business, or objects or purposes proposed to be
transacted, provided or carried on are:

In general to engage in any lawful act or activity for which Corporations
may be organized under the General Corporation Law of Delaware.

4. The aggregate number of shares which the Corporation shall have authority
to issue is 75,000,000 shares, all of which are to be common stock, and the
par value of each of such shares is to be $.01.

5. The Board of Directors is expressly authorized to adopt, amend or repeal
the by-laws of this Corporation.

6. Tender offers for the purchase of equity securities of this Corporation
shall not be subject to the provisions of Section 203 of the General
Corporation Law of the State of Delaware.

7. The Corporation is to have perpetual existence.

8. Elections of directors need not be by written ballot unless the by-laws
of the Corporation shall so provide.

Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the Corporation.

9. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

10. A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of
the State of Delaware or (iv) for any transaction from which the director
receives an improper personal benefit.

B-1
<PAGE>

If the General Corporation Law of the State of Delaware is hereafter amended
to authorize the further elimination or limitation of the liability of a
director, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended from time to time.

Any repeal or amendment of this Article 11 by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.

This Restated Certificate of Incorporation restates and integrates and
further amends the Corporation's Certificate of Incorporation, was duly
adopted by the Board of Directors and was approved by the stockholders in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.

B-2
<PAGE>

IN WITNESS WHEREOF, this Certificate has been signed by J. Terrence Lanni,
Chairman of the Board and Chief Executive Officer, and Scott Langsner,
Secretary/Treasurer, of MGM Grand, Inc. this day of , 1996.

-------------------------------------
J. Terrence Lanni
Chairman of the Board and
Chief Executive Officer

- -------------------------------------
Scott Langsner
Secretary/Treasurer

B-3
<PAGE>

APPENDIX 1

THE OPTION PLANS

The following is the text of the Option Plans:

THE NONQUALIFIED PLAN

1. Purpose. The purpose of the MGM Grand, Inc. Nonqualified Stock Option
Plan is to provide a means whereby MGM Grand, Inc. may attract and retain
persons of ability as employees and motivate such persons to exert their best
effort on behalf of the Company and any Parent or Subsidiary.

2. Definitions.

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(d) "Company" shall mean MGM Grand, Inc., a Delaware corporation.

(e) "Nonqualified Option" shall mean an option to purchase shares of
Stock, subject to the terms and conditions described in the Plan, which is
not an incentive stock option within the meaning of Code Section 422A.

(f) "Parent" shall mean a parent corporation as defined in Code Section
425(e).

(g) "Participant" shall mean an employee of the Company or any Parent
or Subsidiary who is designated to receive Nonqualified Options pursuant
to Section 3.

(h) "Plan" shall mean the MGM Grand, Inc. Nonqualified Stock Option
Plan.

(i) "Stock" shall mean the Company's $.01 par value common stock.

(j) "Subsidiary" shall mean a subsidiary corporation as defined in Code
Section 425(f) or any partnership or joint venture in which the Company
owns a 50 percent or greater ownership interest.

3. Administration. The Plan shall be administered by the Committee,
consisting of at least three members, appointed by and holding office at the
pleasure of the Board. Members of the Committee shall be members of the Board
and shall not be eligible to participate in the Plan while serving on the
Committee.

All employees of the Company or any Parent or Subsidiary (other than any
employee who owns stock possessing more than 10 percent of the total combined
voting power or value of all classes of stock of the Company or any Parent or
Subsidiary) shall be eligible to receive Nonqualified Options. Subject to the
provisions of the Plan, the Committee shall have the power to (a) determine and
designate from time to time those employees who perform services for the Company
or for any Parent or Subsidiary who shall be Participants in the Plan and the
number of shares to be subject to the Nonqualified Options to be granted to each
Participant; provided, however, that no Nonqualified Option shall be granted
after the expiration of the period of ten years from the effective date of the
Plan specified in Section 8; (b) authorize the granting of Nonqualified Options
to Participants; and (c) determine the time or times and the manner when each
Nonqualified Option shall be exercisable and the duration of the exercise
period.

For the purposes of this Plan, the fair market value of the Stock shall be
determined in good faith by the Committee by applying the rules and principles
of valuation set forth in Treasury Regulations Section 20.2031-2, relating to
the valuation of stocks and bonds for purposes of Code Section 2031.

The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it deems
necessary or advisable. Without limiting the generality of the foregoing
sentence, the Committee may, in its discretion, treat all or any portion of any
period during which a Participant is on military or on an approved leave of
absence from the Company or a Parent or Subsidiary as a period of service of
such Participant with the Company or a Parent or Subsidiary, as the case may be,
for purposes of accrual of his or her rights under the Nonqualified Options. Any
interpretation, determination, or other action made or taken by the Committee
shall be final, binding, and conclusive. Any action reduced to writing and
signed by all members of the Committee shall be as fully effective as if it had
been taken by vote at a meeting duly called and held. No member of the Committee
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Nonqualified Options.

4. Benefit Available Under Plan. The benefits provided by the Plan to
Participants are Nonqualified Options. Nonqualified Options may be granted by
the Company from time to time for all Participants to acquire an aggregate of
5,000,000 shares of stock, subject to adjustment as provided in Paragraph 5(h),
and reduced by the number of shares subject to options which are granted under
the MGM Grand, Inc. Incentive Stock Option Plan. The shares to be delivered upon
exercise of Nonqualified Options shall be made available, at the discretion of
the Board, either from authorized
<PAGE>

but unissued shares of Stock or from Stock reacquired by the Company, including
shares purchased in the open market. If any Nonqualified Option terminates,
expires or is cancelled with respect to any shares of Stock, new Nonqualified
Options may thereafter be granted covering such shares.

5. Terms and Conditions. Each Nonqualified Option shall be evidenced by an
agreement (the "Agreement"), in a form approved by the Committee, which shall be
signed by an officer of the Company and the Participant receiving the
Nonqualified Option, and which shall be subject to the following express terms
and conditions and to such other terms and conditions as the Committee may deem
appropriate:

(a) Period. Each Agreement shall specify that the Nonqualified Option
thereunder is granted for a period not to exceed ten years (the "Option
Period") and shall provide that the Nonqualified Option shall expire at the
end of such period.

(b) Option Price. The price per share at which a Nonqualified Option
may be exercised (the "Option Price") shall be determined by the Committee
at or prior to the time the Nonqualified Option is granted, but shall be at
least equal to the fair market value per share at the time the Nonqualified
Option is granted.

(c) Exercise of Option. In order to exercise Nonqualified Options,
the person or persons entitled to exercise them shall give written notice
to the Company specifying the number of shares to be purchased pursuant to
the exercise of Nonqualified Options. This notice shall be accompanied by
payment for the shares as provided in Paragraph 5(d). Options may be
exercised at such time or times as may be determined by the Committee at
the time of grant, subject to the provisions of this Section 5, including
the following limitation: no part of any Nonqualified Option may be
exercised until the Participant holding the Nonqualified Option shall have
performed services for the Company or for a Parent or Subsidiary for such
period after the date on which the Nonqualified Option is granted as the
Committee may specify in the Agreement; provided, however, that, although a
Nonqualified Option may provide for earlier exercise, each Nonqualified
Option must be exercisable so that at least 20 percent of the shares
subject to the Nonqualified Option are exercisable no later than the third
anniversary of the grant of the Nonqualified Option, 40 percent of such
shares no later than the fourth such anniversary, 60 percent of such shares
no later than the fifth such anniversary, 80 percent of such shares no
later than the sixth such anniversary, and 100 percent of such shares no
later than the seventh such anniversary; provided, further, that if the
Committee authorizes a Nonqualified Option exercisable in more than one
installment and if the employment of any Participant holding such a
Nonqualified Option is terminated for any reason after the first date on
which the right to exercise any portion of the Nonqualified Option has
accrued, the number of shares with respect to which the Nonqualified Option
shall be deemed to have accrued at the date of termination of employment
shall be such number of shares as to which the right to exercise the
Nonqualified Option accrued prior to the date of termination of employment,
plus, in case the Nonqualified Option was not fully exercisable on such
date, that proportion of the number of shares with respect to which the
Nonqualified Option would next have become exercisable but for such
termination of employment as the number of days the Participant was
employed by the Company, or a Parent or Subsidiary, prior to such date and
subsequent to the last preceding date on which the right to exercise the
Nonqualified Option as to additional shares accrued (the "Preceding
Exercise Date") bears to the number of days between the Preceding Exercise
Date and the next date on which the right to exercise the Nonqualified
Option as to additional shares would otherwise accrue; and provided,
further, that no Nonqualified Option may at any time be exercised in part
with respect to fewer than the lesser of (i) fifty shares, or (ii) the
number of shares which remain to be purchased pursuant to the Nonqualified
Option.

(d) Payment of Option Price. The Option Price of the Stock
transferred to a Participant pursuant to the exercise of a Nonqualified
Option shall be paid to the Company at the time of delivery of notice of
exercise: (1) in cash; (2) with previously acquired Stock having a fair
market value equal to the Option Price; or (3) with cash and previously
acquired Stock having a fair market value which together with the cash is
equal to the Option Price.
<PAGE>

(e) Exercise in the Event of Death or Termination of Employment. If a
Participant holding Nonqualified Options shall terminate employment by
the Company, its Parent and Subsidiaries because of death, or shall die within
three months of termination of employment by the Company, its Parent and
Subsidiaries, the Nonqualified Options held by the Participant may be exercised,
to the extent that the Participant was entitled to do so at the date of
termination of employment, by the person or persons to whom the Participant's
rights under the Nonqualified Options pass by will or applicable law , or if no
such person has such rights, by the Participant's executors or administrators,
at any time, or from time to time, within one year after the date of such
termination of employment, but in no event later than the expiration date
specified pursuant to Paragraph 5(a). If a Participant's employment by the
Company, its Parent and Subsidiaries shall terminate for any reason other than
death, he may exercise his Nonqualified Options, to the extent he was entitled
to do so at the date of termination of employment, at any time, or from time to
time, within three months after the date of termination of employment, but in no
event later than the expiration date specified pursuant to Paragraph 5(a).

(f) Nontransferability. No Nonqualified Option granted under the Plan shall
be transferable other than by will or by the laws of descent and distribution.
No Interest of any Participant under the Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or equitable process. During the lifetime of the Participant, Nonqualified
Options shall be exercisable only by the Participant who received them.

(g) Investment Representation. Each Agreement shall contain a provision
that, upon demand by the Company for such a representation, the Participant
holding the Nonqualified Options (or any person acting under Paragraph 5(e))
shall deliver to the Company at the time of any exercise of any Nonqualified
Options a written representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale or with a view to
the distribution thereof. Upon such demand, delivery of such representation
prior to the delivery of any shares issued upon exercise of Nonqualified Options
and prior to the expiration of the Option Period shall be a condition precedent
to the right of the Participant or such other person to acquire any shares.

(h) Adjustments in Event of Change in Stock. In the event of any change in
the Stock by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination, or exchange of shares, or of any
similar change affecting the Stock, the number and class of shares which
thereafter may be acquired under the Plan, the number and class of shares
subject to outstanding Agreements, the Option Price per share thereof, and any
other terms of the Plan or the Agreements which in the Committee's sole
discretion require adjustment (including, without limitation, relating to the
Stock, other securities, cash or other consideration which may be acquired upon
exercise of the Nonqualified Options) shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem
appropriate.

(i) No Rights as Shareholder. No Participant shall have any rights as a
shareholder with respect to any shares subject to Nonqualified Options prior to
the date of issuance to him of a certificate or certificates for such shares.

(j) No Right to Continued Employment. The Plan and any Nonqualified Options
granted under the Plan shall not confer upon any employee any right with respect
to continuance of employment by the Company or any Parent or Subsidiary, nor
shall they interfere in any way with the right of the Company or any Parent or
Subsidiary for which an employee performs services to terminate his employment
at any time.

(k) Arrangement for Tax Payment. Each Agreement shall contain a provision
that the Participant shall agree to make any arrangements required by the
Committee to insure that the amount of tax required to be withheld by the
Company or a Parent or Subsidiary as a result of the exercise of Nonqualified
Options is available for payment.

(l) Certain Corporate Transactions. Each Agreement shall provide that
nothing in the Plan or the Agreement shall in any way prohibit the Company from
merging with or consolidating into
<PAGE>

another corporation, or from selling or transferring all or substantially all of
its assets, or from distributing all or substantially all of its assets to its
stockholders in liquidation, or from dissolving and terminating its corporate
existence, and in any such event (other than a merger in which the Company is
the surviving corporation and under the terms of which the shares of Stock
outstanding immediately prior to the merger remain outstanding and unchanged),
the Participant shall be entitled to receive, at the time the Nonqualified
Option or portion thereof would otherwise become exercisable and upon payment of
the Option Price, the same shares of stock, cash or other consideration received
by shareholders of the Company in accordance with such merger, consolidation,
sale or transfer of assets, liquidation or dissolution.

6. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Nonqualified Options under the Plan, and the obligation of the
Company to transfer shares under these Nonqualified Options shall be subject to
all applicable federal and state laws, rules and regulations, including those
related to disclosure of financial and other information to Participants, and to
any approvals by any government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares of
Stock prior to (a) the listing of such shares on any stock exchange on which the
Stock may then be listed, where such listing is required under the rules or
regulations of such exchange, and (b) the compliance with applicable federal and
state securities laws and regulations relating to the issuance and delivery of
such certificates; provided, however, that the Company shall make all reasonable
efforts to so list such shares and to comply with such laws and regulations.

7. Amendment and Discontinuance. The Board may from time to time amend,
suspend or discontinue the Plan; provided, however, that, subject to the
provisions of Paragraph 5(h), no action of the Board may (a) increase the number
of shares reserved for options pursuant to Section 4 without approval of the
shareholders of the Company, (b) permit the granting of any Nonqualified Option
at an Option Price less than that determined in accordance with Paragraph 5(b),
(c) permit the granting of Nonqualified Options which expire beyond the period
provided for in Paragraph 5(a), or (d) make any material change in the class of
eligible employees as defined in the Plan.

8. Effective Date. The effective date of the Plan shall be the earlier of
the date the Plan is adopted by the Board or the date the Plan is approved by
shareholders of the Company.

THE INCENTIVE PLAN

1. Purpose. The purpose of the MGM Grand, Inc. Incentive Stock Option Plan
is to provide a means whereby MGM Grand, Inc. may attract and retain persons of
ability as employees and motivate such persons to exert their best efforts on
behalf of the Company and any Parent or Subsidiary.

2. Definitions.

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(d) "Company" shall mean MGM Grand, Inc., a Delaware corporation.

(e) "Incentive Option" shall mean an option to purchase shares of Stock,
subject to the terms and conditions described in the Plan, which is an
incentive stock option within the meaning of Code Section 422A.

(f) "Parent" shall mean a parent corporation as defined in Code Section
425(e).

(g) "Participant" shall mean an employee of the Company or any Parent
or Subsidiary who is designated to receive Incentive Options pursuant to
Section 3.

(h) "Plan" shall mean the MGM Grand, Inc. Incentive Stock Option Plan.

(i) "Stock" shall mean the Company's $.01 par value common stock.
<PAGE>

(l) "Subsidiary" shall mean a subsidiary corporation as defined in
Code Section 425(f).

(3) Administration. The Plan shall be administered by the Committee,
consisting of at least three members, appointed by and holding office at the
pleasure of the Board. Members of the Committee shall be members of the Board
and shall not be eligible to participate in the Plan while serving on the
Committee.

All employees of the Company or any Parent or Subsidiary (other than any
employee who owns stock possessing more than 10 percent of the total combined
voting power or value of all classes of stock of the Company or any Parent or
Subsidiary) shall be eligible to receive Incentive Options. Subject to the
provisions of the Plan, the Committee shall have the power to (a) determine and
designate from time to time those employees who perform services for the Company
or for any Parent or Subsidiary who shall be Participants in the Plan and the
number of shares to be subject to the Incentive Options to be granted to each
Participant; provided, however, that no Incentive Option shall be granted after
the expiration of the period of ten years from the effective date of the Plan
specified in Section 9; (b) authorize the granting of Incentive Options to
Participants; and (c) determine the time or times and the manner when each
Incentive Option shall be exercisable and the duration of the exercise period.

For all purposes of this Plan, the fair market value of the Stock shall be
determined in good faith by the Committee by applying the rules and principles
of valuation set forth in Treasury Regulations Section 20.2031-2, relating to
the valuation of stocks and bonds for purposes of Code Section 2031.

The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it deems
necessary or advisable. Without limiting the generality of the foregoing
sentence, the Committee may, in its discretion, treat all or any portion of any
period during which a Participant is on military or on an approved leave of
absence from the Company or a Parent or Subsidiary as a period of service of
such Participant with the Company or a Parent or Subsidiary, as the case may be,
for purposes of accrual of his or her rights under the Incentive Options. Any
interpretation, determination, or other action made or taken by the Committee
shall be final, binding, and conclusive. Any action reduced to writing and
signed by all members of the Committee shall be as fully effective as if it had
been taken by vote at a meeting duly called and held. No member of the Committee
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan or the Incentive Options.

4. Benefits Available Under Plan. The benefits provided by the Plan to
Participants are Incentive Options. Incentive Options may be granted by the
Company from time to time for all Participants to acquire an aggregate of
5,000,000 shares of Stock, subject to adjustment as provided in Paragraph 5(i),
and reduced by the number of shares subject to options which are granted under
the MGM Grand, Inc. Nonqualified Stock Option Plan. The shares to be delivered
upon exercise of Incentive Options shall be made available, at the discretion of
the Board, either from authorized but unissued shares of Stock or from Stock
reacquired by the Company, including shares purchased in the open market. If any
Incentive Option terminates, expires or is cancelled with respect to any shares
of Stock, new Incentive Options may thereafter be granted covering such shares.

5. Terms and Conditions. Each Incentive Option shall be evidenced by an
agreement (the "Agreement"), in a form approved by the Committee, which shall be
signed by an officer of the Company and the Participant receiving the Incentive
Option, and which shall be subject to the following express terms and conditions
and to such other terms and conditions as the Committee may deem appropriate.

(a) Period. Each Agreement shall specify that the Incentive Option
thereunder is granted for a period not to exceed ten years (the "Option
Period") and shall provide that the Incentive Option shall expire at the
end of such period.
<PAGE>

(b) Option Price. The price per share at which an Incentive Option may be
exercised (the "Option Price") shall be determined by the Committee at or prior
to the time the Incentive Option is granted, but shall be at least equal to the
fair market value per share at the time the Incentive Option is granted.

(c) Exercise of Option. In order to exercise Incentive Options, the person
or persons entitled to exercise them shall give written notice to the Company
specifying the number of shares to be purchased pursuant to the exercise of
Incentive Options. This notice shall be accompanied by payment for the shares as
provided in Paragraph 5(d). Options may be exercised at such time or times as
may be determined by the Committee at the time of grant, subject to the
provisions of this Section 5, including the following limitations: no part of
any Incentive Option may be exercised until the Participant holding the
Incentive Option shall have performed services for the Company or for a
Parent or Subsidiary for such period after the date on which the Incentive
Option is granted as the Committee may specify in the Agreement; provided,
however, that, although an Incentive Option may provide for earlier exercise,
each Incentive Option must be exercisable so that at least 20 percent of the
shares subject to the Incentive Option are exercisable no later than the third
anniversary of the grant of the Incentive Option, 40 percent of such shares no
later than the fourth such anniversary, 60 percent of such shares no later than
the fifth such anniversary, 80 percent of such shares no later than the sixth
such anniversary, and 100 percent of such shares no later than the seventh such
anniversary; provided, further, that if the Committee authorizes an Incentive
Option exercisable in more than one installment and if the employment of any
Participant holding such an Incentive Option is terminated for any reason after
the first date on which the right to exercise any portion of the Incentive
Option has accrued, the number of shares with respect to which the Incentive
Option shall be deemed to have accrued at the date of termination of employment
shall be such number of shares as to which the right to exercise the Incentive
Option accrued prior to the date of termination of employment, plus, in case the
Incentive Option was not fully exercisable on such date, that proportion of the
number of shares with respect to which the Incentive Option would next have
become exercisable but for such termination of employment as the number of days
the Participant was employed by the Company, or a Parent or Subsidiary, prior to
such, date and subsequent to the last preceding date on which the right to
exercise the Incentive Option as to additional shares accrued (the "Preceding
Exercise Date") bears to the number of days between the Preceding Exercise Date
and the next date on which the right to exercise the Incentive Option as to
additional shares would otherwise accrue; and provided, further, that no
Incentive Option may at any time be exercised in part with respect to fewer than
the lesser of (i) fifty shares, or (ii) the number of shares which remain to be
purchased pursuant to the Incentive Option.

(d) Payment of Option Price. The Option Price of the Stock transferred to
a Participant pursuant to the exercise of an Incentive Option shall be paid to
the Company at the time of delivery of notice of exercise: (1) in cash; (2) with
previously acquired Stock having a fair market value equal to the Option Price;
or (3) with cash and previously acquired Stock having a fair market value which
together with the cash is equal to the Option Price.

(e) Limitation. The aggregate fair market value (determined at the time
an option is granted) of the Stock with respect to which incentive stock options
described in Code Section 422A(b) are exercisable for the first time by any
Participant during any calendar year (under all plans of the Company and any
Parent and any Subsidiary) shall not exceed $100,000.

(f) Exercise in the Event of Death or Termination of Employment. If a
Participant holding Incentive Options shall terminate employment by the Company,
its Parent and Susidiaries because of death, or shall die within three months of
termination of employment by the Company, its Parent and Subsidiaries, the
Incentive Options held by the Participant may be exercised, to the extent that
the Participant was entitled to do so at the date of termination of employment,
by the person or persons to whom the Participant's rights under the Incentive
Options pass by will or applicable law, or if no such person has such rights, by
the Participant's executors or administrators, at any time, or from time to
time, within one year after the date of such termination
<PAGE>

of employment, but in no event later than the expiration date specified pursuant
to Paragraph 5(a). If a Participant's employment by the Company, its Parent and
Subsidiaries shall terminate for any reason other than death, he may exercise
his Incentive Options, to the extent he was entitled to do so at the date of
termination of employment, at any time, or from time to time, within three
months after the date of termination of employment, but in no event later than
the expiration date specified pursuant to Paragraph 5(a).

(g) Nontransferability. No Incentive Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution. No
interest of any Participant under the Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or equitable process. During the lifetime of the Participant, Incentive Options
shall be exercisable only by the Participant who received them.

(h) Investment Representation. Each Agreement shall contain a provision
that, upon demand by the Company for such a representation, the Participant
holding the Incentive Options (or any person acting under Paragraph 5(b) shall
deliver to the Company at the time of any exercise of any Incentive Options a
written representation that the shares to be acquired upon such exercise are to
be acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to the delivery
of any shares issued upon exercise of Incentive Options and prior to the
expiration of the Option Period shall be a condition precedent to the right of
the Participant or such other person to acquire any shares.

(i) Adjustments in Event of Change in Stock. In the event of any change in
the stock by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination, or exchange of shares, or of any
similar change affecting the stock, the number and class of shares which
thereafter may be acquired under the Plan, the number and class of shares
subject to outstanding Agreements, the Option Price per share thereof, and any
other terms of the Plan or the Agreements which in the Committee's sole
discretion require adjustment (including, without limitation, relating to the
Stock, other securities, cash or other consideration which may be acquired upon
exercise of the Incentive Options) shall be appropriately adjusted consistent
with such change in such manner as the Committee may deem appropriate.

(j) No Rights as Shareholder. No Participant shall have any rights as a
shareholder with respect to any shares subject to Incentive Options prior to the
date of issuance to him of a certificate or certificates for such shares.

(k) No Rights to Continued Employment. The Plan and any Incentive Options
granted under the Plan shall not confer upon any employee any right with respect
to continuance of employment by the Company or any Parent or Subsidiary, nor
shall they interfere in any way with the right of the Company or any Parent or
Subsidiary for which an employee performs services to terminate his employment
at any time.

(l) Certain Corporate Transactions. Each Agreement shall provide that
nothing in the Plan or the Agreement shall in any way prohibit the Company from
merging with or consolidating into another corporation, or from selling or
transferring all or substantially all of its assets, or from distributing all or
substantially all of its assets to its stockholders in liquidation, or from
dissolving and terminating its corporate existence, and in any such event (other
than a merger in which the Company is the surviving corporation and under the
terms of which the shares of Stock outstanding immediately prior to the merger
remain outstanding and unchanged), the Participant shall be entitled to receive,
at the time the Incentive Option or portion thereof would otherwise become
exercisable and upon payment of the Option Price, the same shares of stock, cash
or other consideration received by shareholders of the Company in accordance
with such merger, consolidation, sale or transfer of assets, liquidation or
dissolution.

6. Compliance With Other Laws and Regulations. The Plan, the grant and
exercise of Incentive Options under the Plan, and the obligation of the Company
to transfer shares under these Incentive
<PAGE>

Options shall be subject to all applicable federal and state laws, rules and
regulations, including those related to disclosure of financial and other
information to Participants, and to any approvals by any government or
regulatory agency as may be required. The Company shall not be required to issue
or deliver any certificates for shares of Stock prior to (a) the listing of such
shares on any stock exchange on which the Stock may then be listed, where such
listing is required under the rules or regulations of such exchange, and (b) the
compliance with applicable federal and state securities laws and regulations
relating to the issuance and delivery of such certificates; provided, however,
that the Company shall make all reasonable efforts to so list such shares and to
comply with such laws and regulations.

7. Certain Dispositions. All Incentive Options shall provide that if the
Participant makes a disposition, within the meaning of Code Section 425(c), of
any shares of Stock transferred upon exercise of an Incentive Option within two
years from the date of the granting of the Incentive Option or within one year
after the transfer of the shares of Stock to the Participant pursuant to the
exercise of the Incentive Option, the Participant shall notify the Company
within ten days of the disposition. The Company may cause an appropriate legend
to be affixed to any stock certificates representing the shares of Stock issued
under the Plan to enable it to receive notice of the disposition.

8. Amendment and Discontinuance. The Board may from time to time amend,
suspend or discontinue the Plan; provided, however, that, subject to the
provisions of Paragraph 5(i), no action of the Board may (a) increase the number
of shares reserved for options pursuant to Section 4 without approval of the
shareholders of the Company, (b) permit the granting of any Incentive Option at
an Option Price less than that determined in accordance with Paragraph 5(b), (c)
permit the granting of Incentive Options which expire beyond the period provided
for in Paragraph 5(a), or (d) make any material change in the class of eligible
employees as defined in the Plan.

9. Effective Date. The effective date of the Plan shall be the earlier of
the date the Plan is adopted by the Board or the date the Plan is approved by
shareholders of the Company.
<PAGE>

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PRELIMINARY COPY

MGM GRAND, INC.

Proxy for Annual Meeting of Stockholders

May 7, 1996

Solicited on Behalf of the Board of Directors

The undersigned hereby appoints ALEX YEMENIDJIAN, JAMES D. ALJIAN AND
WALTER M. SHARP, and each of them, Proxies, with full power of substitution, to
represent and vote all shares of common stock which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
MGM Grand, Inc. (the "Company") to be held at the MGM Grand Hotel, 3799 Las
Vegas Boulevard, Las Vegas, Nevada on May 7, 1996, at 10:00 a.m., and at any
adjournments thereof, upon any and all matters which may properly be brought
before said meeting or any adjournments thereof. The undersigned hereby revokes
any and all proxies heretofore given with respect to such meeting.

The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.

(Continued and to be SIGNED on the other side)

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<PAGE>

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This Proxy will be voted as specified herein; if no specification is made, this
Proxy will be voted for Items 1, 2, 3 and 4.

PLEASE MARK VOTES A OR B
I plan to attend
the meeting.

[_]

<TABLE>
<C> <C> <S>
1. ELECTION OF DIRECTORS Names of Nominees: James D. Aljian, Fred Benninger, Terry Christensen,
Glenn A. Cramer, Willie D. Davis, Alexander M. Haig, Jr., Lee A. Iacocca,
FOR all nominees WITHHOLD Kirk Kerkorian, J. Terrence Lanni, Walter M. Sharp, Alex Yemenidjian,
named (except AUTHORITY Jerome B. York.
as marked to the for all nominees
contrary) named (INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that
nominee's name on the following line)
[_] [_]
-----------------------------------------------------------------------------------
</TABLE>

2. Amendment to the Company's Stock Option Plans.

FOR AGAINST ABSTAIN
[_] [_] [_]

3. Amendment and Restatement of the Certificate of Incorporation.

FOR AGAINST ABSTAIN
[_] [_] [_]

4. Ratification of the appointment
of independent auditors.

FOR AGAINST ABSTAIN

[_] [_] [_]

Dated:_______________________, 1996

___________________________________
(Signature)

___________________________________
(Signature if held jointly)

Please sign your name exactly as it
appears hereon, in the case of
joint owners, each should sign. If
signing as executor, trustee,
guardian or in any other
representative capacity or as an
officer of a corporation, please
indicate your full title as such.

PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES*
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