<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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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] No fee required.
[_] 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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
MGM GRAND, INC.
3799 LAS VEGAS BLVD. SOUTH, LAS VEGAS, NEVADA 89109
----------------
NOTICE OF ANNUAL MEETING TO BE HELD ON
MAY 5, 1998
----------------
To the Stockholders:
The Annual Meeting of Stockholders of MGM Grand, Inc., a Delaware
corporation (the "Company"), will be held at MGM Grand Hotel, 3799 Las Vegas
Blvd. South, Las Vegas, Nevada, on May 5, 1998, at 10:00 a.m., for the
following purposes:
1.To elect a Board of Directors.
2. To consider and act upon a proposal to ratify and approve the adoption
of the Company's stock option plans.
3. To consider and act upon the ratification of the selection of
independent auditors.
4. 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 12, 1998 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/ Alex Yemenidjian /s/ J. Terrence Lanni
Alex Yemenidjian J. Terrence Lanni
President and Chief Operating Chairman and Chief Executive Officer
Officer
April 15, 1998
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
TIME:10:00 A.M. | MEETING ADMISSION
DATE:May 5, 1998 | TICKET. NO ADMISSION
LOCATION: MGM GRAND HOTEL & CASINO | WILL BE ALLOWED WITHOUT
Grand Theatre | THIS TICKET.
3799 Las Vegas Blvd. South
Las Vegas, Nevada 89109
STOCKHOLDER NAME:______________________________
[_] WITH SPOUSE [_] WITHOUT SPOUSE
STOCKHOLDER ADDRESS:___________________________
-----------------------------
(PLEASE PRINT)
<PAGE>
MGM GRAND, INC.
3799 LAS VEGAS BLVD. SOUTH
LAS VEGAS, NEVADA 89109
----------------
PROXY STATEMENT
APRIL 15, 1998
----------------
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
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. 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 and 3 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 April 15, 1998.
The authorized capital stock of the Company presently consists of 75,000,000
shares of Common Stock, $.01 par value per share (the "Common Stock"). At the
close of business on March 12, 1998, the record date for determining
stockholders entitled to vote at the meeting, 57,990,640 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.
The affirmative vote of a plurality of the votes cast at the meeting will be
required for the election of directors. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors
will not be voted with respect to the director or directors indicated,
although it will be counted for purposes of determining whether there is a
quorum. For each other item to be acted upon at the meeting, the affirmative
vote of the holders of a majority of the shares of Common Stock represented in
person or by proxy and entitled to vote on the item will be required for
approval. A properly executed proxy marked "ABSTAIN," although counted for
purposes of determining whether there is a quorum, will not be voted.
Accordingly, an abstention will have the same effect as a vote cast against
the matter.
In accordance with the rules of the New York Stock Exchange, brokers and
nominees may be precluded from exercising their voting discretion with respect
to certain matters to be acted upon (e.g., any proposal which would
substantially affect the rights or privileges of the Common Stock) and thus,
in the absence of specific instructions from the beneficial owner of shares,
will not be empowered to vote the shares on such matters. A broker non-vote
will not be counted in determining the number of shares necessary for approval
of the proposals. Shares represented by such broker non-votes will, however,
be counted for purposes of determining whether there is a quorum.
1
<PAGE>
Shown below is certain information as of March 12, 1998 with respect to
beneficial ownership (as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of shares of
Common Stock by the only person or entities known to the Company to be the
beneficial owner of more than five percent of the outstanding shares of Common
Stock, by the Named Executives, as defined under "Executive Compensation," 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
BENEFICIALLY PERCENT
NAME AND ADDRESS(1) OWNED(2) OF CLASS
------------------- ------------ --------
<S> <C> <C>
Kirk Kerkorian 36,239,822(3) 62.5%
4835 Koval Lane
Las Vegas, Nevada 89109
J. Terrence Lanni 435,015(4) --%*
Alex Yemenidjian 340,000(4) --%*
Fred Benninger 40,000(4) --%*
4835 Koval Lane
Las Vegas, Nevada 89109
Scott Langsner 39,722(4) --%*
Edward J. Jenkins 10,315(4) --%*
FMR Corp. 4,386,700(5) 7.6%
82 Devonshire Street
Boston, MA 02109
Capital Group Companies,
Inc. 3,650,000(6) 6.3%
333 South Hope Street
Los Angeles, CA 90071-
1447
All directors and
executive officers 37,167,489(3)(4) 63.2%
as a group (16 persons)
</TABLE>
- --------
* Less than one percent (1%)
(1) Unless otherwise indicated, the address for the persons listed is 3799 Las
Vegas Blvd. South, Las Vegas, Nevada 89109.
(2) 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.
(3) Of these shares, 32,345,416 are held by Tracinda Corporation ("Tracinda"),
a Nevada corporation wholly owned by Mr. Kerkorian.
(4) Included in these amounts are 400,000 shares, 300,000 shares, 30,000
shares, 35,500 shares, and 10,000 shares subject to stock options
exercisable on or prior to May 12, 1998 held by Messrs. Lanni,
Yemenidjian, Benninger, Langsner and Jenkins, respectively, and 907 shares
held in Mr. Langsner's 401(k) Savings Plan. Also included are 7,000 shares
subject to stock options exercisable on or prior to May 12, 1998, held by
seven non-employee directors (see "Election of Directors"), at 1,000
shares each, which are exercisable on or prior to May 12, 1998.
2
<PAGE>
(5) Based upon a Schedule 13G, dated February 14, 1998, filed by FMR Corp.,
Edward C. Johnson 3d and Abigail P. Johnson with the Securities and
Exchange Commission. Of these shares, 3,681,800 are held by Fidelity
Management & Research Company and 704,900 shares are held by Fidelity
Management Trust Company, each a wholly owned subsidiary of FMR Corp. FMR
Corp. and Edward C. Johnson 3d each has sole power to dispose of 4,386,700
of such shares and the sole power to vote or to direct the voting of
539,000 of such shares.
(6) Based upon a Schedule 13G, dated February 10, 1998, filed by The Capital
Group Companies, Inc. with the Securities and Exchange Commission, wherein
The Capital Group Companies, Inc. states that it does not have investment
or voting power over, but may be deemed to beneficially own, such shares.
As indicated above, Mr. 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 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 and 3, and Mr. Kerkorian's vote will be
sufficient to cause adoption of Proposals 2 and 3.
3
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL NO. 1
INFORMATION CONCERNING THE NOMINEES
One of the purposes of the meeting is to elect 13 Directors, each of whom
will serve until the next annual meeting of stockholders or until their
respective successor shall have been elected and qualified or until their
earlier resignation or removal.
The table set forth below names each nominee for Director and gives
information concerning their principal occupation for at least the past five
years, beneficial ownership of Company Common Stock, age as of March 12, 1998
and certain other matters. 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.
<TABLE>
<CAPTION>
SHARES OF
COMMON
FIRST STOCK
PRINCIPAL OCCUPATION AND BECAME BENEFICIALLY
NAME (AGE) OTHER DIRECTORSHIPS A DIRECTOR OWNED(1)
-------------------------- ------------------------ ---------- ------------
<C> <S> <C> <C>
James D. Aljian (65) Executive of Tracinda 1988 11,400(2)(3)
since October 1987.
Director of Chrysler
Corporation ("Chrysler")
since February 1996, and
Metro-Goldwyn-Mayer Inc.
("MGM Inc."), of which
Tracinda has an
approximate 65%
ownership interest,
since October 1996.
Fred Benninger (81) Vice Chairman of the 1986 40,000(2)(3)
Board of the 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, and Chief
Executive Officer of the
Company from August 1987
to January 1991.
Terry Christensen (57) Partner, Christensen, 1987 3,000(2)(3)
Miller, Fink, Jacobs,
Glaser, Weil & Shapiro,
LLP, attorneys, Los
Angeles, California,
since May 1988. Director
of GIANT GROUP, LTD.,
Rally's Hamburgers, Inc.
and Checkers Drive-In
Restaurants, Inc.
Glenn A. Cramer (76) Director of Transamerica 1992 6,033(2)(3)
Corporation from 1968 to
April 1994, and Chairman
of the Executive
Committee of
Transamerica Airlines
from 1983 to April 1994.
Willie D. Davis (63) President and Director 1989 1,500(2)(3)
of All-Pro 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>
4
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON
FIRST STOCK
PRINCIPAL OCCUPATION AND BECAME BENEFICIALLY
NAME (AGE) OTHER DIRECTORSHIPS A DIRECTOR OWNED(1)
--------------------------- ------------------------ ---------- ------------
<C> <S> <C> <C>
Alexander M. Haig, Jr. (73) Chairman of Worldwide 1990 1,200(2)(3)
Associates, Inc., an
international business
advisory firm. Director
of America Online, Inc.
and Interneuron
Pharmaceuticals, Inc.
Consultant to the
Company since May 1990.
Kirk Kerkorian (80) Chief Executive Officer, 1987 36,239,822(4)
President and sole
director and stockholder
of Tracinda. Director of
MGM Inc. since October
1996.
J. Terrence Lanni (55) Chairman of the Company 1995 435,015(2)(3)
since July 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
Meditrust Operating
Company, a New York
Stock Exchange listed
real estate investment
trust.
Frank G. Mancuso (64) Chairman of the Board 1997 3,000(2)
and Chief Executive
Officer of MGM Inc.
since October 1996, and
of Metro-Goldwyn-Mayer
Studios, Inc. since July
1993. Chairman and Chief
Executive Officer of
Paramount Pictures
Corporation
("Paramount") from
September 1984 to March
1991, having served
Paramount in numerous
other capacities
beginning in 1963.
Entertainment industry
consultant from March
1991 to July 1993.
James J. Murren (36) Executive Vice President 1998 --
and Chief Financial
Officer of the Company
since January 1998.
Prior thereto, Managing
Director and Co-Director
of research for Deutsche
Morgan Grenfell ("DMG"),
having served DMG in
various other capacities
since 1984.
Walter M. Sharp (81) President of Walter M. 1986 30,482(2)(3)
Sharp Company (financial
consultants) and a
consultant to Tracinda.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON
FIRST STOCK
PRINCIPAL OCCUPATION AND BECAME BENEFICIALLY
NAME (AGE) OTHER DIRECTORSHIPS A DIRECTOR OWNED(1)
-------------------------- ------------------------ ---------- ------------
<C> <S> <C> <C>
Alex Yemenidjian (42) President of the Company 1989 340,000(2)(3)
since July 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 from May
1994 to January 1998.
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
January 1997. Director
of MGM Inc. since
November 1997.
Jerome B. York (59) Vice Chairman of 1995 6,000(2)(3)
Tracinda since 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 from April 1992
to May 1993. Director of
MGM Inc. since October
1996. In addition, Mr.
York serves on the board
of directors of Apple
Computer, Inc. and USA
Waste Services, Inc.
</TABLE>
- --------
(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 these amounts are shares subject to stock options exercisable
on or prior to May 12, 1998 held as follows:
<TABLE>
<CAPTION>
NAME SHARES
---- -------
<S> <C>
Mr. Aljian........................... 1,000
Mr. Benninger........................ 30,000
Mr. Christensen...................... 1,000
Mr. Cramer........................... 1,000
Mr. Davis............................ 1,000
Mr. Haig............................. 1,000
Mr. Lanni............................ 400,000
Mr. Sharp............................ 1,000
Mr. Yemenidjian...................... 300,000
Mr. York............................. 1,000
</TABLE>
(4) Of this amount, 32,345,416 shares are owned by Tracinda.
6
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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 all reports were filed on a timely basis.
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. There is no nominating committee
or committee performing a similar function.
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. The current members of the Executive
Committee are J. Terrence Lanni (Chairman), Fred Benninger, Kirk Kerkorian,
James J. Murren, Walter M. Sharp, Alex Yemenidjian and Jerome B. York. The
Executive Committee held 16 meetings during fiscal 1997 and acted by written
consent six times.
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 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 an Audit
Committee member. The current members of the Audit Committee are Jerome B.
York (Chairman), James D. Aljian, Willie D. Davis, Glenn A. Cramer and Walter
M. Sharp. The Audit Committee held three meetings during fiscal 1997.
The Compensation and Stock Option Committee - The functions of the
Compensation and Stock Option Committee (the "Compensation 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 Compensation Committee recommends
executive compensation policy to the Board, determines compensation of senior
executives of the Company, determines the performance criteria and bonuses to
be granted pursuant to the Company's Annual Performance Based Incentive Plan,
and administers and approves granting of Company stock options. The
Compensation Committee's authority and oversight extends to total
compensation, including base salaries, bonuses, stock options, and other forms
of compensation. The Compensation Committee is 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 Compensation
Committee member. The current members of the Compensation Committee are James
D. Aljian (Chairman), Walter M. Sharp and Jerome B. York. The Compensation
Committee held 13 meetings during fiscal 1997.
7
<PAGE>
BOARD MEETINGS. The Board of Directors held four meetings during 1997, and
acted once by unanimous written consent. 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 1997, all Directors attended at least 94% 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 meeting 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 Committee receives $750 per
quarter. Directors are also reimbursed expenses for attendance at Board and
Committee meetings.
On February 28, 1997, the Compensation Committee adopted a stock option
grant program pursuant to the Nonqualified Stock Option Plan, which received
subsequent stockholder approval, whereby members of the Company's Board of
Directors who are not full-time employees of the Company would receive an
initial grant of 5,000 stock options, if so accepted, and subsequent yearly
grants of 1,000 stock options during their respective terms as directors.
During 1995, 1996, and 1997, 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.
8
<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, 1997, 1996, and 1995, of those persons who were, at
December 31, 1997, (i) the Chief Executive Officer, and (ii) the other most
highly compensated Executive Officers of the Company who have received in
excess of $100,000 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------
SHARES
NAME AND PRINCIPAL OTHER UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS ANNUAL OPTION(A) COMPENSATION(B)
- ------------------ ---- ---------- ---------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrence Lanni 1997 $1,000,000 $983,642(C) $-- -- $ 591
Chairman and Chief 1996 1,000,000 500,000(D) -- -- --
Executive Officer 1995 583,333(E) -- -- 1,000,000 85,000
Alex Yemenidjian 1997 750,000 826,482(C) -- -- --
President and Chief 1996 750,000 423,750(D) -- -- --
Operating Officer 1995 410,416(E) -- -- 400,000 --
Fred Benninger 1997 110,000 97,500(C) -- -- --
Vice-Chairman of the 1996 110,000 97,500(D) -- -- --
Board 1995 401,666 -- -- -- --
Scott Langsner 1997 200,000 118,037(C) -- 7,000 591
Secretary/Treasurer 1996 183,333(G) 50,000(D) -- 7,500 --
1995 160,000 25,000(F) -- -- --
Edward J. Jenkins 1997 150,000 30,000(C) -- -- 591
Vice President 1996 140,000 30,000(D) -- -- --
1995 32,105 -- -- 25,000 --
</TABLE>
- --------
(A) During the years indicated, the only long-term compensation was pursuant
to the Company Non-qualified Stock Option Plan. No grants have been made
under the Company Incentive Stock Option Plan.
(B) The amounts in this column for 1997 represent value received pursuant to
the employee stock grant program in May 1997 (see "Benefit Plans"). The
payment of $85,000 to Mr. Lanni in 1995 represented a moving allowance and
reimbursement of moving costs incurred related to relocation to the
Company offices in Las Vegas, Nevada.
(C) In February 1998, certain of the Named Executives received bonuses
pursuant to the Company's Annual Performance Based Incentive Plan for
executive officers (see "Compensation Committee Report on Executive
Compensation") as follows: Mr. Lanni--$983,642; Mr. Yemenidjian--$737,732;
Mr. Langsner--$118,037; and Mr. Jenkins--$30,000. Additionally, in April
1997, Mr. Yemenidjian received $40,000 pursuant to commencement of an
employment contract (see "Certain Transactions"), and in February 1998,
Mr. Yemenidjian and Mr. Benninger received $48,750 and $97,500,
respectively, pursuant to long-term incentive agreements as detailed
herein (see "Certain Transactions").
(D) In February 1997, certain of the Named Executives received bonuses based
on (i) the financial performance of the Company for 1996 and (ii) the
Named Executives' individual performance. Additionally, in February 1996,
Mr. Yemenidjian and Mr. Benninger received $48,750 and $97,500,
respectively, pursuant to long-term incentive agreements as detailed
herein (see "Certain Transactions").
9
<PAGE>
(E) Pursuant to the terms of their respective employment, Mr. Lanni's annual
salary was $1,000,000 and Mr. Yemenidjian's annual salary was $750,000.
The amounts shown cover a period of less than one year.
(F) Represents payment from the MGM Grand-Bally's Monorail Limited Liability
Company, of which the Company is a 50% owner.
(G) Mr. Langsner's annual salary was $180,000; the excess shown here
represents a retroactive salary adjustment.
The table below sets forth certain information regarding options granted
during 1997 to the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
NUMBER OF SECURITIES APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM(B)
----------------------------------------- -----------------
PERCENT
OF TOTAL
OPTIONS
GRANTED
TO EXERCISE
EMPLOYEES PRICE
OPTIONS IN FISCAL PER EXPIRATION
NAME GRANTED (A) YEAR SHARE DATE 5% 10%
- ---- ----------- --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Scott Langsner..... 7,000 1.11% $35.13 7/7/07 $154,630 $391,860
</TABLE>
- --------
(A) The options were granted on July 7, 1997. All options have a ten-year
term, with 20% of the options becoming exercisable on each of the first
through the fourth anniversary dates, and with full vesting occurring on
the fifth anniversary date.
(B) These amounts represent certain assumed rates of appreciation only. 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 1997 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(A)
------------------------- -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrence Lanni....... -- $-- 200,000 800,000 $2,025,000 $8,100,000
Alex Yemenidjian........ -- -- 215,000 335,000 4,083,125 3,391,875
Fred Benninger.......... -- -- 20,000 30,000 202,500 303,750
Scott Langsner.......... -- -- 35,500 29,000 755,500 211,500
Edward J. Jenkins....... -- -- 5,000 20,000 60,625 242,500
</TABLE>
- --------
(A) Based upon the market value of the underlying securities at December 31,
1997 of $36.125, minus the exercise price of "in-the-money" options.
10
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION POLICIES
The Compensation Committee is responsible for establishing, monitoring and
implementing the policies governing the compensation of the Company's
executives. During 1997, the Compensation Committee was 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 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 the 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 1997. Stock option grants are considered by the Compensation
Committee from time to time.
Annual bonuses for 1997 paid to executive officers of the Company were
granted under the Company's Annual Performance Based Incentive Plan for
Executive Officers (the "Incentive Plan"). The Incentive Plan provides for
performance-based bonuses for executives who are "covered employees" under
Section 162(m) of the Internal Revenue Code, enacted in 1993. Section 162(m)
generally disallows a tax deduction to public companies for compensation over
$1 million paid to any such company's chief executive officer and four other
most highly compensated executive officers. Qualifying performance-based
compensation will not be subject to the deduction limitation if certain
requirements are met. The Compensation Committee's current policy is to
structure the performance-based portion of the compensation of its executive
officers (currently consisting of stock option grants and the bonuses granted
pursuant to the Incentive Plan) in a manner that complies with Section 162(m)
of the Internal Revenue Code whenever, in the judgment of the Compensation
Committee, to do so would be consistent with the objectives of the
compensation plan under which the compensation would be payable.
The Incentive Plan, which was approved by the Company's stockholders in May
1997, is an annual bonus plan designed to provide certain senior executive
officers with incentive compensation based upon the achievement of performance
goals which are set by the Compensation Committee during the first quarter of
each year. The Compensation Committee based the performance measure in 1997 on
achievement by the Company of target revenues and net income before tax,
subject to application of an adjustment factor. The actual bonus award, if
any, for eligible executives is determined by the Compensation Committee,
provided that no bonus award may exceed the lesser of 100% of the eligible
executive's annual base salary as in effect at the beginning of the plan year
or
11
<PAGE>
$1,000,000. In determining whether to grant any bonuses under the Incentive
Plan for 1997 and the amount of such bonuses, the Compensation Committee
considered, in order of importance, the following: an assessment of overall
Company performance as compared to both targeted and prior year performance;
the extent to which the Company achieved its financial goals of growth in
revenues and net income before taxes; 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 eligible executives'
compensation attributable to 1997. Based upon the foregoing, and consistent
with the recommendations of the Chairman of the Board and Chief Executive
Officer, the Compensation Committee determined, in February 1998, to grant
bonuses for 1997 to the Named Executives (other than the Chief Executive
Officer) as follows: Mr. Yemenidjian--$737,732; Mr. Langsner--$118,037; and
Mr. Jenkins--$30,000.
The Compensation 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 Compensation 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 1997, the Committee
granted to Mr. Langsner options to purchase 7,000 shares of Common Stock and
determined that the other Named Executives had adequate stock incentives at
that time. The Committee anticipates that it will grant additional options to
the Company's senior executive officers in the future.
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 agreement, Mr. Lanni's
salary is $1,000,000 per year. In considering whether to pay Mr. Lanni a bonus
for 1997 under the Incentive Plan, the Committee considered, in order of
importance, the following: an assessment of overall Company performance as
compared to both targeted and prior year performance; the extent to which the
Company achieved its financial goals of growth in revenues and net income
before taxes; the level of responsibility and performance of the Chief
Executive Officer; and the other components of his compensation attributable
to 1997. Based upon the foregoing factors applied to the results of 1997 and
upon the compensation policies described above, the Compensation Committee
determined, in February 1998, to grant Mr. Lanni a bonus of $983,642 for 1997.
/s/ James D. Aljian
-------------------------------------
JAMES D. ALJIAN
/s/ Walter M. Sharp
-------------------------------------
WALTER M. SHARP
/s/ Jerome B. York
-------------------------------------
JEROME B. YORK
12
<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 five year period commencing January 1, 1993 and
ended December 31, 1997.
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 MGM Grand Las
Vegas, a hotel/casino and entertainment complex located in Las Vegas, Nevada,
which opened on December 18, 1993. However, the Company believes that the
selected indices provide 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
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
MGM Grand, Inc. 100 205 126 120 182 189
Dow Jones Equity Market Index 100 110 111 152 188 251
Dow Jones Casinos Group 100 153 117 155 170 149
</TABLE>
- --------
* Assumes $100 invested on January 1, 1993 in each of Company stock, the Dow
Jones Equity Market Index, and the Dow Jones Casinos Group.
13
<PAGE>
BENEFIT PLANS
The Company's Annual Performance Based Incentive Plan for Executive Officers
(the "Incentive Plan"), which was approved by the Company's stockholders in
May 1997, is an annual bonus plan designed to provide certain senior executive
officers with incentive compensation based upon the achievement of performance
goals which are set by the Compensation Committee during the first quarter of
each year. The Incentive Plan provides for performance-based bonuses for
executives who are "covered employees" under Section 162(m) of the Internal
Revenue Code, enacted in 1993. Section 162(m) generally disallows a tax
deduction to public companies for compensation over $1 million paid to any
such company's chief executive officer and four other most highly compensated
executives. Qualifying performance-based compensation will not be subject to
the deduction limitation if certain requirements are met. The Compensation
Committee's current policy is to structure the performance-based portion of
the compensation of its executive officers (currently consisting of stock
option grants and the bonuses granted pursuant to the Incentive Plan) in a
manner that complies with Section 162(m) of the Internal Revenue Code
whenever, in the judgment of the Compensation Committee, to do so would be
consistent with the objectives of the compensation plan under which the
compensation would be payable.
MGM Grand Hotel, Inc., a wholly-owned subsidiary of the Company, separately
adopted a Section 401(k) employee savings plan (the "Hotel Savings Plan"). 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, short-term bond fund, or international equity
fund as directed by the participant. MGM Grand Hotel, Inc. will make matching
contributions of 25% up to an annual limit of 1% of a participant's salary
(based upon a maximum annual salary of $160,000) 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 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 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 also eligible to participate under the Hotel Savings Plan.
Effective November 1994, the Company and MGM Grand Hotel, Inc. 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. At the time of enrollment in the plan,
each participant must elect either a lump-sum payment or 10-year-installment-
payout to be distributed 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 ("MGM Grand Australia") by MGM Grand Australia Pty., Ltd., an
Australian employee retirement fund was acquired. The plan is subject to the
Superannuation Industry (Supervision) Act of 1993 imposing a legal obligation
on MGM Grand Australia to contribute to all employee superannuation funds. 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, under certain circumstances or normal
retirement.
14
<PAGE>
On March 26, 1996, the Compensation Committee of the Board of Directors
determined to adjust the vesting provision of the Company's Nonqualified Stock
Option Plan and Incentive Stock Option Plan to provide for the vesting of
future stock option grants under the plans at 20% on each of the first four
anniversary dates of the grant, with full vesting on the fifth anniversary
date of the grant. The Compensation Committee also determined that pro-rata
vesting at times other than successive anniversary dates of the date of grant
would no longer be applicable. Stock option holders with grants dated prior to
March 26, 1996 were given the opportunity to accept or decline the new vesting
provisions with regard to their existing grants, and if they accepted and
conformed to the new standard vesting schedule, a new effective date of April
1, 1996 was adopted solely for purposes of determining the subsequent yearly
20% vestings.
On May 7, 1996, the Company made a commitment to grant 15 shares of Company
Common Stock to each of its employees in exchange for continued active
employment through the one year anniversary date of the commitment. As a
result of the stock grant commitment, deferred compensation was charged to
stockholders' equity and amortized monthly to compensation expense over the
one year commitment period. On May 7, 1997, 99,045 shares were issued to
employees as a result of the commitment. Over the life of the commitment,
approximately $4 million was amortized to expense.
Effective November 1996, the Company and MGM Grand Hotel, Inc. adopted an
Employee Stock Purchase Plan. The plan provides eligible employees the
opportunity to purchase shares of the Company's Common Stock via payroll
deductions. The price for each share of Common Stock is the weighted average
price paid for all shares purchased by the Plan Administrator on behalf of the
participating employees on the last trading day of each month. The Company and
MGM Grand Hotel, Inc. pay the administrative costs of the plan. The plan may
be amended or terminated at any time by the Company's Board of Directors or by
a committee designated by the Board of Directors.
The Company also maintains stock option plans. See "Approval of Stock Option
Plans." The Company's Board of Directors may adopt other benefit plans,
including an employee retirement plan. 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 pretax operating profits to be available for
distribution on a discretionary basis. The terms and benefit levels of any
such plans have not yet been determined.
CERTAIN TRANSACTIONS
J. Terrence Lanni, Chairman and Chief Executive Officer of the Company, has
an employment agreement with the Company through April 1, 2000 pursuant to
which he receives an annual salary of $1,000,000. If the agreement is
terminated without cause (as defined) by the Company during the first five
years of its term, Mr. Lanni is entitled to continue to receive his monthly
salary, less any income or benefits received as a result of Mr. Lanni's
employment elsewhere, for the period from the date of termination through and
including March 31, 2000. "Cause" is defined as: (i) misconduct or negligence
in the performance of Mr. Lanni's material duties or the refusal to perform
such duties; (ii) any breach of Mr. Lanni's representations, warranties or
covenants; (iii) failure by Mr. Lanni to promptly obtain or retain any
permits, licenses or approvals required by state or local authorities; (iv)
Mr. Lanni's death or disability for a period of six consecutive months; (v)
indictment or conviction of Mr. Lanni for a crime, other than traffic
violations or similar misdemeanors; or (vi) the Board of Directors, after
reasonable inquiry, concludes that Mr. Lanni has engaged in conduct materially
adverse to the Company. Pursuant to the agreement, Mr. Lanni was granted
options to purchase 1,000,000 shares of Common Stock, of which 40% have vested
with the balance vesting on April 1, 1999. If there is a change in control in
the Company as the result of stockholders disposing of their shares in a sale,
exchange or merger (a "Change in Control"), as distinguished from a change in
control resulting from the issuance of treasury shares or from any other
transaction, all unvested stock options become fully vested.
15
<PAGE>
Alex Yemenidjian, President and Chief Operating Officer of the Company, has
a 4-year employment agreement with the Company which commenced April 22, 1997,
pursuant to which he received a signing bonus of $40,000, and receives an
annual salary of $750,000 and which contains a covenant not to compete. The
agreement is terminable by either party. Pursuant to the agreement, the
Company may terminate the agreement for good cause (as defined). In such
event, Mr. Yemenidjian shall be entitled to receive so much of the stock from
the Company's Nonqualified Stock Option Plan as had been vested but
unexercised as of the date of termination. Also, pursuant to the agreement, if
the Company terminates the agreement for any or no cause, Mr. Yemenidjian's
salary will continue for the term of the agreement, he will continue to
receive certain employee benefits, and all unvested stock options held will
continue to vest for a period of 12 months. If Mr. Yemenidjian seeks to
terminate the agreement for good cause (as defined), he must give the Company
30 days notice to cure the breach. If such breach is not cured (and the
Company does not invoke its right to arbitration), or if Mr. Yemenidjian
terminates without cause upon 30 days notice, then termination will result and
Mr. Yemenidjian shall be entitled to receive so much of the stock from the
Company's Nonqualified Stock Option Plan as had been vested but unexercised as
of the date of termination. Mr. Yemenidjian was granted options to purchase
125,000 shares of Common Stock on January 7, 1991; 25,000 shares on February
5, 1993; and 400,000 shares on December 5, 1995. The granted options totaling
125,000 and 25,000 shares vest 20% in each of the third, fourth and fifth
years, and 40% in the sixth year from the date of the grants, while the
400,000 share grant vests 20% on April 1, 1997; April 1, 1998; April 1, 1999;
April 1, 2000; and April 1, 2001. If there is a Change in Control (as defined)
of the Company, all unvested stock options become fully vested. If the Change
in Control results from an exchange of outstanding Common Stock as a result of
which the Common Stock of the Company is no longer publicly held, then options
held by Mr. Yemenidjian to purchase Common Stock of the Company shall be
exercisable at the time or times they would otherwise have been exercisable
for the consideration (cash, stock or otherwise) which the holders of the
Company's Common Stock received in such exchange.
James Murren, Executive Vice President and Chief Financial Officer of the
Company, has a 4-year employment agreement with the Company which commenced
January 16, 1998, pursuant to which he received a signing bonus of $30,000,
and receives an annual salary of $375,000 and which contains a covenant not to
compete. The agreement is terminable by either party. Pursuant to the
agreement, the Company may terminate the agreement for good cause (as
defined). In such event, Mr. Murren shall be entitled to receive so much of
the stock from the Company's Nonqualified Stock Option Plan as had been vested
but unexercised as of the date of termination. Also, pursuant to the
agreement, if the Company terminates the agreement for any or no cause, Mr.
Murren's salary will continue for the term of the agreement, he will continue
to receive certain employee benefits and all unvested stock options held will
continue to vest for a period of 12 months. If Mr. Murren seeks to terminate
the agreement for good cause (as defined), he must give the Company 30 days
notice to cure the breach. If such breach is not cured (and the Company does
not invoke its right to arbitration), or if Mr. Murren terminates without
cause upon 30 days notice, then termination will result and Mr. Murren shall
be entitled to receive so much of the stock from the Company's Nonqualified
Stock Option Plan as had been vested but unexercised as of the date of
termination. Mr. Murren was granted options to purchase 475,000 shares of
Common Stock on January 16, 1998, which vest 20% on each of the first four
anniversary dates of the grant, with full vesting on the fifth anniversary
date of the grant. If there is a Change in Control of the Company (as
defined), all unvested stock options become fully vested. If the Change in
Control results from an exchange of outstanding Common Stock as a result of
which the Common Stock of the Company is no longer publicly held, then options
held by Mr. Murren to purchase Common Stock of the Company shall be
exercisable at the time or times they would otherwise have been exercisable
for the consideration (cash, stock or otherwise) which the holders of the
Company's Common Stock received in such exchange.
16
<PAGE>
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. Benninger and Yemenidjian
and two senior executives who are no longer employed by the Company. 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, 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. Benninger and Yemenidjian, on each
of February 1, 1996, 1997, 1998, cash amounts equal to 10,000 and 5,000,
respectively, and on February 1, 1999, cash amounts equal to 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, February 1997 and February 1998.
Edward J. Jenkins, Vice President of the Company, has an employment
agreement, pursuant to which he received an annual salary of $150,000 and
which is terminable upon 30 days notice by either party. If there is a Change
in Control of the Company, all unvested stock options held by Mr. Jenkins
become fully vested.
Christensen, Miller, Fink, Jacobs, Glaser, Weil, & 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 rendered relate to litigation, sales of securities, financing
transactions, acquisitions and dispositions of certain assets and operations,
tax matters and other business transactions, contracts and agreements.
During 1995, 1996, and 1997, 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.
On February 28, 1997, the Compensation Committee adopted a stock option
grant program pursuant to the Nonqualified Stock Option Plan, which was
subsequently approved by stockholders, whereby members of the Company's Board
of Directors who are not full-time employees of the Company would receive an
initial grant of 5,000 stock options, and subsequent yearly grants of 1,000
stock options during their respective terms as directors.
During 1997, the Company contributed $7,000,000 to New York-New York Hotel &
Casino, LLC ("NYNY"), its 50% joint venture with Primadonna Resorts, Inc., as
its share of capital contribution to the hotel/casino, and received
$15,160,000 in distributions from NYNY to pay taxes on its allocated share of
income.
For the twelve months ended December 31, 1997, the Company and its
subsidiaries rented aircraft from Tracinda for various business purposes. The
aggregate amount of rental payments were approximately $539,000, and the rent
payments were at rates which management believes are generally below those
offered by third parties. The Company and Tracinda have entered into various
other transactions and arrangements which, individually and in the aggregate,
are not material.
The Company, through its wholly owned subsidiary MGM Grand Hotel, Inc., has
an agreement with NYNY to lease space in the New York-New York Hotel & Casino
to operate a race book and
17
<PAGE>
sports pool. The terms of the lease are for ten years from the commencement
date of January 3, 1997, with an option for an additional term of ten years.
MGM Grand Hotel, Inc. is obligated to pay to NYNY a minimum annual rent of
$200,000 versus a percentage rent based upon gross revenue, as defined by the
Nevada Gaming Commission and Nevada State Gaming Control Board. The percentage
rent is based on a graduated scale of gross revenue at percentages ranging
from 12% to 15%. New York-New York Hotel & Casino commenced operations on
January 3, 1997. During 1997, approximately $496,000 was paid under this
agreement. Additionally, MGM Grand Hotel, Inc. provided various other hotel
goods and services for which NYNY paid approximately $226,000. The Company
also has an agreement with NYNY to provide exclusive floral services through
its wholly owned subsidiary MGM Grand Merchandising, Inc., at rates generally
comparable to those offered by third parties. Payments made by NYNY under the
floral service contract during 1997 were approximately $127,000. The Company
and NYNY have entered into various other transactions and arrangements which,
individually and in the aggregate, are not material.
In conjunction with the Company's 50% interest in the MGM Grand-Bally's
Monorail Limited Liability Company, the Company, through its wholly owned
subsidiary MGM Grand Hotel, Inc., contributed approximately $1,489,000 to the
joint venture as part of its operating contribution during 1997. The Company
made capital contributions of approximately $27,000 to the MGM Grand-Bally's
Monorail Limited Liability Company during 1997.
Pursuant to an agreement dated December 23, 1996 between MGM Grand Hotel,
Inc. and MGM/UA Home Entertainment, Inc. ("MGM/UA"), a wholly owned subsidiary
of Metro-Goldwyn-Mayer Inc., ("MGM Inc.") a California based motion picture
studio in which Tracinda has an approximate 65% ownership interest, MGM Grand
Hotel, Inc. utilized key art and still photographs from certain MGM Inc. and
United Artists Corporation motion pictures for the period commencing on
December 27, 1996 and ending on July 1, 1997, which was subsequently extended
to December 31, 1997. In exchange, MGM Grand Hotel, Inc. agreed to promote
MGM/UA motion picture video cassettes for availability in its retail venues.
During 1997, MGM Grand Hotel, Inc. provided various goods and services for
which MGM Inc. paid approximately $462,000, and MGM Grand Merchandising, Inc.
purchased merchandise from MGM Inc. and MGM/UA for sale in its retail outlets
in the approximate amount of $299,000.
Pursuant to a License Agreement between a predecessor in interest to the
Company and Metro-Goldwyn-Mayer Film Co. dated February 29, 1980, the Company
has an exclusive royalty-free license in perpetuity to use certain trademarks,
tradenames and logos in and in connection with the Company's hotel/gaming
business and other businesses, excluding the film entertainment business.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Alex Yemenidjian, President and Chief Operating Officer of the Company, has
served on the Board of Directors and Compensation Committee of MGM Inc. since
November 1997. Frank Mancuso, Chairman of the Board and Chief Executive
Officer of MGM Inc., has served on the Board of the Company since December
1997. MGM Inc. is a California based motion picture studio in which Tracinda
has an approximate 65% ownership interest.
18
<PAGE>
APPROVAL OF STOCK OPTION PLANS
PROPOSAL NO. 2
In December 1997, the Board of Directors adopted the 1997 Nonqualified Plan
and the 1997 Incentive Plan (collectively, the "Plans"), which provide for the
grant of options for an aggregate of up to 1,500,000 shares of Common Stock.
Shares delivered or to be delivered pursuant to grants under one of the Plans
are to be deducted from shares otherwise available for grant under the other
Plan. The purpose of the Plans is to provide additional incentive for officers
and key employees of the Company and its subsidiaries to invest in the
Company's Common Stock and thereby increase their proprietary interest in the
Company, to encourage such officers and employees to remain in the employ of
the Company or its subsidiaries and to increase their personal interest in the
continued success and progress of the Company. The Company's directors believe
that the Company's long-term
growth is dependent upon obtaining the best possible management and believe
the Plans will assist the Company in attracting and retaining key personnel.
Approval and ratification of the Plans requires the affirmative vote of the
holders of a majority of the shares of Common Stock present in person or by
proxy and voted at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THIS PROPOSAL.
The Nonqualified Plan and the Incentive Plan are attached hereto as Exhibits
A and B, respectively. Some of the more important features of the Plans are
summarized below, but the summaries are qualified in their entirety by express
reference to the terms of the Plans attached hereto.
NONQUALIFIED STOCK OPTION PLAN
Administration. The Nonqualified Plan will be administered by a committee
whose members are appointed by the Board of Directors (the "Committee"). The
Committee's members will be eligible to participate in the Nonqualified Plan.
The Committee will designate the participants, the number of options to be
granted and the time or times when the options will become vested.
Eligible Employees. All employees of the Company and its subsidiaries as
defined in Form S-8 under the Securities Act of 1933, as amended.
Option Price. The price at which shares may be purchased upon exercise of an
option must be at least equal to the fair market value per share at the time
the option is granted.
Maximum Number of Shares; Changes in Corporate Structure. Subject to
adjustment as hereinafter provided, no more than 1,500,000 shares of Common
Stock may be issued under the Nonqualified Plan. In the event of any change in
the Company's Common Stock by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or any similar change affecting the Common Stock, such adjustment
shall be made in the number of shares subject to the Nonqualified Plan, and
the number and option price of shares subject to options granted under the
Nonqualified Plan as the Committee may deem appropriate.
Exercise of Options. Options will be exercisable at such time or times and
with respect to such number of shares as shall be fixed by the Committee. When
exercising options, optionees may pay the exercise price either in cash or in
shares of Company Common Stock or any combination thereof.
Termination of Options. If an optionee's employment terminates, the option
shall be exercisable for three months as to those shares to which the right to
exercise had vested prior to the date of termination of employment. If the
employment terminated (i) due to the death of the participant, the
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period in which the exercisable portion of the option may be exercised will be
one year after such death or (ii) for any other cause, such exercise period
will be three months from such termination. If the participant dies during
such three months, the exercise period will be one year after such death. The
Committee may, in its sole discretion, vary the foregoing provisions with
respect to a particular optionee or particular nonqualified stock option to
make the termination provisions applicable to such optionee more favorable to
such optionee so long as such variation does not extend the expiration date of
such nonqualified stock option.
Amendment of Plan. The Board of Directors of the Company may amend, suspend,
or discontinue the Nonqualified Plan, but may not (a) increase the total
number of shares for which options may be granted without the approval of the
shareholders of the Company, (b) decrease the minimum option price, (c) extend
the maximum option period, or (d) make any material change in the eligible
employees as defined in the Nonqualified Plan.
Federal Income Tax Consequences. Holders of nonqualified options will
generally be subject to federal income tax by reason of option exercise on the
difference between the fair market value of the shares at the time of exercise
and the option price. Upon a subsequent sale of the stock, the holder will
recognize capital gain (or loss) in the amount by which the sale price exceeds
(or is less than) the adjusted basis of the stock. Such gain (or loss) will be
mid-term gain (or loss) if the stock is held for more than one year from the
date of exercise, and will be long-term gain (or loss) if the stock is held
for more than 18 months. The Company generally will be entitled to a federal
income tax deduction at the time of the exercise of nonqualified stock options
equal to the difference between the fair market value of the shares at the
time of exercise and the option price.
INCENTIVE STOCK OPTION PLAN
Most features of the Incentive Plan are similar to the terms of the
Nonqualified Plan, including administration, eligible employees, option price,
maximum number of shares, changes in corporate structure, exercise,
termination of options and amendments (see "Approval of Stock Option Plans--
Nonqualified Stock Option Plan"). The only significant differences between the
Plans are described below.
If any options are granted to a "10% owner" under the Incentive Plan, the
exercise price must be at least 100% of the fair market value of the
underlying Common Stock at the time of grant and any such options shall expire
not later than five years from the date of grant. In addition, the aggregate
market value of the Common Stock with respect to which incentive stock options
are exercisable by any optionee during any calendar year may not exceed
$100,000, and the Committee may not extend the termination of options granted
under the Incentive Plan when the optionee ceases to be an employee of the
Company or any parent or subsidiary of the Company. The Incentive Plan also
provides that if an optionee disposes of shares of Common Stock received upon
exercise of an incentive stock option within two years from the date of grant
of such incentive stock option or within one year of the exercise of such
incentive stock option, the optionee must notify the Company of such
disposition.
Under the Incentive Plan, no income will be recognized by holders of
incentive stock options either at the time of grant or at the time of exercise
of an option. However, the difference between the fair market value of the
stock at the time of exercise and the option price is a tax preference item
which, depending on the taxpayer's other income, may result in imposition of
the alternative minimum tax at the time of exercise. Upon the sale of the
stock acquired by such a holder who has held the stock for at least (i) two
years after the date on which the option was granted and (ii) one year after
the date on which the stock was transferred to the optionee, the holder will
recognize capital gain (or loss) in the amount by which the sales price
exceeds (or is less than) the adjusted basis of stock. Such gain (or loss)
will be mid-term gain (or loss) if the stock is held for more than one year
from the date of
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exercise, and will be long-term gain (or loss) if the stock is held for more
than 18 months from the date of exercise. No deduction will be allowed to the
Company as a result of either the grant or the exercise of an incentive stock
option in accordance with the foregoing. If the stock is sold prior to the end
of the holding period discussed above, the holder will recognize ordinary
income at the time of disposition equal to the difference between the fair
market value of the stock at the time of exercise and the option price. The
Company will be allowed a corresponding deduction.
SELECTION OF AUDITORS
PROPOSAL NO. 3
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, 1998. This firm acted as
auditors for the Company during the year ended December 31, 1997.
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 present at the 1999 Annual Meeting
of Stockholders must be received by the Company on or before November 30, 1998
in order to be included in the form of proxy and proxy statement to be issued
by the Board of Directors at 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 to them.
The Company's Annual Report to Stockholders for the year ended December 31,
1997 accompanies this Proxy Statement.
By Order of the Board of Directors,
/s/ Alex Yemenidjian /s/ J. Terrence Lanni
Alex Yemenidjian J. Terrence Lanni
President and Chief Operating Chairman and Chief Executive Officer
Officer Chairman and Chief Executive Officer
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EXHIBIT A
MGM GRAND, INC. 1997 NONQUALIFIED STOCK OPTION PLAN
1. Purpose. The purpose of the MGM Grand, Inc. 1997 Nonqualified Stock
Option Plan is to provide a means whereby MGM Grand, Inc. may attract and
retain persons of ability and motivate such persons to exert their best
efforts on behalf of the Company and its Subsidiaries.
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 from
time to time. Reference to any section of the Code shall include any provision
successor thereto.
(c) "Committee" shall mean the administrative committee appointed pursuant
to Section 3.
(d) "Company" shall mean MGM Grand, Inc., a Delaware corporation.
(e) "Employee" shall mean an employee of the Company or any of its
Subsidiaries, as defined in Instruction 1(a) to Form S-8 under the Securities
Act of 1933, as amended.
(f) "Nonqualified Option" shall mean an option to purchase shares of Stock,
subject to the terms and conditions described in the Nonqualified Plan, which
is not an incentive stock option within the meaning of Code Section 422.
(g) "Nonqualifed Plan" shall mean the MGM Grand, Inc. 1997 Nonqualified
Stock Option Plan.
(h) "Participant" shall mean an Employee of the Company or any Subsidiary
who is designated to receive Nonqualified Options pursuant to Section 3.
(i) "Stock" shall mean the Company's $.01 par value common stock.
(j) "Subsidiary" shall mean a subsidiary corporation as defined in Code
Section 424(f) or any partnership or joint venture in which the Company owns a
50 percent or greater ownership interest.
3. Administration. The Nonqualified Plan shall be administered by the
Committee, consisting of at least two members, who shall be members of the
Board, appointed by and holding office as Committee members at the pleasure of
the Board. Subject to the provisions of the Nonqualified 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 Subsidiary who shall
be Participants in the Nonqualified 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 ten years from the effective date of the Nonqualified 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 all purposes of the Nonqualified 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 (S)20.2031-2,
relating to the valuation of stocks and bonds for purposes of Code (S)2031.
The Committee may interpret the Nonqualified Plan, prescribe, amend, and
rescind any rules and regulations necessary or appropriate for the
administration of the Nonqualified Plan, and make such
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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 Subsidiary as a period of service of such Participant
with the Company or a Subsidiary, as the case may be, for purposes of accrual
of such Participant's 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 Nonqualified Plan or the
Nonqualified Options.
4. Benefits Available Under the Nonqualified Plan. The benefits provided by
the Nonqualified Plan to Participants are Nonqualified Options. Nonqualified
Options may be granted by the Company from time to time for all Participants
to acquire up to an aggregate of 1,500,000 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. 1997 Incentive
Stock Option Plan. However, no Participant in the Nonqualified Plan shall be
entitled to receive options to purchase more than 1,000,000 shares in any
calendar year. The shares to be delivered upon exercise of Nonqualified
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 purchase in the open market. If any Nonqualified
Option terminates, expires or is canceled 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 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 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, the Nonqualified Option shall be exercisable with respect to
at least 20 percent of the shares subject thereto no later than the first
anniversary of the grant of the Nonqualified Option, 40 percent of such shares
no later than the second such anniversary, 60 percent of such shares no later
than the third such anniversary, 80 percent of such shares no later than the
fourth such anniversary and 100 percent of such shares no later than the fifth
such anniversary; 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.
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(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.
(e) Exercise in the Event of Death or Termination of Employment. If a
Participant holding Nonqualified Options shall terminate employment by the
Company and its Subsidiaries because of death, or shall die within three
months of termination of employment by the Company and its 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 determined
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,
Nonqualified Options held by such Participant may be exercised, to the extent
the Participant 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
determined pursuant to Paragraph 5(a). Notwithstanding the foregoing, the
Committee may, in its sole discretion, vary the foregoing provisions with
respect to a particular Participant or particular Nonqualified Options granted
to such Participant to make the termination provisions applicable to such
Participant more favorable to such Participant so long as such variation does
not extend the expiration date of such Nonqualified Options. Any such
variation shall be set forth in the applicable Agreement or amendment thereto.
(f) Nontransferability. No Nonqualified Option under the Nonqualified Plan
shall be transferable other than by will or by the laws of descent and
distritbution. 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 Nonqualified Plan, the number and class
of shares subject to outstanding Agreements, the Option Price per share
thereof, and any other terms of the Nonqualified 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 Stockholder. No Participant shall have any rights as a
stockholder with respect to any shares subject to Nonqualified Options prior
to the date of issuance to such Participant of a certificate or certificates
for such shares.
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(j) No Right to Continued Employment. Neither the Nonqualified Plan nor any
Nonqualified Options granted under the Nonqualified Plan shall confer upon any
employee any right with respect to continuance of employment by the Company or
any Subsidiary, nor shall they interfere in any way with the right of the
Company or any Subsidiary for which a Participant performs services to
terminate such 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 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 Nonqualified 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 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 stockholders 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 Nonqualified Plan, the
grant and exercise of Nonqualified Options under the Nonqualified 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) 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 Nonqualified Plan; provided, however, that, subject
to the provisions of Paragraph 5(h), no action of the Board, or any committee
thereof, may (a) increase the number of shares reserved for options pursuant
to Section 4 without approval of the stockholders 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 Nonqualified Plan.
8. Compliance with Rule 16(b)(3) under the SecuritiesExchange Act of
1934. (a) The Nonqualified Plan is intended to comply with all applicable
conditions of Rule 16(b)(3) under the Securities Exchange Act of 1934, as
amended, or any successor rule; (b) all transactions involving insider
Participants are subject to such conditions, regardless of whether the
conditions are expressly set forth in the Plan; and (c) any provision of the
Nonqualified Plan or action by the Committee that is contrary to a condition
of Rule 16(b)(3) shall not apply to insider-participants.
9. Effective Date. The effective date of the Nonqualified Plan shall be the
earlier of the date the Nonqualified Plan is adopted by the Board or the date
it is approved by the stockholders of the Company.
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EXHIBIT B
MGM GRAND, INC. 1997 INCENTIVE STOCK OPTION PLAN
1. Purpose. The purpose of the MGM Grand, Inc. 1997 Incentive Stock Option
Plan is to provide a means whereby MGM Grand, Inc. may attract and retain
persons of ability and motivate such persons to exert their best efforts on
behalf of the Company and its Subsidiaries.
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 from time to time. Reference to any section of the Code shall
include any provision successor thereto.
(c) "Committee" shall mean the administrative committee appointed pursuant
to Section 3.
(d) "Company" shall mean MGM Grand, Inc., a Delaware corporation.
(e) "Employee" shall mean an employee as defined in accordance with Treasury
Regulation (S)1.421-7(h)(1).
(f) "Incentive Option" shall mean an option to purchase shares of Stock,
subject to the terms and conditions described in the Incentive Plan, which is
an incentive stock option within the meaning of Code Section 422.
(g) "Incentive Plan" shall mean the MGM Grand, Inc. 1997 Incentive Stock
Option Plan.
(h)"Participant" shall mean an employee of the Company or any Subsidiary who
is designated to receive Incentive Options pursuant to Section 3.
(i) "Stock" shall mean the Company's $.01 par value common stock.
(j)"Subsidiary" shall mean a subsidiary corporation as defined in Code
Section 424(f).
3. Administration. The Incentive Plan shall be administered by the
Committee, consisting of at least two members, who shall be members of the
Board, appointed by and holding office as Committee members at the pleasure of
the Board. Subject to the provisions of the Incentive 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 Subsidiary who shall
be Participants in the Incentive Plan and the number of shares of Stock 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 Incentive 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 the Incentive 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 (S)20.2031-2,
relating to the valuation of stocks and bonds for purposes of Code (S)2031.
The Committee may interpret the Incentive Plan, prescribe, amend, and
rescind any rules and regulations necessary or appropriate for the
administration of the Incentive 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
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any period during which a Participant is on military or on an approved leave
of absence from the Company or a Subsidiary as a period of service of such
Participant with the Company or a Subsidiary, as the case may be, for purposes
of accrual of such Participant's 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 Incentive Plan or the
Incentive Options.
4. Benefits Available Under the Incentive Plan. The benefits provided by the
Incentive Plan to Participants are Incentive Options. Incentive Options may be
granted by the Company from time to time for all Participants to acquire up to
an aggregate of 1,500,000 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. 1997 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 canceled 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.
(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(e). 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, the
Incentive Option shall be exercisable with respect to at least 20 percent of
the shares subject thereto no later than the first anniversary of the grant of
the Incentive Option, 40 percent of such shares no later than the second such
anniversary, 60 percent of such shares no later than the third such
anniversary, 80 percent of such shares no later than the fourth such
anniversary, and 100 percent of such shares no later than the fifth such
anniversary; 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.
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(d) Ten-percent Owners. Notwithstanding the provisions of Paragraphs 5(b)
and 5(c), the following terms and conditions shall apply to Incentive Options
granted to a "ten-percent owner." For this purpose, a "ten-percent owner"
shall mean a Participant who, at the time the Incentive Option is granted,
owns stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or of any Subsidiary. With respect to a
ten-percent owner: (1) the price at which shares of stock may be purchased
under the Incentive Option shall not be less than 110 percent of the fair
market value thereof, said fair market value determined in the manner
described in Paragraph 5(b); and (2) the period during which the Incentive
Option may be exercised shall expire not later than five years from the date
the Incentive Option is granted.
(e) 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.
(f) Limitation on the Value of Incentive Options. The aggregate fair market
value (determined at the time an option is granted) of the Stock with respect
to which Incentive Options described in Code Section 422(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.
(g) Exercise in the Event of Death or Termination of Employment. If a
Participant holding Incentive Options shall terminate employment by the
Company and its Subsidiaries because of death, or shall die within three
months of termination of employment by the Company and its 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 of
employment, but in no event later than the expiration date determined 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, Incentive
Options held by such Participant may be exercised, to the extent the
Participant 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
determined pursuant to Paragraph 5(a).
(h) Nontransferability. No Incentive Option granted under the Incentive Plan
shall be transferable other than by will or by the laws of descent and
distribution. No interest of any Participant under the Incentive 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.
(i) 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(g))
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.
(j) 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
B-3
<PAGE>
exchange of shares, or of any similar change affecting the stock, the number
and class of shares which thereafter may be acquired under the Incentive Plan,
the number and class of shares subject to outstanding Agreements, the Option
Price per share thereof, and any other terms of the Incentive 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.
(k) No Rights as Stockholder. No Participant shall have any rights as a
stockholder with respect to any shares subject to Incentive Options prior to
the date of issuance to the Participant of a certificate or certificates for
such shares.
(l) No Rights to Continued Employment. Neither the Incentive Plan nor any
Incentive Options granted under the Incentive 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 a Participant performs
services to terminate such employment at any time.
(m) 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 Subsidiary as a result of the exercise of Nonqualified Options is
available for payment.
(n) Certain Corporate Transactions. Each Agreement shall provide that
nothing in the Incentive 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 stockholders 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 Incentive Plan, the grant
and exercise of Incentive Options under the Incentive Plan, and the obligation
of the Company to transfer shares under these Incentive 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 424(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.
B-4
<PAGE>
8. Amendment and Discontinuance. The Board may from time to time amend,
suspend or discontinue the Incentive Plan; provided, however, that, subject to
the provisions of Paragraph 5(i), no action of the Board, or any committee
thereof, may (a) increase the number of shares reserved for options pursuant
to Section 4 without approval of the stockholders 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 Incentive Plan.
9. Compliance with Rule 16(b)(3) of the Securities Exchange Act of 1934. (a)
The Incentive Plan is intended to comply with all applicable conditions of
Rule 16(b)(3) under the Securities Exchange Act of 1934, as amended, or any
successor rule; (b) all transactions involving insider Participants are
subject to such conditions, regardless of whether the conditions are expressly
set forth in the Incentive Plan; and (c) any provision of the Incentive Plan
or action by the Committee that is contrary to a condition of Rule 16(b)(3)
shall not apply to insider-participants.
10. Effective Date. The effective date of the Incentive Plan shall be the
earlier of the date the Incentive Plan is adopted by the Board or the date it
is approved by the stockholders of the Company.
B-5
<PAGE>
Please mark [X]
your vote as
indicated in
this example
This Proxy will be voted as specified herein; if no specification is made, this
Proxy will be voted for Items 1, 2 and 3.
1. Election of Directors
FOR all nominees WITHHOLD
named (except AUTHORITY
as marked to the for all nominees
contrary) named
[_] [_]
Names of Nominees: James D. Aljian, Fred Benninger, Glenn A. Cramer, Terry
Christensen, Willie D. Davis, Alexander M. Haig, Jr., Kirk Kerkorian, J.
Terrence Lanni, Frank G. Mancuso, James J. Murren, Walter M. Sharp, Alex
Yemenidjian, Jerome B. York.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the following line.)
______________________________________________________________________________
2. Approval of the Company's Stock Option Plans.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Ratification of the appointment of independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
I plan to attend meeting [_]
___ Dated:_______________________, 1998
|
___________________________________
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Admission Ticket
Annual Meeting
of
MGM GRAND, INC.
Tuesday May 5, 1998
10:00 a.m.
MGM GRAND HOTEL AND CASINO
3799 LAS VEGAS BLVD. SOUTH
LAS VEGAS, NEVADA
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Agenda +
+ ------ +
+ +
+ 1. To elect a Board of Directors. +
+ 2. To consider and act upon a proposal to ratify and approve the +
+ adoption of the Company's stock option plans. +
+ 3. To consider and act upon the ratification of the selection of +
+ independent auditors. +
+ 4. To transact such other business as may properly come before the +
+ meeting or any adjournments thereof. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
MGM GRAND, INC.
Proxy for Annual Meeting of Stockholders
May 5, 1998
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints TERRY CHRISTENSEN, WILLIE D. DAVIS 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 South, Las Vegas, Nevada on May 5, 1998, 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 and 3.
(Continued and to be SIGNED on the other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
MGM GRAND, INC.
Annual Meeting of Stockholders
Tuesday May 5, 1998
10:00 a.m.
MGM Grand Hotel and Casino
3799 Las Vegas Blvd. South
Las Vegas, Nevada
ADMISSION TICKET
This ticket must be presented at the door for entrance to the meeting.
