Tender-Offer Statement — Issuer Tender Offer — Schedule 13E-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13E4 Tender-Offer Statement -- Issuer Tender Offer 5 29K
2: EX-99.(A)(1) Form of Offer to Purchase Dated June 17, 1999 36 174K
3: EX-99.(A)(2) Form of Letter of Transmittal 12 55K
4: EX-99.(A)(3) Notice of Guaranteed Delivery 2 16K
5: EX-99.(A)(4) Form of Letter to Brokers 2 14K
6: EX-99.(A)(5) Form of Letter to Clients 2 13K
7: EX-99.(A)(6) Press Release by Mgm Grand Dated June 10, 1999 2 13K
8: EX-99.(A)(7) Form of Summary Advertisement Dated June 17, 3± 18K
1999
9: EX-99.(A)(8) Substitute Form W-9 Tax Guidelines 4± 16K
10: EX-99.(A)(9) Form of Memorandum Dated June 17, 1999 9 34K
11: EX-99.(G)(1) Pgs 29-49 of Ex. 13 to Mgm Grand's AR on Form 21 128K
10-K
12: EX-99.(G)(2) Pgs 2-14 of Mgm Grand's Quarterly Report 13 67K
13: EX-99.(G)(3) Consent of Independent Public Accountants 1 7K
EX-99.(A)(1) — Form of Offer to Purchase Dated June 17, 1999
Exhibit Table of Contents
EXHIBIT (a)(1)
OFFER TO PURCHASE FOR CASH
by
MGM GRAND, INC.
UP TO 6,000,000 SHARES OF ITS COMMON STOCK AT A PURCHASE
PRICE OF $50.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JULY 23, 1999
UNLESS THE OFFER IS EXTENDED.
MGM Grand, Inc., a Delaware corporation, invites its stockholders to tender
shares of its common stock, par value $.01 per share, to the company at a
price of $50.00 per share in cash, upon the terms and subject to the
conditions set forth in this offer to purchase, the related letter of
transmittal and the option election form and related instructions, which
together constitute the offer. As part of the offer, MGM Grand is permitting
tenders of shares in connection with the conditional exercise by holders of
exercisable stock options granted under our stock option plans having exercise
prices below $50.00. We will pay $50.00 per share, net to the seller in cash,
or, in the case of option shares, $50.00 less the exercise price and
applicable withholding taxes, for up to 6,000,000 shares validly tendered and
not withdrawn, upon the terms and subject to the conditions of the offer,
including the proration terms. MGM Grand reserves the right, in its sole
discretion, to purchase more than 6,000,000 shares pursuant to the offer.
The offer is not conditioned on any minimum number of shares being tendered.
The offer is, however, subject to certain other conditions. See Section 6.
The common stock is listed and principally traded on the New York Stock
Exchange, Inc. under the symbol "MGG." On June 10, 1999, the last full trading
day on the NYSE prior to the announcement by the company of the offer,
including the price and number of shares sought, the closing per share sales
price as reported on the NYSE Composite Tape was $43.125. Stockholders are
urged to obtain current market quotations for the shares. See Section 7.
The board of directors of MGM Grand has approved the offer. However,
stockholders must make their own decisions whether to tender shares and, if
so, how many shares to tender. Neither MGM Grand nor its board of directors
makes any recommendation as to whether to tender or refrain from tendering
shares. MGM Grand has been advised that while most of its directors and senior
executive officers do not intend to tender shares in the offer, some may
tender shares they own as well as shares subject to exercisable options held
by them. MGM Grand has been further advised that Kirk Kerkorian and Tracinda
Corporation, a Nevada corporation wholly owned by Mr. Kerkorian, its principal
stockholders, do not intend to tender any shares. However, Mr. Kerkorian has
requested MGM Grand to register for sale by him up to 3,894,406 shares, which
is the number of shares he owns directly and which is the approximate number
of shares he and Tracinda could have sold in the offer had they elected to
participate assuming full participation by all stockholders. Any such shares
will only be sold by means of a prospectus after completion of the offer in
the open market or through privately negotiated transactions as market
conditions warrant and as he may determine.
THE DEALER MANAGER FOR THE OFFER IS:
Donaldson, Lufkin & Jenrette
The Date of this Offer to Purchase is June 17, 1999.
TABLE OF CONTENTS
[Download Table]
Section Page
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Summary................................................................... 4
Introduction.............................................................. 5
The Offer................................................................. 6
1. Number of Shares; Proration........................................... 6
2. Tenders by Owners of Fewer than 100 Shares............................ 8
3. Procedure for Tendering Shares........................................ 8
4. Withdrawal Rights..................................................... 13
5. Purchase of Shares and Payment of Purchase Price...................... 14
6. Certain Conditions of the Offer....................................... 15
7. Price Range of Shares................................................. 17
8. Background and Purpose of the Offer; Certain Effects of the Offer..... 17
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares..................................... 18
10. Source and Amount of Funds............................................ 19
11. Certain Information about MGM Grand................................... 20
12. Effect of the Offer on the Market for Shares; Registration under the
Securities Exchange Act................................................ 27
13. Certain Legal Matters................................................. 28
14. Certain United States Federal Income Tax Consequences................. 28
15. Extension of the Offer; Termination; Amendments....................... 32
16. Fees and Expenses..................................................... 33
17. Miscellaneous......................................................... 34
SCHEDULE I--Certain Transactions Involving Shares......................... 35
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IMPORTANT
General
Except as described below, any MGM Grand stockholder desiring to accept the
offer should either:
(1) complete and sign the letter of transmittal or a facsimile thereof in
accordance with the instructions in the letter of transmittal, mail or deliver
it with any required signature guarantee and any other required documents to
ChaseMellon Shareholder Services, LLC as depositary, and either mail or
deliver the stock certificates for such shares to the depositary, with all
such other documents, or follow the procedure for book-entry delivery set
forth in Section 3, or
(2) request the stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for him or her.
An MGM Grand stockholder having shares registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact that
broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such shares. Stockholders who desire to tender
shares and whose certificates for such shares are not immediately available or
who cannot comply with the procedure for book-entry transfer on a timely basis
or whose other required documentation cannot be delivered to the depositary,
in any case, by the expiration of the offer should tender such shares by
following the procedures for guaranteed delivery set forth in Section 3. For
shares to be properly tendered, the depositary must timely receive a properly
completed letter of transmittal.
If you have any questions or requests for assistance or for additional
copies of this offer to purchase, the letter of transmittal or the notice of
guaranteed delivery, please direct them to ChaseMellon Shareholder Services,
LLC, as information agent, at its address and telephone number set forth on
the back cover of this offer to purchase.
Special Instructions for Holders of Exercisable Options
Holders of exercisable options who wish to participate in the offer by
conditionally tendering the options must follow the instructions and
procedures set forth in the documents described below. These documents are
also part of the terms of the offer.
. Holders of exercisable options should read this offer to purchase, the
related letter of transmittal and the option election form and related
instructions, as they contain the terms of the offer. The special
instructions in the documents referred to below supplement the
information contained in this offer to purchase and the related letter
of transmittal. Holders of exercisable options should also see "Certain
United States Federal Income Tax Consequences--Tax Considerations for
Holders of Option Shares" in Section 14 for information about tax
considerations and Section 5 for special payment procedures that apply
to such holders if they participate in the offer.
. Holders of exercisable options who wish to tender option shares in the
offer should review the information and must follow the instructions
contained in the materials printed on green paper.
We have not authorized any person to make any recommendation on behalf of us
as to whether stockholders should tender or refrain from tendering shares
pursuant to the offer. We have not authorized any person to give any
information or to make any representation in connection with the offer on our
behalf other than those contained in this offer to purchase or in the letter
of transmittal. Do not rely on any such recommendation or any such information
or representations, if given or made, as having been authorized by us.
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SUMMARY
This general summary is provided for your convenience and is qualified in
its entirety by reference to the full text and more specific details of this
offer to purchase.
[Download Table]
Number of Shares to be Purchased 6,000,000 shares, including option shares.
Purchase Price $50.00 net to the seller in cash or, in the
case of option shares, $50.00 less the per
share exercise price and the applicable
withholding tax amount.
How to Tender Shares See Section 3. Call the information agent
(ChaseMellon Shareholder Services, LLC) at
(800) 774-5469 or consult your broker for
assistance.
Brokerage Commissions None.
Stock Transfer Tax None, if payment is made to the registered
holder.
Expiration and Proration Dates Friday, July 23, 1999, at 5:00 p.m., New York
City time, unless extended by us.
Payment Date As soon as practicable after the expiration
date.
Position of the Company Neither we nor our board of directors makes
any recommendation to any stockholder as to
whether to tender or refrain from tendering
shares.
Withdrawal Rights Tendered shares may be withdrawn at any time
until 5:00 p.m., New York City time, on
Friday, July 23, 1999 (unless the offer is
extended by the company) and, unless
previously purchased, at any time after 12:00
midnight, New York City time, on Wednesday,
August 11, 1999. See Section 4.
Odd Lots There will be no proration of shares tendered
by any stockholder owning beneficially fewer
than 100 shares in the aggregate (excluding
shares attributable to individual accounts
under the MGM Grand savings plan but
including shares held in the MGM Grand
purchase plan) as of the close of business on
June 15, 1999 and as of the expiration date,
who tenders all such shares prior to the
expiration date and who checks the "Odd Lots"
box in the letter of transmittal.
Further Developments Call the information agent or consult your
broker.
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To the holders of shares of common stock of
MGM Grand, Inc.:
INTRODUCTION
We invite the stockholders of MGM Grand, Inc., a Delaware corporation, to
tender to the company shares of its common stock, par value $.01 per share, at
a price of $50.00 per share in cash, or, in the case of option shares, $50.00
less the per share exercise price and the applicable withholding tax amount,
upon the terms and subject to the conditions set forth in this offer to
purchase and the related letter of transmittal, which together constitute the
"offer." As part of the offer, we invite tenders of shares subject to
exercisable options in connection with the conditional exercise by holders of
exercisable options granted under our stock option plans having an exercise
price of less than $50.00 per share.
We will pay $50.00, net to the seller in cash, or, in the case of option
shares, $50.00 less the per share exercise price and the applicable
withholding tax amount, for up to 6,000,000 shares validly tendered prior to
the expiration date, as defined in Section 1, and not withdrawn, upon the
terms and subject to the conditions of the offer, including the proration
terms described below. We reserve the right, in our sole discretion, to
purchase more than 6,000,000 shares pursuant to the offer.
If, before the expiration date, more than 6,000,000 shares, or such greater
number of shares as the company may decide to purchase, are validly tendered
and not withdrawn, we will, upon the terms and subject to the conditions of
the offer, purchase shares first from all odd lot owners, that is owners of
fewer than 100 shares of the common stock (excluding shares attributable to
individual accounts under the MGM Grand savings plan but including shares held
in the MGM Grand purchase plan) as of June 15, 1999, who validly tender all
their shares and then on a pro rata basis from all other stockholders who
validly tender shares and do not withdraw them prior to the expiration date.
We will return at our own expense all shares not purchased pursuant to the
offer, including shares not purchased because of proration.
The $50.00 purchase price will be paid net to the tendering stockholder in
cash for all shares purchased, except that holders of exercisable options
granted under our stock option plans will be permitted to tender in connection
with the conditional "cashless" exercises of such options and receive the
difference between $50.00 and the exercise price, less applicable withholding
taxes, for each option share purchased by us. Tendering stockholders will not
be obligated to pay brokerage commissions, solicitation fees or, subject to
instruction 7 of the letter of transmittal, stock transfer taxes on the
company's purchase of shares pursuant to the offer. However, any tendering
stockholder or other payee who fails to complete, sign and return to the
depositary the Substitute Form W-9 that is included with the letter of
transmittal may be subject to required backup federal income tax withholding
of 31% of the gross proceeds payable to such stockholder or other payee
pursuant to the offer. See Section 3.
On June 10, 1999, we announced our intention to make an offer to purchase up
to 6,000,000 shares at $50.00 per share as the second half of our 12,000,000
share repurchase program, with the offer to commence on June 17, 1999. We are
making the offer because we believe:
(1) the shares are significantly undervalued in the public market;
(2) in light of our strong financial position, investing in our shares
represents an attractive use of our capital and an efficient way to
provide value to our stockholders; and
(3) the offer will afford to those stockholders who desire liquidity an
opportunity to sell all or a portion of their shares without the usual
transaction costs associated with open market sales.
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After the offer is completed, we expect to have sufficient cash flow and
access to other sources of capital to fund our operations and capital
projects, including completing the transformation of MGM Grand Las Vegas into
the City of Entertainment and developing our proposed hotel/casino projects in
Detroit, Michigan and Atlantic City, New Jersey.
Stockholders who are participants in our employee stock purchase plan may
instruct ChaseMellon Shareholder Services, LLC, as administrator of the
purchase plan, to tender part or all of the shares credited to a participant's
account in the purchase plan by following the instructions set forth in
"Procedure for Tendering Shares--Employee Stock Purchase Plan" in Section 3.
As of June 15, 1999, there were 62,217,545 shares outstanding, net of
treasury shares, and 5,221,901 shares issuable upon exercise of all
outstanding stock options of which 1,875,001 and 2,240,961 shares are
exercisable as of June 15, 1999 and July 23, 1999, respectively. The 6,000,000
shares that we are offering to purchase represent approximately 10% of the
outstanding shares and approximately 9% assuming the exercise of all
outstanding options. The shares are listed on the New York Stock Exchange,
Inc. under the symbol "MGG." On June 10, 1999, the last full trading day on
the NYSE prior to our announcement of the offer, including the purchase price
and number of shares sought, the closing per share sales price, as reported on
the NYSE composite tape, was $43.125. We urge stockholders to obtain current
quotations on the market price of the shares.
THE OFFER
1. Number of Shares; Proration
Upon the terms and subject to the conditions of the offer, we will accept
for payment 6,000,000 shares or such lesser number of shares as are validly
tendered before the expiration date, and not withdrawn in accordance with
Section 4, at a net cash price of $50.00 per share. Holders of exercisable
options granted under our stock option plans having exercise prices below
$50.00 will be permitted to tender in connection with conditional "cashless"
exercises of such options and will receive the difference between $50.00 and
the exercise price less applicable withholding taxes for each option share
purchased by us. The term "expiration date" means 5:00 p.m., New York City
time, on Friday, July 23, 1999, unless and until we in our sole discretion
extend the period of time during which the offer is open, in which event the
term "expiration date" shall refer to the latest time and date at which the
offer, as so extended by us, is scheduled to expire. See Section 15 for a
description of our right to extend the time during which the offer is open and
to delay, terminate or amend the offer. Subject to Section 2 below, if the
offer is oversubscribed, shares tendered and not withdrawn before the
expiration date will be eligible for proration. The shares and option shares
tendered on or prior to the expiration date are the shares subject to
proration.
We reserve the right, in our sole discretion, to purchase more than
6,000,000 shares pursuant to the offer. See Section 15. In accordance with
applicable regulations of the Securities and Exchange Commission, we may
purchase pursuant to the offer an additional number of shares not to exceed 2%
of the outstanding shares without extending the offer. If
(a)(1) we increase or decrease the price to be paid for shares,
(2) we increase or decrease the fee of Donaldson, Lufkin & Jenrette
Securities Corporation, as dealer manager,
(3) we increase the number of shares being sought and such increase in the
number of shares being sought exceeds 2% of the outstanding shares, or
(4) we decrease the number of shares being sought, and
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(b) the offer is scheduled to expire at any time earlier than the expiration
of a period ending on the tenth business day from, and including, the date
that notice of such increase or decrease is first published, sent or given
as specified in Section 15,
then we will extend the offer until the expiration of such ten business day
period. For purposes of the offer, a "business day" means any day that is not
a Saturday, Sunday or federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
The offer is not conditioned on any minimum number of shares being tendered.
The offer is, however, subject to certain other conditions. See Section 6.
We will pay the $50.00 purchase price, or, in the case of option shares,
$50.00 less the exercise price and the applicable withholding tax amount, for
all shares validly tendered prior to the expiration date and not withdrawn,
upon the terms and subject to the conditions of the offer. We will return, at
our expense, as promptly as practicable following the expiration date all
shares which we do not purchase in the offer, including shares we do not
purchase because of proration and all of the options that are not exercised
because of proration.
If the number of shares validly tendered and not withdrawn prior to the
expiration date is less than or equal to 6,000,000 shares (or such greater
number of shares as we may elect to purchase), we will, upon the terms and
subject to the conditions of the offer, purchase at the purchase price all
shares so tendered.
Priority. Upon the terms and subject to the conditions of the offer, in the
event that prior to the expiration date more than 6,000,000 shares (or such
greater number of shares as we may elect to purchase in the offer) are validly
tendered and not withdrawn, we will purchase such validly tendered shares in
the following order of priority:
(1) all shares validly tendered and not withdrawn prior to the expiration
date by any odd lot owner who:
(a) tenders all shares (excluding shares attributable to individual
accounts under the MGM Grand savings plan but including shares
held in the MGM Grand purchase plan) beneficially owned by such
odd lot owner (partial tenders will not qualify for this
preference); and
(b) completes the box captioned "Odd Lots" on the letter of
transmittal and, if applicable, on the notice of guaranteed
delivery; and
(2) after purchase of all of the foregoing shares, all other shares
validly tendered and not withdrawn prior to the expiration date on a
pro rata basis.
Proration. In the event that proration is required, we will determine the
final proration factor as promptly as practicable after the expiration date.
Proration for each stockholder tendering shares, other than odd lot owners,
shall be based on the ratio of the number of shares tendered by such
stockholder to the total number of shares tendered by all stockholders, other
than odd lot owners. This ratio will be applied to stockholders tendering
shares, other than odd lot owners, to determine the number of shares that we
will purchase from each such stockholder in the offer. Although we do not
expect to be able to announce the final results of such proration until
approximately seven business days after the expiration date, we will announce
preliminary results of proration by press release as promptly as practicable
after the expiration date. Such preliminary information can be obtained from
the information agent and may be available from a stockholder's broker.
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The same proration factor will be separately applied to option shares which
are tendered, provided that we will purchase option shares in the order in
which the holder of such options indicates on the notice of conditional
exercise.
As described in Section 14, the number of shares that we will purchase from
a stockholder may affect the United States federal income tax consequences to
the stockholder of such purchase and therefore may be relevant to a
stockholder's decision whether to tender shares. The letter of transmittal
affords each tendering stockholder the opportunity to designate the order of
priority in which shares tendered are to be purchased in the event of
proration.
We will mail this offer to purchase and the related letter of transmittal to
record holders of shares as of June 15, 1999 and furnish to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on our
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of shares.
2. Tenders by Owners of Fewer Than 100 Shares
Upon the terms and subject to the conditions of the offer, we will accept
for purchase, without proration, all shares validly tendered and not withdrawn
on or prior to the expiration date by or on behalf of odd lot owners, that is
stockholders who beneficially owned as of the close of business on June 15,
1999, and continue to beneficially own as of the expiration date, an aggregate
of fewer than 100 shares, excluding shares attributable to individual accounts
under the MGM Grand savings plan, but including shares held in the MGM Grand
purchase plan. To avoid proration, however, an odd lot owner must validly
tender all such shares that such odd lot owner beneficially owns; partial
tenders will not qualify for this preference. This preference is not available
to partial tenders or to owners of 100 or more shares in the aggregate, even
if such owners have separate stock certificates for fewer than 100 such
shares. Any odd lot owner wishing to tender all such shares beneficially owned
by such stockholder in this offer must complete the box captioned "Odd Lots"
in the letter of transmittal and, if applicable, on the notice of guaranteed
delivery. See Section 3 below. Stockholders owning an aggregate of less than
100 shares whose shares are purchased pursuant to the offer will avoid both
the payment of brokerage commissions and any applicable odd lot discounts
payable on a sale of their shares in transactions on the NYSE.
We also reserve the right, but will not be obligated, to purchase all shares
duly tendered by any stockholder who tendered all shares beneficially owned
and who, as a result of proration, would then beneficially own an aggregate of
fewer than 100 shares. If we exercise this right, we will increase the number
of shares that we are offering to purchase in the offer by the number of
shares we purchase through the exercise of such right.
3. Procedure for Tendering Shares
Proper Tender of Shares. For shares, other than option shares, to be validly
tendered pursuant to the offer:
(1) the certificates for such shares, or confirmation of receipt of such
shares pursuant to the procedures for book-entry transfer set forth
below, together with a properly completed and duly executed letter of
transmittal, or manually signed facsimile thereof, with any required
signature guarantees, and any other documents required by the letter of
transmittal, must be received prior to 5:00 p.m., New York City time,
on the expiration date by the depositary at its address set forth on
the back cover of this offer to purchase; or
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(2) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
Holders of options should not complete the letter of transmittal but should
follow the instructions for tendering shares discussed in the instructions
referred to below. See "--Tenders by Holders of Options." In addition, odd lot
owners who tender all shares must complete the section entitled "Odd Lots" on
the letter of transmittal in order to qualify for the preferential treatment
available to odd lot owners as set forth in Section 2 above.
Tenders by Holders of Exercisable Options. Holders of exercisable options
granted under our stock option plans who wish to participate by conditionally
exercising options and tendering the underlying shares should not complete the
letter of transmittal. They should complete the form discussed in the document
referred to below. In addition, holders of exercisable options who wish to
participate in the offer by conditionally tendering their exercisable options
must follow the instructions and procedures set forth in the documents
described below. These documents are also part of the terms of the offer.
Holders of exercisable options should read this offer to purchase, the
related letter of transmittal and the option election form and related
instructions, as they contain the terms of the offer. Holders of options
should also see "Certain United States Federal Income Tax Consequences--Tax
Considerations for Holders of Options" in Section 14 for information about tax
considerations and Section 5 for special payment procedures that apply to such
holders if they participate in the offer.
Holders of exercisable options who wish to tender option shares in the offer
should review the information and must follow the instructions contained in
the option election form and related instructions printed on green paper. See
Section 5 below "Purchases of Shares and Payment of Purchase Price--Special
Procedures for Holders of Options." In addition, holders of exercisable
options who also hold shares directly may participate in the offer by
following the instructions in this offer to purchase and the letter of
transmittal.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the letter of transmittal if:
(1) The letter of transmittal is signed by the registered holder of the
shares tendered and payment and delivery are to be made directly to
such registered holder. Registered holder, for purposes of this Section
3, includes any participant in The Depository Trust Company, as the
book-entry transfer facility, whose name appears on a security position
listing as the holder of the shares, or
(2) Shares are tendered for the account of an eligible institution, that is
a member firm of a registered national securities exchange, a member of
the National Association of Securities Dealers, Inc. or a commercial
bank or trust company, not a savings bank or savings and loan
association, having an office, branch or agency in the United States.
In all other cases, all signatures on the letter of transmittal must be
guaranteed by an eligible institution. See Instruction 1 of the letter of
transmittal.
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If a certificate representing shares is registered in the name of a person
other than the signer of a letter of transmittal, or if payment is to be made,
or shares not purchased or tendered are to be issued, to a person other than
the registered holder, the certificate must be endorsed or accompanied by an
appropriate stock power, in either case signed exactly as the name of the
registered holder appears on the certificate, with the signature on the
certificate or stock power guaranteed by an eligible institution. In this
regard, see Section 5 for information with respect to applicable stock
transfer taxes. In all cases, payment for Shares tendered and accepted for
payment pursuant to the offer will be made only after timely receipt by the
depositary of certificates for such shares, or a timely confirmation of a
book-entry transfer of such shares into the depositary's account at the book-
entry transfer facility as described above, a properly completed and duly
executed letter of transmittal, or manually signed facsimile thereof, and any
other documents required by the letter of transmittal.
The method of delivery of all documents, including share certificates, the
letter of transmittal and any other required documents, is at the election and
risk of the tendering stockholder. If you decide to make delivery by mail, we
recommend you use registered mail with return receipt requested, properly
insured.
Book-Entry Delivery. The depositary will establish an account with respect
to the shares at the book-entry transfer facility for purposes of the offer
within two business days after the date of this offer to purchase. Any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of the shares by causing such
facility to transfer such shares into the depositary's account in accordance
with such facility's procedure for such transfer. Even though delivery of
shares may be effected through book-entry transfer into the depositary's
account at the book-entry transfer facility, a properly completed and duly
executed letter of transmittal, or manually signed facsimile thereof, with any
required signature guarantees and other required documents must, in any case,
be transmitted to and received by the depositary at one of its addresses set
forth on the back cover of this offer to purchase prior to the expiration
date. Delivery of the letter of transmittal and any other required documents
to the book-entry transfer facility does not constitute delivery to the
depositary.
Guaranteed Delivery. If a stockholder desires to tender shares pursuant to
the offer and such stockholder's share certificates cannot be delivered to the
depositary prior to the expiration date (or the procedures for book-entry
transfer cannot be completed on a timely basis) or time will not permit all
required documents to reach the depositary before the expiration date, such
shares may nevertheless be tendered provided that all of the following
conditions are satisfied:
(i) such tender is made by or through an eligible institution;
(ii) The depositary receives (by hand, mail, overnight courier, telegram or
facsimile transmission), on or prior to the expiration date, a
properly completed and duly executed notice of guaranteed delivery
substantially in the form MGM Grand has provided with this offer to
purchase, including (where required) a signature guarantee by an
eligible institution in the form set forth in such notice of
guaranteed delivery; and
(iii) the certificates for all tendered shares in proper form for transfer
(or confirmation of book-entry transfer of such shares into the
depositary's account at the book-entry transfer facility), together
with a properly completed and duly executed letter of transmittal (or
manually signed facsimile thereof) and any required signature
guarantees or other documents required by the letter of transmittal,
are received by the depositary within three NYSE trading days after
the date the depositary receives such notice of guaranteed delivery.
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If any tendered shares are not purchased, or if less than all shares
evidenced by a stockholder's certificates are tendered, certificates for
unpurchased shares will be returned as promptly as practicable after the
expiration or termination of the offer or, in the case of shares tendered by
book-entry transfer at the book-entry transfer facility, such shares will be
credited to the appropriate account maintained by the tendering stockholder at
the book-entry transfer facility, in each case without expense to such
stockholder.
Return of Certificates. If we do not purchase all of the tendered shares, or
if less than all shares evidenced by a stockholder's certificates are
tendered, certificates for unpurchased shares will be returned at our expense
as promptly as practicable after the expiration or termination of the offer.
If shares are tendered by book-entry transfer at the book-entry transfer
facility, such shares will be credited to the appropriate account maintained
by the tendering stockholder at the book-entry transfer facility, without
expense to such stockholder.
Backup Federal Income Tax Withholding. Under the United States federal
income tax backup withholding rules, unless an exemption applies under the
applicable law and regulations, 31% of the gross proceeds payable to a
stockholder or other payee pursuant to the offer must be withheld and remitted
to the United States Treasury, unless the stockholder or other payee provides
such person's taxpayer identification number, employer identification number
or social security number, to the depositary and certifies under penalties of
perjury that such number is correct. Therefore, each tendering stockholder
should complete and sign the Substitute Form W-9 included as part of the
letter of transmittal so as to provide the information and certification
necessary to avoid backup withholding, unless such stockholder otherwise
establishes to the satisfaction of the depositary that the stockholder is not
subject to backup withholding. Certain stockholders, including, among others,
all corporations and certain foreign stockholders, in addition to foreign
corporations, are not subject to these backup withholding and reporting
requirements. In order for a foreign stockholder to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8 or a Substitute Form
W-8, signed under penalties of perjury, attesting to that stockholder's exempt
status. Such statements can be obtained from the depositary. See Instructions
10 and 11 of the letter of transmittal.
To prevent backup federal income tax withholding equal to 31% of the gross
payments made to stockholders for shares purchased pursuant to the offer, each
stockholder who does not otherwise establish an exemption from such
withholding must provide the depositary with the stockholder's correct
taxpayer identification number and provide certain other information by
completing the Substitute Form W-9 included with the letter of transmittal.
For a discussion of certain United States federal income tax consequences to
tendering stockholders, see Section 14.
Withholding For Foreign Stockholders. Even if a foreign stockholder has
provided the required certification to avoid backup withholding, the
depositary will withhold United States federal income taxes equal to 30% of
the gross payments payable to a foreign stockholder or his or her agent unless
the depositary determines that a reduced rate of withholding is available
pursuant to a tax treaty or that an exemption from withholding is applicable
because such gross proceeds are effectively connected with the conduct of a
trade or business within the United States. For this purpose, a foreign
stockholder is any stockholder that is not (1) a citizen or resident of the
United States, (2) a corporation, partnership, or other entity created or
organized in or under the laws of the United States, any State or any
political subdivision thereof, (3) an estate, the income of which is subject
to United States federal income taxation regardless of the source of such
income or (4) a trust if a court within
11
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States trustees have the
authority to control all substantial decisions relating to the trust. In order
to obtain a reduced rate of withholding pursuant to a tax treaty, a foreign
stockholder must deliver to the depositary before the payment a properly
completed and executed IRS Form 1001. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the offer
are effectively connected with the conduct of a trade or business within the
United States, a foreign stockholder must deliver to the depositary a properly
completed and executed IRS Form 4224. The depositary will determine a
stockholder's status as a foreign stockholder and eligibility for a reduced
rate of, or exemption from, withholding by reference to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding, e.g., IRS Form 1001 or IRS Form 4224, unless
facts and circumstances indicate that such reliance is not warranted. A
foreign stockholder may be eligible to obtain a refund of all or a portion of
any tax withheld if such stockholder meets the "complete redemption,"
"substantially disproportionate" or "not essentially equivalent to a dividend"
test described in Section 14 or is otherwise able to establish that no tax or
a reduced amount of tax is due. Foreign stockholders are urged to consult
their own tax advisors regarding the application of United States federal
income tax withholding, including eligibility for a withholding tax reduction
or exemption, and the refund procedure. See Instructions 10 and 11 of the
letter of transmittal.
Employee Stock Purchase Plan. As of June 15, 1999, the purchase plan owned
39,303 shares. Shares credited to participants' accounts under the purchase
plan will be tendered by ChaseMellon Stockholder Services, LLC, as
administrator, according to instructions provided to the administrator from
participants in the purchase plan. Shares for which the administrator has not
received timely instructions from participants will not be tendered. The
administrator will make available to the participants whose accounts are
credited with shares under the purchase plan all documents furnished to
stockholders generally in connection with the offer. Each participant may
direct that all, some or none of the shares credited to the participant's
account under the purchase plan be tendered. Participants in the purchase plan
are urged to read the letter of transmittal and related materials carefully.
Tendering Stockholder's Representation and Warranty; MGM Grand's Acceptance
Constitutes an Agreement. It is a violation of Rule 14e-4 under the Securities
Exchange Act of 1934 for a person acting alone or in concert with others,
directly or indirectly, to tender shares for such person's own account unless
at the time of tender and at the expiration date such person (1) has a "net
long position" equal to or greater than the number of shares tendered and will
deliver or cause to be delivered such shares for the purpose of tender to us
within the period specified in the offer, or (2) is the beneficial owner of
equivalent securities (that is other securities immediately convertible into,
exercisable for or exchangeable into shares) and, upon the acceptance of such
tender, will acquire such shares by conversion, exchange or exercise of such
equivalent securities to the extent required by the terms of the offer and
will deliver or cause to be delivered such shares so acquired for the purpose
of tender to us within the period specified in the offer. Rule 14e-4 also
provides a similar restriction applicable to the tender on behalf of another
person. A tender of shares made pursuant to any method of delivery permitted
by the offer will constitute the tendering stockholder's representation and
warranty to us that (1) such stockholder has a "net long position" in shares
or equivalent securities being tendered within the meaning of rule 14e-4, and
(2) such tender of shares complies with Rule 14e-4. Our acceptance for payment
of shares tendered pursuant to the offer will constitute a binding agreement
between the tendering stockholder and us upon the terms and subject to the
conditions of the offer.
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Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. We will determine, in our sole
discretion, all questions as to the number of shares to be accepted, the price
to be paid therefor and the validity, form, eligibility, including time of
receipt, and acceptance for payment of any tender of shares. Our determination
will be final and binding on all parties. We reserve the absolute right to
reject any or all tenders we determine not to be in proper form or the
acceptance of or payment for which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the conditions of
the offer and any defect or irregularity in the tender of any particular
shares or any particular stockholder. No tender of shares will be deemed to be
properly made until all defects or irregularities have been cured or waived.
None of MGM Grand, the dealer manager, the depositary, the information agent
or any other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for
failure to give any such notice.
Certificates for shares, together with a properly completed letter of
transmittal and any other documents required by the letter of transmittal,
must be delivered to the depositary and not to the company. Any such documents
delivered to the company will not be forwarded to the depositary and therefore
will not be deemed to be validly tendered.
4. Withdrawal Rights
Except as otherwise provided in this Section 4, tenders of shares pursuant
to the offer are irrevocable. Shares tendered pursuant to the offer may be
withdrawn at any time before the expiration date and, unless the company has
accepted the shares, including option shares, for payment as provided in this
offer to purchase, may also be withdrawn after 12:00 midnight, New York City
time, on Wednesday, August 11, 1999.
For a withdrawal as to shares other than option shares to be effective, the
depositary must receive, at its address set forth on the back cover of this
offer to purchase, a notice of withdrawal in written, telegraphic or facsimile
transmission form on a timely basis. Such notice of withdrawal must specify
the name of the person who tendered the shares to be withdrawn, the number of
shares tendered, the number of shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
shares. If the certificates have been delivered or otherwise identified to the
depositary, then, prior to the release of such certificates, the tendering
stockholder must also submit the serial numbers shown on the particular
certificates evidencing the shares and the signature on the notice of
withdrawal must be guaranteed by an eligible institution, except in the case
of shares tendered by an eligible institution. If shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 3, the
notice of withdrawal must specify the name and the number of the account at
the book-entry transfer facility to be credited with the withdrawn shares and
otherwise comply with the procedures of such facility. Holders of exercisable
options must comply with the withdrawal procedures set forth in the
instructions for such holders.
We will determine, in our sole discretion, all questions as to the form and
validity, including time of receipt, of notices of withdrawal. Our
determination will be final and binding on all parties. None of the company,
the dealer manager, the depositary, the information agent or any other person
is or will be obligated to give any notice of any defects or irregularities in
any notice of withdrawal, and none of them will incur any liability for
failure to give any such notice. Withdrawals may not be rescinded, and any
shares properly withdrawn will thereafter be deemed not tendered for purposes
of the offer. However, withdrawn shares may be retendered before the
expiration date by again following any of the procedures described in Section
3.
13
If we extend the offer, or if we are delayed in our purchase of shares or
are unable to purchase shares in the offer for any reason, then, without
prejudice to our rights under the offer, the depositary may, subject to
applicable law, retain on our behalf all tendered shares, and such shares may
not be withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in this Section 4.
5. Purchase of Shares and Payment of Purchase Price
Upon the terms and subject to the conditions of the offer, we will purchase
and pay the $50.00 purchase price for all of the shares we accept for payment
in the offer, or, in the case of option shares, $50.00 less the exercise price
and the applicable withholding tax amount, as soon as practicable after the
expiration date. In all cases, we will make prompt payment for shares tendered
and accepted for payment in the offer, subject to possible delay in the event
of proration, but only after the depositary timely receives certificates for
shares, or timely confirmation of a book-entry transfer of such shares into
the depositary's account at one of the book-entry transfer facilities, a
properly completed and duly executed letter of transmittal, or manually signed
facsimile thereof, and any other required documents.
We will pay for the shares, other than option shares, purchased in the offer
by depositing the aggregate purchase price therefor with the depositary, which
will act as agent for tendering holders of such shares for the purpose of
receiving payment from us and transmitting payment to the tendering
stockholders. In the event of proration, we will determine the proration
factor and pay for those tendered shares, including option shares, accepted
for payment as soon as practicable after the expiration date. However, we do
not expect to be able to announce the final results of any such proration
until approximately seven business days after the expiration date. Under no
circumstances will we pay interest on the purchase price including, without
limitation, by reason of any delay in making payment. Certificates for all
shares not purchased, including all shares not purchased due to proration,
will be returned, or, in the case of shares tendered by book-entry transfer,
such shares will be credited to the account maintained with the book-entry
transfer facility by the participant who so delivered such shares, as promptly
as practicable following the expiration date or termination of the offer
without expense to the tendering stockholder. In addition, if certain events
occur, we may not be obligated to purchase shares in the offer. See Section 6.
We will pay all stock transfer taxes, if any, payable on the transfer to us
of shares purchased pursuant to the offer; provided, however, that if payment
of the purchase price is to be made to, or, in the circumstances permitted by
the offer, if unpurchased shares are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are
registered in the name of any person other than the person signing the letter
of transmittal, the amount of all stock transfer taxes, if any, whether
imposed on the registered holder or such other person, payable on account of
the transfer to such person will be deducted from the purchase price unless
evidence satisfactory to us of the payment of such taxes or exemption
therefrom is submitted. See Instruction 7 of the letter of transmittal.
Any tendering stockholder or other payee who fails to complete fully, sign
and return to the depositary the Substitute Form W-9 included with the letter
of transmittal may be subject to required backup federal income tax
withholding of 31% of the gross proceeds paid to such stockholder or other
payee pursuant to the offer. See Section 3. Also see Section 3 regarding
federal income tax consequences for foreign stockholders.
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Special Procedures for Holders of Exercisable Options
Holders of exercisable options to purchase shares granted under the
company's stock option plans may tender option shares in connection with the
conditional exercise of exercisable options having exercise prices below
$50.00 per share as part of the offer. Such option holders will instruct the
company, as their agent, to tender part or all of the option shares resulting
from the conditional exercise.
This exercise of options will be "conditional" because the option holder is
deemed to exercise the option only if, and to the extent that, the company
actually purchases the option shares in the offer. If, after taking into
account proration, the company purchases less than all of a holder's option
shares, the options will be exercised, and the option shares purchased, in the
order designated by the holder in the option election form, and the remaining
options will not be considered to have been exercised and will remain
outstanding.
As an accommodation to option holders planning to tender option shares in
the offer, the company will permit a "cashless" exercise of the options for
shares purchased in the offer. In this event, the option holder will not be
required to pay cash for the exercise price, and the consideration received by
the holder whose option shares are purchased in the offer will be the
difference between $50.00 per share and the exercise price per share relating
to the option shares so purchased (less the applicable tax withholding
amount). Option holders who have not exercised their options for cash and
received shares may not use the letter of transmittal to direct the tender of
the option shares. Instead, such holders must follow the procedures for tender
described in the option election form and related instructions on green paper
included with this offer to purchase.
6. Certain Conditions of the Offer
Notwithstanding any other provision of the offer, we shall not be required
to accept for payment, purchase or pay for any shares tendered, and may
terminate or amend the offer or may postpone the acceptance for payment of, or
the purchase of and the payment for shares tendered, subject to Rule 13e-4(f)
promulgated under the Exchange Act, if at any time on or after June 17, 1999
and prior to the time of payment for any such shares, whether any shares have
theretofore been accepted for payment, purchased or paid for pursuant to the
offer, any of the following events occur, or are determined by us to have
occurred, that, in our sole judgment in any such case and regardless of the
circumstances giving rise thereto, including any action or omission to act by
us, makes it inadvisable to proceed with the offer or with such acceptance for
payment or payments:
(a) any action, suit or proceeding by any government or governmental,
regulatory or administrative agency or authority or by any other person,
domestic or foreign is threatened, instituted or pending before any court,
agency, authority or other tribunal, or any judgment, order or injunction
is entered, enforced or deemed applicable by any such court, authority,
agency or tribunal, which (1) challenges or seeks to make illegal, or to
delay or otherwise directly or indirectly to restrain, prohibit or
otherwise affect the making of the offer, the acquisition of shares
pursuant to the offer or is otherwise related in any manner to, or
otherwise affects, the offer; or (2) could, in our sole judgment,
materially affect our business, condition, financial or other, income,
operations or prospects, taken as a whole, or otherwise materially impair
in any way the contemplated future conduct of our business, taken as a
whole, or materially impair the offer's contemplated benefits to us;
15
(b) any action is threatened or taken, or any approval is withheld, or any
statute, rule or regulation is invoked, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the
offer or us or any of our subsidiaries, by any government or governmental,
regulatory or administrative authority or agency or tribunal, domestic or
foreign, which, in our sole judgment, would or might directly or
indirectly result in any of the consequences referred to in clause (1) or
(2) of paragraph (a) above;
(c) the declaration of any banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory);
(d) any general suspension of trading in, or limitation on prices for,
securities on any United States national securities exchange or in the
over-the-counter market;
(e) the commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States;
(f) any limitation (whether or not mandatory) by any governmental, regulatory
or administrative agency or authority on, or any event which, in our sole
judgment, might materially affect, the extension of credit by banks or
other lending institutions in the United States;
(g) any significant decrease in the market price of the shares or in the
market prices of equity securities generally in the United States or any
change in the general political, market, economic or financial conditions
or in the commercial paper markets in the United States or abroad that
could have in our sole judgment a material adverse effect on our business,
condition, financial or otherwise, income, operations or prospects, taken
as a whole, or on the trading in the shares or on the proposed financing
for the offer;
(h) in the case of any of the foregoing existing at the time of the
announcement of the offer, a material acceleration or worsening thereof;
(i) any decline in either the Dow Jones Industrial Average or the S&P 500
Composite Index by an amount in excess of 10% measured from the close of
business on June 17, 1999;
(j) any change occurs or is threatened in our business, condition, financial
or other, income, operations or prospects, taken as a whole, which in our
sole judgment is or may be material to us;
(k) a tender or exchange offer with respect to some or all of our outstanding
shares, other than the offer, or a merger or acquisition proposal for us,
is proposed, announced or made by another person or is publicly disclosed,
or we learn that (1) any person or "group," within the meaning of
Section 13(d)(3) of the Exchange Act, has acquired or proposes to acquire
beneficial ownership of more than 5% of the outstanding shares, or any new
group is formed that beneficially owns more than 5% of our outstanding
shares; or
(l) any person or group files a Notification and Report Form under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 reflecting an intent to
acquire us or any of our shares.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition, including
any action or inaction by us, or may be waived by us in whole or in part. Our
failure at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an on-
going right that may be asserted by us at any time and from time to time. Our
determination concerning the events described above and any related judgment
or decision by us regarding the inadvisability of proceeding with the purchase
of or payment for any shares tendered will be final and binding on all
parties.
16
7. Price Range of Shares
The shares are listed on the NYSE. The high and low closing sales prices per
share on the NYSE Composite Tape as compiled from published financial sources
for the periods indicated are listed below:
[Download Table]
High Low
-------- --------
Fiscal 1997
1st Quarter.............................................. $40.00 $32.875
2nd Quarter.............................................. 40.125 32.375
3rd Quarter.............................................. 43.75 32.9375
4th Quarter.............................................. 44.8125 34.50
Fiscal 1998
1st Quarter.............................................. $39.1875 $33.625
2nd Quarter.............................................. 35.125 26.625
3rd Quarter.............................................. 33.4375 23.0625
4th Quarter.............................................. 29.0625 22.9375
Fiscal 1999
1st Quarter.............................................. $39.625 27.75
2nd Quarter (through June 16, 1999)...................... 49.3125 33.3125
On June 10, 1999, the last full trading day on the NYSE prior to our
announcement of the purchase price and the number of shares sought in the
offer, the closing per share price on the NYSE was $43.125. We urge
stockholders to obtain current quotations of the market price of the shares.
8. Background and Purpose of the Offer; Certain Effects of the Offer
On June 10, 1999, we announced our intention to make an offer to purchase up
to 6,000,000 shares at $50.00 per share as the second half of our 12,000,000
share repurchase program, with the offer to commence on June 17, 1999. We are
making the offer because we believe:
(1) the shares are significantly undervalued in the public market;
(2) in light of our strong financial position, investing in our shares
represents an attractive use of our capital and an efficient way to
provide value to our stockholders; and
(3) the offer will afford to those stockholders who desire liquidity an
opportunity to sell all or a portion of their shares without the usual
transaction costs associated with open market sales.
After the offer is completed, we expect to have sufficient cash flow and
access to other sources of capital to fund our operations and capital
projects, including completing the transformation of the MGM Grand
Hotel/Casino in Las Vegas, Nevada into the City of Entertainment and
developing our proposed hotel/casino projects in Detroit, Michigan and
Atlantic City, New Jersey.
The offer provides stockholders who are considering a sale of all or a
portion of their shares the opportunity to sell their shares to us at $50.00
per share. Any odd lot owners whose shares are purchased pursuant to the offer
will avoid both the payment of brokerage commissions and any applicable odd
lot discounts payable on sales of odd lots. To the extent the purchase of
shares in the offer results in a reduction in the number of record or
beneficial holders of shares, the costs to us for services to stockholders
will be reduced. Stockholders who determine not to accept the offer will
increase their proportionate interest in our equity, and thus in our future
earnings and assets, subject to our right to issue additional shares and other
equity securities in the future.
17
Our board of directors has approved the offer. However, stockholders must
make their own decisions whether to tender shares and, if so, how many shares
to tender. Neither we nor our board of directors makes any recommendation to
any stockholder as to whether to tender or refrain from tendering shares and
neither we nor our board of directors has authorized any person to make any
such recommendation. We have been advised that while most of our directors and
senior executive officers do not intend to tender shares in the offer, some
may tender shares they own as well as shares subject to exercisable options
held by them. We are further advised that Kirk Kerkorian and Tracinda
Corporation, a Nevada corporation wholly owned by Mr. Kerkorian, our principal
stockholders, do not intend to tender any shares. However, Mr. Kerkorian has
requested us to register for sale by him up to 3,894,406 shares, which is the
number of shares he owns directly and is the approximate number of shares he
and Tracinda could have sold in the offer had they elected to participate
assuming full participation by all stockholders. Any such shares will only be
sold by means of a prospectus after completion of the tender offer in the open
market or through privately negotiated transactions as market conditions
warrant and as he may determine.
As set forth in our press release dated June 10, 1999 and under "Certain
Information about the Company," the offer is part of our program to repurchase
a total of 12,000,000 shares. We purchased 6,000,000 shares in 1998 in a
$35.00 per share tender offer. We may in the future repurchase additional
shares in the open market, in private transactions, through tender offers or
otherwise, although no such purchases are presently contemplated. Any such
purchases may be on the same terms as, or on terms that are more or less
favorable to stockholders than, the terms of the offer. However, Rule 13e-4
under the Exchange Act generally prohibits us and our affiliates from
purchasing any shares, other than through the offer, until at least ten
business days after the expiration or termination of the offer. Any possible
future purchases by us will depend on many factors, including the market price
of the shares, the results of the offer, our business and financial position
and general economic and market conditions.
Except as required by applicable law or, if retired, the rules of any
securities exchange on which shares are listed, shares we acquire pursuant to
the offer will be retained as treasury stock by us, unless and until we
determine to retire such shares, and will be available for us to issue without
further stockholder action, for purposes including, but not limited to, the
acquisition of other businesses, the raising of additional capital for use in
our business and the satisfaction of obligations under existing or future
employee benefit plans. We have no current plans for issuance of the shares
repurchased pursuant to the offer.
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares
As of June 15, 1999, there were 62,217,545 shares outstanding, net of
treasury stock, and 5,221,901 shares issuable upon exercise of all outstanding
options. As of June 15, 1999, our directors and executive officers as a group
(17 persons) beneficially owned 42,659,284 shares, including 1,630,600 shares
issuable to such persons upon exercise of options exercisable within sixty
days of such date, which constituted approximately 63% of the outstanding
shares, including shares issuable if all exercisable options were exercised at
such time. Included in the foregoing is an aggregate of 38,005,122 shares
which are held by Kirk Kerkorian and Tracinda, representing approximately 61%
of the outstanding shares.
If we purchase 6,000,000 shares in the offer and no director or executive
officer tenders shares, then after the purchase of such 6,000,000 shares, our
directors and executive officers as a group would beneficially own
approximately 69% of the outstanding shares, including the 1,630,600 shares
issuable
18
on exercise of exercisable options held by directors and executive officers,
and Mr. Kerkorian and Tracinda would beneficially own approximately 69% of the
outstanding shares. Mr. Kerkorian has requested us to register for sale by him
of up to 3,894,406 shares. If all of such shares were sold, then Mr. Kerkorian
and Tracinda would beneficially own approximately 61% of the outstanding
shares, which is approximately the same percentage they currently own.
Except as set forth in this offer to purchase and in Schedule I hereto,
based upon our records and upon information provided to us by our directors,
executive officers, associates and subsidiaries, neither we nor any of our
associates or subsidiaries or persons controlling us nor, to the best of our
knowledge, any of our directors or executive officers or any of our
subsidiaries, nor any associates or subsidiaries of any of the foregoing, has
effected any transactions in the shares during the 40 business days prior to
the date hereof.
Except as set forth in this offer to purchase, neither we nor any person
controlling us nor, to our knowledge, any of our directors or executive
officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
offer with respect to any of our securities, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies, consents or authorizations.
10. Source and Amount of Funds
Assuming that we purchase 6,000,000 shares in the offer at a purchase price
of $50.00 per share, we expect the maximum aggregate cost, including all fees
and expenses applicable to the offer, to be approximately $600,000. We
estimate that substantially all of the funds necessary to pay such amounts
will come from available cash, cash flow from operations and, to the extent
necessary, the existing credit facility.
Our Bank Credit Facility
Since 1996, we have had available to us a credit facility from a syndicate
of banks led by Bank of America NT&SA. On July 23, 1997, we amended our
syndicated bank credit facility to make it a $1.25 billion senior revolving
credit facility which may be increased to $1.5 billion under its existing
terms. The facility has subsequently been amended several times in less
significant ways. The following description is a summary of the material
provisions of the Amended and Restated Loan Agreement, dated as of July 17,
1997. It does not restate the agreement in its entirety. We urge you to read
the agreement. We have filed copies of the agreement with the Securities and
Exchange Commission. See Section 11.
The facility is available:
(1) to finance capital improvements at MGM Grand Las Vegas in accordance
with our master plan with respect to that property, up to $850 million;
(2) to fund development costs for MGM Grand Atlantic City or other casino,
resort and hotel projects, or to invest in casino, resort and hotel
companies or projects, up to $1.0 billion;
(3) to fund the proposed project in Detroit, Michigan, up to $750 million;
and
(4) for general corporate purposes, including repurchases of our own common
stock, investments in qualified investments and other capital
expenditures, up to $750 million.
19
Availability under the facility will decline in quarterly increments of the
greater of $62.5 million or 5% of the commitment amount under the facility,
commencing on December 31, 2001, with the balance due on December 31, 2002. We
have the right to request one-year extensions, subject to the consent of the
lenders, which would have the effect of deferring scheduled reductions in
availability.
Interest on outstanding balances and commitment fees on unutilized
availabilities under the facility are determined by a formula based either on
our leverage ratio (which is the ratio of our total debt to annualized cash
flow) or the facility rating (which is the credit rating then applicable to
the facility), and in the case of interest rates, on the basis of the
Eurodollar or base rate existing at the time of determination. As our leverage
ratio declines, the interest rate and commitment fees will also decline. We
will also pay certain underwriting and agency fees in connection with the
facility.
The facility is unconditionally guaranteed by each of our subsidiaries
except New York-New York and Primadonna Resorts, Inc. and their subsidiaries,
MGM Grand Detroit II, LLC, MGM Grand-Bally's Monorail Limited Liability
Company, MGM Grand Australia, Inc. and our non-U.S. subsidiaries and their
U.S. holding companies which have no other assets or operations. Our
subsidiaries which do not guarantee the facility are called the
"nonguarantors" below. The facility is secured by pledges of substantially all
of our assets, including the stock of MGM Grand Hotel, Inc. and MGM Grand
Atlantic City, Inc., but not our interest in any nonguarantor, and the assets
of our subsidiaries other than the nonguarantors. The guaranty given by MGM
Grand Detroit, LLC, and the pledge of its assets, are limited to the amount
borrowed under the facility which is made available to MGM Grand Detroit, LLC.
The facility can become unsecured, at our option, if it receives investment
grade ratings as unsecured debt from both Moody's and Standard & Poor's.
The facility contains certain customary events of default and agreements,
including limitations on additional debt, dividends, mergers and asset sales
and capital expenditures. It also restricts acquisitions and similar
transactions. As of June 15, 1999, approximately $360 million was outstanding
under the facility. Also, during May 1999, two letters of credit were issued
under the facility totaling approximately $50 million, which support municipal
financing used to acquire land for a permanent casino in Detroit.
Although we currently do not have specific plans, we may, depending on
business and market conditions, refinance or replace all or a portion of the
cash used to purchase shares in the offer with proceeds from sales of debt or
equity securities or such other financing as we deem appropriate.
11. Certain Information about MGM Grand
We are a leading operator of first class casino and hotel properties with an
emphasis on the total gaming and entertainment experience. We own and operate
the MGM Grand Las Vegas and the New York-New York Hotel and Casino, two of the
most prominent hotel/casinos on the Las Vegas Strip. We believe the MGM Grand
Las Vegas is one of the largest hotel/casinos in the world with approximately
5,000 rooms, 171,500 square feet of gaming space and one of the largest arenas
in Las Vegas. We have nearly completed an approximate $570 million master plan
to expand and transform the MGM Grand Las Vegas into The City of
Entertainment. Our New York-New York property has 2,033 hotel rooms and
84,000 square feet of casino space. In Primm, Nevada, we own and operate the
three hotel/casinos that travelers first encounter on the principal route from
Southern California. We also own and operate the MGM Grand Australia in
Darwin, Australia and operate three casinos in South Africa. We expect to open
an interim casino resort in Detroit in the fall of this year
20
while a permanent property is under development, and also have announced plans
to develop a casino resort in Atlantic City, New Jersey.
[Download Table]
Casino Number Number
Number of Square of of Table
Location/Property Rooms/Suites Footage Slots Games
----------------- ------------ ------- ------ --------
Las Vegas, Nevada
MGM Grand City of Entertainment.......... 5,034 171,500 3,566 153
New York-New York Hotel and Casino....... 2,033 84,000 2,292 71
Primm, Nevada
Primm Valley Resort...................... 623 38,000 1,446 33
Buffalo Bills............................ 1,240 62,000 1,585 39
Whiskey Petes............................ 777 36,400 1,374 30
Detroit, Michigan
MGM Grand Detroit (interim casino)(1).... -- 73,000 2,300 80
Australia
MGM Grand Australia...................... 96 28,000 360 32
South Africa (operated properties)
Johannesburg............................. -- 58,000 1,700 50
Nelspruit................................ -- 10,500 275 10
Witbank.................................. -- 15,500 375 13
--------
(1) Under construction, expected to open Fall of 1999.
We were incorporated in the state of Delaware in January 1986. Our executive
offices are located at 3799 Las Vegas Boulevard South, Las Vegas, Nevada
89109. Our mailing address is P.O. Box 98655, Las Vegas, Nevada 89193, and our
telephone number is (702) 891-3333.
Historical Financial Information. The table below sets forth summary
historical consolidated financial information of the company and its
subsidiaries. The historical financial information for fiscal years 1997 and
1998 (other than the ratios of earnings to fixed charges) has been derived
from, and should be read in conjunction with, our audited consolidated
financial statements as reported in our Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, which, together with our interim
unaudited consolidated financial statements as reported in our Quarterly
Report on Form 10-Q for the period ended March 31, 1999, is hereby
incorporated herein by reference. The summary historical financial information
should be read in conjunction with, and is qualified in its entirety by
reference to, the audited financial statements and the related notes thereto
from which it has been derived. Copies of the company's periodic reports may
be inspected or obtained from the Securities and Exchange Commission in the
manner specified in "Additional Information" below.
21
MGM GRAND, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
[Download Table]
For the Years Ended Three Months Ended
December 31, March 31,
---------------------- ----------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
(Unaudited)
Revenues:
Gross revenue................ $ 891,330 $ 840,082 $ 195,610 $ 273,845
Less promotional allowances.. 63,733 66,219 15,763 22,478
---------- ---------- ---------- ----------
Net Revenue................ 827,597 773,863 179,847 251,367
---------- ---------- ---------- ----------
Expenses:
Operating expenses........... 540,533 555,316 132,334 178,629
Depreciation and
amortization................ 64,104 76,284 16,904 20,892
---------- ---------- ---------- ----------
604,637 631,600 149,238 199,521
---------- ---------- ---------- ----------
Operating Profit Before Master
Plan Asset Disposition,
Preopening and Other and
Corporate Expense............. 222,960 142,263 30,609 51,846
Master Plan Asset Disposition,
Preopening and Other.......... 28,566 -- -- 8,810
Corporate expense.............. 3,424 10,689 2,451 5,094
---------- ---------- ---------- ----------
Operating Income............... 190,970 131,574 28,158 37,942
---------- ---------- ---------- ----------
Other Income (Expense):
Interest and other, net...... (10,669) (22,046) (2,749) (9,118)
---------- ---------- ---------- ----------
Income Before Income Taxes,
Extraordinary Item and
Cumulative Effect of
Accounting Change............. 180,301 109,528 25,409 28,824
Provision for income taxes... (65,045) (40,580) (9,147) (10,333)
---------- ---------- ---------- ----------
Income Before Extraordinary
Item and Cumulative Effect of
Accounting Change............. 115,256 68,948 16,262 18,491
Extraordinary loss on early
extinguishment of debt, net
of income tax benefits of
$2,333 and $484............. (4,238) -- -- (898)
Cumulative effect of change
in accounting for
preopening, net of income
tax benefit of $4,399....... -- -- -- (8,168)
---------- ---------- ---------- ----------
Net Income..................... $ 111,018 $ 68,948 $ 16,262 $ 9,425
========== ========== ========== ==========
Basic Income Per Share of
Common Stock:
Income before extraordinary
item and cumulative effect
of accounting change........ $ 2.00 $ 1.24 $ 0.28 $ 0.34
Extraordinary item, net...... (0.07) -- -- (0.02)
Cumulative effect of
accounting change, net...... -- -- -- (0.15)
---------- ---------- ---------- ----------
Net income per share......... $ 1.93 $ 1.24 $ 0.28 $ 0.17
========== ========== ========== ==========
Weighted Average Shares
Outstanding................... 57,475 55,678 57,990 55,376
========== ========== ========== ==========
Diluted Income Per Share of
Common Stock:
Income before extraordinary
item and cumulative effect
of accounting change........ $ 1.96 $ 1.22 $ 0.28 $ 0.33
Extraordinary item, net...... (0.07) -- -- (0.02)
Cumulative effect of
accounting change, net...... -- -- -- (0.14)
---------- ---------- ---------- ----------
Net income per share......... $ 1.89 $ 1.22 $ 0.28 $ 0.17
========== ========== ========== ==========
Weighted Average Shares
Outstanding................... 58,835 56,342 58,775 56,646
========== ========== ========== ==========
Selected Balance Sheet
Information:
At December 31, At March 31,
---------------------- ----------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
(Unaudited)
Working capital................ $ (10,699) $ 18,715 $ 398,898 $ (13,447)
Total assets................... 1,398,374 1,773,794 1,872,259 2,538,855
Total assets less excess of
purchase price over fair
market value of net assets
acquired, net................. 1,359,776 1,736,220 1,833,917 2,501,537
Current and long-term
indebtedness.................. 68,365 552,827 566,037 1,012,117
Shareholders' equity........... 1,101,622 964,381 1,117,248 1,222,306
22
Pro Forma Financial Information. The following summary unaudited condensed
consolidated pro forma financial information gives effect to our purchase of
6,000,000 shares in the offer and the acquisition of Primadonna Resorts, Inc.,
based on certain assumptions described in the Notes to Summary Unaudited
Consolidated Pro Forma Financial Information, as if both had occurred on
January 1, 1998 and January 1, 1999, with respect to income statement data,
and on December 31, 1998 and March 31, 1999, with respect to balance sheet
data. The pro forma financial information should be read in conjunction with
the historical consolidated financial information incorporated herein by
reference and does not purport to be indicative of the results that would
actually have been obtained had the purchase of the shares pursuant to the
offer and the acquisition been completed at the dates indicated or that may be
obtained in the future.
23
MGM GRAND, INC. AND SUBSIDIARIES
PRO FORMA SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
[Download Table]
For the Year Ended Three Months Ended
December 31, 1998 March 31, 1999
--------------------- ---------------------
As As
Actual Adjusted(1) Actual Adjusted(1)
-------- ----------- -------- -----------
Revenues:
Gross revenue.................. $840,082 $1,278,831 $273,845 $345,168
Less promotional allowances.... 66,219 90,119 22,478 26,703
-------- ---------- -------- --------
Net Revenue.................. 773,863 1,188,712 251,367 318,465
-------- ---------- -------- --------
Expenses:
Operating expenses............. 555,316 858,930 178,629 226,829
Depreciation and amortization.. 76,284 132,449 20,892 29,934
-------- ---------- -------- --------
631,600 991,379 199,521 256,763
-------- ---------- -------- --------
Operating Profit Before
Preopening and Other and
Corporate Expense............... 142,263 197,333 51,846 61,702
Preopening and other............. -- -- 8,810 8,810
Corporate expense................ 10,689 10,689 5,094 5,094
-------- ---------- -------- --------
Operating Income................. 131,574 186,644 37,942 47,798
-------- ---------- -------- --------
Other Income (Expense):
Interest and other, net........ (22,046) (64,645) (9,118) (17,257)
-------- ---------- -------- --------
Income Before Income Taxes,
Extraordinary Item and
Cumulative Effect of Accounting
Change.......................... 109,528 121,999 28,824 30,541
Provision for income taxes..... (40,580) (46,601) (10,333) (11,058)
-------- ---------- -------- --------
Income Before Extraordinary Item
and Cumulative Effect of
Accounting Change............... 68,948 75,398 18,491 19,483
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit of $484.... -- -- (898) (898)
Cumulative effect of change in
accounting for preopening, net
of income tax benefit of
$4,399........................ -- -- (8,168) (8,168)
-------- ---------- -------- --------
Net Income....................... $ 68,948 $ 75,398 $ 9,425 $ 10,417
======== ========== ======== ========
Basic Income Per Share of Common
Stock:
Income before extraordinary
item and cumulative effect of
accounting change............. $ 1.24 $ 1.27 $ 0.34 $ 0.36
Extraordinary item, net........ -- -- (0.02) (0.02)
Cumulative effect of accounting
change, net................... -- -- (0.15) (0.15)
-------- ---------- -------- --------
Net income per share........... $ 1.24 $ 1.27 $ 0.17 $ 0.19
======== ========== ======== ========
Weighted Average Shares
Outstanding..................... 55,678 59,221 55,376 55,610
======== ========== ======== ========
Diluted Income Per Share of
Common Stock:
Income before extraordinary
item and cumulative effect of
accounting change............. $ 1.22 $ 1.26 $ 0.33 $ 0.34
Extraordinary item, net........ -- -- (0.02) (0.02)
Cumulative effect of accounting
change, net................... -- -- (0.14) (0.14)
-------- ---------- -------- --------
Net income per share........... $ 1.22 $ 1.26 $ 0.17 $ 0.18
======== ========== ======== ========
Weighted Average Shares
Outstanding..................... 56,342 59,901 56,646 56,973
======== ========== ======== ========
24
Pro Forma Selected Balance Sheet Information:
[Download Table]
At December 31, 1998 At March 31, 1999
---------------------------- --------------------------
Actual As Adjusted(2)(3) Actual As Adjusted(2)
---------- ----------------- ---------- --------------
Working capital......... $ 18,715 $ 2,705 $ (13,447) $ (13,447)
Total assets............ 1,773,794 2,538,848 2,538,855 2,538,855
Total assets less excess
of purchase price over
fair market value of
net assets acquired,
net.................... 1,736,220 2,501,274 2,501,537 2,501,537
Current and long-term
indebtedness........... 552,827 1,279,683 1,012,117 1,312,717
Shareholders' equity.... 964,381 907,248 1,222,306 921,706
Other Data:
Book value per share
(4).................... $ 18.53 $ 16.33 $ 19.78 $ 16.52
--------
(1) Assumes the following transactions occurred as of the beginning of each
period presented: (a) the acquisition of Primadonna Resorts, Inc. for
approximately 9.5 million shares of MGM Grand, Inc. stock and the
assumption of approximately $315 million of debt (including 50% of New
York- New York debt) accounted for as a purchase, (b) the reallocation of
revenues and expenses from unconsolidated affiliate since New York-New
York became a wholly-owned consolidated subsidiary of MGM Grand, Inc. as
a result of the Primadonna acquisition, (c) the elimination of income and
expenses related to activity between MGM Grand, Inc. and New York-New
York, (d) interest expense associated with the additional draw downs
under the company's senior reducing revolving credit facility of $300.6
million used to finance the repurchase of 6,000,000 shares at the
company's borrowing rate of 6% and using a statutory tax rate of 35%, and
(e) the impact on the provision for income taxes of the transactions
above. Summary financial information for Primadonna and New York-New York
used in the pro forma summary consolidated financial information above is
as follows:
[Download Table]
Primadonna Resorts, Inc. New York-New York
------------------------- -------------------------
For the For the
For the year three months For the year three months
ended ended ended ended
December 31, March 31, December 31, March 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
Net Revenues............. 272,866 64,392 219,107 54,915
Operating Income......... 55,213 13,874 76,628 17,274
Net Income............... 18,143 5,877 60,066 11,497
Primadonna Resorts, Inc. historical financial information includes revenue
of $38,409 and $6,099, respectively, and interest expense of $8,376 and
$1,058, respectively, recognized by Primadonna related to Primadonna's 50%
ownership interest of New York-New York.
MGM historical financial information includes revenue of $38,362 and
$6,084, respectively, interest expense of $8,376 and $1,058, respectively
related to MGM's 50% ownership of New York-New York.
The acquisition of Primadonna Resorts, Inc. and the remaining 50% of New
York-New York was effective March 1, 1999. Accordingly, net revenues,
operating income, and net income for the month of March for Primadonna
Resorts, Inc. included in the MGM historical financial statements as of
March 31, 1999 were $20,305, $4,022 and $1,829, respectively. Net revenues,
operating income, and net income for the month of March for New York-New
York included in the MGM historical financial statements as of March 31,
1999 were $19,738, $5,069 and $1,734, respectively.
25
(2) The pro forma balance sheet amounts for both periods were adjusted for
the 6,000,000 share repurchase at an approximate cost of $300.6 million,
including transaction fees, financed by a drawdown under the company's
credit facility.
(3) The pro forma balance sheet for December 31, 1998 was adjusted to include
the merger with Primadonna Resorts, Inc.
(4) Book value per share was calculated by dividing total stockholders'
equity by the number of shares outstanding. The pro forma book value per
share amounts for both periods were adjusted for the 6,000,000 share
repurchase at an approximate cost of $300.6 million, including
transaction fees.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the company for the periods indicated:
[Enlarge/Download Table]
Year Ended December 31, Three Months Ended March 31,
------------------------------- -------------------------------
1997 1998 1998 1998 1999 1999
------ ------ ----------------- ------ ------ -----------------
Actual Actual As Adjusted(2)(3) Actual Actual As Adjusted(2)(3)
Ratio of Earnings to
Fixed Charges (1)...... 10.11 2.40 1.81 3.26 2.33 1.88
--------
(1) For purposes of computing the foregoing ratios: (i)"Earnings" consist of
income from continuing operations before income taxes and fixed charges,
adjusted to exclude earnings in excess of distributions from New York-New
York, capitalized interest, and (ii)"Fixed Charges" consist of interest,
whether expensed or capitalized, amortization of debt discount and
issuance costs, the company's proportionate share of the interest cost of
50% owned joint ventures (such as the limited liability company which
owns New York-New York) and the estimated interest component of rental
expense.
(2) Interest expense, capitalized interest and the provision for income taxes
have been adjusted as if the repurchase of 6,000,000 shares for
approximately $300.6 million occurred on January 1, 1998 and January 1,
1999, respectively, and the repurchase was financed by a drawdown under
the company's credit facility.
(3) The pro forma Ratio of Earnings to Fixed Charges for the year ended
December 31, 1998 and the three months ended March 31, 1999 was adjusted
to include the merger with Primadonna Resorts, Inc. and the effects of
the share repurchase.
26
Additional Information. We are subject to the informational filing
requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, are obligated to file reports and other information with the
Securities and Exchange Commission relating to our business, financial
condition and other matters. Information, as of particular dates, concerning
our directors and officers, their remuneration, options granted to them, the
principal holders of our securities and any material interest of such persons
in transactions with us is required to be disclosed in proxy statements
distributed to our stockholders and filed with the Commission. Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 2120, Washington D.C. 20549; at its regional offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World
Trade Center, New York, New York 10048. Copies of such material may also be
obtained by mail, upon payment of the Commission's customary charges, from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549. The Commission also maintains a web site
on the World Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Such reports, proxy statements and other
information concerning us also can be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005, on which the shares are listed.
Forward-Looking Statements. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for forward-looking statements. Certain
information included or incorporated by reference in this offer to purchase
contains statements that are forward-looking, such as statements relating to
plans for future expansion and other business development activities, as well
as other capital spending, financing sources, the effects of regulation,
including gaming and tax regulations, and competition. Such forward-looking
information involves important risks and uncertainties that could
significantly affect anticipated results in the future and, accordingly, such
results may differ from those expressed in any forward-looking statements made
by or on behalf of the company. These risks and uncertainties include, but are
not limited to, those relating to:
- Development and construction activities;
- Dependence on existing management;
- Leverage and debt service, including sensitivity to fluctuations in
interest rates;
- Domestic or global economic conditions, including sensitivity to
fluctuations in foreign currencies;
- Changes in federal or state tax laws or the administration of such laws;
- Changes in gaming laws or regulations, including legalization of gaming
in certain jurisdictions; and
- The requirement to apply for licenses and approvals under applicable
jurisdictional laws and regulations (including gaming laws and
regulations).
12. Effect of the Offer on the Market for Shares; Registration under the
Securities Exchange Act
Our purchase of shares in the offer will reduce the number of shares that
might otherwise trade publicly and is likely to reduce the number of
stockholders. Nonetheless, there will still be a sufficient number of shares
outstanding and publicly traded following the offer to ensure a continued
trading market in the shares. Based on the published guidelines of the NYSE,
we do not believe that our
27
purchase of shares pursuant to the offer will cause our remaining shares to be
delisted from such exchange.
The shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the shares. The company believes that,
following the purchase of shares pursuant to the offer, the shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The shares are registered under the Securities Exchange Act, which requires,
among other things, that we furnish certain information to our stockholders
and to the Commission and comply with the Commission's proxy rules in
connection with meetings of our stockholders. We believe that our purchase of
shares in the offer will not result in the shares becoming eligible for
deregistration under the Securities Exchange Act.
13. Certain Legal Matters
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by our acquisition
of shares as contemplated in the offer or of any approval or other action by
any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for our acquisition or
ownership of shares as contemplated by the offer. Should any such approval or
other action be required, we currently contemplate that we will seek such
approval or other action. We cannot predict whether we may determine that we
are required to delay the acceptance for payment of, or payment for, shares
tendered in the offer pending the outcome of any such matter. There can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that the failure to
obtain any such approval or other action might not result in adverse
consequences to our business. Our obligations under the offer to accept for
payment and pay for shares are subject to certain conditions. See Section 6.
14. Certain United States Federal Income Tax Consequences
In General. The following summary describes certain United States federal
income tax consequences relevant to the offer. The discussion contained in
this summary is based upon the Internal Revenue Code of 1986, existing and
proposed United States Treasury regulations promulgated thereunder, rulings,
administrative pronouncements and judicial decisions, changes to which could
materially affect the tax consequences described herein and could be made on a
retroactive basis. As discussed below, depending upon a stockholder's
particular circumstances, our purchase of such stockholder's shares pursuant
to the offer may be treated either as a sale or a dividend for United States
federal income tax purposes. Accordingly, such a purchase generally will be
referred to in this section of the offer to purchase as an "exchange" of
shares for cash.
Scope. This summary does not apply to shares acquired as compensation,
including shares acquired upon the exercise of options or which were or are
subject to forfeiture restrictions. The summary also does not address the
state, local or foreign tax consequences of participating in the offer. The
summary discusses only shares held as capital assets, within the meaning of
Section 1221 of the Code, and does not address all of the tax consequences
that may be relevant to particular stockholders in light of their personal
circumstances, or to certain types of stockholders, such as certain financial
institutions, dealers in securities or commodities, insurance companies, tax-
exempt organizations or persons who hold shares as a position in a "straddle"
or as a part of a "hedging" or "conversion"
28
transaction for United States federal income tax purposes. In particular, the
discussion of the consequences of an exchange of shares for cash pursuant to
the offer applies only to a United States stockholder. For purposes of this
summary, a "stockholder" is a holder of shares that is (1) a citizen or
resident of the United States, (2) a corporation, partnership or other entity
created or organized in or under the laws of the United States, any state or
any political subdivision thereof, or (3) an estate, the income of which is
subject to United States federal income taxation regardless of its source or
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
trustees have the authority to control all substantial decisions relating to
the trust. This discussion does not address the tax consequences to foreign
stockholders who will be subject to United States federal income tax on a net
basis on the proceeds of their exchange of shares pursuant to the offer
because such income is effectively connected with the conduct of a trade or
business within the United States. Such stockholders are generally taxed in a
manner similar to United States holders; however, certain special rules apply.
Foreign stockholders who are not subject to United States federal income tax
on a net basis should see Section 3 for a discussion of the applicable United
States withholding rules and the potential for obtaining a refund of all or a
portion of the tax withheld. Each stockholder should consult such
stockholder's tax advisor as to the particular consequences of participation
in the offer.
Characterization of the Sale. An exchange of shares by a stockholder
pursuant to the offer will be a taxable transaction for United States federal
income tax purposes and may also be a taxable transaction under any applicable
state, local and foreign tax laws. The United States federal income tax
consequences of such exchange to a stockholder may vary depending upon the
stockholder's particular facts and circumstances. Under Sections 302 and 304
of the Code, an exchange of shares by a stockholder to the company pursuant to
the offer will be treated as a "sale or exchange" of such shares for United
States federal income tax purposes, rather than as a deemed distribution by
the company with respect to shares continued to be held, or deemed to be held,
by the tendering stockholder, if the receipt of cash upon such exchange (1) is
"substantially disproportionate" with respect to the stockholder, (2) results
in a "complete termination" of the stockholder's interest in the company, or
(3) is "not essentially equivalent to a dividend" with respect to the
stockholder. These Section 302 tests are explained more fully below.
If any of the Section 302 tests are satisfied, and the sale of the tendered
shares is therefore treated as a "sale or exchange" of such shares for United
States federal income tax purposes, the tendering stockholder will recognize
capital gain or loss equal to the difference between the amount of cash
received by the stockholder pursuant to the offer and the stockholder's
adjusted tax basis in the shares sold pursuant to the offer. Any such gain or
loss recognized by individuals, trusts or estates will be long-term capital
gain or loss if the shares have been held for more than 12 months.
If none of the Section 302 tests are satisfied, then, to the extent our
current and accumulated earnings and profits, the tendering stockholder will
be treated as having received a dividend taxable as ordinary income in an
amount equal to the entire amount of cash received by the stockholder pursuant
to the offer, without reduction for the adjusted tax basis of the shares sold
pursuant to the offer, no loss will be recognized, and, subject to reduction
as described below for corporate stockholders eligible for the dividends-
received deduction, the tendering stockholder's adjusted tax basis in the
shares exchanged pursuant to the offer will be added to such stockholder's
adjusted tax basis in its remaining shares, if any. No assurance can be given
that any of the Section 302 tests will be satisfied as to any particular
stockholder, and thus no assurance can be given that any particular
stockholder will not be treated as having received a dividend taxable as
ordinary income. If the exchange of shares by a
29
stockholder is not treated as a sale or exchange for federal income tax
purposes, any cash received for shares pursuant to the offer in excess of our
current and accumulated earnings and profits will be treated, first, as a
nontaxable return of capital to the extent of the stockholder's shares, and
thereafter, as taxable capital gain, to the extent the cash received exceeds
such basis.
Constructive Ownership of Stock. In determining whether any of the Section
302 tests are satisfied, a stockholder must take into account not only the
shares which are actually owned by the stockholder, but also shares which are
constructively owned by the stockholder by reason of the attribution rules
contained in Section 318 of the Code, as modified by Section 304 of the Code.
Under Section 318 of the Code, as so modified, a stockholder may be treated as
owning (1) shares that are actually owned, and in some cases constructively
owned, by certain related individuals or entities in which the stockholder
owns an interest, or, in the case of stockholders that are entities, by
certain individuals or entities that own an interest in the stockholder, and
(2) shares which the stockholder has the right to acquire by exercise of an
option or a conversion right contained in another instrument held by the
stockholder. Contemporaneous dispositions or acquisitions of shares by a
stockholder or related individuals or entities may be deemed to be part of a
single integrated transaction which will be taken into account in determining
whether any of the Section 302 tests have been satisfied in connection with
shares sold pursuant to the offer. Each stockholder should be aware that
because proration may occur in the offer, even if all the shares actually and
constructively owned by a stockholder are tendered pursuant to the offer, we
may purchase fewer than all of such shares. Thus, proration may affect whether
a sale by a stockholder pursuant to the offer will meet any of the Section 302
tests.
Section 302 Tests. One of the following tests must be satisfied in order for
the exchange of shares pursuant to the offer to be treated as a sale or
exchange for federal income tax purposes.
a. Substantially Disproportionate Test. The receipt of cash by a stockholder
will be "substantially disproportionate" if the percentage of the
outstanding shares actually and constructively owned by the stockholder
immediately following the exchange of shares pursuant to the offer,
treating as not being outstanding all shares purchased pursuant to the
offer, is less than 80% of the percentage of the outstanding shares
actually and constructively owned by such stockholder immediately before
the exchange of shares pursuant to the offer, treating as outstanding all
shares purchased pursuant to the offer. Stockholders should consult their
own tax advisors with respect to the application of the "substantially
disproportionate" test to their particular situation and circumstances.
b. Complete Termination Test. The receipt of cash by a stockholder will be a
"complete termination" of the stockholder's interest in the company if
either (1) all of the shares actually and constructively owned by the
stockholder are exchanged pursuant to the offer, or (2) all of the shares
actually owned by the stockholder are exchanged pursuant to the offer and,
with respect to the shares constructively owned by the stockholder which
are not exchanged pursuant to the offer, the stockholder is eligible to
waive (and effectively waives) constructive ownership of all such shares
under procedures described in Section 302(c) of the Code. Stockholders
considering making such a waiver should do so in consultation with their
own tax advisors.
c. Not Essentially Equivalent to a Dividend Test. Even if the receipt of cash
by a stockholder fails to satisfy the "substantially disproportionate" test
and the "complete termination" test, a stockholder may nevertheless satisfy
the "not essentially equivalent to a dividend" test if the stockholder's
exchange of shares pursuant to the offer results in a "meaningful
reduction" in the stockholder's proportionate interest in the company.
Whether the receipt of cash by a stockholder
30
who exchanges shares pursuant to the offer will be "not essentially
equivalent to a dividend" will depend upon the stockholder's particular
facts and circumstances. The IRS has indicated in published Revenue Rulings
that even a small reduction in the proportionate interest of a small
minority stockholder in a publicly held corporation who exercises no
control over corporate affairs may constitute such a "meaningful
reduction." The IRS held, for example, in Rev. Rul. 76-385, 1976-2 C.B. 92,
that a reduction in the percentage ownership interest of a stockholder in a
publicly held corporation from .0001118% to .0001081% (a reduction of only
3.3% in the stockholder's prior percentage ownership interest) would
constitute a "meaningful reduction." Stockholders expecting to rely on the
"not essentially equivalent to a dividend" test should consult their own
tax advisors as to its application to their particular situation and
circumstances.
If a stockholder sells shares to persons other than the company at or about
the time such holder also exchanges shares pursuant to the offer, and the
various sales effected by the holder are part of an overall plan to reduce or
terminate such holder's proportionate interest in the company, then the sales
to persons other than the company may, for United States federal income tax
purposes, be integrated with the holder's exchange of shares pursuant to the
offer and, if integrated, should be taken into account in determining whether
the holder satisfies any of the three tests described above.
Corporate Stockholder Dividend Treatment. If an exchange of shares pursuant
to the offer by a corporate stockholder is treated as a dividend, the
corporate stockholder may be entitled to claim a deduction in an amount equal
to 70% of the gross dividend under Section 243 of the Code, subject to
applicable limitations. Corporate stockholders should consider the effect of
Section 246(c) of the Code, which disallows the 70% dividends-received
deduction with respect to any dividend on any share of stock that is held for
45 days or less during the 90-day period beginning on the date which is 45
days before the date on which such share becomes ex-dividend with respect to
such dividend. For this purpose, the length of time a taxpayer is deemed to
have held stock may be reduced by periods during which the taxpayer's risk of
loss with respect to the stock is diminished by reason of the existence of
certain options or other hedging transactions. Moreover, under Section 246A of
the Code, if a corporate stockholder has incurred indebtedness directly
attributable to an investment in shares, the 70% dividends-received deduction
may be reduced by a percentage generally computed based on the amount of such
indebtedness and the stockholder's total adjusted tax basis in the shares.
In addition, any amount received by a corporate stockholder pursuant to the
offer that is treated as a dividend will constitute an "extraordinary
dividend" under Section 1059 of the Code. Generally, an "extraordinary
dividend" is a dividend that (1) equals or exceeds 10% of the stockholder's
tax basis in its shares (treating all dividends having ex-dividend dates
within an 85-day period as a single dividend) or (2) exceeds 20% of the
stockholder's adjusted tax basis in the shares (treating all dividends having
ex-dividend dates within a 365-day period as a single dividend). Accordingly,
a corporate stockholder would be required under Section 1059(a) of the Code to
reduce its adjusted tax basis, but not below zero, in its shares by the non-
taxed portion of the extraordinary dividend, i.e., the portion of the dividend
for which a deduction is allowed, and, if such portion exceeds the
stockholder's adjusted tax basis in its shares, to treat the excess as gain
from the sale of such shares in the year in which the dividend is received.
These basis reduction and gain recognition rules would be applied by taking
account only of the stockholder's adjusted tax basis in the shares that were
sold, without regard to other shares that the stockholder may continue to own.
Corporate stockholders should consult their own tax advisors as to the
application of Section 1059 of the Code to the offer, and to any dividends
which may be treated as paid with respect to shares sold pursuant to the
offer.
We cannot predict whether or to what extent the offer will be
oversubscribed. If the offer is oversubscribed, proration of the tenders
pursuant to the offer will cause us to accept fewer shares than
31
are tendered. Therefore, a stockholder can be given no assurance that a
sufficient number of such stockholder's shares will be exchanged pursuant to
the offer to ensure that such exchange will be treated as a sale, rather than
as a dividend, for United States federal income tax purposes pursuant to the
rules discussed above.
If a stockholder who exchanges shares pursuant to the offer is not treated
under Section 302 of the Code as having sold such holder's shares for cash,
the entire amount of cash received by such stockholder will be treated as a
dividend to the extent of our current and accumulated earnings and profits,
which we anticipate will be sufficient to cover the amount of any such
dividend and will be includible in the stockholder's gross income as ordinary
income in its entirety, without reduction for the tax basis of the shares
exchanged. No loss will be recognized. The stockholder's tax basis in the
shares exchanged generally will be added to such holder's tax basis in such
holder's remaining shares. To the extent that cash received in exchange for
shares is treated as a dividend to a corporate stockholder, such stockholder
will be, (1) eligible for a dividends-received deduction (subject to
applicable limitations) and (2) subject to the "extraordinary dividend"
provisions of the Code. To the extent, if any, that the cash received by a
stockholder exceeds our current and accumulated earnings and profits, it will
be treated first as a tax-free return of such holder's tax basis in the shares
and thereafter as capital gain.
Backup Withholding. See Section 3 with respect to the application of United
States federal income tax backup withholding.
Tax Considerations for Holders of Option Shares. A holder of a non-qualified
stock option (or an incentive stock option that as a result of the holder's
participation in the offer constitutes a disqualifying disposition of said
option) who receives cash in the offer in exchange for option shares will be
treated as receiving compensation income per share sold equal to the excess of
$50.00 over the exercise price per share of the relevant option. Such income
will be taxed to the option holder at ordinary income rates and will be
subject to withholding for income and employment taxes. A holder of shares
received with respect to the exercise of an incentive stock option more than
12 months prior to the date the shares were purchased will be taxed as
described under the heading "characterization of the sale" if any of the
Section 302 tests are satisfied and as described under the heading
"characterization of the sale" if none of the Section 302 tests are satisfied.
The tax consequences of a sale of shares in the offer may vary depending
upon, among other things, the particular situation and circumstances of the
tendering stockholder. No information is provided herein as to the state,
local or foreign tax consequences of the transaction contemplated by the
offer. Stockholders are urged to consult their own tax advisors to determine
the specific federal, state, local, foreign and other tax consequences of
sales made by them pursuant to the offer, including the effect of the stock
ownership attribution rules mentioned above.
15. Extension of the Offer; Termination; Amendment
We expressly reserve the right, in our sole discretion, at any time and from
time to time, and regardless of whether or not any of the events set forth in
Section 6 occur or are deemed by us to have occurred, to extend the period of
time during which the offer is open and thereby delay acceptance for payment
of, and payment for, any shares by giving oral or written notice of such
extension to the depositary and making a public announcement of the extension.
We also expressly reserve the right, in our sole discretion, to terminate the
offer and not accept for payment or pay for any shares not already accepted
for payment or paid for or, subject to applicable law, to postpone payment for
shares
32
upon the occurrence of any of the conditions specified in Section 6 by giving
oral or written notice of such termination or postponement to the depositary
and making a public announcement of the termination or postponement. Our
reservation of the right to delay payment for shares which we have accepted
for payment is limited by Rule 13e-4(f)(5) under the Securities Exchange Act,
which requires that we must pay the consideration offered or return the shares
tendered promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, we further reserve the right, in
our sole discretion, and regardless of whether any of the events set forth in
Section 6 shall occur or are deemed by us to have occurred, to amend the offer
in any respect, including, without limitation, by decreasing or increasing the
consideration offered in the offer to holders of shares or by decreasing or
increasing the number of shares being sought in the offer. Amendments to the
offer may be made at any time and from time to time effected by public
announcement. Such announcement, in the case of an extension, shall be issued
no later than 9:00 a.m., New York city time, on the next business day after
the last previously scheduled or announced expiration date. Any public
announcement made pursuant to the offer will be disseminated promptly to
stockholders in a manner reasonably designated to inform stockholders of such
change. Without limiting the manner in which we may choose to make any public
announcement, except as provided by applicable law, including Rule 13e-4(e)(2)
promulgated under the Securities Exchange Act, we shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If we make a material change in the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we
will extend the offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Securities Exchange Act, which require that the minimum
period during which an offer must remain open following material changes in
the terms of the offer or information concerning the offer, other than a
change in price or a change in percentage of securities sought, will depend
upon the facts and circumstances, including the relative materiality of such
terms or information. If (1) we increase or decrease the price to be paid for
shares, we increase or decrease the dealer manager's soliciting fee, we
increase the number of shares being sought and such increase in the number of
shares being sought exceeds 2% of the outstanding shares, or we decrease the
number of shares being sought, and (2) the offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that notice of such increase or decrease is
first published, sent or given, we will extend the offer until the expiration
of such period of ten business days.
16. Fees and Expenses
We have retained Donaldson, Lufkin & Jenrette Securities Corporation to act
as the dealer manager in connection with the offer. Donaldson, Lufkin &
Jenrette Securities Corporation will receive reasonable and customary
compensation for its services as dealer manager. We have agreed to indemnify
Donaldson, Lufkin & Jenrette Securities Corporation against certain
liabilities in connection with the offer, including certain liabilities under
the federal securities laws. Donaldson, Lufkin & Jenrette Securities
Corporation has rendered various investment banking and other advisory
services to the company in the past, for which they have received customary
compensation, and can be expected to render similar services to the company in
the future.
We have retained ChaseMellon Shareholder Services, LLC as information agent
and as depositary in connection with the offer, which will receive reasonable
and customary compensation for its
33
services. We will also reimburse the information agent and the depositary for
out-of-pocket expenses and have agreed to indemnify the information agent and
the depositary against certain liabilities in connection with the offer,
including certain liabilities under the federal securities laws. The dealer
manager and information agent may contact stockholders by mail, telephone,
telex, telegraph and personal interviews, and may request brokers, dealers and
other nominee stockholders to forward materials relating to the offer to
beneficial owners. Neither the information agent nor the depositary has been
retained to make solicitations or recommendations in connection with the
offer.
We will not pay fees or commissions to any broker, dealer, commercial bank,
trust company or other person, other than the dealer managers, for soliciting
any shares pursuant to the offer. We will, however, on request, reimburse such
persons for customary handling and mailing expenses incurred in forwarding
materials in respect of the offer to the beneficial owners for which they act
as nominees. No such broker, dealer, commercial bank or trust company has been
authorized to act as our agent for purposes of the offer. We will pay, or
cause to be paid, any stock transfer taxes on its purchase of shares, except
as otherwise provided in instruction 7 of the letter of transmittal.
17. Miscellaneous
We are not aware of any jurisdiction where the making of the offer is not in
compliance with applicable law. If we become aware of any jurisdiction where
the making of the offer is not in compliance with any valid applicable law, we
will make a good faith effort to comply with such law. If, after such good
faith effort, we cannot comply with such law, we will not make the offer to,
nor will we accept tenders from or on behalf of, the holders of shares
residing in such jurisdiction. In any jurisdiction where the securities or
blue sky laws of which require the offer to be made by a licensed broker or
dealer, the offer is being made on our behalf by the dealer managers or one or
more registered brokers or dealers licensed under the laws of such
jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Securities Exchange Act, we
have filed with the Commission an Issuer Tender Offer Statement on Schedule
13E-4 which contains additional information with respect to the offer. The
Schedule 13E-4, including the exhibits and any amendments thereto, may be
examined, and copies may be obtained, at the same places and in the same
manner as is set forth in Section 11 with respect to information concerning
us.
No person has been authorized to give any information or make any
representation on behalf of us or the dealer manager in connection with the
offer other than those contained in this offer to purchase or in the related
letter of transmittal. If given or made, such information or representation
must not be relied upon as having been authorized by us or the dealer manager.
MGM GRAND, INC.
June 17, 1999
34
SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
Except as set forth below, based upon the records of MGM Grand, Inc. and
upon information provided to the company by its directors, executive officers,
associates and subsidiaries, neither the company nor any of its associates or
subsidiaries or persons controlling the company nor, to the best of the
company's knowledge, any of the directors or executive officers of the
company, nor any associates or subsidiary of any of the foregoing, has
effected any transactions in the company's common stock during the 40 business
days prior to June 17, 1999.
[Download Table]
Date of Type of Number Price
Name & Title Transaction Transaction of Shares Per Share
------------ ----------- ---------------- --------- ---------
Fred Benninger 5/11/99 Option Exercise 50,000 $ 26.00
Director 5/11/99 Open Market Sale 50,000 48.00
Daniel Wade 5/6/99 Option Exercise 15,000 $ 19.125
Executive Vice President 5/6/99 Option Exercise 27,500 24.00
& Chief Operating Officer 5/6/99 Option Exercise 15,000 26.00
5/6/99 Option Exercise 14,000 25.00
5/6/99 Open Market Sale 71,500 46.50
Scott Langsner 4/26/99 Option Exercise 25,000 $ 11.50
Secretary/Treasurer 4/26/99 Open Market Sale 25,000 43.0625
Edward Jenkins 4/30/99 Open Market Sale 300 $ 44.00
Vice President 4/26/99 Option Exercise 15,000 24.00
4/26/99 Open Market Sale 15,000 43.0625
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Facsimile copies of the letter of transmittal will be accepted. A holder of
shares, other than option shares, or such stockholder's broker, dealer,
commercial bank, trust company or other nominee should properly complete and
send or deliver the letter of transmittal and certificates for the shares and
any other required documents to the depositary at its address set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
[Download Table]
By Mail: By Overnight Courier: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, N.J. 07606 Mail Drop-Reorg New York, N.Y. 10271
Attn: Reorganization Dept. Ridgefield Park, N.J. 07660 Attn: Reorganization Dept.
Attn: Reorganization Dept.
By Facsimile Transmission: (201) 296-4293
Confirm Receipt of Notice of Guaranteed Delivery by Telephone (collect): (201)
296-4860
Any questions or requests for assistance or for additional copies of this
offer to purchase, the letter of transmittal or the notice of guaranteed
delivery may be directed to the information agent, at the telephone number and
address below. Stockholders may also contact their broker, dealer, commercial
bank or trust company for assistance concerning the offer. To confirm delivery
of shares, stockholders are directed to contact the depositary.
The Information Agent for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, LLC
450 West 33rd Street
14th Floor
New York, New York 10001
(800) 774-5469
Banks and Brokers Call(collect): (212) 273-8080
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
(212) 892-3000 (call collect)
June 17, 1999
36
Dates Referenced Herein and Documents Incorporated by Reference
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