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 25K
2: EX-99.(A)(1) Form of Offer to Purchase 34 158K
3: EX-99.(A)(2) Form of Letter of Transmittal 12 54K
4: EX-99.(A)(3) Form of Notice of Guaranteed Delivery 2 16K
5: EX-99.(A)(4) Form of Letter to Brokers, Dealers 2 13K
6: EX-99.(A)(5) Form of Letter to Clients 2 13K
7: EX-99.(A)(6) Press Release Dated 6/23/98 2 12K
8: EX-99.(A)(7) Form of Summary Advertisement 4± 17K
9: EX-99.(A)(8) Substitute W-9 Tax Guidelines 4± 16K
10: EX-99.(G)(1) Exhibit 13 to Company's Annual Report on Form 37 182K
10-K
11: EX-99.(G)(2) Certain Pages of the Company's Form 10-Q 9 47K
12: EX-99.(G)(3) Consent of Independent Accountants 1 6K
EXHIBIT (a)(1)
MGM GRAND, INC.
OFFER TO PURCHASE FOR CASH UP TO 6,000,000 SHARES OF ITS COMMON STOCK AT A
PURCHASE PRICE OF $35.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON FRIDAY, JULY 31, 1998, UNLESS THE OFFER IS EXTENDED.
MGM Grand, Inc., a Delaware corporation (the "Company"), invites its
stockholders to tender shares of its common stock, par value $.01 per share
(the "Shares"), to the Company at a price of $35.00 per Share in cash, 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").
The Company will pay $35.00 per Share, net to the seller in cash (the
"Purchase Price"), for Shares validly tendered and not withdrawn, upon the
terms and subject to the conditions of the Offer, including the proration
terms hereof. The Company 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 Shares are listed and principally traded on the New York Stock Exchange,
Inc. (the "NYSE") under the symbol "MGG." On June 22, 1998, the last full
trading day on the NYSE prior to the announcement by the Company of the price
of and the number of Shares sought in the Offer, the closing per Share sales
price as reported on the NYSE Composite Tape was $26.625. STOCKHOLDERS ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE SECTION 7.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS
MAKES ANY RECOMMENDATION AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
SHARES. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS, SENIOR
EXECUTIVE OFFICERS OR PRINCIPAL STOCKHOLDER INTENDS TO TENDER ANY SHARES
PURSUANT TO THE OFFER.
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
The Date of this Offer to Purchase is July 2, 1998.
IMPORTANT
Any stockholders desiring to tender all or any portion of their Shares
should either: (i) 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 (the "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 (ii) request a broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. A 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. TO
EFFECT A VALID TENDER OF SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE LETTER
OF TRANSMITTAL.
Questions and 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 its address and telephone number
set forth on the back cover of this Offer to Purchase.
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).
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SUMMARY
This general summary is provided for the convenience of the Company's
stockholders 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.
Purchase Price $35.00 net to the seller in cash.
How to Tender Shares See Section 3. CALL THE INFORMATION AGENT
(CHASEMELLON SHAREHOLDER SERVICES, LLC) AT
(800) 953-2497 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 31, 1998, at 5:00 p.m., New York
City time, unless extended by the Company.
Payment Date As soon as practicable after the Expiration
Date.
Position of the Company Neither the Company nor its Board of
Directors makes any recommendation to any
stockholder as to whether to tender or
refrain from tendering Shares. The Company
has been advised that none of its directors,
senior executive officers or principal
stockholder intends to tender any Shares
pursuant to the Offer.
Withdrawal Rights Tendered Shares may be withdrawn at any time
until 5:00 p.m., New York City time, on
Friday, July 31, 1998 (unless the Offer is
extended by the Company) and, unless
previously purchased, at any time after 12:00
midnight, New York City time, on Thursday,
August 27, 1998. 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 as of the
close of business on June 30, 1998 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 and, if applicable, the Notice of
Guaranteed Delivery.
Further Developments Call the Information Agent or consult your
broker.
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THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION
WITH THE OFFER ON BEHALF OF THE COMPANY 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 THE COMPANY OR THE DEALER MANAGER.
TABLE OF CONTENTS
[Download Table]
SECTION PAGE
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Summary................................................................... 3
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..................................................... 12
5. Purchase of Shares and Payment of Purchase Price...................... 13
6. Certain Conditions of the Offer....................................... 14
7. Price Range of Shares................................................. 16
8. Background and Purpose of the Offer; Certain Effects of the Offer..... 16
9. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares.................................... 17
10. Source and Amount of Funds............................................ 18
11. Certain Information about the Company................................. 19
12. Effect of the Offer on the Market for Shares; Registration under the
Exchange Act.......................................................... 24
13. Certain Legal Matters................................................. 24
14. Certain United States Federal Income Tax Consequences................. 25
15. Extension of the Offer; Termination; Amendment........................ 30
16. Fees and Expenses..................................................... 31
17. Miscellaneous......................................................... 31
SCHEDULE I--Certain Transactions Involving Shares......................... 33
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To the holders of shares of Common Stock of
MGM Grand, Inc.:
INTRODUCTION
MGM Grand, Inc., a Delaware corporation (the "Company"), invites its
stockholders to tender shares of its common stock, par value $.01 per share
(the "Shares"), to the Company at a price of $35.00 per Share in cash, 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").
The Company will pay $35.00, net to the seller in cash (the "Purchase
Price"), for all 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. The
Company 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.
If, before the Expiration Date, more than 6,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase) are validly tendered
and not withdrawn, the Company will, upon the terms and subject to the
conditions of the Offer, purchase Shares first from all Odd Lot Owners (as
defined in Section 2) 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). The Company will return at its
own expense all Shares not purchased pursuant to the Offer, including Shares
not purchased because of proration. The Purchase Price will be paid net to the
tendering stockholder in cash for all Shares purchased. 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.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS
MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS
DIRECTORS, SENIOR EXECUTIVE OFFICERS OR PRINCIPAL STOCKHOLDER INTENDS TO
TENDER ANY SHARES PURSUANT TO THE OFFER.
On June 23, 1998, the Company announced its intention to make an offer to
purchase up to 6,000,000 Shares at $35.00 per Share as part of a 12,000,000
Share repurchase program, with the Offer
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to commence on July 2, 1998. The Company is making the Offer because it
believes (i) the Shares to be significantly undervalued in the public market;
(ii) in light of the Company's strong financial position and excess cash
balances due to slower than anticipated expenditures related to the Atlantic
City and Detroit developments, investing in the Company's Shares represents an
attractive use of the Company's capital and an efficient way to provide value
to the Company's stockholders; and (iii) 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, the Company expects to have sufficient
cash, cash flow and access to other sources of capital to fund its operations
and capital projects, including the on-going transformation of MGM Grand Las
Vegas into the City of Entertainment and the proposed hotel/casino
developments in Atlantic City, New Jersey and Detroit, Michigan.
Stockholders who are participants in the Company's Employee Stock Purchase
Plan (the "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 30, 1998, there were 58,001,480 Shares outstanding and 4,426,786
Shares issuable upon exercise of outstanding stock options under the Company's
stock option plans (the "Options"). The 6,000,000 Shares that the Company is
offering to purchase represent approximately 10.3% of the outstanding Shares
(approximately 9.6% assuming the exercise of all outstanding Options). The
Shares are listed on the New York Stock Exchange, Inc. ("NYSE") under the
symbol "MGG." On June 22, 1998, the last full trading day on the NYSE prior to
the announcement by the Company of the Purchase Price of and the number of
Shares sought in the Offer, the closing per Share sales price, as reported on
the NYSE Composite Tape, was $26.625. THE COMPANY URGES STOCKHOLDERS TO OBTAIN
CURRENT QUOTATIONS OF THE MARKET PRICE OF THE SHARES.
THE OFFER
1. NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) 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 $35.00 per
Share. The term "Expiration Date" means 5:00 p.m., New York City time, on
Friday, July 31, 1998, unless and until the Company in its sole discretion
shall have extended 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 the Company, shall expire. See Section
15 for a description of the Company's right to extend the time during which
the Offer is open and to delay, terminate or amend the Offer. Subject to
Section 2, if the Offer is oversubscribed, Shares tendered before the
Expiration Date will be eligible for proration. The proration period also
expires on the Expiration Date.
The Company reserves the right, in its 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 (the
"Commission"), the Company may purchase pursuant to the Offer an additional
amount of Shares not to exceed 2% of the outstanding Shares without amending
or extending the Offer. If (i) the Company increases or decreases the price to
be paid for Shares, the Company increases or decreases the fee of Merrill
Lynch & Co. (the "Dealer Manager"), the
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Company increases the number of Shares being sought and such increase in the
number of Shares being sought exceeds 2% of the outstanding Shares, or the
Company decreases the number of Shares being sought and (ii) 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 in the manner specified
in Section 15, the Offer will be extended until the expiration of such period
of ten business days. For purposes of the Offer, a "business day" means any
day other than 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.
The Company will pay the Purchase Price for all Shares validly tendered
prior to the Expiration Date and not withdrawn, upon the terms and subject to
the conditions of the Offer. All Shares not purchased pursuant to the Offer,
including Shares not purchased because of proration, will be returned to the
tendering stockholders at the Company's expense as promptly as practicable
following the Expiration Date.
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 the Company may elect to purchase), the Company 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 the Company may elect to purchase pursuant to the
Offer) are validly tendered and not withdrawn, the Company will purchase such
validly tendered Shares in the following order of priority:
(i) all Shares validly tendered and not withdrawn prior to the Expiration
Date by any Odd Lot Owner (as defined in Section 2) who:
(a) tenders all Shares 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
(ii) 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 of tendered Shares is required, the
Company 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 will be purchased from each such stockholder pursuant to
the Offer. Although the Company does not expect to be able to announce the
final results of such proration until approximately seven business days after
the Expiration Date, it will announce preliminary results of proration by
press release as promptly as practicable after the Expiration Date.
Stockholders can obtain such preliminary information from the Information
Agent and may be able to obtain such information from their brokers.
7
As described in Section 14, the number of Shares that the Company 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.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares as of June 30, 1998 and will be furnished to
brokers, banks and similar persons whose names, or the names of whose
nominees, appear on the Company's 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
The Company, upon the terms and subject to the conditions of the Offer, 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 stockholders
who beneficially owned as of the close of business on June 30, 1998, and
continue to beneficially own as of the Expiration Date, an aggregate of fewer
than 100 Shares ("Odd Lot Owners"). 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 pursuant to 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. 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.
The Company also reserves 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 the Company exercises this
right, it will increase the number of Shares that it is offering to purchase
in the Offer by the number of Shares purchased through the exercise of such
right.
3. PROCEDURE FOR TENDERING SHARES
Proper Tender of Shares. For Shares to be validly tendered pursuant to the
Offer:
(i) 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
(ii) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
8
In addition, Odd Lot Owners who tender all Shares must complete the section
entitled "Odd Lots" on the Letter of Transmittal and, if applicable, on the
Notice of Guaranteed Delivery, in order to qualify for the preferential
treatment available to Odd Lot Owners as set forth in Section 2.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letter of Transmittal if (i) the Letter of Transmittal is
signed by the registered holder of the Shares (which term, for purposes of
this Section, includes any participant in The Depository Trust Company (the
"Book-Entry Transfer Facility") whose name appears on a security position
listing as the holder of the Shares) tendered therewith and payment and
delivery are to be made directly to such registered holder, or (ii) if Shares
are tendered for the account of 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 (each such entity being hereinafter referred to as an "Eligible
Institution"). 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. 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 DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
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, or the guaranteed delivery procedure set forth below must be followed.
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
9
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 the Company 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.
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.
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
9 and 10 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.
10
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 (i) a citizen or resident of the
United States; (ii) 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; (iii) an estate, the income of which is subject
to United States federal income taxation regardless of the source of such
income; or (iv) a trust if a court within the United States is able to
exercise primary supervision of the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of 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. Backup withholding generally
will not apply to amounts subject to the 30% or a treaty-reduced rate of
withholding. 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 9 and 10 of the Letter of Transmittal.
Employee Stock Purchase Plan. As of June 26, 1998, the Purchase Plan owned
37,924 Shares. Shares credited to participants' accounts under the Purchase
Plan will be tendered by ChaseMellon Shareholder 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 and the price at which such
participant's Shares are to 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; Company's Acceptance
Constitutes an Agreement. It is a violation of Rule 14e-4 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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 has a "net long position" equal to or
greater than the amount tendered in (i) the Shares and will deliver or cause
to be delivered such Shares for the purpose of tender to the Company within
the period specified in the Offer, or (ii) other securities immediately
convertible into, exercisable for or exchangeable into Shares ("Equivalent
Securities") and, upon the acceptance of
11
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 the Company within the period specified in the Offer.
Rule 14e-4 also provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. A tender of Shares made
pursuant to any method of delivery set forth herein will constitute the
tendering stockholder's representation and warranty to the Company that
(i) such stockholder has a "net long position" in Shares or Equivalent
Securities being tendered within the meaning of Rule 14e-4, and (ii) such
tender of Shares complies with Rule 14e-4. The Company's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms and
subject to the conditions of the Offer.
Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. 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 will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any or all tenders it determines not to
be in proper form or the acceptance of or payment for which may, in the
opinion of the Company's counsel, be unlawful. The Company also reserves 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 the Company, 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 accepted for
payment by the Company as provided in this Offer to Purchase, may also be
withdrawn after 12:00 midnight, New York City time, on Thursday, August 27,
1998.
For a withdrawal 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.
12
All questions as to the form and validity, including time of receipt, of
notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall 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.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain on behalf of the Company 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, the Company will
purchase and pay the Purchase Price for all of the Shares accepted for payment
pursuant to the Offer as soon as practicable after the Expiration Date. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made promptly (subject to possible delay in the event of
proration) but only after timely receipt by the Depositary of certificates for
Shares (or of a timely confirmation of a book-entry transfer of such Shares
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) and any other required documents.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payment from the Company and transmitting payment to the tendering
stockholders. In the event of proration, the Company will determine the
proration factor and pay for those tendered Shares accepted for payment as
soon as practicable after the Expiration Date. However, the Company does 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 the Company 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, the Company may not be obligated to purchase Shares pursuant to the
Offer. See Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it 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
13
satisfactory to the Company 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.
6. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company 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 July
2, 1998 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 shall have occurred (or
shall have been determined by the Company to have occurred) that, in the
Company's judgment in any such case and regardless of the circumstances giving
rise thereto (including any action or omission to act by the Company), makes
it inadvisable to proceed with the Offer or with such acceptance for payment
or payment:
(a) there shall have been threatened, instituted or pending before any court,
agency, authority or other tribunal any action, suit or proceeding by any
government or governmental, regulatory or administrative agency or
authority or by any other person, domestic or foreign, or any judgment,
order or injunction entered, enforced or deemed applicable by any such
court, authority, agency or tribunal, which (i) 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 (ii) could, in the sole judgment of the
Company, materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries, taken
as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company and its subsidiaries, taken
as a whole, or materially impair the Offer's contemplated benefits to the
Company; or
(b) there shall have been any action threatened or taken, or any approval
withheld, or any statute, rule or regulation invoked, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or the Company or any of its subsidiaries, by any
government or governmental, regulatory or administrative authority or
agency or tribunal, domestic or foreign, which, in the sole judgment of
the Company, would or might directly or indirectly result in any of the
consequences referred to in clause (i) or (ii) of paragraph (a) above; or
(c) there shall have occurred (i) the declaration of any banking moratorium or
any suspension of payments in respect of banks in the United States
(whether or not mandatory); (ii) 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; (iii) the
commencement or escalation of a war, armed hostilities or any other
national or international crisis directly or indirectly involving the
United States; (iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event which, in the sole judgment of the Company, might materially affect,
the extension of credit by banks or other lending institutions in
14
the United States; (v) 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 the sole judgment of the Company a
material adverse effect on the business, condition (financial or
otherwise), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or on the trading in the Shares or on the
proposed financing for the Offer; (vi) in the case of any of the foregoing
existing at the time of the announcement of the Offer, a material
acceleration or worsening thereof; or (vii) 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 July 1, 1998; or
(d) any change shall occur or be threatened in the business, condition
(financial or other), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, which in the sole judgment of the
Company is or may be material to the Company and its subsidiaries taken as
a whole; or
(e) a tender or exchange offer with respect to some or all of the Shares
(other than the Offer), or a merger or acquisition proposal for the
Company, shall have been proposed, announced or made by another person or
shall have been publicly disclosed, or the Company shall have learned that
(i) any person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) shall have acquired or proposed to acquire beneficial
ownership of more than 5% of the outstanding Shares, or any new group
shall have been formed that beneficially owns more than 5% of the
outstanding Shares; or
(f) any person or group shall have filed a Notification and Report Form under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 reflecting an
intent to acquire the Company or any of its Shares.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition (including any action or inaction by the Company) or may be
waived by the Company in whole or in part. The Company's 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 at any time and from time to time. Any determination by the Company
concerning the events described above and any related judgment or decision by
the Company regarding the inadvisability of proceeding with the purchase of or
payment for any Shares tendered will be final and binding on all parties.
15
7. PRICE RANGE OF SHARES
The Shares are listed on the NYSE. The high and low closing 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 1996
1st Quarter.............................................. $39.75 $22.75
2nd Quarter.............................................. 47.875 38.375
3rd Quarter.............................................. 43.25 35.50
4th Quarter.............................................. 45.125 34.125
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
On June 22, 1998, the last full trading day on the NYSE prior to the
announcement by the Company of the Purchase Price and the number of Shares
sought in the Offer, the closing per Share price on the NYSE was $26.625. THE
COMPANY URGES 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 23, 1998, the Company announced its intention to make an offer to
purchase up to 6,000,000 Shares at $35.00 per Share as part of a 12,000,000
Share repurchase program, with the Offer to commence on July 2, 1998. The
Company is making the Offer because it believes (i) the Shares to be
significantly undervalued in the public market; (ii) in light of the Company's
strong financial position and excess cash balances due to slower than
anticipated expenditures related to the Atlantic City and Detroit
developments, investing in the Company's Shares represents an attractive use
of the Company's capital and an efficient way to provide value to the
Company's stockholders; and (iii) 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, the Company expects to have sufficient cash, cash flow
and access to other sources of capital to fund its operations and capital
projects, including the ongoing transformation of the MGM Grand Hotel/Casino
in Las Vegas, Nevada ("MGM Grand Las Vegas") into the City of Entertainment
and the proposed hotel/casino developments in Atlantic City, New Jersey and
Detroit, Michigan.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares the opportunity to sell their Shares to the Company at
$35.00 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 the Company for services to
stockholders will be reduced. Stockholders who determine not to accept the
Offer will increase their proportionate interest in the Company's equity, and
thus in the Company's
16
future earnings and assets, subject to the Company's right to issue additional
Shares and other equity securities in the future.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS
MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN
FROM TENDERING SHARES AND NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS
AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. THE COMPANY HAS BEEN
ADVISED THAT NONE OF ITS DIRECTORS, SENIOR EXECUTIVE OFFICERS OR PRINCIPAL
STOCKHOLDER INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
As set forth in the Company's press release dated June 23, 1998 and under
"Certain Information about the Company," the Offer is part of the Company's
program to repurchase an aggregate of 12,000,000 Shares. The Company
anticipates that, depending on market conditions, the remaining Shares in the
repurchase program may be acquired in the open market, in private
transactions, through a tender offer or offers or otherwise. The Company may
in the future also repurchase Shares outside of the repurchase program 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 promulgated
under the Exchange Act generally prohibits the Company and its affiliates from
purchasing any Shares, other than pursuant to the Offer, until at least ten
business days after the expiration or termination of the Offer. Any possible
future purchases by the Company will depend on many factors, including the
market price of the Shares, the results of the Offer, the Company's business
and financial position and general economic and market conditions.
Shares the Company acquires pursuant to the Offer will be retained as
treasury stock by the Company (unless and until the Company determines to
retire such Shares) and will be available for the Company to issue without
further stockholder action (except as required by applicable law or, if
retired, the rules of any securities exchange on which Shares are listed) for
purposes including, but not limited to, the acquisition of other businesses,
the raising of additional capital for use in the Company's business and the
satisfaction of obligations under existing or future employee benefit plans.
The Company has no current plans for issuance of the Shares repurchased
pursuant to the Offer.
As a result of the Offer, on June 23, 1998, Standard & Poor's revised its
outlook on the Company to negative from stable, but reaffirmed the Company's
corporate credit, bank loan and first mortgage note ratings at triple-"B'-
minus. On June 24, 1998, Moody's Investors Service downgraded the Company's
debt ratings to Ba1 from Baa3 and indicated that the rating outlook is stable.
9. INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE SHARES
As of June 30, 1998, there were 58,001,480 Shares outstanding and 4,426,786
Shares issuable upon exercise of all outstanding options. As of June 30, 1998,
the Company's directors and executive officers as a group (15 persons)
beneficially owned 37,173,389 Shares (including 788,400 Shares issuable to
such persons upon exercise of Options exercisable within sixty days of such
date ("Exercisable Options")) which constituted approximately 63.2% of the
outstanding Shares (including Shares issuable if all Exercisable Options held
by directors and executive officers were exercised) at such time. Included in
the foregoing is an aggregate of 36,239,822 Shares which are held by Kirk
Kerkorian and Tracinda Corporation, which is wholly owned by Mr. Kerkorian,
representing approximately 62.5% of the outstanding Shares.
17
If the Company purchases 6,000,000 Shares pursuant to the Offer (10.3% of
the outstanding Shares as of June 30, 1998) and no director or executive
officer tenders Shares pursuant to the Offer, then after the purchase of
Shares pursuant to the Offer, the Company's directors and executive officers
as a group would beneficially own approximately 70.4% of the outstanding
Shares (including Shares issuable on exercise of Exercisable Options held by
directors and executive officers), and Mr. Kerkorian and Tracinda Corporation
would beneficially own approximately 69.7% of the outstanding Shares.
Based upon a recommendation from management in early June 1998 and, in light
of the current competitive environment in Las Vegas and in order to retain
qualified and talented personnel, the Compensation Committee of the Board of
Directors of the Company approved an offer to employees to reprice their out-
of-the-money options (covering an aggregate of 1,973,077 Shares, including
options to purchase 494,500 Shares held by the Company's officers and
directors). The original options had exercise prices ranging from $29.375 to
$44.00, and the new options have an exercise price of $26.625. Such repricing
offer will be made, subject to stockholder approval of an increase in the
Shares subject to the Company's 1997 Employee Stock Option Plan, only to
option holders who agree to accept the new price and certain conditions
including (1) commencement of a new holding period for vesting of options
(whether or not the initial options had vested) and (2) a one-year extension
of employee employment contracts, at the Company's option, where applicable.
The repricing offer will not be made to the Company's outside directors. Such
repricing does not affect options held by the Chairman or the President of the
Company.
Except as set forth in this Offer to Purchase and in Schedule I hereto,
based upon the Company's records 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 or any of its 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 the Company or any
person controlling the Company nor, to the Company's knowledge, any of its
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 securities of the Company
(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 the Company purchases 6,000,000 Shares pursuant to the Offer
at a purchase price of $35.00 per Share, the Company expects the maximum
aggregate cost, including all fees and expenses applicable to the Offer, to be
approximately $210.6 million. The Company estimates 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, existing credit facilities.
Although the Company currently does not have specific plans, it 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 the Company
deems appropriate.
18
11. CERTAIN INFORMATION ABOUT THE COMPANY
The Company is an entertainment, hotel and gaming company headquartered in
Las Vegas, Nevada. The Company owns and operates the MGM Grand Las Vegas, the
MGM Grand Hotel/Casino in Darwin, Australia, owns a 50% interest in, and is a
joint operator of, the New York-New York Hotel/Casino in Las Vegas and manages
casinos in South Africa. The Company is also planning to construct destination
hotel/casino resorts in Atlantic City, New Jersey and Detroit, Michigan.
On June 23, 1998, the Company announced that while hotel occupancy in the
second quarter of 1998 has been in the high 90th percentile, it anticipates
that a lower than average table games hold percentage at MGM Grand Las Vegas
will result in second quarter earnings in a range of $.25 to $.30 per share.
The table games hold percentage is expected to be in the low teens compared
with an industry average of 18% to 20%.
The Company was incorporated in the State of Delaware in January 1986. The
executive offices of the Company are located at 3799 Las Vegas Boulevard
South, Las Vegas, Nevada 89109. The Company's mailing address is P.O. Box
98655, Las Vegas, Nevada 89193, and its telephone number is (702) 891-3333.
Historical Financial Information. The table below sets forth historical
summary consolidated financial information of the Company and its
subsidiaries. The historical financial information for fiscal years 1996 and
1997 has been derived from, and should be read in conjunction with, the
audited consolidated financial statements of the Company as reported in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997, and the interim consolidated financial statements of the Company as
reported in the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1998. Such Form 10-K and Form 10-Q are 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 Commission in the manner specified in "Additional
Information" below.
19
MGM GRAND, INC. AND SUBSIDIARIES
HISTORICAL SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
[Download Table]
FOR THE YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
Revenues:
Gross revenues............... $ 856,438 $ 891,330 $ 212,597 $195,610
Less: promotional allowances. 56,249 63,733 15,099 15,763
---------- ---------- ---------- ----------
Net Revenue................ 800,189 827,597 197,498 179,847
---------- ---------- ---------- ----------
Expenses:
Operating expenses........... 541,408 540,533 129,002 132,334
Depreciation and
amortization................ 62,196 64,104 15,458 16,904
---------- ---------- ---------- ----------
603,604 604,637 144,460 149,238
---------- ---------- ---------- ----------
Operating Profit Before Master
Plan Asset Disposition,
Preopening and Corporate
Expense....................... 196,585 222,960 53,038 30,609
Master Plan Asset Disposition,
Preopening and Other-
Unconsolidated Affiliate...... 57,269 28,566 -- --
Corporate Expense.............. 10,022 3,424 1,489 2,451
---------- ---------- ---------- ----------
Operating Income............... 129,294 190,970 51,549 28,158
---------- ---------- ---------- ----------
Other Income (Expense):
Interest and other, net...... (30,143) (10,669) (3,472) (2,749)
---------- ---------- ---------- ----------
Income Before Income Taxes and
Extraordinary Item............ 99,151 180,301 48,077 25,409
Provision for income taxes... (24,634) (65,045) (17,927) (9,147)
---------- ---------- ---------- ----------
Income Before Extraordinary
Item.......................... 74,517 115,256 30,150 16,262
Extraordinary Item:
Loss on early extinguishment
of debt, net of income tax
benefits of $17,710 and
$2,333...................... (30,811) (4,238) -- --
---------- ---------- ---------- ----------
Net Income..................... $ 43,706 $ 111,018 $ 30,150 $ 16,262
========== ========== ========== ==========
Basic Income Per Share of
Common Stock:
Income before extraordinary
item........................ $ 1.41 $ 2.00 $ 0.52 $ 0.28
Extraordinary item--loss on
early extinguishment of
debt, net of income tax
benefit..................... (0.58) (0.07) -- --
---------- ---------- ---------- ----------
Net income per share......... $ 0.83 $ 1.93 $ 0.52 $ 0.28
========== ========== ========== ==========
Weighted Average Shares
Outstanding................... 52,759 57,475 57,836 57,990
========== ========== ========== ==========
Diluted Income Per Share of
Common Stock:
Income before extraordinary
item........................ $ 1.38 $ 1.96 $ 0.51 $ 0.28
Extraordinary item--loss on
early extinguishment of
debt, net of income tax
benefit..................... (0.57) (0.07) -- --
---------- ---------- ---------- ----------
Net income per share......... $ 0.81 $ 1.89 $ 0.51 $ 0.28
========== ========== ========== ==========
Weighed Average Shares
Outstanding................... 54,257 58,835 58,772 58,775
========== ========== ========== ==========
HISTORICAL SELECTED BALANCE
SHEET INFORMATION:
AT DECEMBER 31, AT MARCH 31,
---------------------- ----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
Working capital................ $ 35,937 $ (10,699) $ 25,584 $ 398,898
Total assets................... 1,287,689 1,398,374 1,242,950 1,872,259
Total assets less excess of
purchase price over fair
market value of net assets
acquired, net................. 1,248,067 1,359,776 1,203,584 1,833,917
Current and long-term
indebtedness.................. 94,022 68,365 103,613 566,037
Stockholders' equity........... 973,382 1,101,622 1,006,548 1,117,248
20
Pro Forma Financial Information. The following unaudited pro forma summary
consolidated financial information gives effect to the purchase of 6,000,000
Shares pursuant to the Offer, based on certain assumptions described in the
Notes to Pro Forma Summary Consolidated Financial Information as if such
purchase had occurred on January 1, 1997 and January 1, 1998, with respect to
income statement data, and on December 31, 1997 and March 31, 1998, 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 such Shares
pursuant to the Offer been completed at the dates indicated or that may be
obtained in the future.
21
MGM GRAND, INC. AND SUBSIDIARIES
PRO FORMA SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
[Download Table]
FOR THE YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
--------------------- ------------------------
AS AS
ACTUAL ADJUSTED(1) ACTUAL ADJUSTED(1)(4)
-------- ----------- -------- --------------
Revenues:
Gross revenue................. $891,330 $891,330 $195,610 $195,610
Less: promotional allowances.. 63,733 63,733 15,763 15,763
-------- -------- -------- --------
Net Revenue................. 827,597 827,597 179,847 179,847
-------- -------- -------- --------
Expenses:
Operating expenses............ 540,533 540,533 132,334 132,334
Depreciation and amortization. 64,104 64,104 16,904 16,904
-------- -------- -------- --------
604,637 604,637 149,238 149,238
-------- -------- -------- --------
Operating Profit Before Master
Plan Asset
Disposition and Corporate
Expense...................... 222,960 222,960 30,609 30,609
Master Plan Asset Disposition... 28,566 28,566 -- --
Corporate Expense............... 3,424 3,424 2,451 2,451
-------- -------- -------- --------
Operating Income................ 190,970 190,970 28,158 28,158
-------- -------- -------- --------
Other Income (Expense):
Interest and other, net....... (10,669) (16,608) (2,749) (4,679)
-------- -------- -------- --------
Income Before Income Taxes and
Extraordinary Item............. 180,301 174,362 25,409 23,479
Provision for income taxes.... (65,045) (62,907) (9,147) (8,452)
-------- -------- -------- --------
Income Before Extraordinary
Item........................... 115,256 111,455 16,262 15,027
Extraordinary Item:
Loss on early extinguishment
of debt, net of income tax
benefit of $2,333............ (4,238) (4,238) -- --
-------- -------- -------- --------
Net Income...................... $111,018 $107,217 $ 16,262 $ 15,027
======== ======== ======== ========
Basic Income Per Share of Common
Stock:
Income before extraordinary
item......................... $ 2.00 $ 2.17 $ 0.28 $ 0.29
Extraordinary item-loss on
early extinguishment of debt,
net of income tax benefit.... (0.07) (0.08) -- --
-------- -------- -------- --------
Net Income per share.......... $ 1.93 $ 2.09 $ 0.28 $ 0.29
======== ======== ======== ========
Weighted Average Shares
Outstanding.................... 57,475 51,475 57,990 51,990
======== ======== ======== ========
Diluted Income Per Share of
Common Stock:
Income before extraordinary
item......................... $ 1.96 $ 2.11 $ 0.28 $ 0.28
Extraordinary item-loss on
early extinguishment of debt,
net of income tax benefit.... (0.07) (0.08) -- --
-------- -------- -------- --------
Net Income per share.......... $ 1.89 $ 2.03 $ 0.28 $ 0.28
======== ======== ======== ========
Weighted Average Shares
Outstanding.................... 58,835 52,835 58,775 52,775
======== ======== ======== ========
22
PRO FORMA SELECTED BALANCE SHEET INFORMATION:
[Download Table]
AT DECEMBER 31, 1997 AT MARCH 31, 1998
-------------------------- ----------------------------
ACTUAL AS ADJUSTED(2) ACTUAL AS ADJUSTED(2)(4)
---------- -------------- ---------- -----------------
Working capital......... $ (10,699) $ (10,699) $ 398,898 $ 188,298
Total assets............ 1,398,374 1,398,374 1,872,259 1,661,659
Total assets less excess
of purchase price over
fair market value of
net assets acquired,
net.................... 1,359,776 1,359,776 1,833,917 1,623,317
Current and long-term
indebtedness........... 68,365 278,965 566,037 566,037
Stockholders' equity.... 1,101,622 891,022 1,117,248 906,648
Other Data:
Book value per share(3). $ 19.00 $ 17.14 $ 19.26 $ 17.44
--------
(1) Interest expense, capitalized interest, interest income, and the provision
for income taxes have been adjusted as if the repurchase of 6,000,000
Shares for approximately $210.6 million occurred on January 1, 1997 and
January 1, 1998, respectively, financed by a drawdown under the Company's
Senior Reducing Revolving Credit Facility (the "Credit Facility").
(2) The pro forma balance sheet amounts for both periods were adjusted for the
6,000,000 Share repurchase at an approximate cost of $210.6 million,
including transaction fees. The pro forma balance sheet amount for
December 31, 1997 was adjusted to reflect a drawdown under the Company's
Credit Facility.
(3) 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 $210.6 million, including transaction fees.
(4) Assumes repayment of the Credit Facility with proceeds from the issuance
of the $500 million Senior Collateralized Notes.
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:
[Download Table]
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------- ----------------------------
1996 1997 1997 1997 1998 1998
------ ------ -------------- ------ ------ --------------
ACTUAL ACTUAL AS ADJUSTED(2) ACTUAL ACTUAL AS ADJUSTED(2)
Ratio of Earnings to
Fixed Charges(1)....... 2.78 10.11 5.96 10.39 3.26 2.74
--------
(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 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, interest income, and the provision
for income taxes have been adjusted as if: (i) the repurchase of 6,000,000
Shares for approximately $210.6 million occurred on January 1, 1997 and
January 1, 1998, respectively; (ii) the repurchase was financed by a
drawdown under the Company's Credit Facility; and (iii) the drawdown under
the Credit Facility was subsequently repaid with proceeds from the $500
million Senior Collateralized Notes.
23
Additional Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning the Company's directors and officers, their remuneration,
options granted to them, the principal holders of the Company's stockholders
and any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
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 the Company also can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005, on which the Shares are
listed.
12. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT
The Company's purchase of Shares pursuant to 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, the Company does not believe that its purchase of Shares pursuant to
the Offer will cause its 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 Exchange Act, which requires, among
other things, that the Company furnish certain information to its stockholders
and to the Commission and comply with the Commission's proxy rules in
connection with meetings of the Company's stockholders. The Company believes
that its purchase of Shares pursuant to the Offer will not result in the
Shares becoming subject to deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its
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 the
Company's acquisition or ownership of Shares as contemplated by the Offer.
Should any such approval or other action be required, the Company currently
contemplates that it will seek such approval or other action. The Company
cannot predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the
Offer pending the outcome of any such
24
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 the Company's business. The Company's
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, as amended to
the date hereof (the "Code"), 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, the
Company's 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 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" 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 Holder. For
purposes of this summary, a "Stockholder" is a holder of shares that is (i) a
citizen or resident of the United States, (ii) 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 (iii) an estate, the income
of which is subject to United States federal income taxation regardless of its
source, or (iv) a trust if a court within the United States is able to
exercise primary supervision of the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of 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.
THE SUMMARY DISCUSSION SET FORTH HEREIN IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE TAX CONSEQUENCES OF A SALE OF SHARES PURSUANT TO 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
25
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 HEREIN.
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. 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 (i) is "substantially disproportionate"
with respect to the Stockholder, (ii) results in a "complete termination" of
the Stockholder's interest in the Company, or (iii) is "not essentially
equivalent to a dividend" with respect to the Stockholder. These tests (the
"Section 302 tests") are explained more fully below.
If any of the Section 302 tests is 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. Such capital gain
or loss will generally be long-term capital gain or loss if the tendering
Stockholder held the tendered Shares for more than 12 months. Under current
law, any such gain or loss recognized by individuals, trusts or estates will be
subject to a maximum 20% tax rate, if the Shares have been held for more than
eighteen months. Any such gain will be subject to a maximum 28% tax rate, if
the Shares have been held for more than one year but not more than eighteen
months (the "mid-term rate").
On June 25, 1998, the House of Representatives passed the IRS Restructuring
and Reform Act of 1998 (the "IRS Reform Act") which contains a provision that
would eliminate the mid-term rate and apply the 20% maximum rate to all gains
recognized by individual taxpayers on the sale of capital assets held for more
than 12 months. The Senate is expected to vote on the IRS Reform Act in early
July. This provision would apply retroactively to the sale or disposition of a
capital asset occuring after December 31, 1997. In addition, Representative
Newt Gingrich has introduced separate proposed legislation (the "Proposed
Legislation") that is not part of the IRS Reform Act which would additionally
lower the maximum tax rate on sales of capital assets held for more than 12
months by individuals to 15% effective June 24, 1998. No assurance can be given
as to whether or not either the IRS Reform Act or the Proposed Legislation will
be enacted into law and what their respective effective dates will be, if
enacted. Prospective investors are urged to consult their own tax advisors
regarding the IRS Reform Act and the Proposed Legislation.
If none of the Section 302 tests is satisfied, then, to the extent the
Company's current and accumulated earnings and profits, the tendering
Shareholder 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
26
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 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 the current and accumulated earnings and profits of the
Company 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 is satisfied, 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 (i) 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 (ii)
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 has 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, FEWER THAN ALL OF SUCH SHARES
MAY BE PURCHASED BY THE COMPANY. 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). Stockholder 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 Stockholder will be a
"complete termination" of the Stockholder's interest in the Company if
either (i) all of the Shares actually and constructively owned by the
Stockholder are exchanged pursuant to the Offer, or (ii) 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.
27
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 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 United States Holder 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 below.
Corporate Shareholder 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 Stockholder s 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, as a result of changes made by the Taxpayer Relief Act of 1997,
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 (except as may otherwise be provided in regulations yet to be
promulgated by the Treasury Department). 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
28
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.
The Company cannot predict whether or to what extent the Offer will be over-
subscribed. If the Offer is oversubscribed, proration of the tenders pursuant
to the Offer will cause the Company to accept fewer Shares than 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 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 the Company's current and accumulated earnings and profits, which
the Company anticipates 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, (i) eligible for a dividends-received deduction (subject to applicable
limitations) and (ii) subject to the "extraordinary dividend" provisions of the
Code. To the extent, if any, that the cash received by a Stockholder exceeds
the Company's 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.
Foreign Stockholders. The Company will withhold United States federal income
tax at a rate of 30% from the gross proceeds paid pursuant to the Offer to a
foreign stockholder or his agent, unless the Company determines that such
foreign stockholder is entitled to a reduced rate of withholding is pursuant to
an applicable income tax treaty or to an exemption from withholding because
such gross proceeds are effectively connected with the conduct of a trade or
business by the foreign Shareholder within the United States. For this purpose,
a foreign stockholder is any stockholder of the Company that is not (i) a
citizen or resident alien individual of the United States, (ii) 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, (iii) an estate,
the income of which is subject to United States federal income taxation
regardless of its source, or (iv) 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 persons have the authority to control all
substantial decisions relating to the trust.
Generally, the determination of whether a reduced rate of withholding is
available pursuant to an applicable income tax treaty is made by reference to a
foreign stockholder's address or to a properly completed IRS Form 1001
furnished by the stockholder, and the determination of whether an exemption
from withholding is available on the ground that gross proceeds paid to a
foreign stockholder are effectively connected with a United States trade or
business is made on the basis of a properly completed IRS Form 4224 furnished
by the stockholder. The Company will determine a foreign stockholder's
eligibility for a reduced rate of, or exemption from, withholding by reference
to the stockholder's address and any IRS Forms 1001 or 4224 submitted to the
Company by the stockholder unless facts and circumstances indicate that such
reliance is not warranted or unless applicable law requires some other method
for determining whether a reduced rate of withholding is applicable. These
forms can be obtained from the Company.
29
A foreign stockholder with respect to whom tax has been withheld may be
eligible for a refund from the IRS of all or a portion of the withheld tax if
the stockholder satisfies one of the Section 302 tests for capital gain
treatment or is otherwise able to establish that no tax or a reduced amount of
tax is due. Foreign stockholder s 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 details
of the refund procedure.
Backup Withholding. See Section 3 with respect to the application of United
States federal income tax backup withholding.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT
The Company expressly reserves the right, in its 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 shall have occurred or shall be deemed by the Company 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 thereof. The Company also expressly reserves the right, in its
sole discretion, to terminate the Offer and not accept for payment or pay for
any Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence of any of
the conditions specified in Section 6 hereof by giving oral or written notice
of such termination or postponement to the Depositary and making a public
announcement thereof. The Company's reservation of the right to delay payment
for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that the Company 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, the Company further reserves the right, in its sole discretion,
and regardless of whether any of the events set forth in Section 6 shall have
occurred or shall be deemed by the Company 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 thereof, such announcement, in the case of an extension, to 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 the Company may choose to make any
public announcement, except as provided by applicable law (including Rule 13e-
4(e)(2) promulgated under the Exchange Act), the Company 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 the Company makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules 13e-
4(d)(2) and 13e-4(e)(2) promulgated under the 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 (i) the Company increases or decreases the price
to be paid for Shares, the Company increases or decreases the Dealer Manager's
fee, the Company increases the number of Shares being sought and such increase
in the number of Shares being sought exceeds 2%
30
of the outstanding Shares, or the Company decreases the number of Shares being
sought, and (ii) 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, the Offer will be extended until the expiration of such period of ten
business days.
16. FEES AND EXPENSES
The Company has retained Merrill Lynch & Co. ("Merrill Lynch") to act as the
Dealer Manager in connection with the Offer. Merrill Lynch will receive pre-
determined compensation for its services as Dealer Manager. Merrill Lynch has
agreed to cover all of its reasonable expenses incurred in connection with the
Offer. The Company has agreed to indemnify Merrill Lynch against certain
liabilities in connection with the Offer, including certain liabilities under
the federal securities laws. Merrill Lynch 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. The Company has retained ChaseMellon
Shareholder Services, LLC as Information Agent and as Depositary in connection
with the Offer, and will pay reasonable and customary compensation for its
services in such capacities. The Company will also reimburse the Information
Agent and the Depositary for out-of-pocket expenses and has 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.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than the Dealer Manager)
for soliciting any Shares pursuant to the Offer. The Company 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 the Company's agent for purposes
of the Offer. The Company 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
The Company is not aware of any jurisdiction where the making of the Offer is
not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction. In any jurisdiction
the securities or blue sky laws of which require the
31
Offer to be made by a licensed broker or dealer, the Offer is being made on
the Company's behalf by the Dealer Manager or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
Pursuant to Rule 13e-4 promulgated under the Exchange Act, the Company has
filed with the Commission an Issuer Tender Offer Statement on Schedule 13E-4
(the "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 the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY 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 THE
COMPANY OR THE DEALER MANAGER.
MGM Grand, Inc.
July 2, 1998
32
SCHEDULE I
CERTAIN TRANSACTIONS INVOLVING SHARES
Except as set forth below, based upon the Company's records 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
or any of its subsidiaries, nor any associates or subsidiary of any of the
foregoing, has effected any transactions in the Shares during the 40 business
days prior to July 2, 1998.
1. James J. Murren, Executive Vice President and Chief Financial Officer of
the Company purchased 3,000 Shares in the open market on May 5, 1998, for
$34.00 per Share.
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A properly completed Letter of Transmittal (or a manually signed facsimile
thereof) and certificates for the Shares and any other required documents
should be sent or delivered by each stockholder or such stockholder's broker,
dealer, commercial bank, trust company or other nominee to the Depositary at
one of its addresses 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:
(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) 953-2497
Banks and Brokers Call Collect: (212) 273-8080
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1305
(212) 449-8971 (call collect)
July 2, 1998
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Dates Referenced Herein and Documents Incorporated by Reference
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