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Nonqualified Stock Option Plan - MGM MIRAGE - 3-26-1997

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Nonqualified Stock Option Plan - MGM MIRAGE - 3-26-1997 Powered By Docstoc
					EXHIBIT 10.1 MGM GRAND, INC. NONQUALIFIED STOCK OPTION PLAN 1. Purpose. The purpose of the MGM Grand, Inc. Nonqualified Stock Option Plan is to provide a means whereby MGM Grand, Inc. may attract and retain persons of ability as employees and motivate such persons to exert their best efforts on behalf of the Company and any Parent or Subsidiary. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the administrative committee appointed pursuant to Section 3. (d) "Company" shall mean MGM Grand, Inc., a Delaware Corporation. (e) "Nonqualified Option" shall mean an option to purchase shares of Stock, subject to the terms and conditions described in the Plan, which is not an incentive stock option within the meaning of Code Section 422A. (f) "Parent" shall mean a parent corporation as defined in Code Section 425(e). (g) "Participant" shall mean an employee of the Company or any Parent or Subsidiary who is designated to receive Nonqualified Options pursuant to Section 3. (h) "Plan" shall mean the MGM Grand, Inc. Nonqualified Stock Option Plan. (i) "Stock" shall mean the Company's $.01 par value common stock. (j) "Subsidiary" shall mean a subsidiary corporation as defined in Code Section 425(f) or any partnership or joint venture in which the Company owns a 50 percent or greater ownership interest. 3. Administration. The Plan shall be administered by the Committee, consisting of at least three members, appointed by and holding office at the pleasure of the Board. Members of the Committee shall be members of the Board. No participant in the Plan shall be entitled to receive options to purchase more than 1,000,000 share of Common Stock in any calendar year. All employees of the Company or any Parent or Subsidiary (other than any employee who owns stock possession more than 10 percent of the total combined voting power or value

of all classes of stock of the Company or any Parent or Subsidiary) shall be eligible to receive Nonqualified Options. Subject to the provisions of the Plan, the Committee shall have the power to (a) determine and designate from time to time those employees who perform services for the Company or for any Parent or Subsidiary who shall be Participants in the Plan and the number of shares to be subject to the Nonqualified Options to be granted to each Participant; provided, however, that the Nonqualified option shall be granted after the expiration of the period of ten years from the effective date of the Plan specified in Section 8; (b) authorize the granting of Nonqualified Options to Participants; and (c) determine the time and the manner when each Nonqualified Option shall be exercisable and the duration of the exercised period. For all purposes of this Plan, the fair market value of the Stock shall be determined in good faith by the Committee by applying the rules and principles of valuation set forth in Treasury Regulations Section 20.2031-2,

of all classes of stock of the Company or any Parent or Subsidiary) shall be eligible to receive Nonqualified Options. Subject to the provisions of the Plan, the Committee shall have the power to (a) determine and designate from time to time those employees who perform services for the Company or for any Parent or Subsidiary who shall be Participants in the Plan and the number of shares to be subject to the Nonqualified Options to be granted to each Participant; provided, however, that the Nonqualified option shall be granted after the expiration of the period of ten years from the effective date of the Plan specified in Section 8; (b) authorize the granting of Nonqualified Options to Participants; and (c) determine the time and the manner when each Nonqualified Option shall be exercisable and the duration of the exercised period. For all purposes of this Plan, the fair market value of the Stock shall be determined in good faith by the Committee by applying the rules and principles of valuation set forth in Treasury Regulations Section 20.2031-2, relating to the valuation of stocks and bonds for purposes of Code Section 2031. The Committee may interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and make such other determinations and take such other action as it deems necessary or advisable. Without limiting the generality of the foregoing sentence, the Committee may, it its discretion, treat all or any portion of any period during which a Participant is on military or on an approved leave of absence from the Company or a Parent or Subsidiary as a period of service of such Participant with the Company or a Parent or Subsidiary, as the case may be, for purposes of accrual of his or her rights under the Nonqualified Options. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive. Any action reduced to writing and signed by all members of the Committee shall be as fully effective as if it had been taken by vote at a meeting duly called and held. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Nonqualified Options. 4. Benefits Available Under Plan. The benefits provided by the Plan to Participants are Nonqualified Options. Nonqualified Option. may be granted by the Company from time to time for all Participants to acquire an aggregate of 5,000,000 shares of Stock, subject to adjustment as provided in Paragraph 5(h), and reduced by the number of shares subject to options which are granted under the MGM Grand, Inc. Incentive Stock Option Plan. The shares to be delivered upon exercise of Nonqualified Options shall be made available, at the discretion of the Board, either from authorized but unissued shares of Stock or from Stock reacquired by the Company, including shares purchased in the open market. If any Nonqualified Option terminates, expires or is cancelled with respect to any shares of Stock, new Nonqualified Options may thereafter be granted covering such shares. 5. Terms and Conditions. Each Nonqualified Option shall be evidenced by an agreement (the "Agreement"), in a form approved by the Committee, which shall be signed by an officer of the Company and the Participant receiving the Nonqualified Option, and -2-

which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate: (a) Period. Each Agreement shall specify that the Nonqualified Option thereunder is granted for a period not to exceed ten years (the "Option Period") and shall provided that the Nonqualified Option shall expire at the end of such period. (b) Option Price. The price per share at which a Nonqualified Option may be exercised (the "Option Price") shall be determined by the Committee at or prior to the time the Nonqualified Option is granted, but shall be at least equal to the fair market value per share at the time the Nonqualified Option is granted. (c) Exercise of Option. In order to exercise the Nonqualified Options, the person or persons entitled to exercise them shall give written notice to the Company specifying the number of shares to be purchased pursuant to the exercise of the Nonqualified Options. This notice shall be accompanied by payment for the shares as provided in Paragraph 5(d). Options may be exercised at such time or times as may be determined by the Committee at the time of grant, subject to the provision of this Section 5, including the following limitation: no part of any Nonqualified Option may be exercised until the Participant holding the Nonqualified Option shall have performed

which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate: (a) Period. Each Agreement shall specify that the Nonqualified Option thereunder is granted for a period not to exceed ten years (the "Option Period") and shall provided that the Nonqualified Option shall expire at the end of such period. (b) Option Price. The price per share at which a Nonqualified Option may be exercised (the "Option Price") shall be determined by the Committee at or prior to the time the Nonqualified Option is granted, but shall be at least equal to the fair market value per share at the time the Nonqualified Option is granted. (c) Exercise of Option. In order to exercise the Nonqualified Options, the person or persons entitled to exercise them shall give written notice to the Company specifying the number of shares to be purchased pursuant to the exercise of the Nonqualified Options. This notice shall be accompanied by payment for the shares as provided in Paragraph 5(d). Options may be exercised at such time or times as may be determined by the Committee at the time of grant, subject to the provision of this Section 5, including the following limitation: no part of any Nonqualified Option may be exercised until the Participant holding the Nonqualified Option shall have performed services for the Company or for a Parent or Subsidiary for such period after the date on which the Nonqualified Option is granted as the Committee may specify in the Agreement; provided, however, that, although a Nonqualified Option may provide for earlier exercise, each Nonqualified Option must be exercisable so that at least 20 percent of the shares subject to the Nonqualified Option are exercisable no later than the third anniversary of the grant of the Nonqualified Option, 40 percent of such shares no later than the fourth such anniversary, 60 percent of such shares no later than the fifth such anniversary, 80 percent of such shares no later than the sixth such anniversary, and 100 percent of such shares no later than the seventh such anniversary; provided, further, that if the Committee authorizes a Nonqualified Option exercisable in more than one installment and if the employment of any Participant holding such a Nonqualified Option is terminated for any reason after the first day on which the right to exercise any portion of the Nonqualified Option has accrued, the number of shares with respect to which the Nonqualified Option shall be deemed to have accrued at the date of termination of employment shall be such number of shares as to which the right to exercise the Nonqualified Option accrued prior to the date of termination of employment, plus, in case the Nonqualified Option was not fully exercisable on such date, that proportion of the number of shares with respect to which the Nonqualified Option would next have become exercisable but for such termination of employment as the number of days the Participant was employed by the Company, or a Parent or Subsidiary, prior to such date and subsequent to the last preceding on which the right to exercise the Nonqualified Option as to additional shares accrued (the "Preceding Exercise Date") bears the number of days between the Preceding Exercise Date and the next date on which the right to exercise the Nonqualified Option as to additional shares would otherwise accrue; and provided, further, that no Nonqualified Option may at any time be exercised in part with respect to fewer than the -3-

lesser of (i) fifty shares, or (ii) the number of shares which remain to be purchased pursuant to the Nonqualified Option. (d) Payment of Option Price. The Option Price of the Stock transferred to a Participant pursuant to the exercise of a Nonqualified Option shall be paid to the Company at the time of delivery of notice to exercise: (1) in cash; (2) with previously acquired Stock having a fair market value to the Option Price; or (3) with cash and previously acquired Stock having a fair market value which together with the cash is equal to the Option Price. (e) Exercise in the Event of Death or Termination of Employment. If a Participant holding Nonqualified Options shall terminate employment by the Company, its Parent or Subsidiaries because of death, or shall die within three months of termination of employment by the Company, its Parent and Subsidiaries, the Nonqualified Options held by the Participant may be exercised, to the extent that the Participant was entitled to do so at the date of termination of employment, by the person or person to whom the Participant's rights under the Nonqualified Options pass by will or applicable law, or if no such person has such rights, the Participant's executors or administrators, at any time, within one year after the date of such termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). If a Participant's employment by the Company, its Parent or Subsidiaries shall terminate for any reason other than death, he may exercise his Nonqualified Options,

lesser of (i) fifty shares, or (ii) the number of shares which remain to be purchased pursuant to the Nonqualified Option. (d) Payment of Option Price. The Option Price of the Stock transferred to a Participant pursuant to the exercise of a Nonqualified Option shall be paid to the Company at the time of delivery of notice to exercise: (1) in cash; (2) with previously acquired Stock having a fair market value to the Option Price; or (3) with cash and previously acquired Stock having a fair market value which together with the cash is equal to the Option Price. (e) Exercise in the Event of Death or Termination of Employment. If a Participant holding Nonqualified Options shall terminate employment by the Company, its Parent or Subsidiaries because of death, or shall die within three months of termination of employment by the Company, its Parent and Subsidiaries, the Nonqualified Options held by the Participant may be exercised, to the extent that the Participant was entitled to do so at the date of termination of employment, by the person or person to whom the Participant's rights under the Nonqualified Options pass by will or applicable law, or if no such person has such rights, the Participant's executors or administrators, at any time, within one year after the date of such termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). If a Participant's employment by the Company, its Parent or Subsidiaries shall terminate for any reason other than death, he may exercise his Nonqualified Options, to the extent he was entitled to do so at the date of termination of employment, at any time, or from time to time, within three months after the date of termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). (f) Nontransferability. No Nonqualified Option granted under the Plan shall be transferrable other than by will or by the laws of descent and distribution. No interest of any Participant under the Plan shall be subject to attachment, execution, garnishment, sequestration, the laws of bankruptcy or any other legal or equitable process. During the lifetime of the Participant, Nonqualified Options shall be exercisable only by the Participant who received them. (g) Investment Representation. Each Agreement shall contain a provision that, upon demand by the Company for such a representation, the Participant holding the Nonqualified Options (or any person acting under Paragraph 5 (e)) shall deliver to the Participant at the time of any exercise of any Nonqualified Options a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of Nonqualified Options and prior to the expiration of the Option Period shall be a condition precedent to the right of the Participant or such other person to acquire any shares. (h) Adjustments in Event of Change in Stock. In the event of any change in the Stock by reason of any stock dividend, recapitalization,reorganization, merger, consolidation, split-up, combination, or exchange of shares, or of any similar change -4-

affecting the Stock, the number and class of shares which thereafter may be acquired under the Plan, the number and class of shares subject to outstanding Agreements, the Option Price per share thereof, and any other terms of the Plan or the Agreements which in the Committee's sole discretion require adjustment (including, without limitation, relating to the Stock, other securities, cash or other consideration which may be acquired upon exercise of the Nonqualified Options) shall be appropriately adjusted consistent with such change in such manner as the Committee may deem appropriate. (i) No Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any shares subject to Nonqualified Options prior to the date of issuance to him of a certificate or certificates for such shares. (j) No Rights to Continued Employment. The Plan any Nonqualified Options granted under the Plan shall not confer upon any employee any right with respect to continuance of employment by the Company or any Parent or Subsidiary, nor shall they interfere in any way with the right of the Company or any Parent or Subsidiary for which an employee performs services to terminate his employment at any time. (k) Arrangement for Tax Payment. Each Agreement shall contain a provision that the Participant shall agree to make any arrangements required by the Committee to insure that the amount of tax required to be withheld by the

affecting the Stock, the number and class of shares which thereafter may be acquired under the Plan, the number and class of shares subject to outstanding Agreements, the Option Price per share thereof, and any other terms of the Plan or the Agreements which in the Committee's sole discretion require adjustment (including, without limitation, relating to the Stock, other securities, cash or other consideration which may be acquired upon exercise of the Nonqualified Options) shall be appropriately adjusted consistent with such change in such manner as the Committee may deem appropriate. (i) No Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any shares subject to Nonqualified Options prior to the date of issuance to him of a certificate or certificates for such shares. (j) No Rights to Continued Employment. The Plan any Nonqualified Options granted under the Plan shall not confer upon any employee any right with respect to continuance of employment by the Company or any Parent or Subsidiary, nor shall they interfere in any way with the right of the Company or any Parent or Subsidiary for which an employee performs services to terminate his employment at any time. (k) Arrangement for Tax Payment. Each Agreement shall contain a provision that the Participant shall agree to make any arrangements required by the Committee to insure that the amount of tax required to be withheld by the Company or a Parent or Subsidiary as a result of the exercise of Nonqualified Options is available for payment. (l) Certain Corporate Transactions. Each Agreement shall provide that nothing in the Plan or the Agreement shall in any way prohibit the Company from merging or consolidating into another corporation, or from selling or transferring all or substantially all of its assets, or from distributing all or substantially all of its assets to its stockholders in liquidation, or from dissolving and terminating its corporate existence, and in any such event (other than a merger in which the Company is the surviving corporation and under the terms of which the shares of Stock outstanding immediately prior to the merger remain outstanding and unchanged), the Participant shall be entitled to receive, at the time the Nonqualified Option or portion thereof would otherwise become exercisable and upon payment of the Option Price, the same shares of stock, cash, or other consideration received by shareholders of the Company in accordance with such merger, consolidation, sale or transfer of assets, liquidation or dissolution. 6. Compliance With Other Laws and Regulations. The Plan, the grant and exercise of Nonqualified Options under the Plan, and the obligation of the Company to transfer shares under these Nonqualified Options shall be subject to all applicable federal and state laws, rules and regulations, including those related to disclosure of financial and other information to the Participants, and to any approvals by any government or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of Stock prior to (a) the listing of such shares on any stock exchange on which the Stock may then be listed, where such listing is required under the rules or -5-

regulations of such exchange, and (b) the compliance with applicable federal and state securities laws and regulations relating to the issuance and delivery of such certificates; provided, however, that the Company shall make all reasonable efforts to so list such shares and to comply with such laws and regulations. 7. Amendment and Discontinuance. The Board may from time to time amend, suspend or discontinue the Plan; provided, however, that subject to the provisions of Paragraph 5(h), no action of the Board may (a) increase the number of shares reserved for options pursuant to Section 4 without approval of the shareholders of the Company, (b) permit the granting of any Nonqualified Option at an Option Price less than that determined in accordance with Paragraph 5(b), (c) permit the granting of Nonqualified Options which expire beyond the period provided for in Paragraph 5(a), or (d) many any material change in the class of eligible employees as defined in the Plan. 8. Effective Date. The effective date of the Plan shall be the earlier of the date the Plan is adopted by the Board or the date the Plan is approved by shareholders of the Company. -6-

regulations of such exchange, and (b) the compliance with applicable federal and state securities laws and regulations relating to the issuance and delivery of such certificates; provided, however, that the Company shall make all reasonable efforts to so list such shares and to comply with such laws and regulations. 7. Amendment and Discontinuance. The Board may from time to time amend, suspend or discontinue the Plan; provided, however, that subject to the provisions of Paragraph 5(h), no action of the Board may (a) increase the number of shares reserved for options pursuant to Section 4 without approval of the shareholders of the Company, (b) permit the granting of any Nonqualified Option at an Option Price less than that determined in accordance with Paragraph 5(b), (c) permit the granting of Nonqualified Options which expire beyond the period provided for in Paragraph 5(a), or (d) many any material change in the class of eligible employees as defined in the Plan. 8. Effective Date. The effective date of the Plan shall be the earlier of the date the Plan is adopted by the Board or the date the Plan is approved by shareholders of the Company. -6-

MGM GRAND, INC. INCENTIVE STOCK OPTION PLAN 1. Purpose. The purpose of the MGM Grand, Inc. Incentive Option Plan is to provide a means whereby MGM Grand, Inc. may attract and retain persons of ability as employees and motivate such persons to exert their best efforts on behalf of the Company and any Parent or Subsidiary. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the administrative committee appointed pursuant to Section 3. (d) "Company" shall mean MGM Grand, Inc., a Delaware Corporation. (e) "Incentive Option" shall mean an option to purchase shares of Stock, subject to the terms and conditions described in the Plan, which is not an incentive stock option within the meaning of Code Section 422A. (f) "Parent" shall mean a parent corporation as defined in Code Section 425(e). (g) "Participant" shall mean an employee of the Company or any Parent or Subsidiary who is designated to receive Incentive Options pursuant to Section 3. (h) "Plan" shall mean the MGM Grand, Inc. Incentive Stock Option Plan. (i) "Stock" shall mean the Company's $.01 par value common stock. (j) "Subsidiary" shall mean a subsidiary corporation as defined in Code Section 425(f) or any partnership or joint venture in which the Company owns a 50 percent or greater ownership interest. 3. Administration. The Plan shall be administered by the Committee, consisting of at least three members, appointed by and holding office at the pleasure of the Board. Members of the Committee shall be members of the Board and shall not be eligible to participate in the Plan while serving on the Committee. All employees of the Company or any Parent or Subsidiary (other than any employee who owns stock possession more than 10 percent of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary) shall be eligible to

MGM GRAND, INC. INCENTIVE STOCK OPTION PLAN 1. Purpose. The purpose of the MGM Grand, Inc. Incentive Option Plan is to provide a means whereby MGM Grand, Inc. may attract and retain persons of ability as employees and motivate such persons to exert their best efforts on behalf of the Company and any Parent or Subsidiary. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the administrative committee appointed pursuant to Section 3. (d) "Company" shall mean MGM Grand, Inc., a Delaware Corporation. (e) "Incentive Option" shall mean an option to purchase shares of Stock, subject to the terms and conditions described in the Plan, which is not an incentive stock option within the meaning of Code Section 422A. (f) "Parent" shall mean a parent corporation as defined in Code Section 425(e). (g) "Participant" shall mean an employee of the Company or any Parent or Subsidiary who is designated to receive Incentive Options pursuant to Section 3. (h) "Plan" shall mean the MGM Grand, Inc. Incentive Stock Option Plan. (i) "Stock" shall mean the Company's $.01 par value common stock. (j) "Subsidiary" shall mean a subsidiary corporation as defined in Code Section 425(f) or any partnership or joint venture in which the Company owns a 50 percent or greater ownership interest. 3. Administration. The Plan shall be administered by the Committee, consisting of at least three members, appointed by and holding office at the pleasure of the Board. Members of the Committee shall be members of the Board and shall not be eligible to participate in the Plan while serving on the Committee. All employees of the Company or any Parent or Subsidiary (other than any employee who owns stock possession more than 10 percent of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary) shall be eligible to -7-

receive Incentive Options. Subject to the provisions of the Plan, the Committee shall have the power to (a) determine and designate from time to time those employees who perform services for the Company or for any Parent or Subsidiary who shall be Participants in the Plan and the number of shares to be subject to the Incentive Options to be granted to each Participant; provided, however, that the Incentive option shall be granted after the expiration of the period of ten years from the effective date of the Plan specified in Section 8; (b) authorize the granting of Incentive Options to Participants; and (c) determine the time and the manner when each Incentive Option shall be exercisable and the duration of the exercised period. For all purposes of this Plan, the fair market value of the Stock shall be determined in good faith by the Committee by applying the rules and principles of valuation set forth in Treasury Regulations Section 20.2031-2, relating to the valuation of stocks and bonds for purposes of Code Section 2031. The Committee may interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and make such other determinations and take such other action as

receive Incentive Options. Subject to the provisions of the Plan, the Committee shall have the power to (a) determine and designate from time to time those employees who perform services for the Company or for any Parent or Subsidiary who shall be Participants in the Plan and the number of shares to be subject to the Incentive Options to be granted to each Participant; provided, however, that the Incentive option shall be granted after the expiration of the period of ten years from the effective date of the Plan specified in Section 8; (b) authorize the granting of Incentive Options to Participants; and (c) determine the time and the manner when each Incentive Option shall be exercisable and the duration of the exercised period. For all purposes of this Plan, the fair market value of the Stock shall be determined in good faith by the Committee by applying the rules and principles of valuation set forth in Treasury Regulations Section 20.2031-2, relating to the valuation of stocks and bonds for purposes of Code Section 2031. The Committee may interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and make such other determinations and take such other action as it deems necessary or advisable. Without limiting the generality of the foregoing sentence, the Committee may, it its discretion, treat all or any portion of any period during which a Participant is on military or on an approved leave of absence from the Company or a Parent or Subsidiary as a period of service of such Participant with the Company or a Parent or Subsidiary, as the case may be, for purposes of accrual of his or her rights under the Incentive Options. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive. Any action reduced to writing and signed by all members of the Committee shall be as fully effective as if it had been taken by vote at a meeting duly called and held. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Incentive Options. 4. Benefits Available Under Plan. The benefits provided by the Plan to Participants are Incentive Options. Incentive Option may be granted by the Company from time to time for all Participants to acquire an aggregate of 5,000,000 shares of Stock, subject to adjustment as provided in Paragraph 5(h), and reduced by the number of shares subject to options which are granted under the MGM Grand, Inc. Incentive Stock Option Plan. The shares to be delivered upon exercise of Incentive Options shall be made available, at the discretion of the Board, either from authorized but unissued shares of Stock or from Stock reacquired by the Company, including shares purchased in the open market. If any Incentive Option terminates, expires or is cancelled with respect to any shares of Stock, new Incentive Options may thereafter be granted covering such shares. 5. Terms and Conditions. Each Incentive Option shall be evidenced by an agreement (the "Agreement"), in a form approved by the Committee, which shall be signed by an officer of the Company and the Participant receiving the Incentive Option, and which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate: -8-

(a) Period. Each Agreement shall specify that the Incentive Option thereunder is granted for a period not to exceed ten years (the "Option Period") and shall provided that the Incentive Option shall expire at the end of such period. (b) Option Price. The price per share at which an Incentive Option may be exercised (the "Option Price") shall be determined by the Committee at or prior to the time the Incentive Option is granted, but shall be at least equal to the fair market value per share at the time the Incentive Option is granted. (c) Exercise of Option. In order to exercise the Incentive Options, the person or persons entitled to exercise them shall give written notice to the Company specifying the number of shares to be purchased pursuant to the exercise of the Incentive Options. This notice shall be accompanied by payment for the shares as provided in Paragraph 5 (d). Options may be exercised at such time or times as may be determined by the Committee at the time of grant, subject to the provision of this Section 5, including the following limitation: no part of any Incentive Option may be exercised until the Participant holding the Incentive Option shall have performed services for the Company or for a Parent or Subsidiary for such period after the date on which the Incentive Option is granted as the Committee may specify in the Agreement; provided, however, that, although a Incentive Option may provide for earlier exercise, each Incentive Option must be exercisable so that at least 20 percent of the shares subject to the

(a) Period. Each Agreement shall specify that the Incentive Option thereunder is granted for a period not to exceed ten years (the "Option Period") and shall provided that the Incentive Option shall expire at the end of such period. (b) Option Price. The price per share at which an Incentive Option may be exercised (the "Option Price") shall be determined by the Committee at or prior to the time the Incentive Option is granted, but shall be at least equal to the fair market value per share at the time the Incentive Option is granted. (c) Exercise of Option. In order to exercise the Incentive Options, the person or persons entitled to exercise them shall give written notice to the Company specifying the number of shares to be purchased pursuant to the exercise of the Incentive Options. This notice shall be accompanied by payment for the shares as provided in Paragraph 5 (d). Options may be exercised at such time or times as may be determined by the Committee at the time of grant, subject to the provision of this Section 5, including the following limitation: no part of any Incentive Option may be exercised until the Participant holding the Incentive Option shall have performed services for the Company or for a Parent or Subsidiary for such period after the date on which the Incentive Option is granted as the Committee may specify in the Agreement; provided, however, that, although a Incentive Option may provide for earlier exercise, each Incentive Option must be exercisable so that at least 20 percent of the shares subject to the Incentive Option are exercisable no later than the third anniversary of the grant of the Incentive Option, 40 percent of such shares no later than the fourth such anniversary, 60 percent of such shares no later than the fifth such anniversary, 80 percent of such shares no later than the sixth such anniversary, and 100 percent of such shares no later than the seventh such anniversary; provided, further, that if the Committee authorizes a Incentive Option exercisable in more than one installment and if the employment of any Participant holding such a Incentive Option is terminated for any reason after the first day on which the right to exercise any portion of the Incentive Option has accrued, the number of shares with respect to which the Incentive Option shall be deemed to have accrued at the date of termination of employment shall be such number of shares as to which the right to exercise the Incentive Option accrued prior to the date of termination of employment, plus, in case the Incentive Option was not fully exercisable on such date, that proportion of the number of shares with respect to which the Incentive Option would next have become exercisable but for such termination of employment as the number of days the Participant was employed by the Company, or a Parent or Subsidiary, prior to such date and subsequent to the last preceding on which the right to exercise the Incentive Option as to additional shares accrued (the "Preceding Exercise Date") bears the number of days between the Preceding Exercise Date and the next date on which the right to exercise the Incentive Option as to additional shares would otherwise accrue; and provided, further, that no Incentive Option may at any time be exercised in part with respect to fewer than the lesser of (i) fifty shares, or (ii) the number of shares which remain to be purchased pursuant to the Incentive Option. (d) Payment of Option Price. The Option Price of the Stock transferred to a Participant pursuant to the exercise of a Incentive Option shall be paid to the Company at -9-

the time of delivery of notice to exercise: (1) in cash; (2) with previously acquired Stock having a fair market value to the Option Price; or (3) with cash and previously acquired Stock having a fair market value which together with the cash is equal to the Option Price. (e) Limitation. The aggregate fair market value (determined at the time an option is granted) of the Stock with respect to which incentive stock options described in Code Section 422A(b) are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Parent and any Subsidiary) shall not exceed $100,000. (f) Exercise in the Event of Death or Termination of Employment. If a Participant holding Incentive Options shall terminate employment by the Company, its Parent or Subsidiaries because of death, or shall die within three months of termination of employment by the Company, its Parent and Subsidiaries, the Incentive Options held by the Participant may be exercised, to the extent that the Participant was entitled to do so at the date of termination of employment, by the person or person to whom the Participant's rights under the Incentive Options pass by will or applicable law, or if no such person has such rights, the Participant's executors or administrators, at any time, within one year after the date of such termination of employment, but in no event later than the expiration date

the time of delivery of notice to exercise: (1) in cash; (2) with previously acquired Stock having a fair market value to the Option Price; or (3) with cash and previously acquired Stock having a fair market value which together with the cash is equal to the Option Price. (e) Limitation. The aggregate fair market value (determined at the time an option is granted) of the Stock with respect to which incentive stock options described in Code Section 422A(b) are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Parent and any Subsidiary) shall not exceed $100,000. (f) Exercise in the Event of Death or Termination of Employment. If a Participant holding Incentive Options shall terminate employment by the Company, its Parent or Subsidiaries because of death, or shall die within three months of termination of employment by the Company, its Parent and Subsidiaries, the Incentive Options held by the Participant may be exercised, to the extent that the Participant was entitled to do so at the date of termination of employment, by the person or person to whom the Participant's rights under the Incentive Options pass by will or applicable law, or if no such person has such rights, the Participant's executors or administrators, at any time, within one year after the date of such termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). If a Participant's employment by the Company, its Parent or Subsidiaries shall terminate for any reason other than death, he may exercise his Incentive Options, to the extent he was entitled to do so at the date of termination of employment, at any time, or from time to time, within three months after the date of termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). (g) Nontransferability. No Incentive Option granted under the Plan shall be transferrable other than by will or by the laws of descent and distribution. No interest of any Participant under the Plan shall be subject to attachment, execution, garnishment, sequestration, the laws of bankruptcy or any other legal or equitable process. During the lifetime of the Participant, Incentive Options shall be exercisable only by the Participant who received them. (h) Investment Representation. Each Agreement shall contain a provision that, upon demand by the Company for such a representation, the Participant holding the Incentive Options (or any person acting under Paragraph 5(e)) shall deliver to the Participant at the time of any exercise of any Incentive Options a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of Incentive Options and prior to the expiration of the Option Period shall be a condition precedent to the right of the Participant or such other person to acquire any shares. (i) Adjustments in Event of Change in Stock. In the event of any change in the Stock by reason of any stock dividend, recapitalization, reorganization, merger, -10-

consolidation, split-up, combination, or exchange of shares, or of any similar change affecting the Stock, the number and class of shares which thereafter may be acquired under the Plan, the number and class of shares subject to outstanding Agreements, the Option Price per share thereof, and any other terms of the Plan or the Agreements which in the Committee's sole discretion require adjustment (including, without limitation, relating to the Stock, other securities, cash or other consideration which may be acquired upon exercise of the Incentive Options) shall be appropriately adjusted consistent with such change in such manner as the Committee may deem appropriate. (j) No Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any shares subject to Incentive Options prior to the date of issuance to him of a certificate or certificates for such shares. (k) No Rights to Continued Employment. The Plan any Incentive Options granted under the Plan shall not confer upon any employee any right with respect to continuance of employment by the Company or any Parent or Subsidiary, nor shall they interfere in any way with the right of the Company or any Parent or Subsidiary for which an employee performs services to terminate his employment at any time. (l) Certain Corporate Transactions. Each Agreement shall provide that nothing in the Plan or the Agreement shall

consolidation, split-up, combination, or exchange of shares, or of any similar change affecting the Stock, the number and class of shares which thereafter may be acquired under the Plan, the number and class of shares subject to outstanding Agreements, the Option Price per share thereof, and any other terms of the Plan or the Agreements which in the Committee's sole discretion require adjustment (including, without limitation, relating to the Stock, other securities, cash or other consideration which may be acquired upon exercise of the Incentive Options) shall be appropriately adjusted consistent with such change in such manner as the Committee may deem appropriate. (j) No Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any shares subject to Incentive Options prior to the date of issuance to him of a certificate or certificates for such shares. (k) No Rights to Continued Employment. The Plan any Incentive Options granted under the Plan shall not confer upon any employee any right with respect to continuance of employment by the Company or any Parent or Subsidiary, nor shall they interfere in any way with the right of the Company or any Parent or Subsidiary for which an employee performs services to terminate his employment at any time. (l) Certain Corporate Transactions. Each Agreement shall provide that nothing in the Plan or the Agreement shall in any way prohibit the Company from merging or consolidating into another corporation, or from selling or transferring all or substantially all of its assets, or from distributing all or substantially all of its assets to its stockholders in liquidation, or from dissolving and terminating its corporate existence, and in any such event (other than a merger in which the Company is the surviving corporation and under the terms of which the shares of Stock outstanding immediately prior to the merger remain outstanding and unchanged), the Participant shall be entitled to receive, at the time the Incentive Option or portion thereof would otherwise become exercisable and upon payment of the Option Price, the same shares of stock, cash, or other consideration received by shareholders of the Company in accordance with such merger, consolidation, sale or transfer of assets, liquidation or dissolution. 6. Compliance With Other Laws and Regulations. The Plan, the grant and exercise of Incentive Options under the Plan, and the obligation of the Company to transfer shares under these Incentive Options shall be subject to all applicable federal and state laws, rules and regulations, including those related to disclosure of financial and other information to the Participants, and to any approvals by any government or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of Stock prior to (a) the listing of such shares on any stock exchange on which the Stock may then be listed, where such listing is required under the rules or regulations of such exchange, and (b) the compliance with applicable federal and state securities laws and regulations relating to the issuance and delivery of such certificates; provided, however, that the Company shall make all reasonable efforts to so list such shares and to comply with such laws and regulations. -11-

7. Certain Dispositions. All Incentive Options shall provide that if the Participant makes a disposition, within the meaning of Code Section 425(c), of any shares of Stock transferred upon exercise of an Incentive Option within two years from the date of the granting of the Incentive Option or within one year after the transfer of the shares of Stock to the Participant pursuant to the exercise of the Incentive Option, the Participant shall notify the Company within ten days of the disposition. The Company may cause an appropriate legend to be affixed to any stock certificates representing the shares of Stock issued under the Plan to enable it to receive notice of the disposition. 8. Amendment and Discontinuance. The Board may from time to time amend, suspend or discontinue the Plan; provided, however, that subject to the provisions of Paragraph 5(h), no action of the Board may (a) increase the number of shares reserved for options pursuant to Section 4 without approval of the shareholders of the Company, (b) permit the granting of any Incentive Option at an Option Price less than that determined in accordance with Paragraph 5(b), (c) permit the granting of Incentive Options which expire beyond the period provided for in Paragraph 5(a), or (d) many any material change in the class of eligible employees as defined in the Plan. 9. Effective Date. The effective date of the Plan shall be the earlier of the date the Plan is adopted by the Board

7. Certain Dispositions. All Incentive Options shall provide that if the Participant makes a disposition, within the meaning of Code Section 425(c), of any shares of Stock transferred upon exercise of an Incentive Option within two years from the date of the granting of the Incentive Option or within one year after the transfer of the shares of Stock to the Participant pursuant to the exercise of the Incentive Option, the Participant shall notify the Company within ten days of the disposition. The Company may cause an appropriate legend to be affixed to any stock certificates representing the shares of Stock issued under the Plan to enable it to receive notice of the disposition. 8. Amendment and Discontinuance. The Board may from time to time amend, suspend or discontinue the Plan; provided, however, that subject to the provisions of Paragraph 5(h), no action of the Board may (a) increase the number of shares reserved for options pursuant to Section 4 without approval of the shareholders of the Company, (b) permit the granting of any Incentive Option at an Option Price less than that determined in accordance with Paragraph 5(b), (c) permit the granting of Incentive Options which expire beyond the period provided for in Paragraph 5(a), or (d) many any material change in the class of eligible employees as defined in the Plan. 9. Effective Date. The effective date of the Plan shall be the earlier of the date the Plan is adopted by the Board or the date the Plan is approved by shareholders of the Company. -12WORD PROCESSING DEPARTMENT WORK REQUEST FORM THIS REQUEST FORM MUST ACCOMPANY EACH DOCUMENT SUBMITTED
TIME/DATE OUT - ---------------------------------ATTY/REQUESTER: CLIENT NAME: DOCUMENT NO.: Janet McCloud MGM Grand JSM 0054 TIME/DATE IN ----------------------EXT.: BILLING NO.: 247 0176-071

DOCUMENT DESCRIPTION: Option Plans

DATE/TIME DUE: _______________________________________________________ DRAFT _________ DUPLICATE (COPY DOC./RETAIN ORIGINAL) _____________ FINAL _________ TOC/TOA __________ (ALLOW 1 HR FOR GENERATION) REDLINING: CUMULATIVE __________ CURRENT VERSION __________ SPECIAL INSTRUCTIONS: __________________________________________________

SPACE BELOW FOR WORD PROCESSING DEPARTMENT USE ONLY TIME STARTED: ______ TIME FINISHED: ______ TOTAL/INIT: / Date/Initials: 03.13.97/HSH -13-

WORD PROCESSING DEPARTMENT WORK REQUEST FORM THIS REQUEST FORM MUST ACCOMPANY EACH DOCUMENT SUBMITTED
TIME/DATE OUT - ---------------------------------ATTY/REQUESTER: CLIENT NAME: DOCUMENT NO.: Janet McCloud MGM Grand JSM 0054 TIME/DATE IN ----------------------EXT.: BILLING NO.: 247 0176-071

DOCUMENT DESCRIPTION: Option Plans

DATE/TIME DUE: _______________________________________________________ DRAFT _________ DUPLICATE (COPY DOC./RETAIN ORIGINAL) _____________ FINAL _________ TOC/TOA __________ (ALLOW 1 HR FOR GENERATION) REDLINING: CUMULATIVE __________ CURRENT VERSION __________ SPECIAL INSTRUCTIONS: __________________________________________________

SPACE BELOW FOR WORD PROCESSING DEPARTMENT USE ONLY TIME STARTED: ______ TIME FINISHED: ______ TOTAL/INIT: / Date/Initials: 03.13.97/HSH -13-

EXHIBIT 10.2 MGM GRAND, INC. INCENTIVE STOCK OPTION PLAN 1. Purpose. The purpose of the MGM Grand, Inc. Incentive Option Plan is to provide a means whereby MGM Grand, Inc. may attract and retain persons of ability as employees and motivate such persons to exert their best efforts on behalf of the Company and any Parent or Subsidiary. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the administrative committee appointed pursuant to Section 3. (d) "Company" shall mean MGM Grand, Inc., a Delaware Corporation. (e) "Incentive Option" shall mean an option to purchase shares of Stock, subject to the terms and conditions described in the Plan, which is not an incentive stock option within the meaning of Code Section 422A.

EXHIBIT 10.2 MGM GRAND, INC. INCENTIVE STOCK OPTION PLAN 1. Purpose. The purpose of the MGM Grand, Inc. Incentive Option Plan is to provide a means whereby MGM Grand, Inc. may attract and retain persons of ability as employees and motivate such persons to exert their best efforts on behalf of the Company and any Parent or Subsidiary. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the administrative committee appointed pursuant to Section 3. (d) "Company" shall mean MGM Grand, Inc., a Delaware Corporation. (e) "Incentive Option" shall mean an option to purchase shares of Stock, subject to the terms and conditions described in the Plan, which is not an incentive stock option within the meaning of Code Section 422A. (f) "Parent" shall mean a parent corporation as defined in Code Section 425(e). (g) "Participant" shall mean an employee of the Company or any Parent or Subsidiary who is designated to receive Incentive Options pursuant to Section 3. (h) "Plan" shall mean the MGM Grand, Inc. Incentive Stock Option Plan. (i) "Stock" shall mean the Company's $.01 par value common stock. (j) "Subsidiary" shall mean a subsidiary corporation as defined in Code Section 425(f) or any partnership or joint venture in which the Company owns a 50 percent or greater ownership interest. 3. Administration. The Plan shall be administered by the Committee, consisting of at least three members, appointed by and holding office at the pleasure of the Board. Members of the Committee shall be members of the Board and shall not be eligible to participate in the Plan while serving on the Committee. All employees of the Company or any Parent or Subsidiary (other than any employee who owns stock possession more than 10 percent of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary) shall be eligible to

receive Incentive Options. Subject to the provisions of the Plan, the Committee shall have the power to (a) determine and designate from time to time those employees who perform services for the Company or for any Parent or Subsidiary who shall be Participants in the Plan and the number of shares to be subject to the Incentive Options to be granted to each Participant; provided, however, that the Incentive option shall be granted after the expiration of the period of ten years from the effective date of the Plan specified in Section 8; (b) authorize the granting of Incentive Options to Participants; and (c) determine the time and the manner when each Incentive Option shall be exercisable and the duration of the exercised period. For all purposes of this Plan, the fair market value of the Stock shall be determined in good faith by the Committee by applying the rules and principles of valuation set forth in Treasury Regulations Section 20.2031-2, relating to the valuation of stocks and bonds for purposes of Code Section 2031. The Committee may interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or

receive Incentive Options. Subject to the provisions of the Plan, the Committee shall have the power to (a) determine and designate from time to time those employees who perform services for the Company or for any Parent or Subsidiary who shall be Participants in the Plan and the number of shares to be subject to the Incentive Options to be granted to each Participant; provided, however, that the Incentive option shall be granted after the expiration of the period of ten years from the effective date of the Plan specified in Section 8; (b) authorize the granting of Incentive Options to Participants; and (c) determine the time and the manner when each Incentive Option shall be exercisable and the duration of the exercised period. For all purposes of this Plan, the fair market value of the Stock shall be determined in good faith by the Committee by applying the rules and principles of valuation set forth in Treasury Regulations Section 20.2031-2, relating to the valuation of stocks and bonds for purposes of Code Section 2031. The Committee may interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and make such other determinations and take such other action as it deems necessary or advisable. Without limiting the generality of the foregoing sentence, the Committee may, it its discretion, treat all or any portion of any period during which a Participant is on military or on an approved leave of absence from the Company or a Parent or Subsidiary as a period of service of such Participant with the Company or a Parent or Subsidiary, as the case may be, for purposes of accrual of his or her rights under the Incentive Options. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive. Any action reduced to writing and signed by all members of the Committee shall be as fully effective as if it had been taken by vote at a meeting duly called and held. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Incentive Options. 4. Benefits Available Under Plan. The benefits provided by the Plan to Participants are Incentive Options. Incentive Option may be granted by the Company from time to time for all Participants to acquire an aggregate of 500,000,000 shares of Stock, subject to adjustment as provided in Paragraph 5(h), and reduced by the number of shares subject to options which are granted under the MGM Grand, Inc. Incentive Stock Option Plan. The shares to be delivered upon exercise of Incentive Options shall be made available, at the discretion of the Board, either from authorized but unissued shares of Stock or from Stock reacquired by the Company, including shares purchased in the open market. If any Incentive Option terminates, expires or is cancelled with respect to any shares of Stock, new Incentive Options may thereafter be granted covering such shares. 5. Terms and Conditions. Each Incentive Option shall be evidenced by an agreement (the "Agreement"), in a form approved by the Committee, which shall be signed by an officer of the Company and the Participant receiving the Incentive Option, and which shall be subject to the following express terms and conditions and to such other terms and conditions as the Committee may deem appropriate: 2

(a) Period. Each Agreement shall specify that the Incentive Option thereunder is granted for a period not to exceed ten years (the "Option Period") and shall provided that the Incentive Option shall expire at the end of such period. (b) Option Price. The price per share at which an Incentive Option may be exercised (the "Option Price") shall be determined by the Committee at or prior to the time the Incentive Option is granted, but shall be at least equal to the fair market value per share at the time the Incentive Option is granted. (c) Exercise of Option. In order to exercise the Incentive Options, the person or persons entitled to exercise them shall give written notice to the Company specifying the number of shares to be purchased pursuant to the exercise of the Incentive Options. This notice shall be accompanied by payment for the shares as provided in Paragraph 5 (d). Options may be exercised at such time or times as may be determined by the Committee at the time of grant, subject to the provision of this Section 5, including the following limitation: no part of any Incentive Option may be exercised until the Participant holding the Incentive Option shall have performed services for the Company or for a Parent or Subsidiary for such period after the date on which the Incentive Option is granted as the Committee may specify in the Agreement; provided, however, that, although a Incentive Option may provide for

(a) Period. Each Agreement shall specify that the Incentive Option thereunder is granted for a period not to exceed ten years (the "Option Period") and shall provided that the Incentive Option shall expire at the end of such period. (b) Option Price. The price per share at which an Incentive Option may be exercised (the "Option Price") shall be determined by the Committee at or prior to the time the Incentive Option is granted, but shall be at least equal to the fair market value per share at the time the Incentive Option is granted. (c) Exercise of Option. In order to exercise the Incentive Options, the person or persons entitled to exercise them shall give written notice to the Company specifying the number of shares to be purchased pursuant to the exercise of the Incentive Options. This notice shall be accompanied by payment for the shares as provided in Paragraph 5 (d). Options may be exercised at such time or times as may be determined by the Committee at the time of grant, subject to the provision of this Section 5, including the following limitation: no part of any Incentive Option may be exercised until the Participant holding the Incentive Option shall have performed services for the Company or for a Parent or Subsidiary for such period after the date on which the Incentive Option is granted as the Committee may specify in the Agreement; provided, however, that, although a Incentive Option may provide for earlier exercise, each Incentive Option must be exercisable so that at least 20 percent of the shares subject to the Incentive Option are exercisable no later than the third anniversary of the grant of the Incentive Option, 40 percent of such shares no later than the fourth such anniversary, 60 percent of such shares no later than the fifth such anniversary, 80 percent of such shares no later than the sixth such anniversary, and 100 percent of such shares no later than the seventh such anniversary; provided, further, that if the Committee authorizes a Incentive Option exercisable in more than one installment and if the employment of any Participant holding such a Incentive Option is terminated for any reason after the first day on which the right to exercise any portion of the Incentive Option has accrued, the number of shares with respect to which the Incentive Option shall be deemed to have accrued at the date of termination of employment shall be such number of shares as to which the right to exercise the Incentive Option accrued prior to the date of termination of employment, plus, in case the Incentive Option was not fully exercisable on such date, that proportion of the number of shares with respect to which the Incentive Option would next have become exercisable but for such termination of employment as the number of days the Participant was employed by the Company, or a Parent or Subsidiary, prior to such date and subsequent to the last preceding on which the right to exercise the Incentive Option as to additional shares accrued (the "Preceding Exercise Date") bears the number of days between the Preceding Exercise Date and the next date on which the right to exercise the Incentive Option as to additional shares would otherwise accrue; and provided, further, that no Incentive Option may at any time be exercised in part with respect to fewer than the lesser of (i) fifty shares, or (ii) the number of shares which remain to be purchased pursuant to the Incentive Option. (d) Payment of Option Price. The Option Price of the Stock transferred to a Participant pursuant to the exercise of a Incentive Option shall be paid to the Company at 3

the time of delivery of notice to exercise: (1) in cash; (2) with previously acquired Stock having a fair market value to the Option Price; or (3) with cash and previously acquired Stock having a fair market value which together with the cash is equal to the Option Price. (e) Limitation. The aggregate fair market value (determined at the time an option is granted) of the Stock with respect to which incentive stock options described in Code Section 422A(b) are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Parent and any Subsidiary) shall not exceed $100,000. (f) Exercise in the Event of Death or Termination of Employment. If a Participant holding Incentive Options shall terminate employment by the Company, its Parent or Subsidiaries because of death, or shall die within three months of termination of employment by the Company, its Parent and Subsidiaries, the Incentive Options held by the Participant may be exercised, to the extent that the Participant was entitled to do so at the date of termination of employment, by the person or person to whom the Participant's rights under the Incentive Options pass by will or applicable law, or if no such person has such rights, the Participant's executors or administrators, at any time, within one year after the date of such termination of employment, but in no event later than the expiration date

the time of delivery of notice to exercise: (1) in cash; (2) with previously acquired Stock having a fair market value to the Option Price; or (3) with cash and previously acquired Stock having a fair market value which together with the cash is equal to the Option Price. (e) Limitation. The aggregate fair market value (determined at the time an option is granted) of the Stock with respect to which incentive stock options described in Code Section 422A(b) are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Parent and any Subsidiary) shall not exceed $100,000. (f) Exercise in the Event of Death or Termination of Employment. If a Participant holding Incentive Options shall terminate employment by the Company, its Parent or Subsidiaries because of death, or shall die within three months of termination of employment by the Company, its Parent and Subsidiaries, the Incentive Options held by the Participant may be exercised, to the extent that the Participant was entitled to do so at the date of termination of employment, by the person or person to whom the Participant's rights under the Incentive Options pass by will or applicable law, or if no such person has such rights, the Participant's executors or administrators, at any time, within one year after the date of such termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). If a Participant's employment by the Company, its Parent or Subsidiaries shall terminate for any reason other than death, he may exercise his Incentive Options, to the extent he was entitled to do so at the date of termination of employment, at any time, or from time to time, within three months after the date of termination of employment, but in no event later than the expiration date specified pursuant to Paragraph 5(a). (g) Nontransferability. No Incentive Option granted under the Plan shall be transferrable other than by will or by the laws of descent and distribution. No interest of any Participant under the Plan shall be subject to attachment, execution, garnishment, sequestration, the laws of bankruptcy or any other legal or equitable process. During the lifetime of the Participant, Incentive Options shall be exercisable only by the Participant who received them. (h) Investment Representation. Each Agreement shall contain a provision that, upon demand by the Company for such a representation, the Participant holding the Incentive Options (or any person acting under Paragraph 5(e)) shall deliver to the Participant at the time of any exercise of any Incentive Options a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of Incentive Options and prior to the expiration of the Option Period shall be a condition precedent to the right of the Participant or such other person to acquire any shares. (i) Adjustments in Event of Change in Stock. In the event of any change in the Stock by reason of any stock dividend, recapitalization, reorganization, merger, 4

consolidation, split-up, combination, or exchange of shares, or of any similar change affecting the Stock, the number and class of shares which thereafter may be acquired under the Plan, the number and class of shares subject to outstanding Agreements, the Option Price per share thereof, and any other terms of the Plan or the Agreements which in the Committee's sole discretion require adjustment (including, without limitation, relating to the Stock, other securities, cash or other consideration which may be acquired upon exercise of the Incentive Options) shall be appropriately adjusted consistent with such change in such manner as the Committee may deem appropriate. (j) No Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any shares subject to Incentive Options prior to the date of issuance to him of a certificate or certificates for such shares. (k) No Rights to Continued Employment. The Plan any Incentive Options granted under the Plan shall not confer upon any employee any right with respect to continuance of employment by the Company or any Parent or Subsidiary, nor shall they interfere in any way with the right of the Company or any Parent or Subsidiary for which an employee performs services to terminate his employment at any time. (l) Certain Corporate Transactions. Each Agreement shall provide that nothing in the Plan or the Agreement shall

consolidation, split-up, combination, or exchange of shares, or of any similar change affecting the Stock, the number and class of shares which thereafter may be acquired under the Plan, the number and class of shares subject to outstanding Agreements, the Option Price per share thereof, and any other terms of the Plan or the Agreements which in the Committee's sole discretion require adjustment (including, without limitation, relating to the Stock, other securities, cash or other consideration which may be acquired upon exercise of the Incentive Options) shall be appropriately adjusted consistent with such change in such manner as the Committee may deem appropriate. (j) No Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any shares subject to Incentive Options prior to the date of issuance to him of a certificate or certificates for such shares. (k) No Rights to Continued Employment. The Plan any Incentive Options granted under the Plan shall not confer upon any employee any right with respect to continuance of employment by the Company or any Parent or Subsidiary, nor shall they interfere in any way with the right of the Company or any Parent or Subsidiary for which an employee performs services to terminate his employment at any time. (l) Certain Corporate Transactions. Each Agreement shall provide that nothing in the Plan or the Agreement shall in any way prohibit the Company from merging or consolidating into another corporation, or from selling or transferring all or substantially all of its assets, or from distributing all or substantially all of its assets to its stockholders in liquidation, or from dissolving and terminating its corporate existence, and in any such event (other than a merger in which the Company is the surviving corporation and under the terms of which the shares of Stock outstanding immediately prior to the merger remain outstanding and unchanged), the Participant shall be entitled to receive, at the time the Incentive Option or portion thereof would otherwise become exercisable and upon payment of the Option Price, the same shares of stock, cash, or other consideration received by shareholders of the Company in accordance with such merger, consolidation, sale or transfer of assets, liquidation or dissolution. 6. Compliance With Other Laws and Regulations. The Plan, the grant and exercise of Incentive Options under the Plan, and the obligation of the Company to transfer shares under these Incentive Options shall be subject to all applicable federal and state laws, rules and regulations, including those related to disclosure of financial and other information to the Participants, and to any approvals by any government or regulatory agency as may be required. The Company shall not be required to issue or deliver any certificates for shares of Stock prior to (a) the listing of such shares on any stock exchange on which the Stock may then be listed, where such listing is required under the rules or regulations of such exchange, and (b) the compliance with applicable federal and state securities laws and regulations relating to the issuance and delivery of such certificates; provided, however, that the Company shall make all reasonable efforts to so list such shares and to comply with such laws and regulations. 5

7. Certain Dispositions. All Incentive Options shall provide that if the Participant makes a disposition, within the meaning of Code Section 425(c), of any shares of Stock transferred upon exercise of an Incentive Option within two years from the date of the granting of the Incentive Option or within one year after the transfer of the shares of Stock to the Participant pursuant to the exercise of the Incentive Option, the Participant shall notify the Company within ten days of the disposition. The Company may cause an appropriate legend to be affixed to any stock certificates representing the shares of Stock issued under the Plan to enable it to receive notice of the disposition. 8. Amendment and Discontinuance. The Board may from time to time amend, suspend or discontinue the Plan; provided, however, that subject to the provisions of Paragraph 5(h), no action of the Board may (a) increase the number of shares reserved for options pursuant to Section 4 without approval of the shareholders of the Company, (b) permit the granting of any Incentive Option at an Option Price less than that determined in accordance with Paragraph 5(b), (c) permit the granting of Incentive Options which expire beyond the period provided for in Paragraph 5(a), or (d) many any material change in the class of eligible employees as defined in the Plan. 9. Effective Date. The effective date of the Plan shall be the earlier of the date the Plan is adopted by the Board

7. Certain Dispositions. All Incentive Options shall provide that if the Participant makes a disposition, within the meaning of Code Section 425(c), of any shares of Stock transferred upon exercise of an Incentive Option within two years from the date of the granting of the Incentive Option or within one year after the transfer of the shares of Stock to the Participant pursuant to the exercise of the Incentive Option, the Participant shall notify the Company within ten days of the disposition. The Company may cause an appropriate legend to be affixed to any stock certificates representing the shares of Stock issued under the Plan to enable it to receive notice of the disposition. 8. Amendment and Discontinuance. The Board may from time to time amend, suspend or discontinue the Plan; provided, however, that subject to the provisions of Paragraph 5(h), no action of the Board may (a) increase the number of shares reserved for options pursuant to Section 4 without approval of the shareholders of the Company, (b) permit the granting of any Incentive Option at an Option Price less than that determined in accordance with Paragraph 5(b), (c) permit the granting of Incentive Options which expire beyond the period provided for in Paragraph 5(a), or (d) many any material change in the class of eligible employees as defined in the Plan. 9. Effective Date. The effective date of the Plan shall be the earlier of the date the Plan is adopted by the Board or the date the Plan is approved by shareholders of the Company. 6

EXHIBIT 10.10 AMENDMENT NO. 1 TO KEEP-WELL AGREEMENT Reference is made to that certain Keep-Well Agreement dated as of September 15, 1995 (the "Keep-Well Agreement") among MGM Grand Inc., Primadonna Resorts, Inc. and Bank of America N.T. & S.A., as Managing Agent for the Banks under the Loan Agreement of even date therewith (the "Loan Agreement") with New York -- New York Hotel & Casino, LLC, as Borrower. Capitalized terms not defined herein are used with the meanings thereof for purposes of the Keep-Well Agreement. The Maintaining Parties and the Managing Agent, acting with the written consent of the Requisite Banks pursuant to Section 12.2 of the Loan Agreement, hereby agree as follows: 1. Section 3. Section 3 of the Keep-Well Agreement is hereby amended by adding thereto a new Subsection (d) to read in full as follows: "(d) Notwithstanding Subsection (a) above, during any period when there is outstanding indebtedness of Borrower permitted by Sections 6.8(e) and 6.9(e) of the Loan Agreement ("Purchase Money Indebtedness"), the Cash payments to be made into the Deposit Account during an Insolvency Proceeding shall be calculated pursuant to this Subsection (d). During any such period, the Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated (solely for purposes of Section 3 of this Keep-Well Agreement) to ignore the effect of all outstanding principal of, and payment of interest on, any Purchase Money Indebtedness; provided that such principal and interest are concurrently taken into account to calculate amounts payable under keep-well agreements substantially identical to this Keep-Well Agreement in favor of the holders of Purchase Money Indebtedness." 2. Section 8. Section 8 of the Keep-Well Agreement is amended by lower casing the initial word of the second sentence of Subsection (a) thereof and adding the following clause at the beginning of such sentence: "Except as otherwise provided in Section 18 hereof with respect to the actions described in clauses (i) and (ii) of the preceding sentence," -13. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed.

EXHIBIT 10.10 AMENDMENT NO. 1 TO KEEP-WELL AGREEMENT Reference is made to that certain Keep-Well Agreement dated as of September 15, 1995 (the "Keep-Well Agreement") among MGM Grand Inc., Primadonna Resorts, Inc. and Bank of America N.T. & S.A., as Managing Agent for the Banks under the Loan Agreement of even date therewith (the "Loan Agreement") with New York -- New York Hotel & Casino, LLC, as Borrower. Capitalized terms not defined herein are used with the meanings thereof for purposes of the Keep-Well Agreement. The Maintaining Parties and the Managing Agent, acting with the written consent of the Requisite Banks pursuant to Section 12.2 of the Loan Agreement, hereby agree as follows: 1. Section 3. Section 3 of the Keep-Well Agreement is hereby amended by adding thereto a new Subsection (d) to read in full as follows: "(d) Notwithstanding Subsection (a) above, during any period when there is outstanding indebtedness of Borrower permitted by Sections 6.8(e) and 6.9(e) of the Loan Agreement ("Purchase Money Indebtedness"), the Cash payments to be made into the Deposit Account during an Insolvency Proceeding shall be calculated pursuant to this Subsection (d). During any such period, the Leverage Ratio and the Fixed Charge Coverage Ratio shall be calculated (solely for purposes of Section 3 of this Keep-Well Agreement) to ignore the effect of all outstanding principal of, and payment of interest on, any Purchase Money Indebtedness; provided that such principal and interest are concurrently taken into account to calculate amounts payable under keep-well agreements substantially identical to this Keep-Well Agreement in favor of the holders of Purchase Money Indebtedness." 2. Section 8. Section 8 of the Keep-Well Agreement is amended by lower casing the initial word of the second sentence of Subsection (a) thereof and adding the following clause at the beginning of such sentence: "Except as otherwise provided in Section 18 hereof with respect to the actions described in clauses (i) and (ii) of the preceding sentence," -13. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed. Dated: January 17, 1997 MGM GRAND, INC.
By /s/ Scott Langsner ----------------------------------Scott Langsner Secretary/Treasurer ----------------------------------[Printed Name and Title]

PRIMADONNA RESORTS, INC. By [Printed Name and Title] BANK OF AMERICA, N.T. & S.A., as Managing Agent By

3. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed. Dated: January 17, 1997 MGM GRAND, INC.
By /s/ Scott Langsner ----------------------------------Scott Langsner Secretary/Treasurer ----------------------------------[Printed Name and Title]

PRIMADONNA RESORTS, INC. By [Printed Name and Title] BANK OF AMERICA, N.T. & S.A., as Managing Agent By [Printed Name and Title] -23. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed. Dated: January 17, 1997 MGM GRAND, INC. By [Printed Name and Title] PRIMADONNA RESORTS, INC.
By /s/ Craig F. Sullivan ------------------------------Craig F. Sullivan, CFO/Treasurer ------------------------------[Printed Name and Title]

BANK OF AMERICA, N.T. & S.A., as Managing Agent By [Printed Name and Title] -2-

3. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed. Dated: January 17, 1997 MGM GRAND, INC. By [Printed Name and Title] PRIMADONNA RESORTS, INC.
By /s/ Craig F. Sullivan ------------------------------Craig F. Sullivan, CFO/Treasurer ------------------------------[Printed Name and Title]

BANK OF AMERICA, N.T. & S.A., as Managing Agent By [Printed Name and Title] -23. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed. Dated: January 17, 1997 MGM GRAND, INC. By [Printed Name and Title] PRIMADONNA RESORTS, INC. By [Printed Name and Title] BANK OF AMERICA, N.T. & S.A., as Managing Agent
By /s/ Patrick Carroll ------------------------------Patrick Carroll, Vice President ------------------------------[Printed Name and Title]

3. Confirmation. In all other respects, the Keep-Well Agreement is hereby confirmed. Dated: January 17, 1997 MGM GRAND, INC. By [Printed Name and Title] PRIMADONNA RESORTS, INC. By [Printed Name and Title] BANK OF AMERICA, N.T. & S.A., as Managing Agent
By /s/ Patrick Carroll ------------------------------Patrick Carroll, Vice President ------------------------------[Printed Name and Title]

-2-

EXHIBIT 10.27 [Letterhead of MGM Grand, Inc.] October 10, 1995 Mr. Ed Jenkins 5164 McLeod Drive Las Vegas, NV 89120 Dear Mr. Jenkins: This letter will memorialize the agreement between you and MGM Grand, Inc. ("Company"). 1. Commencement Date: October 23, 1995 2. Position/Title: Vice President 3. Compensation: a) Base: $140,000 per year b) Stock Options: 25,000 shares of MGM Grand, Inc.'s common stock pursuant to its Non-Qualified Stock Option Plan, and subject to the following vesting schedule:
End of Year ----------1 Percent Vesting --------------0

EXHIBIT 10.27 [Letterhead of MGM Grand, Inc.] October 10, 1995 Mr. Ed Jenkins 5164 McLeod Drive Las Vegas, NV 89120 Dear Mr. Jenkins: This letter will memorialize the agreement between you and MGM Grand, Inc. ("Company"). 1. Commencement Date: October 23, 1995 2. Position/Title: Vice President 3. Compensation: a) Base: $140,000 per year b) Stock Options: 25,000 shares of MGM Grand, Inc.'s common stock pursuant to its Non-Qualified Stock Option Plan, and subject to the following vesting schedule:
End of Year ----------1 2 3 4 5 6 Percent Vesting --------------0 0 20 20 20 40

c) Acceleration of Stock Options: If there is a change in control as a result of a sale or exchange to a third party of outstanding common stock (as distinguished from a change in control resulting from the issuance of treasury shares or from any other transaction) before the stock options are fully vested, all unvested stock options shall become fully vested as of the date of such sale or exchange.

Mr. Ed Jenkins October 10, 1995 Page 2 d) Additional Compensation: You will be entitled to receive an annual bonus, not to exceed 50% of your base compensation, at the sole discretion of the Company's executive committee. e) Sign on Bonus: You will receive $5,000 upon signing and acceptance of this agreement. f) Taxes: All payments to you under this section will be subject to withholding taxes and other tax requirements, as applicable. 4. Duties and Responsibilities: Those consistent with position/title including, but not limited to, security matters related to domestic and international Company ventures, and Company development matters as directed by the Senior Vice President of Development. 5. Exclusivity: You agree to devote your full business time to the Company, and to render your services solely

Mr. Ed Jenkins October 10, 1995 Page 2 d) Additional Compensation: You will be entitled to receive an annual bonus, not to exceed 50% of your base compensation, at the sole discretion of the Company's executive committee. e) Sign on Bonus: You will receive $5,000 upon signing and acceptance of this agreement. f) Taxes: All payments to you under this section will be subject to withholding taxes and other tax requirements, as applicable. 4. Duties and Responsibilities: Those consistent with position/title including, but not limited to, security matters related to domestic and international Company ventures, and Company development matters as directed by the Senior Vice President of Development. 5. Exclusivity: You agree to devote your full business time to the Company, and to render your services solely and exclusively for the Company and any of its affiliates. 6. Representations and Warranties: You represent and warrant that: a) You can and will be unconditionally licensed by all applicable gaming authorities, and other authorities, including those to which the Company may become subject in the future. b) There are no existing conditions which may impair your ability to perform your duties hereunder. c) You have the full right to enter into this agreement, and your entering into this agreement will not violate or conflict with any arrangements or agreements you have with any other entity. 7. Termination Right: Each party shall have the right to terminate this agreement and your employment hereunder on thirty (30) days notice without any further obligations to the other, including, without limitation, any obligations under Paragraph 3 above.

Mr. Ed Jenkins October 10, 1995 Page 3 8. Employee Benefits: You shall be entitled to all the employee benefits that are in place at the Company as of the commencement date of this agreement, subject to change from time to time at the discretion of the Company. If the foregoing properly reflects your understanding, please so acknowledge by signing where indicated below. Sincerely yours,
/s/ J. Terrence Lanni J. Terrence Lanni Chairman & CEO MGM Grand, Inc.

Agreed to and acknowledged:
/s/ Edward Jenkins - --------------------------Ed Jenkins

Mr. Ed Jenkins October 10, 1995 Page 3 8. Employee Benefits: You shall be entitled to all the employee benefits that are in place at the Company as of the commencement date of this agreement, subject to change from time to time at the discretion of the Company. If the foregoing properly reflects your understanding, please so acknowledge by signing where indicated below. Sincerely yours,
/s/ J. Terrence Lanni J. Terrence Lanni Chairman & CEO MGM Grand, Inc.

Agreed to and acknowledged:
/s/ Edward Jenkins - --------------------------Ed Jenkins Dated: 10/10/95 ----------

EXHIBIT 10.28 [LETTERHEAD OF MGM GRAND, INC.]

October 10, 1995 Mr. Ken Rosevear 8407 Turtle Creek Circle Las Vegas, NV 89113 Dear Ken: This letter will memorialize the agreement between you and MGM Grand, Inc. ("Company"). 1. Commencement Date: November 1, 1995 2. Position/Title: Senior Vice President - Development 3. Compensation: a) Base: $270,000 per year b) Stock Options: 50,000 shares of MGM Grand, Inc.'s common stock pursuant to its Non-Qualified Stock Option Plan, and subject to the following vesting schedule:
End of Year ----------1 2 Percent Vesting --------------0 0

EXHIBIT 10.28 [LETTERHEAD OF MGM GRAND, INC.]

October 10, 1995 Mr. Ken Rosevear 8407 Turtle Creek Circle Las Vegas, NV 89113 Dear Ken: This letter will memorialize the agreement between you and MGM Grand, Inc. ("Company"). 1. Commencement Date: November 1, 1995 2. Position/Title: Senior Vice President - Development 3. Compensation: a) Base: $270,000 per year b) Stock Options: 50,000 shares of MGM Grand, Inc.'s common stock pursuant to its Non-Qualified Stock Option Plan, and subject to the following vesting schedule:
End of Year ----------1 2 3 4 5 6 Percent Vesting --------------0 0 20 20 20 40

c) Acceleration of Stock Options: If there is a change in control as a result of a sale or exchange to a third party of outstanding common stock (as distinguished from a change in control resulting from the issuance of treasury shares or from any other transaction) before the stock options are fully vested, all unvested stock options shall become fully vested as of the date of such sale or exchange. d) Additional Compensation: You will be entitled to receive an annual bonus, not to exceed 100% of your base compensation, at the sole discretion of the Company's executive committee.

Mr. Ken Rosevear October 10, 1995 Page 2 e) Special Compensation: Recognizing that Mr. Rosevear has significant experience, knowledge and relationships relating to the gaming industry in South Africa ("SA"), and as a result is in a position to provide opportunities to MGM Grand, Inc. in that country, should MGM Grand, Inc. elect to enter into project development in SA, Mr. Rosevear will receive 20% of the resulting net profit, after all expenses, of any future operational venture by MGM Grand, Inc. for the duration of the contracts. Provided, however, that if in the reasonable judgment of MGM Grand, Inc., Mr. Rosevear's participation in the net profits would pose a risk to MGM Grand, Inc. or any of its subsidiaries of the denial, suspension, loss or forfeiture of any gaming license or other permits necessary to conduct its business, then Mr. Rosevear shall not be entitled to any such participation. f) Taxes: All payments to you under this section will be subject to withholding taxes and other tax requirements,

Mr. Ken Rosevear October 10, 1995 Page 2 e) Special Compensation: Recognizing that Mr. Rosevear has significant experience, knowledge and relationships relating to the gaming industry in South Africa ("SA"), and as a result is in a position to provide opportunities to MGM Grand, Inc. in that country, should MGM Grand, Inc. elect to enter into project development in SA, Mr. Rosevear will receive 20% of the resulting net profit, after all expenses, of any future operational venture by MGM Grand, Inc. for the duration of the contracts. Provided, however, that if in the reasonable judgment of MGM Grand, Inc., Mr. Rosevear's participation in the net profits would pose a risk to MGM Grand, Inc. or any of its subsidiaries of the denial, suspension, loss or forfeiture of any gaming license or other permits necessary to conduct its business, then Mr. Rosevear shall not be entitled to any such participation. f) Taxes: All payments to you under this section will be subject to withholding taxes and other tax requirements, as applicable. 4. Duties and Responsibilities: Those consistent with position/title. 5. Exclusivity: You agree to devote your full business time to the Company, and to render your services solely and exclusively for the Company and any of its affiliates. 6. Representations and Warranties: You represent and warrant that: a) You can and will be unconditionally licensed by all applicable gaming authorities, and other authorities, including those to which the Company may become subject in the future. b) There are no existing conditions which may impair your ability to perform your duties hereunder. c) You have the full right to enter into this agreement, and your entering into this agreement will not violate or conflict with any arrangements or agreements you have with any other entity.

Mr. Ken Rosevear October 10, 1995 Page 3 7. Termination Right: Each party shall have the right to terminate this agreement and your employment hereunder on thirty (30) days notice without any further obligations to the other, including, without limitation, any obligations under Paragraph 3 above. 8. Employee Benefits: You shall be entitled to all the employee benefits that are in place at the Company as of the commencement date of this agreement, subject to change from time to time at the discretion of the Company. If the foregoing properly reflects your understanding, please so acknowledge by signing where indicated below. Sincerely yours,
/s/ J. Terrence Lanni J. Terrence Lanni Chairman & CEO MGM Grand, Inc.

Agreed to and acknowledged:

Mr. Ken Rosevear October 10, 1995 Page 3 7. Termination Right: Each party shall have the right to terminate this agreement and your employment hereunder on thirty (30) days notice without any further obligations to the other, including, without limitation, any obligations under Paragraph 3 above. 8. Employee Benefits: You shall be entitled to all the employee benefits that are in place at the Company as of the commencement date of this agreement, subject to change from time to time at the discretion of the Company. If the foregoing properly reflects your understanding, please so acknowledge by signing where indicated below. Sincerely yours,
/s/ J. Terrence Lanni J. Terrence Lanni Chairman & CEO MGM Grand, Inc.

Agreed to and acknowledged:
/s/ Ken Rosevear - ------------------------Ken Rosevear

Dated:

10 Oct 1995 ------------------

[LETTERHEAD OF MGM GRAND, INC.]

EXHIBIT 10.29 September 25, 1995 Mr. Patrick Smith 132 Ithaca Newport Beach, CA 92663 Dear Patrick: This letter will memorialize the agreement between you and MGM Grand, Inc. ("Company"). 1. Commencement Date: September 18, 1995 2. Position/Title: Vice President - Real Estate Operations 3. Compensation: a) Base: $250,000 per year b) Stock Options: 50,000 shares of MGM Grand, Inc.'s common stock pursuant to its Non-Qualified Stock

[LETTERHEAD OF MGM GRAND, INC.]

EXHIBIT 10.29 September 25, 1995 Mr. Patrick Smith 132 Ithaca Newport Beach, CA 92663 Dear Patrick: This letter will memorialize the agreement between you and MGM Grand, Inc. ("Company"). 1. Commencement Date: September 18, 1995 2. Position/Title: Vice President - Real Estate Operations 3. Compensation: a) Base: $250,000 per year b) Stock Options: 50,000 shares of MGM Grand, Inc.'s common stock pursuant to its Non-Qualified Stock Option Plan, and subject to the following vesting schedule:
End of Year ----------1 2 3 4 5 6 Percent Vesting --------------0 0 20 20 20 40

c) Acceleration of Stock Options: If there is a change in control as a result of a sale or exchange to a third party of outstanding common stock (as distinguished from a change in control resulting from the issuance of treasury shares or from any other transaction) before the stock options are fully vested, all unvested stock options shall become fully vested as of the date of such sale or exchange. d) Additional Compensation: You will be entitled to receive an annual bonus, not to exceed 50% of your base compensation, at the sole discretion of the Company's executive committee.

Mr. Patrick Smith September 25, 1995 Page 2 e) Taxes: All payments to you under this section will be subject to withholding taxes and other tax requirements, as applicable. 4. Duties and Responsibilities: Those consistent with position/title. 5. Exclusivity: You agree to devote your full business time to the Company, and to render your services solely and exclusively for the Company and any of its affiliates. 6. Representations and Warranties: You represent and warrant that:

Mr. Patrick Smith September 25, 1995 Page 2 e) Taxes: All payments to you under this section will be subject to withholding taxes and other tax requirements, as applicable. 4. Duties and Responsibilities: Those consistent with position/title. 5. Exclusivity: You agree to devote your full business time to the Company, and to render your services solely and exclusively for the Company and any of its affiliates. 6. Representations and Warranties: You represent and warrant that: a) You can and will be unconditionally licensed by all applicable gaming authorities, and other authorities, including those to which the Company may become subject in the future. b) There are no existing conditions which may impair your ability to perform your duties hereunder. c) You have the full right to enter into this agreement, and your entering into this agreement will not violate or conflict with any arrangements or agreements you have with any other entity. 7. Termination Right: Each party shall have the right to terminate this agreement and your employment hereunder on thirty (30) days notice without any further obligations to the other, including, without limitation, any obligations under Paragraph 3 above. 8. Employee Benefits: You shall be entitled to all the employee benefits that are in place at the Company as of the commencement date of this agreement, subject to change from time to time at the discretion of the Company.

Mr. Patrick Smith September 25, 1995 Page 3 If the foregoing properly reflects your understanding, please so acknowledge by signing where indicated below. Sincerely yours, J. Terrence Lanni Chairman & CEO MGM Grand, Inc. Agreed to and acknowledged: Patrick Smith Dated: _________________

EXHIBIT 10.30 MGM GRAND, INC. ANNUAL PERFORMANCE BASED INCENTIVE PLAN FOR EXECUTIVE OFFICER

Mr. Patrick Smith September 25, 1995 Page 3 If the foregoing properly reflects your understanding, please so acknowledge by signing where indicated below. Sincerely yours, J. Terrence Lanni Chairman & CEO MGM Grand, Inc. Agreed to and acknowledged: Patrick Smith Dated: _________________

EXHIBIT 10.30 MGM GRAND, INC. ANNUAL PERFORMANCE BASED INCENTIVE PLAN FOR EXECUTIVE OFFICER PURPOSE The MGM Grand, Inc. Annual Performance Based Incentive Plan For Executive Officers (the "Plan") is an annual short-term incentive plan designed to reward executive officers of MGM Grand Inc. (the "Company") for achieving preestablshied corporate performance goals. The Plan is intended to provide an incentive for superior performance and to motivate participating officers toward the highest levels of achievement and business results, to tie their goals and interests to those of the Company and its stockholders, and to enable the Company to attract and retain highly qualified executive officers. The Plan is also intended to preserve the Company's tax deduction for bonus compensation paid to executive officers by meeting the requirements for performance-based compensation under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). ARTICLE 1 ELIGIBILITY AND PARTICIPATION Section 1.1 Participation in the Plan is limited to those executive officers of the Company who are officers among the named executives in the Company's annual proxy statements; specifically, any individual who (a) at any time during the taxable year, served as the chief executive officer of the Company or acted in such capacity, or (b) is among the four highest compensated executive officers of the Company other than the chief executive officer. At or prior to the time performance objectives for a "Performance Period" are established, as defined in Section 2.2 below, the Compensation and Stock Option Committee (the "Committee") of the Board of Directors (the "Board") will designate in writing which executive officers among those eligible shall participate in the Plan for such Performance Period (the "Participants"). ARTICLE 2 PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES Section 2.1 The fiscal year of the Plan (the "Plan Year") shall be the fiscal year beginning on January 1 and ending on December 31. The performance period with respect to which bonuses shall be calculated and paid under the Plan (the "Performance Period") shall generally be the Plan Year; provided, however, that the Committee shall have the authority to designate different Performance Periods under the Plan.

EXHIBIT 10.30 MGM GRAND, INC. ANNUAL PERFORMANCE BASED INCENTIVE PLAN FOR EXECUTIVE OFFICER PURPOSE The MGM Grand, Inc. Annual Performance Based Incentive Plan For Executive Officers (the "Plan") is an annual short-term incentive plan designed to reward executive officers of MGM Grand Inc. (the "Company") for achieving preestablshied corporate performance goals. The Plan is intended to provide an incentive for superior performance and to motivate participating officers toward the highest levels of achievement and business results, to tie their goals and interests to those of the Company and its stockholders, and to enable the Company to attract and retain highly qualified executive officers. The Plan is also intended to preserve the Company's tax deduction for bonus compensation paid to executive officers by meeting the requirements for performance-based compensation under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). ARTICLE 1 ELIGIBILITY AND PARTICIPATION Section 1.1 Participation in the Plan is limited to those executive officers of the Company who are officers among the named executives in the Company's annual proxy statements; specifically, any individual who (a) at any time during the taxable year, served as the chief executive officer of the Company or acted in such capacity, or (b) is among the four highest compensated executive officers of the Company other than the chief executive officer. At or prior to the time performance objectives for a "Performance Period" are established, as defined in Section 2.2 below, the Compensation and Stock Option Committee (the "Committee") of the Board of Directors (the "Board") will designate in writing which executive officers among those eligible shall participate in the Plan for such Performance Period (the "Participants"). ARTICLE 2 PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES Section 2.1 The fiscal year of the Plan (the "Plan Year") shall be the fiscal year beginning on January 1 and ending on December 31. The performance period with respect to which bonuses shall be calculated and paid under the Plan (the "Performance Period") shall generally be the Plan Year; provided, however, that the Committee shall have the authority to designate different Performance Periods under the Plan.

Section 2.2 Within the first ninety days of each Performance Period the Committee shall establish in writing, with respect to such Performance Period, one or more performance goals, a specific target objective or objectives with respect to such performance goals, and an objective formula or method for computing the amount of bonus compensation awardable to each Participant if the performance goals are attained. Notwithstanding the foregoing sentence, for any Performance Period, such goals, objectives and formulae must be established within that number of days, beginning on the first day of such Performance Period, which is no more than twenty-five percent of the total number of days in such Performance Period. Section 2.3 Performance goals shall be based upon one or more of the following business criteria for the Company as a whole or any of its subsidiaries or operating units: stock price; market share; gross revenue; pretax operating income; cash flow; earnings before interest, taxes, depreciation and amortization; earnings per share; return on equity; return on invested capital or assets; return on revenues; cost reductions and savings; and productivity. In addition, to the extent consistent with the goal of providing for deductibility of bonus compensation under the Code, performance goals may be based upon a Participant's attainment of personal goals with respect to any of the foregoing performance goals, negotiating transactions and sales, or developing long-term business goals. Measurements of the Company's or a Participant's performance against the performance goals established by the Committee shall be objectively determinable and, to the extent they are expressed in standard accounting terms, shall be determined according to generally accepted accounting principles as in existence on the date on which the performance goals are established.

Section 2.2 Within the first ninety days of each Performance Period the Committee shall establish in writing, with respect to such Performance Period, one or more performance goals, a specific target objective or objectives with respect to such performance goals, and an objective formula or method for computing the amount of bonus compensation awardable to each Participant if the performance goals are attained. Notwithstanding the foregoing sentence, for any Performance Period, such goals, objectives and formulae must be established within that number of days, beginning on the first day of such Performance Period, which is no more than twenty-five percent of the total number of days in such Performance Period. Section 2.3 Performance goals shall be based upon one or more of the following business criteria for the Company as a whole or any of its subsidiaries or operating units: stock price; market share; gross revenue; pretax operating income; cash flow; earnings before interest, taxes, depreciation and amortization; earnings per share; return on equity; return on invested capital or assets; return on revenues; cost reductions and savings; and productivity. In addition, to the extent consistent with the goal of providing for deductibility of bonus compensation under the Code, performance goals may be based upon a Participant's attainment of personal goals with respect to any of the foregoing performance goals, negotiating transactions and sales, or developing long-term business goals. Measurements of the Company's or a Participant's performance against the performance goals established by the Committee shall be objectively determinable and, to the extent they are expressed in standard accounting terms, shall be determined according to generally accepted accounting principles as in existence on the date on which the performance goals are established. ARTICLE 3 DETERMINATION OF BONUS AWARDS Section 3.1 As soon as practicable after the end of each Performance Period, the Committee shall certify in writing to what extent the Company and the Participants have achieved the performance goal or goals for such Performance Period, including the specific target objectives and the satisfaction of any other material terms of the bonus award, and the Committee shall calculate the amount of each Participant's bonus for such Performance Period based upon the performance goals, objectives, and computation formulae for such performance period established pursuant to Section 2.2 above. The Committee shall have no discretion to increase the amount of any Participant's bonus as so determined, but may reduce or totally eliminate any Participant's bonus if it determines, in its sole and absolute discretion, that such a reduction or elimination is appropriate with respect to the Participant's performance or any other factors material to the goals, purposes, and administration of the Plan. Section 3.2 No Participant's bonus for any Plan Year shall exceed the lesser of 100% of the Participant's base annual salary as in effect as of the first day of such Plan Year or $1,000,000.00.

ARTICLE 4 PAYMENT OF BONUS AWARDS Section 4.1 Approved bonus awards shall be payable by the Company in cash to each Participant, or to the Participant's estate in the event of the Participant's death, as soon as practicable after the end of each Performance Period and after the Committee has certified in writing pursuant to Section 3.1 that the relevant performance goals were achieved. Section 4.2 A bonus award that would otherwise be payable to a Participant who is not employed by the Company or one of its subsidiaries on the last day of a Performance Period may be prorated or not paid based on rules to be established by the Committee for the administration of the Plan. ARTICLE 5 OTHER TERMS AND CONDITIONS Section 5.1 No bonus awards shall be paid under the Plan unless and until the material terms (within the meaning of the Code and regulations promulgated thereunder) of the Plan, including the business criteria described in Section 2.3 above, are approved by the stockholders by a majority of votes cast in a separate vote on the issue in person or by proxy (including abstentions to the extent abstentions are counted as voting under applicable state law).

ARTICLE 4 PAYMENT OF BONUS AWARDS Section 4.1 Approved bonus awards shall be payable by the Company in cash to each Participant, or to the Participant's estate in the event of the Participant's death, as soon as practicable after the end of each Performance Period and after the Committee has certified in writing pursuant to Section 3.1 that the relevant performance goals were achieved. Section 4.2 A bonus award that would otherwise be payable to a Participant who is not employed by the Company or one of its subsidiaries on the last day of a Performance Period may be prorated or not paid based on rules to be established by the Committee for the administration of the Plan. ARTICLE 5 OTHER TERMS AND CONDITIONS Section 5.1 No bonus awards shall be paid under the Plan unless and until the material terms (within the meaning of the Code and regulations promulgated thereunder) of the Plan, including the business criteria described in Section 2.3 above, are approved by the stockholders by a majority of votes cast in a separate vote on the issue in person or by proxy (including abstentions to the extent abstentions are counted as voting under applicable state law). Section 5.2 No person shall have any legal claim to be granted an award under the Plan and the Committee shall have no obligation to treat Participants uniformly. Except as may be otherwise required by law, bonus awards under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary. Bonuses awarded under the Plan shall be payable from the general assets of the Company and no Participant shall have any claim with respect to any specific assets of the Company. Section 5.3 Neither the Plan nor any action taken under the Plan shall be construed as giving any employee the right to be retained in the employ of the Company or any subsidiary or to obligate the Company or any subsidiary to maintain any employee's compensation at any level. Section 5.4 The Company or any of its subsidiaries may deduct from any award any applicable withholding taxes or any amounts owed by the employee to the Company or any of its subsidiaries. 3 ARTICLE 6 ADMINISTRATION Section 6.1 All members of the Committee shall be persons who qualify as "outside directors" as defined under the Code. Until changed by the Board, the Compensation and Stock Option Committee of the Board shall constitute the Committee hereunder. Section 6.2 The Committee shall have full power and authority to administer and interpret the provisions of the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable. Section 6.3 Except with respect to matters which under the Code are required to be determined in the sole and absolute discretion of the Committee, the Committee shall have full power to delegate to any officer or employee of the Company the authority to administer and interpret the procedural aspects of the Plan, subject to the Plan's terms, including adopting and enforcing rules to decide procedural and administrative issues. Section 6.4 The Committee may rely on opinions, reports or statements of officers or employees of the Company or any subsidiary thereof and of Company counsel (inside or retained counsel), public accountants and other professional or expert persons. Section 6.5 The Board reserves the right to amend or terminate the Plan in whole or in part at any time. Unless otherwise prohibited by applicable law, any amendment required to conform the Plan to the requirements of the

ARTICLE 6 ADMINISTRATION Section 6.1 All members of the Committee shall be persons who qualify as "outside directors" as defined under the Code. Until changed by the Board, the Compensation and Stock Option Committee of the Board shall constitute the Committee hereunder. Section 6.2 The Committee shall have full power and authority to administer and interpret the provisions of the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable. Section 6.3 Except with respect to matters which under the Code are required to be determined in the sole and absolute discretion of the Committee, the Committee shall have full power to delegate to any officer or employee of the Company the authority to administer and interpret the procedural aspects of the Plan, subject to the Plan's terms, including adopting and enforcing rules to decide procedural and administrative issues. Section 6.4 The Committee may rely on opinions, reports or statements of officers or employees of the Company or any subsidiary thereof and of Company counsel (inside or retained counsel), public accountants and other professional or expert persons. Section 6.5 The Board reserves the right to amend or terminate the Plan in whole or in part at any time. Unless otherwise prohibited by applicable law, any amendment required to conform the Plan to the requirements of the Code may be made by the Committee. No amendment may be made to the class of individuals who are eligible to participate in the Plan, the performance criteria specified in Section 2.3 or the maximum bonus payable to any Participant as specified in Section 3.2 without stockholder approval unless stockholder approval is not required in order for bonuses paid to Participants to constitute qualified performance-based compensation under the Code. Section 6.6 No member of the Committee shall be liable for any action taken or omitted to be taken or for any determination made by him or her in good faith with respect to the Plan, and the Company shall indemnify and hold harmless each member of the Committee against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any act or omission in connection with the administration or interpretation of the Plan, unless arising out of such person's own fraud or bad faith. Section 6.7 The place of administration of the Plan shall be the State of Nevada, and the validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Delaware. 4

MGM GRAND INC. 1996 ANNUAL REPORT

MGM Grand, Inc. is an entertainment, hotel and gaming company headquartered in Las Vegas, Nevada. The Company owns and operates the MGM Grand Hotel/Casino in Las Vegas; MGM Grand Australia, a hotel and casino in the city of Darwin; and owns a 50% interest in New York-New York, a 2,033-room hotel and casino which opened in Las Vegas on January 3, 1997. MGM Grand, Inc. is listed on the New York Stock Exchange. Its trading symbol is MGG.

TO OUR STOCKHOLDERS/OWNERS:

MGM GRAND INC. 1996 ANNUAL REPORT

MGM Grand, Inc. is an entertainment, hotel and gaming company headquartered in Las Vegas, Nevada. The Company owns and operates the MGM Grand Hotel/Casino in Las Vegas; MGM Grand Australia, a hotel and casino in the city of Darwin; and owns a 50% interest in New York-New York, a 2,033-room hotel and casino which opened in Las Vegas on January 3, 1997. MGM Grand, Inc. is listed on the New York Stock Exchange. Its trading symbol is MGG.

TO OUR STOCKHOLDERS/OWNERS: By any measure, 1996 was a great year for your Company! MGM Grand's 1996 results set several Company records: Total net revenues were $805 million, an 11% increase over 1995; gaming revenues were $482 million, a 19% increase over 1995; room revenues were $174 million, a 9% increase over 1995; EBITDA (earnings before interest, taxes, depreciation and amortization) was $259 million, a 52% increase over 1995; and, despite having 18.7% more shares outstanding, earnings per share (before one-time charges and on a fully- taxed adjusted basis) reached $1.86, an increase of 200% over 1995. In addition to accomplishing these record results, the Company's EBITDA margin (the most frequently used yardstick to measure operating efficiency in our industry) soared from 23.5% in 1995 to 32.2% in 1996. It is now among the highest in our industry. These results were achieved by redefining our core values and by creating an organization-wide focus on earnings. We were still managing the same physical assets, but challenges can turn people into superb innovators. Mae West was right when she said: "It's not what you've got, it's what you do with what you've got." The Company's dramatic earnings results afforded us the opportunity to refinance our entire capital structure. In June of 1996, we raised $327 million of net equity proceeds. Together with free cash flow from operations, the equity proceeds were used to defease $473 million of high yield bonds. A consortium of 28 banks provided us with a $600 million credit line (which has since been increased to $1 billion) at just over a 6% interest rate. The result of this financial reengineering is that by the end of the year we had almost $1 billion in equity, virtually no debt, and a $1 billion unused credit line to finance your Company's growth. The nation's leading rating agencies have recognized these financial improvements. Moody's upgraded our credit line rating to investment grade (Baa3), and Standard & Poor's raised the Company's overall credit rating to BB+ (just one level below investment grade). There was substantial other good news at MGM Grand in 1996. In April, we announced a master plan for the transformation of the MGM Grand Hotel/Casino, our flagship 113-acre complex in Las Vegas, into "The City of Entertainment." In July, there were several significant developments. We announced an agreement to acquire an interest in 30 acres of prime property on the Atlantic City Boardwalk, with the intention of developing it into a world-class destination resort. A few weeks later the Company was found suitable for licensing by the New Jersey Casino Control Commission. Also late that month, we announced an agreement with South African partners, including one of the largest public companies in the Republic of South Africa, to jointly bid for approximately 15 casino gaming licenses in that country. So far we have applied for two of those licenses, and we are pleased to report that we have been selected for both! In November 1996, the voters in Michigan surprised many people by narrowly passing a referendum for the development of three casinos in the City of Detroit. Since we are strong believers in the demographics and psychographics of the Detroit market, in February of this year we announced the

MGM Grand, Inc. is an entertainment, hotel and gaming company headquartered in Las Vegas, Nevada. The Company owns and operates the MGM Grand Hotel/Casino in Las Vegas; MGM Grand Australia, a hotel and casino in the city of Darwin; and owns a 50% interest in New York-New York, a 2,033-room hotel and casino which opened in Las Vegas on January 3, 1997. MGM Grand, Inc. is listed on the New York Stock Exchange. Its trading symbol is MGG.

TO OUR STOCKHOLDERS/OWNERS: By any measure, 1996 was a great year for your Company! MGM Grand's 1996 results set several Company records: Total net revenues were $805 million, an 11% increase over 1995; gaming revenues were $482 million, a 19% increase over 1995; room revenues were $174 million, a 9% increase over 1995; EBITDA (earnings before interest, taxes, depreciation and amortization) was $259 million, a 52% increase over 1995; and, despite having 18.7% more shares outstanding, earnings per share (before one-time charges and on a fully- taxed adjusted basis) reached $1.86, an increase of 200% over 1995. In addition to accomplishing these record results, the Company's EBITDA margin (the most frequently used yardstick to measure operating efficiency in our industry) soared from 23.5% in 1995 to 32.2% in 1996. It is now among the highest in our industry. These results were achieved by redefining our core values and by creating an organization-wide focus on earnings. We were still managing the same physical assets, but challenges can turn people into superb innovators. Mae West was right when she said: "It's not what you've got, it's what you do with what you've got." The Company's dramatic earnings results afforded us the opportunity to refinance our entire capital structure. In June of 1996, we raised $327 million of net equity proceeds. Together with free cash flow from operations, the equity proceeds were used to defease $473 million of high yield bonds. A consortium of 28 banks provided us with a $600 million credit line (which has since been increased to $1 billion) at just over a 6% interest rate. The result of this financial reengineering is that by the end of the year we had almost $1 billion in equity, virtually no debt, and a $1 billion unused credit line to finance your Company's growth. The nation's leading rating agencies have recognized these financial improvements. Moody's upgraded our credit line rating to investment grade (Baa3), and Standard & Poor's raised the Company's overall credit rating to BB+ (just one level below investment grade). There was substantial other good news at MGM Grand in 1996. In April, we announced a master plan for the transformation of the MGM Grand Hotel/Casino, our flagship 113-acre complex in Las Vegas, into "The City of Entertainment." In July, there were several significant developments. We announced an agreement to acquire an interest in 30 acres of prime property on the Atlantic City Boardwalk, with the intention of developing it into a world-class destination resort. A few weeks later the Company was found suitable for licensing by the New Jersey Casino Control Commission. Also late that month, we announced an agreement with South African partners, including one of the largest public companies in the Republic of South Africa, to jointly bid for approximately 15 casino gaming licenses in that country. So far we have applied for two of those licenses, and we are pleased to report that we have been selected for both! In November 1996, the voters in Michigan surprised many people by narrowly passing a referendum for the development of three casinos in the City of Detroit. Since we are strong believers in the demographics and psychographics of the Detroit market, in February of this year we announced the 3

formation of a joint venture between MGM Grand and a distinguished group of civic, community and business leaders in Detroit to jointly pursue a license to own and operate a casino in this dynamic marketplace.

TO OUR STOCKHOLDERS/OWNERS: By any measure, 1996 was a great year for your Company! MGM Grand's 1996 results set several Company records: Total net revenues were $805 million, an 11% increase over 1995; gaming revenues were $482 million, a 19% increase over 1995; room revenues were $174 million, a 9% increase over 1995; EBITDA (earnings before interest, taxes, depreciation and amortization) was $259 million, a 52% increase over 1995; and, despite having 18.7% more shares outstanding, earnings per share (before one-time charges and on a fully- taxed adjusted basis) reached $1.86, an increase of 200% over 1995. In addition to accomplishing these record results, the Company's EBITDA margin (the most frequently used yardstick to measure operating efficiency in our industry) soared from 23.5% in 1995 to 32.2% in 1996. It is now among the highest in our industry. These results were achieved by redefining our core values and by creating an organization-wide focus on earnings. We were still managing the same physical assets, but challenges can turn people into superb innovators. Mae West was right when she said: "It's not what you've got, it's what you do with what you've got." The Company's dramatic earnings results afforded us the opportunity to refinance our entire capital structure. In June of 1996, we raised $327 million of net equity proceeds. Together with free cash flow from operations, the equity proceeds were used to defease $473 million of high yield bonds. A consortium of 28 banks provided us with a $600 million credit line (which has since been increased to $1 billion) at just over a 6% interest rate. The result of this financial reengineering is that by the end of the year we had almost $1 billion in equity, virtually no debt, and a $1 billion unused credit line to finance your Company's growth. The nation's leading rating agencies have recognized these financial improvements. Moody's upgraded our credit line rating to investment grade (Baa3), and Standard & Poor's raised the Company's overall credit rating to BB+ (just one level below investment grade). There was substantial other good news at MGM Grand in 1996. In April, we announced a master plan for the transformation of the MGM Grand Hotel/Casino, our flagship 113-acre complex in Las Vegas, into "The City of Entertainment." In July, there were several significant developments. We announced an agreement to acquire an interest in 30 acres of prime property on the Atlantic City Boardwalk, with the intention of developing it into a world-class destination resort. A few weeks later the Company was found suitable for licensing by the New Jersey Casino Control Commission. Also late that month, we announced an agreement with South African partners, including one of the largest public companies in the Republic of South Africa, to jointly bid for approximately 15 casino gaming licenses in that country. So far we have applied for two of those licenses, and we are pleased to report that we have been selected for both! In November 1996, the voters in Michigan surprised many people by narrowly passing a referendum for the development of three casinos in the City of Detroit. Since we are strong believers in the demographics and psychographics of the Detroit market, in February of this year we announced the 3

formation of a joint venture between MGM Grand and a distinguished group of civic, community and business leaders in Detroit to jointly pursue a license to own and operate a casino in this dynamic marketplace. One of the most significant developments for our Company occurred in Las Vegas on January 3, 1997, when we opened New York-New York Hotel & Casino, of which MGM Grand owns a 50% interest. The opening was highly successful, and the initial operating results have exceeded even the most optimistic expectations. All of these accomplishments are significant events in laying the foundation for the implementation of your Company's growth strategy. As great as 1996 was, not everything went as planned. Our property in Darwin, Australia is not yet generating an acceptable return on our investment. Although the Australian gaming market overall has suffered dramatically

formation of a joint venture between MGM Grand and a distinguished group of civic, community and business leaders in Detroit to jointly pursue a license to own and operate a casino in this dynamic marketplace. One of the most significant developments for our Company occurred in Las Vegas on January 3, 1997, when we opened New York-New York Hotel & Casino, of which MGM Grand owns a 50% interest. The opening was highly successful, and the initial operating results have exceeded even the most optimistic expectations. All of these accomplishments are significant events in laying the foundation for the implementation of your Company's growth strategy. As great as 1996 was, not everything went as planned. Our property in Darwin, Australia is not yet generating an acceptable return on our investment. Although the Australian gaming market overall has suffered dramatically since we acquired the property, our focus is on making progress, not excuses. We are disappointed to report that Lee Iacocca, a distinguished member of our Board of Directors, chose to not stand for reelection in 1997 due to his significantly increased time commitments to other business interests and charitable activities. We will surely miss Lee's insights and marketing genius. Our Company's fundamental objective, of course, continues to be the enhancement of shareholder value. In order to accomplish this objective, we believe that there are three indispensable ingredients - continued strong and predictable earnings; a well articulated and properly executed growth strategy; [PHOTO] Alex Yemenidjian, left, and J. Terrence Lanni with two new cast members at the MGM Grand Hotel/Casino in Las Vegas.

and the creation of high performance teams with a dedication to a common purpose. Energized by a sense of commitment, we are setting more ambitious performance goals. Every product, every service, every cause that has a competitor is a brand that needs to define and defend its uniqueness. We intend to differentiate the MGM Grand brand by focusing on our financial assets, our physical assets, and our human assets. The Company's financial assets consist of our own capacity to earn, our ability to continue to achieve profit margins among the highest in the industry, and our ability to further reduce the cost of capital. Our commitment to you is that the MGM Grand team will retain its performance ethic and continue to excel in all these areas. In our physical assets, the goal is to have a growing collection of gems. We already have the MGM Grand Hotel/Casino, our City of Entertainment, and New York-New York in Las Vegas. The future promises to bring MGM Grand Atlantic City and, hopefully, another gem in Detroit. The objective is to create environments that have an ambiance and a glow that are irresistible. Yale's Robert Venturi once called it "the architecture of persuasion." Our human assets - comprising thousands of dedicated people - are responsible for the creation of the Company's financial and physical assets. We thank all of them for our success. Money does not think, and buildings do not create. To paraphrase Warren Buffet, a business without good management is like the Eiffel Tower without an elevator. On various occasions, publicly and privately, we have said we would not trade our management team for any other in the industry, bar none. Our management makes up your Company's intellectual capital and consistently delivers the ultimate winning formula - a superior customer experience. What we are committed to - and what we promise you - is that the Company's fortunes are aligned with yours. We also intend to heed the advice of Aristotle: "We are what we repeatedly do. Excellence, then, is not an act, but a habit." Sincerely,

and the creation of high performance teams with a dedication to a common purpose. Energized by a sense of commitment, we are setting more ambitious performance goals. Every product, every service, every cause that has a competitor is a brand that needs to define and defend its uniqueness. We intend to differentiate the MGM Grand brand by focusing on our financial assets, our physical assets, and our human assets. The Company's financial assets consist of our own capacity to earn, our ability to continue to achieve profit margins among the highest in the industry, and our ability to further reduce the cost of capital. Our commitment to you is that the MGM Grand team will retain its performance ethic and continue to excel in all these areas. In our physical assets, the goal is to have a growing collection of gems. We already have the MGM Grand Hotel/Casino, our City of Entertainment, and New York-New York in Las Vegas. The future promises to bring MGM Grand Atlantic City and, hopefully, another gem in Detroit. The objective is to create environments that have an ambiance and a glow that are irresistible. Yale's Robert Venturi once called it "the architecture of persuasion." Our human assets - comprising thousands of dedicated people - are responsible for the creation of the Company's financial and physical assets. We thank all of them for our success. Money does not think, and buildings do not create. To paraphrase Warren Buffet, a business without good management is like the Eiffel Tower without an elevator. On various occasions, publicly and privately, we have said we would not trade our management team for any other in the industry, bar none. Our management makes up your Company's intellectual capital and consistently delivers the ultimate winning formula - a superior customer experience. What we are committed to - and what we promise you - is that the Company's fortunes are aligned with yours. We also intend to heed the advice of Aristotle: "We are what we repeatedly do. Excellence, then, is not an act, but a habit." Sincerely,
/s/ J. Terrence Lanni J. Terrence Lanni Chairman of the Board & Chief Executive Officer

/s/ Alex Yemendijian Alex Yemendijian President, Chief Operating Officer & Chief Financial Officer

March 20, 1997

New York-New York Hotel & Casino opened to worldwide acclaim in January 1997. The resort, 50%-owned by MGM Grand, Inc., recreates the classic Manhattan skyline, complete with 12 skyscrapers housing 2,033 guest rooms and suites. The Empire State Building, the tallest hotel tower, rises 47 stories. Among the many New York icons depicted at this unique resort are a 150 foot-tall Statue of Liberty and a Coney Island-style roller coaster. Located across the famed Las Vegas Strip at the city's busiest four corners, New York-New York is directly attached to the MGM Grand Hotel/Casino via a pedestrian walkway. Lift Page at Right

New York-New York Hotel & Casino opened to worldwide acclaim in January 1997. The resort, 50%-owned by MGM Grand, Inc., recreates the classic Manhattan skyline, complete with 12 skyscrapers housing 2,033 guest rooms and suites. The Empire State Building, the tallest hotel tower, rises 47 stories. Among the many New York icons depicted at this unique resort are a 150 foot-tall Statue of Liberty and a Coney Island-style roller coaster. Located across the famed Las Vegas Strip at the city's busiest four corners, New York-New York is directly attached to the MGM Grand Hotel/Casino via a pedestrian walkway. Lift Page at Right [PHOTO] The spires of the Brooklyn Bridge provide another nostalgic scene at New York-New York. The resort's replica of the famous span is 300 feet long. [PHOTO] Celebrated actor George Hamilton has created a specialty cigar shop - Hamiltons Las Vegas - evoking the spirit of the past as well as present.

[PHOTO] The New York-New York limousines have the flavor of the yellow Checker cabs made famous on the streets of Manhattan. [PHOTO] The 84,000-square-foot New York-New York casino is nearly the size of two football fields and features some 2,400 slot machines and 71 gaming tables. Central Park and other Big Apple landmarks are featured in the resort's interior.

[PHOTO] The music, magic and memories of Motown are captured in The Motown Cafe at New York-New York. [PHOTO] Gallagher's Steakhouse, a New York City landmark since 1927, is now a fixture at New York-New York as well. [PHOTO] The Manhattan Express roller coaster circling the resort rises as high as 20 stories with a maximum drop of 144 feet. It is the first ride in history to feature a "heartline twist and dive maneuver" which has drawn coaster aficionados from around the world.

The Brown Derby, world-famous gathering spot for Hollywood celebrities during the golden era of motion pictures, is today replicated on the MGM Grand's new Studio Walk. Aside from the Derby's renowned Cobb salad, the restaurant offers the best steaks and convivial atmosphere in town, and is decorated with celebrity portraits that adorned the walls of the original Brown Derby. Lift Page at Right

[PHOTO] The New York-New York limousines have the flavor of the yellow Checker cabs made famous on the streets of Manhattan. [PHOTO] The 84,000-square-foot New York-New York casino is nearly the size of two football fields and features some 2,400 slot machines and 71 gaming tables. Central Park and other Big Apple landmarks are featured in the resort's interior.

[PHOTO] The music, magic and memories of Motown are captured in The Motown Cafe at New York-New York. [PHOTO] Gallagher's Steakhouse, a New York City landmark since 1927, is now a fixture at New York-New York as well. [PHOTO] The Manhattan Express roller coaster circling the resort rises as high as 20 stories with a maximum drop of 144 feet. It is the first ride in history to feature a "heartline twist and dive maneuver" which has drawn coaster aficionados from around the world.

The Brown Derby, world-famous gathering spot for Hollywood celebrities during the golden era of motion pictures, is today replicated on the MGM Grand's new Studio Walk. Aside from the Derby's renowned Cobb salad, the restaurant offers the best steaks and convivial atmosphere in town, and is decorated with celebrity portraits that adorned the walls of the original Brown Derby. Lift Page at Right

[PHOTO] Among the new retail outlets along Studio Walk is Peruzzi, featuring high fashion jewelry for men and women. [PHOTO] The Studio Walk at the MGM Grand is themed to portray a studio setting with a klieg-lighted ceiling and facades of retail stores and fine restaurants designed to provide an entertainment ambiance. Many of the facades depict Hollywood landmarks. [PHOTO] The Art of Entertainment, a Company-owned eclectic gallery, provides discriminating buyers an opportunity to acquire works by leading contemporary artists, including many from the world of entertainment.

[PHOTO]

[PHOTO] The music, magic and memories of Motown are captured in The Motown Cafe at New York-New York. [PHOTO] Gallagher's Steakhouse, a New York City landmark since 1927, is now a fixture at New York-New York as well. [PHOTO] The Manhattan Express roller coaster circling the resort rises as high as 20 stories with a maximum drop of 144 feet. It is the first ride in history to feature a "heartline twist and dive maneuver" which has drawn coaster aficionados from around the world.

The Brown Derby, world-famous gathering spot for Hollywood celebrities during the golden era of motion pictures, is today replicated on the MGM Grand's new Studio Walk. Aside from the Derby's renowned Cobb salad, the restaurant offers the best steaks and convivial atmosphere in town, and is decorated with celebrity portraits that adorned the walls of the original Brown Derby. Lift Page at Right

[PHOTO] Among the new retail outlets along Studio Walk is Peruzzi, featuring high fashion jewelry for men and women. [PHOTO] The Studio Walk at the MGM Grand is themed to portray a studio setting with a klieg-lighted ceiling and facades of retail stores and fine restaurants designed to provide an entertainment ambiance. Many of the facades depict Hollywood landmarks. [PHOTO] The Art of Entertainment, a Company-owned eclectic gallery, provides discriminating buyers an opportunity to acquire works by leading contemporary artists, including many from the world of entertainment.

[PHOTO] The MGM Grand Athletic Club retail store offers casual and athletic apparel for the entire family as well as a variety of sports collectibles and memorabilia. [PHOTO] Gatsby's, above, MGM Grand's newest gourmet restaurant, serves a blend of French cuisine with a California flair. The restaurant also has three separate wine cellars, temperature controlled for whites, reds and champagnes, with more than 600 collections representing every wine region in the world.

The City of Entertainment once again lived up to its star-studded billing during 1996. At right is a backstage view of the $45 million stage spectacular "EFX," starring David Cassidy (shown above). Superstars of both stage and

The Brown Derby, world-famous gathering spot for Hollywood celebrities during the golden era of motion pictures, is today replicated on the MGM Grand's new Studio Walk. Aside from the Derby's renowned Cobb salad, the restaurant offers the best steaks and convivial atmosphere in town, and is decorated with celebrity portraits that adorned the walls of the original Brown Derby. Lift Page at Right

[PHOTO] Among the new retail outlets along Studio Walk is Peruzzi, featuring high fashion jewelry for men and women. [PHOTO] The Studio Walk at the MGM Grand is themed to portray a studio setting with a klieg-lighted ceiling and facades of retail stores and fine restaurants designed to provide an entertainment ambiance. Many of the facades depict Hollywood landmarks. [PHOTO] The Art of Entertainment, a Company-owned eclectic gallery, provides discriminating buyers an opportunity to acquire works by leading contemporary artists, including many from the world of entertainment.

[PHOTO] The MGM Grand Athletic Club retail store offers casual and athletic apparel for the entire family as well as a variety of sports collectibles and memorabilia. [PHOTO] Gatsby's, above, MGM Grand's newest gourmet restaurant, serves a blend of French cuisine with a California flair. The restaurant also has three separate wine cellars, temperature controlled for whites, reds and champagnes, with more than 600 collections representing every wine region in the world.

The City of Entertainment once again lived up to its star-studded billing during 1996. At right is a backstage view of the $45 million stage spectacular "EFX," starring David Cassidy (shown above). Superstars of both stage and sport graced MGM Grand showrooms and arena during the year. To name a few: Gloria Estefan, Jimmy Buffett, KISS, The Who, Sting, Bob Seger, Rod Stewart, Rodney Dangerfield, Wayne Newton, the Righteous Brothers, the Four Tops, Carrot Top, Stomp, Evander Holyfield and Mike Tyson. Lift Page at Right

[PHOTO] In November 1996, more than 16,000 fans as well as news media from throughout the world jammed the MGM Grand Garden Arena to watch Evander Holyfield knock out Mike Tyson for [PHOTO] the heavyweight championship of the world, one of the biggest upsets in the history of boxing. Holyfield-Tyson II will again attract international attention on May 3, 1997.

[PHOTO] Among the new retail outlets along Studio Walk is Peruzzi, featuring high fashion jewelry for men and women. [PHOTO] The Studio Walk at the MGM Grand is themed to portray a studio setting with a klieg-lighted ceiling and facades of retail stores and fine restaurants designed to provide an entertainment ambiance. Many of the facades depict Hollywood landmarks. [PHOTO] The Art of Entertainment, a Company-owned eclectic gallery, provides discriminating buyers an opportunity to acquire works by leading contemporary artists, including many from the world of entertainment.

[PHOTO] The MGM Grand Athletic Club retail store offers casual and athletic apparel for the entire family as well as a variety of sports collectibles and memorabilia. [PHOTO] Gatsby's, above, MGM Grand's newest gourmet restaurant, serves a blend of French cuisine with a California flair. The restaurant also has three separate wine cellars, temperature controlled for whites, reds and champagnes, with more than 600 collections representing every wine region in the world.

The City of Entertainment once again lived up to its star-studded billing during 1996. At right is a backstage view of the $45 million stage spectacular "EFX," starring David Cassidy (shown above). Superstars of both stage and sport graced MGM Grand showrooms and arena during the year. To name a few: Gloria Estefan, Jimmy Buffett, KISS, The Who, Sting, Bob Seger, Rod Stewart, Rodney Dangerfield, Wayne Newton, the Righteous Brothers, the Four Tops, Carrot Top, Stomp, Evander Holyfield and Mike Tyson. Lift Page at Right

[PHOTO] In November 1996, more than 16,000 fans as well as news media from throughout the world jammed the MGM Grand Garden Arena to watch Evander Holyfield knock out Mike Tyson for [PHOTO] the heavyweight championship of the world, one of the biggest upsets in the history of boxing. Holyfield-Tyson II will again attract international attention on May 3, 1997. [PHOTO] Neil Diamond made his first Las Vegas appearance in more than 20 years with a three-night engagement at the MGM Grand Garden Arena in late 1996.

[PHOTO]

[PHOTO] The MGM Grand Athletic Club retail store offers casual and athletic apparel for the entire family as well as a variety of sports collectibles and memorabilia. [PHOTO] Gatsby's, above, MGM Grand's newest gourmet restaurant, serves a blend of French cuisine with a California flair. The restaurant also has three separate wine cellars, temperature controlled for whites, reds and champagnes, with more than 600 collections representing every wine region in the world.

The City of Entertainment once again lived up to its star-studded billing during 1996. At right is a backstage view of the $45 million stage spectacular "EFX," starring David Cassidy (shown above). Superstars of both stage and sport graced MGM Grand showrooms and arena during the year. To name a few: Gloria Estefan, Jimmy Buffett, KISS, The Who, Sting, Bob Seger, Rod Stewart, Rodney Dangerfield, Wayne Newton, the Righteous Brothers, the Four Tops, Carrot Top, Stomp, Evander Holyfield and Mike Tyson. Lift Page at Right

[PHOTO] In November 1996, more than 16,000 fans as well as news media from throughout the world jammed the MGM Grand Garden Arena to watch Evander Holyfield knock out Mike Tyson for [PHOTO] the heavyweight championship of the world, one of the biggest upsets in the history of boxing. Holyfield-Tyson II will again attract international attention on May 3, 1997. [PHOTO] Neil Diamond made his first Las Vegas appearance in more than 20 years with a three-night engagement at the MGM Grand Garden Arena in late 1996.

[PHOTO] Gladys Knight [PHOTO] SkyScreamer, above, the world's largest Skycoaster, provides unique, thrilling entertainment for those MGM Grand guests who are especially stout of heart. In this Grand Adventures ride which opened in September 1996, one-to-three flyers are lifted 220 feet into the air. They then pull their own ripcord which turns into a freefall of approximately 10 stories followed by a swing at speeds up to 70 miles per hour. [PHOTO] Tom Jones, left, and Gladys Knight, above, are among the regulars in the Hollywood Theatre. The Tonight Show with Jay Leno returned to the MGM Grand early this year with a week of telecasts originating from the Hollywood Theatre.

The City of Entertainment once again lived up to its star-studded billing during 1996. At right is a backstage view of the $45 million stage spectacular "EFX," starring David Cassidy (shown above). Superstars of both stage and sport graced MGM Grand showrooms and arena during the year. To name a few: Gloria Estefan, Jimmy Buffett, KISS, The Who, Sting, Bob Seger, Rod Stewart, Rodney Dangerfield, Wayne Newton, the Righteous Brothers, the Four Tops, Carrot Top, Stomp, Evander Holyfield and Mike Tyson. Lift Page at Right

[PHOTO] In November 1996, more than 16,000 fans as well as news media from throughout the world jammed the MGM Grand Garden Arena to watch Evander Holyfield knock out Mike Tyson for [PHOTO] the heavyweight championship of the world, one of the biggest upsets in the history of boxing. Holyfield-Tyson II will again attract international attention on May 3, 1997. [PHOTO] Neil Diamond made his first Las Vegas appearance in more than 20 years with a three-night engagement at the MGM Grand Garden Arena in late 1996.

[PHOTO] Gladys Knight [PHOTO] SkyScreamer, above, the world's largest Skycoaster, provides unique, thrilling entertainment for those MGM Grand guests who are especially stout of heart. In this Grand Adventures ride which opened in September 1996, one-to-three flyers are lifted 220 feet into the air. They then pull their own ripcord which turns into a freefall of approximately 10 stories followed by a swing at speeds up to 70 miles per hour. [PHOTO] Tom Jones, left, and Gladys Knight, above, are among the regulars in the Hollywood Theatre. The Tonight Show with Jay Leno returned to the MGM Grand early this year with a week of telecasts originating from the Hollywood Theatre.

MGM Grand is dedicated to enhancing its operations through the revitalization of existing properties as well as seeking opportunities in emerging or potential markets. During the past year the Company announced plans to build a destination resort in Atlantic City, New Jersey; formulated plans to seek a gaming license in Detroit, Michigan; and is actively involved with a joint venture pursuing licenses in the Republic of South Africa. Lift Page at Right

[PHOTO] The famed Atlantic City Boardwalk, shown in this vintage photograph (left) first gained prominence as a summer

[PHOTO] In November 1996, more than 16,000 fans as well as news media from throughout the world jammed the MGM Grand Garden Arena to watch Evander Holyfield knock out Mike Tyson for [PHOTO] the heavyweight championship of the world, one of the biggest upsets in the history of boxing. Holyfield-Tyson II will again attract international attention on May 3, 1997. [PHOTO] Neil Diamond made his first Las Vegas appearance in more than 20 years with a three-night engagement at the MGM Grand Garden Arena in late 1996.

[PHOTO] Gladys Knight [PHOTO] SkyScreamer, above, the world's largest Skycoaster, provides unique, thrilling entertainment for those MGM Grand guests who are especially stout of heart. In this Grand Adventures ride which opened in September 1996, one-to-three flyers are lifted 220 feet into the air. They then pull their own ripcord which turns into a freefall of approximately 10 stories followed by a swing at speeds up to 70 miles per hour. [PHOTO] Tom Jones, left, and Gladys Knight, above, are among the regulars in the Hollywood Theatre. The Tonight Show with Jay Leno returned to the MGM Grand early this year with a week of telecasts originating from the Hollywood Theatre.

MGM Grand is dedicated to enhancing its operations through the revitalization of existing properties as well as seeking opportunities in emerging or potential markets. During the past year the Company announced plans to build a destination resort in Atlantic City, New Jersey; formulated plans to seek a gaming license in Detroit, Michigan; and is actively involved with a joint venture pursuing licenses in the Republic of South Africa. Lift Page at Right

[PHOTO] The famed Atlantic City Boardwalk, shown in this vintage photograph (left) first gained prominence as a summer resort in the mid-1800s. The Boardwalk was revitalized in the late 1970's and has since become a major attraction as a year-round gaming resort.

[PHOTO] A joint venture involving the Company and South African partners was selected for licensing in the cities of Nelspruit and Witbank (red dots at right), in the northeastern portion of the country. MGM Grand

[PHOTO] Gladys Knight [PHOTO] SkyScreamer, above, the world's largest Skycoaster, provides unique, thrilling entertainment for those MGM Grand guests who are especially stout of heart. In this Grand Adventures ride which opened in September 1996, one-to-three flyers are lifted 220 feet into the air. They then pull their own ripcord which turns into a freefall of approximately 10 stories followed by a swing at speeds up to 70 miles per hour. [PHOTO] Tom Jones, left, and Gladys Knight, above, are among the regulars in the Hollywood Theatre. The Tonight Show with Jay Leno returned to the MGM Grand early this year with a week of telecasts originating from the Hollywood Theatre.

MGM Grand is dedicated to enhancing its operations through the revitalization of existing properties as well as seeking opportunities in emerging or potential markets. During the past year the Company announced plans to build a destination resort in Atlantic City, New Jersey; formulated plans to seek a gaming license in Detroit, Michigan; and is actively involved with a joint venture pursuing licenses in the Republic of South Africa. Lift Page at Right

[PHOTO] The famed Atlantic City Boardwalk, shown in this vintage photograph (left) first gained prominence as a summer resort in the mid-1800s. The Boardwalk was revitalized in the late 1970's and has since become a major attraction as a year-round gaming resort.

[PHOTO] A joint venture involving the Company and South African partners was selected for licensing in the cities of Nelspruit and Witbank (red dots at right), in the northeastern portion of the country. MGM Grand [PHOTO] will be responsible for development and management of casino projects undertaken by the joint venture which plans to apply for approximately 15 gaming licenses in all nine provinces of South Africa. [MAP OF SOUTH AFRICA] MAJOR CITIES IN SOUTH AFRICA 1 Nelspruit 2 Witbank 3 Sandton - Johannesburg 4 Pretoria

MGM Grand is dedicated to enhancing its operations through the revitalization of existing properties as well as seeking opportunities in emerging or potential markets. During the past year the Company announced plans to build a destination resort in Atlantic City, New Jersey; formulated plans to seek a gaming license in Detroit, Michigan; and is actively involved with a joint venture pursuing licenses in the Republic of South Africa. Lift Page at Right

[PHOTO] The famed Atlantic City Boardwalk, shown in this vintage photograph (left) first gained prominence as a summer resort in the mid-1800s. The Boardwalk was revitalized in the late 1970's and has since become a major attraction as a year-round gaming resort.

[PHOTO] A joint venture involving the Company and South African partners was selected for licensing in the cities of Nelspruit and Witbank (red dots at right), in the northeastern portion of the country. MGM Grand [PHOTO] will be responsible for development and management of casino projects undertaken by the joint venture which plans to apply for approximately 15 gaming licenses in all nine provinces of South Africa. [MAP OF SOUTH AFRICA] MAJOR CITIES IN SOUTH AFRICA 1 Nelspruit 2 Witbank 3 Sandton - Johannesburg 4 Pretoria 5 Durban 6 Pietermaritzburg 7 Bloemfontein 8 Cape Town 9 Port Elizabeth 10 East London 11 Kimberley 12 Pietersburg [PHOTO] The Company has announced plans to build a world-class destination resort on a parcel of land, shaded in red

[PHOTO] The famed Atlantic City Boardwalk, shown in this vintage photograph (left) first gained prominence as a summer resort in the mid-1800s. The Boardwalk was revitalized in the late 1970's and has since become a major attraction as a year-round gaming resort.

[PHOTO] A joint venture involving the Company and South African partners was selected for licensing in the cities of Nelspruit and Witbank (red dots at right), in the northeastern portion of the country. MGM Grand [PHOTO] will be responsible for development and management of casino projects undertaken by the joint venture which plans to apply for approximately 15 gaming licenses in all nine provinces of South Africa. [MAP OF SOUTH AFRICA] MAJOR CITIES IN SOUTH AFRICA 1 Nelspruit 2 Witbank 3 Sandton - Johannesburg 4 Pretoria 5 Durban 6 Pietermaritzburg 7 Bloemfontein 8 Cape Town 9 Port Elizabeth 10 East London 11 Kimberley 12 Pietersburg [PHOTO] The Company has announced plans to build a world-class destination resort on a parcel of land, shaded in red above, at the southeast end of the famed Boardwalk in Atlantic City. MGM Grand, Inc. was found [PHOTO] suitable for licensing by the New Jersey Gaming Control Commission during 1996 and has subsequently been acquiring property in this area.

[PHOTO] A joint venture involving the Company and South African partners was selected for licensing in the cities of Nelspruit and Witbank (red dots at right), in the northeastern portion of the country. MGM Grand [PHOTO] will be responsible for development and management of casino projects undertaken by the joint venture which plans to apply for approximately 15 gaming licenses in all nine provinces of South Africa. [MAP OF SOUTH AFRICA] MAJOR CITIES IN SOUTH AFRICA 1 Nelspruit 2 Witbank 3 Sandton - Johannesburg 4 Pretoria 5 Durban 6 Pietermaritzburg 7 Bloemfontein 8 Cape Town 9 Port Elizabeth 10 East London 11 Kimberley 12 Pietersburg [PHOTO] The Company has announced plans to build a world-class destination resort on a parcel of land, shaded in red above, at the southeast end of the famed Boardwalk in Atlantic City. MGM Grand, Inc. was found [PHOTO] suitable for licensing by the New Jersey Gaming Control Commission during 1996 and has subsequently been acquiring property in this area.

Performance at a Glance:
Net Revenues In thousands $850,000 1994 742,195 1995 721,843 1996 804,814 Cash Flow from Operating Activities In thousands $250,000 1994 94,461 1995 114,544 1996 245,151 Debt to Equity Percentage

1994 1995 1996

47.2% 48.5% 7.9%

Performance at a Glance:
Net Revenues In thousands $850,000 1994 742,195 1995 721,843 1996 804,814 Cash Flow from Operating Activities In thousands $250,000 1994 94,461 1995 114,544 1996 245,151 Debt to Equity Percentage

1994 1995 1996

47.2% 48.5% 7.9%

EBITDA*

EBITDA* Margin Percentage

Coverage Ratio (EBITDA*/Interest Charges

In thousands $300,000 1994 181,827 1995 169,837 1996 259,072

1994 1995 1996

24.5% 23.5% 32.2%

1994 1995 1996

2.9 2.7 6.3

Adjusted Earnings Per Share** 1994 0.97% 1995 0.62% 1996 1.86%

* EBITDA consists of net income plus net interest expense, taxes, depreciation and amortization, one-time charges (which consists of Master Plan asset disposition, Preopening, Discontinued Operations and Extraordinary Item) and Corporate expense. **Adjusted earnings per share is derived using an assumed 36.5% tax rate and excludes one-time charges related to the Master Plan asset disposition, Discontinued Operations and Extraordinary Item.

[PHOTO]

MGM GRAND, INC. 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-3333 MGM GRAND HOTEL/CASINO 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-1111 Reservations (702) 891-7777 (800) 929-1111 (outside Nevada) MGM GRAND AUSTRALIA Gilruth Avenue Mindil Beach Darwin, Northern Territory 0801 Australia International Number 011-61-8-89438888 NEW YORK-NEW YORK

[PHOTO]

[PHOTO]

[PHOTO]

[PHOTO]

MGM GRAND, INC. 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-3333 MGM GRAND HOTEL/CASINO 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-1111 Reservations (702) 891-7777 (800) 929-1111 (outside Nevada) MGM GRAND AUSTRALIA Gilruth Avenue Mindil Beach Darwin, Northern Territory 0801 Australia International Number 011-61-8-89438888 NEW YORK-NEW YORK 3790 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 740-6969 Reservations (702) 740-6900 (800) 693-6763

[PHOTO]

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[LOGO OF MGM GRAND] MGM GRAND, INC 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-3333

Five-year Financial Highlights
(In thousands except share data) For the Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------Net revenues $ 804,814 $ 721,843 $ 742,195 $ Operating profit before non-recurring items and corporate expense 196,876 114,522 137,481 Operating income (loss) 129,294 103,823 129,715 Income (loss) before income taxes, discontinued operations and extraordinary item 99,151 46,565 73,540 Net income (loss) 43,706 46,565 74,576 ( Earnings (loss) per share: Income (loss) before income taxes, discontinued operations and extraordinary item Discontinued operations Extraordinary item - loss on defeasance of debt, net of income tax benefit Net income (loss) per share Average number of shares At Year End Total assets Total debt Stockholders' equity

$

1.37 --

$

0.96 --

$

1.50 0.02

$

(0.57) --$ 0.80 $ 0.96 $ 1.52 $ ----------------------------------------------------54,235,000 48,544,000 48,988,000 47,

$ 1,287,689 83,391 973,382

$ 1,282,222 551,099 584,548

$ 1,153,511 473,000 529,379

$ 1,

[LOGO OF MGM GRAND] MGM GRAND, INC 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-3333

Five-year Financial Highlights
(In thousands except share data) For the Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------Net revenues $ 804,814 $ 721,843 $ 742,195 $ Operating profit before non-recurring items and corporate expense 196,876 114,522 137,481 Operating income (loss) 129,294 103,823 129,715 Income (loss) before income taxes, discontinued operations and extraordinary item 99,151 46,565 73,540 Net income (loss) 43,706 46,565 74,576 ( Earnings (loss) per share: Income (loss) before income taxes, discontinued operations and extraordinary item Discontinued operations Extraordinary item - loss on defeasance of debt, net of income tax benefit Net income (loss) per share Average number of shares At Year End Total assets Total debt Stockholders' equity Stockholders' equity per share Number of shares at year end

$

1.37 --

$

0.96 --

$

1.50 0.02

$

(0.57) --$ 0.80 $ 0.96 $ 1.52 $ ----------------------------------------------------54,235,000 48,544,000 48,988,000 47,

$ 1,287,689 83,391 973,382 $ 16.82 57,884,000

$ 1,282,222 551,099 584,548 $ 11.98 48,775,000

$ 1,153,511 473,000 529,379 $ 11.05 47,925,000

$ 1,

$ 48,

The selected financial data above includes information for MGM Grand Las Vegas which commenced operations on December 18, 1993, and MGM Grand Air until December 31, 1994, when the company was sold.

Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company, through its wholly-owned subsidiaries, owns and operates MGM Grand Hotel/Casino in Las Vegas, Nevada ("MGM Grand Las Vegas"), which commenced operations on December 18, 1993, and MGM Grand Diamond Beach Hotel/Casino in Darwin, Australia ("MGM Grand Australia"), which was acquired on September 7, 1995 (see Notes 1 and 16). Additionally, the Company's wholly-owned subsidiary MGM Grand Atlantic City in Atlantic City, New Jersey is in the development stage (see Note 1) and New York-New York Hotel and Casino in Las Vegas, Nevada ("NYNY"), owned by the Company's 50% joint venture partnership, was completed prior to December 31, 1996 and commenced operations on January 3, 1997 (see Note 1). Airline operations have been reclassified for the years presented to Discontinued Operations as a result of the sale of the airline on December 31, 1994 (see Note 17). 1996 Compared with 1995 Consolidated net revenues for the year ended December 31, 1996 were $804,814,000, representing an increase

Five-year Financial Highlights
(In thousands except share data) For the Years Ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------Net revenues $ 804,814 $ 721,843 $ 742,195 $ Operating profit before non-recurring items and corporate expense 196,876 114,522 137,481 Operating income (loss) 129,294 103,823 129,715 Income (loss) before income taxes, discontinued operations and extraordinary item 99,151 46,565 73,540 Net income (loss) 43,706 46,565 74,576 ( Earnings (loss) per share: Income (loss) before income taxes, discontinued operations and extraordinary item Discontinued operations Extraordinary item - loss on defeasance of debt, net of income tax benefit Net income (loss) per share Average number of shares At Year End Total assets Total debt Stockholders' equity Stockholders' equity per share Number of shares at year end

$

1.37 --

$

0.96 --

$

1.50 0.02

$

(0.57) --$ 0.80 $ 0.96 $ 1.52 $ ----------------------------------------------------54,235,000 48,544,000 48,988,000 47,

$ 1,287,689 83,391 973,382 $ 16.82 57,884,000

$ 1,282,222 551,099 584,548 $ 11.98 48,775,000

$ 1,153,511 473,000 529,379 $ 11.05 47,925,000

$ 1,

$ 48,

The selected financial data above includes information for MGM Grand Las Vegas which commenced operations on December 18, 1993, and MGM Grand Air until December 31, 1994, when the company was sold.

Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company, through its wholly-owned subsidiaries, owns and operates MGM Grand Hotel/Casino in Las Vegas, Nevada ("MGM Grand Las Vegas"), which commenced operations on December 18, 1993, and MGM Grand Diamond Beach Hotel/Casino in Darwin, Australia ("MGM Grand Australia"), which was acquired on September 7, 1995 (see Notes 1 and 16). Additionally, the Company's wholly-owned subsidiary MGM Grand Atlantic City in Atlantic City, New Jersey is in the development stage (see Note 1) and New York-New York Hotel and Casino in Las Vegas, Nevada ("NYNY"), owned by the Company's 50% joint venture partnership, was completed prior to December 31, 1996 and commenced operations on January 3, 1997 (see Note 1). Airline operations have been reclassified for the years presented to Discontinued Operations as a result of the sale of the airline on December 31, 1994 (see Note 17). 1996 Compared with 1995 Consolidated net revenues for the year ended December 31, 1996 were $804,814,000, representing an increase of $82,971,000 (11.5%) when compared with $721,843,000 for 1995. MGM Grand Las Vegas accounted for a majority of the improved 1996 revenues, providing growth in every revenue segment over the prior year, excluding food and beverage, due to the Company's 1995 restructuring plan which included the conversion of three Company operated restaurants into leased facilities (see Note 14). MGM Grand Australia revenues for the year ended December 31, 1996 were significantly higher than the prior year due to a full year operating period in 1996, compared with an abbreviated 1995 operating period from the acquisition of the property on September 7, 1995 through December 31, 1995 (see Note 16). Promotional allowances remained consistent between years, reflecting management's focus on diversifying its customer mix. Consolidated casino revenues were $481,710,000 for the year ended December 31, 1996, reflecting an increase

Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company, through its wholly-owned subsidiaries, owns and operates MGM Grand Hotel/Casino in Las Vegas, Nevada ("MGM Grand Las Vegas"), which commenced operations on December 18, 1993, and MGM Grand Diamond Beach Hotel/Casino in Darwin, Australia ("MGM Grand Australia"), which was acquired on September 7, 1995 (see Notes 1 and 16). Additionally, the Company's wholly-owned subsidiary MGM Grand Atlantic City in Atlantic City, New Jersey is in the development stage (see Note 1) and New York-New York Hotel and Casino in Las Vegas, Nevada ("NYNY"), owned by the Company's 50% joint venture partnership, was completed prior to December 31, 1996 and commenced operations on January 3, 1997 (see Note 1). Airline operations have been reclassified for the years presented to Discontinued Operations as a result of the sale of the airline on December 31, 1994 (see Note 17). 1996 Compared with 1995 Consolidated net revenues for the year ended December 31, 1996 were $804,814,000, representing an increase of $82,971,000 (11.5%) when compared with $721,843,000 for 1995. MGM Grand Las Vegas accounted for a majority of the improved 1996 revenues, providing growth in every revenue segment over the prior year, excluding food and beverage, due to the Company's 1995 restructuring plan which included the conversion of three Company operated restaurants into leased facilities (see Note 14). MGM Grand Australia revenues for the year ended December 31, 1996 were significantly higher than the prior year due to a full year operating period in 1996, compared with an abbreviated 1995 operating period from the acquisition of the property on September 7, 1995 through December 31, 1995 (see Note 16). Promotional allowances remained consistent between years, reflecting management's focus on diversifying its customer mix. Consolidated casino revenues were $481,710,000 for the year ended December 31, 1996, reflecting an increase of $76,968,000 (19.0%) compared with $404,742,000 for the prior year. MGM Grand Las Vegas primarily accounted for the increase, where casino revenues of $450,402,000 were $52,954,000 (13.3%) above the prior year of $397,448,000, reflecting improved win and win percentages in table games, baccarat and slots. MGM Grand Australia casino revenues were $31,308,000 for 1996, reflecting a significant increase of $24,014,000 above the prior year, which included shortened operating results due to the acquisition on September 7, 1995 (see Note 16). Consolidated room revenues were $174,440,000 for 1996, reflecting an increase of $13,970,000 (8.7%) above the prior year of $160,470,000. MGM Grand Las Vegas reported room revenues of $172,447,000 for 1996, which were $12,395,000 (7.7%) above the prior year of $160,052,000. This improvement reflected increased occupancy and average daily room rate of 94.7% and $101, respectively, when compared with 90.6% and $98 for the prior year. MGM Grand Australia reported room revenues for 1996 of $2,121,000, which were above the prior year by $1,507,000, reflecting the shortened 1995 operating period. Consolidated food and beverage revenues of $78,438,000 for the year ended December 31, 1996 were $10,861,000 (12.2%) below the prior year of $89,299,000. MGM Grand Las Vegas accounted for the reduction, where revenues of $71,974,000 for the 1996 year were $15,384,000 (17.6%) below the prior year of $87,358,000, reflecting the effect of the conversion of three Company operated restaurants to tenancies during the last half of 1995. MGM Grand Australia revenues of $6,528,000 for the year ended December 31, 1996 were above the 1995 year by $4,444,000, reflecting the shortened prior year operating results. Consolidated entertainment, retail and other revenues for 1996 were $126,475,000, representing an increase of $3,168,000 (2.6%) above the prior year of $123,307,000. The increase was attributable to MGM Grand Las Vegas, reflecting a full year of operations for the EFX production show (which opened during March 1995) and the Star Lane Shops retail mall (which opened during September 1995), as well as higher rental income from added restaurant and retail tenancies. Additionally, the MGM Grand Garden arena revenues for 1996 were higher than 1995, reflecting the increased number of entertainment events held. Such improvements were partially offset by reduced revenues at MGM Grand Adventures Theme Park due to decreased overall attendance for the year and lower average ticket prices, and lower midway/arcade revenues in 1996 which reflects the relocation of the midway/arcade to a smaller facility.

Consolidated operating expenses of $607,938,000 for the year ended December 31, 1996 increased $617,000 when compared with the prior year of $607,321,000. MGM Grand Las Vegas operating expenses for 1996 were $571,277,000, or $27,949,000 (4.7%) below the prior year of $599,226,000. Operating expenses as a percentage of net revenues were 23 MGM Grand, Inc. and Subsidiaries

reduced from 84.1% in 1995 to 75.5% in 1996. This reduction was primarily attributable to the continued cost containment efforts at MGM Grand Las Vegas, lower food and beverage expenses in 1996 due to the conversion of three of the Company operated restaurants to tenancies as part of the prior year restructuring plan, and a lower provision for doubtful accounts and discounts reflecting changes in anticipated collectibility and payments on fully reserved casino receivables. Additionally, 1995 contained a one-time charge of $5,942,000 related to the restructuring program. Such decreases were partially offset by higher casino operating costs for gaming taxes (based upon the improved gaming revenues) and increased marketing programs, increased room expenses due to the higher average occupancy throughout the 1996 year, and higher depreciation and amortization expense as a result of additional property and equipment placed in service during 1996. MGM Grand Australia operating expenses were $37,352,000 for the year ended December 31, 1996, representing a $28,634,000 increase above the prior year of $8,718,000 as a result of the reduced 1995 operating period. Consolidated operating profit (before non-recurring charges and Corporate expense) was $196,876,000 for the year ended December 31, 1996, reflecting an increase of $82,354,000 (71.9%) over $114,522,000 for 1995. The increase was primarily attributable to MGM Grand Las Vegas, where continued operating efficiencies and the impact of the 1995 restructuring plan boosted operating profit (before Master Plan asset disposition) to $195,558,000, representing an increase of $81,996,000 (72.2%) over $113,562,000 in 1995. MGM Grand Australia had operating income of $1,320,000 for the 1996 period, representing an increase when compared with the prior year operating income of $936,000, reflecting the property acquisition on September 7, 1995 and the subsequent construction and remodeling program which was completed in June 1996. Master Plan asset disposition relates to the write-off of various assets as a result of the transformation of MGM Grand Las Vegas into "The City of Entertainment," which resulted in a one-time pretax charge of $49,401,000 in the 1996 period (see Note 13). Preopening and other - unconsolidated affiliate represents the Company's 50% share of NYNY preopening expenses, which included direct salaries, marketing and other costs incurred during the period through December 31, 1996, at which time the hotel/casino was substantially complete. NYNY commenced operations on January 3, 1997 (see Note 1). Interest income and other. Interest income and other was $3,635,000 for the year ended December 31, 1996, reflecting an increase of $1,564,000 (75.5%) from $2,071,000 in 1995. The increase was attributable to higher average invested cash balances at MGM Grand Las Vegas in the first half of the 1996 year (prior to the defeasance of the MGM Grand Hotel Finance Corp. First Mortgage Notes - see Note 8), reflecting the higher operating cash flow when compared with the prior year. Interest expense. Interest expense (net of capitalized interest) for the year ended December 31, 1996 was $33,778,000, reflecting a decrease of $25,551,000 (43.1%) when compared with $59,329,000 for 1995. The significant decrease resulted from a combination of the defeasance of the MGM Grand Hotel Finance Corp. First Mortgage Notes (see Note 8) and increased capitalization of interest expense during 1996 related to various new and ongoing construction projects, including the MGM Grand Las Vegas Master Plan, MGM Grand Atlantic City land acquisition and pre-construction activities, and the NYNY construction project. The reduction in interest expense was partially offset by the effect of the MGM Grand Australia bank loan, which was outstanding for the entire 1996 year, compared with the period from the acquisition on September 7, 1995 to December 31, 1995. Income taxes. The Company recorded an income tax provision of $24,634,000 at a rate of 24.8% for the year ended December 31, 1996, compared with the prior year when there was no provision due to the benefit resulting from the reduction of the valuation allowance (see Note 15).

reduced from 84.1% in 1995 to 75.5% in 1996. This reduction was primarily attributable to the continued cost containment efforts at MGM Grand Las Vegas, lower food and beverage expenses in 1996 due to the conversion of three of the Company operated restaurants to tenancies as part of the prior year restructuring plan, and a lower provision for doubtful accounts and discounts reflecting changes in anticipated collectibility and payments on fully reserved casino receivables. Additionally, 1995 contained a one-time charge of $5,942,000 related to the restructuring program. Such decreases were partially offset by higher casino operating costs for gaming taxes (based upon the improved gaming revenues) and increased marketing programs, increased room expenses due to the higher average occupancy throughout the 1996 year, and higher depreciation and amortization expense as a result of additional property and equipment placed in service during 1996. MGM Grand Australia operating expenses were $37,352,000 for the year ended December 31, 1996, representing a $28,634,000 increase above the prior year of $8,718,000 as a result of the reduced 1995 operating period. Consolidated operating profit (before non-recurring charges and Corporate expense) was $196,876,000 for the year ended December 31, 1996, reflecting an increase of $82,354,000 (71.9%) over $114,522,000 for 1995. The increase was primarily attributable to MGM Grand Las Vegas, where continued operating efficiencies and the impact of the 1995 restructuring plan boosted operating profit (before Master Plan asset disposition) to $195,558,000, representing an increase of $81,996,000 (72.2%) over $113,562,000 in 1995. MGM Grand Australia had operating income of $1,320,000 for the 1996 period, representing an increase when compared with the prior year operating income of $936,000, reflecting the property acquisition on September 7, 1995 and the subsequent construction and remodeling program which was completed in June 1996. Master Plan asset disposition relates to the write-off of various assets as a result of the transformation of MGM Grand Las Vegas into "The City of Entertainment," which resulted in a one-time pretax charge of $49,401,000 in the 1996 period (see Note 13). Preopening and other - unconsolidated affiliate represents the Company's 50% share of NYNY preopening expenses, which included direct salaries, marketing and other costs incurred during the period through December 31, 1996, at which time the hotel/casino was substantially complete. NYNY commenced operations on January 3, 1997 (see Note 1). Interest income and other. Interest income and other was $3,635,000 for the year ended December 31, 1996, reflecting an increase of $1,564,000 (75.5%) from $2,071,000 in 1995. The increase was attributable to higher average invested cash balances at MGM Grand Las Vegas in the first half of the 1996 year (prior to the defeasance of the MGM Grand Hotel Finance Corp. First Mortgage Notes - see Note 8), reflecting the higher operating cash flow when compared with the prior year. Interest expense. Interest expense (net of capitalized interest) for the year ended December 31, 1996 was $33,778,000, reflecting a decrease of $25,551,000 (43.1%) when compared with $59,329,000 for 1995. The significant decrease resulted from a combination of the defeasance of the MGM Grand Hotel Finance Corp. First Mortgage Notes (see Note 8) and increased capitalization of interest expense during 1996 related to various new and ongoing construction projects, including the MGM Grand Las Vegas Master Plan, MGM Grand Atlantic City land acquisition and pre-construction activities, and the NYNY construction project. The reduction in interest expense was partially offset by the effect of the MGM Grand Australia bank loan, which was outstanding for the entire 1996 year, compared with the period from the acquisition on September 7, 1995 to December 31, 1995. Income taxes. The Company recorded an income tax provision of $24,634,000 at a rate of 24.8% for the year ended December 31, 1996, compared with the prior year when there was no provision due to the benefit resulting from the reduction of the valuation allowance (see Note 15). Extraordinary item. The Company recorded an extraordinary loss of $30,811,000, net of income tax benefit of $17,710,000, reflecting the defeasance of the MGM Grand Hotel Finance Corp. First Mortgage Notes (see Note 8). 1995 Compared with 1994 Consolidated net revenues for the year ended December 31, 1995 were $721,843,000, representing a decrease of $20,352,000 (2.7%) compared with $742,195,000 for the year ended December 31, 1994. The decrease in

revenue was primarily due to a reduction in casino revenues, offset by an increase in room revenues. MGM Grand, Inc. and Subsidiaries 24

Consolidated casino revenues for the year ended December 31, 1995 were $404,742,000 compared with $434,297,000 for the year ended December 31, 1994, representing a decrease of $29,555,000 (6.8%). MGM Grand Las Vegas casino revenues were $397,448,000 for the year ended December 31, 1995 compared with $434,297,000 in 1994, reflecting a decrease of $36,849,000 (8.5%). This decrease in casino revenue was primarily due to an unusually high table game hold percentage in 1994 and a marginal decrease in 1995 slot revenues, offset by an increase in table game drop (excluding baccarat) for the year ended December 31, 1995. The 1995 period reflected the Company's strategy to emphasize the middle market customer activity and reduce overall gaming volatility. MGM Grand Australia casino revenues were $7,294,000 for the period since the acquisition on September 7, 1995. Consolidated room revenues for the year ended December 31, 1995 were $160,470,000, compared with $145,196,000 for the year ended December 31, 1994, representing an increase of $15,274,000 (10.5%). MGM Grand Las Vegas room revenues were $160,052,000 for the year ended December 31, 1995, reflecting an increase of $14,522,000 (10.0%) from $145,530,000 in 1994. The increase in room revenue was primarily due to the increase in the average daily room rate from $86 in 1994 to $98 in 1995, partially offset by a slightly lower occupancy percentage of 90.6% for the year ended December 31, 1995 compared with 92.0% for the year ended December 31, 1994. MGM Grand Australia room revenues were $614,000 for the period since the acquisition on September 7, 1995. Consolidated food and beverage revenues were $89,299,000 for the year ended December 31, 1995, representing a decrease of $2,267,000 (2.5%) from $91,566,000 in 1994. MGM Grand Las Vegas food and beverage revenues were $4,207,000 (4.6%) lower for the year ended December 31, 1995 when compared with 1994. This decrease was attributable to the Company's restructuring plan which converted three restaurants into leased facilities during the last half of 1995. MGM Grand Australia food and beverage revenues were $2,084,000 for the period since acquisition on September 7, 1995. Consolidated entertainment, retail and other revenues were $123,307,000 for the year ended December 31, 1995, reflecting an increase of $549,000 (.4%) from $122,758,000 in 1994. MGM Grand Las Vegas entertainment, retail and other revenues increased $811,000 (.7%) for the year ended December 31, 1995 when compared with 1994, due to the opening of the EFX production show and the addition of the Star Lane Shops retail mall, offset by lower revenue from the Theme Park as well as fewer entertainment and sporting events in the MGM Grand Garden arena. As part of its restructuring plan and in an effort to reduce volatility at the MGM Grand Garden arena, the Company decreased the number of self-sponsored events during 1995 in favor of "four-wall" venues, which transfers the operating risk to the outside show producers. Consolidated operating expenses were $607,321,000 for the year ended December 31, 1995, compared with $604,714,000 for the year ended December 31, 1994, reflecting an increase of $2,607,000 (.4%). MGM Grand Las Vegas operating expenses improved by $8,105,000 (1.3%) in 1995 when compared with 1994, reflecting among other things, the outsourcing of three Company operated restaurants in the second half of 1995, decreased room expenses due to the Company's continuing cost containment efforts, lower Theme Park expenses and fewer MGM Grand Garden arena events. The 1995 cost reductions were partially offset by higher casino expenses reflecting increased national marketing efforts, costs related to the Mike Tyson boxing events held at the MGM Grand Garden arena, expenses related to the EFX production show which opened during March 1995, and an increased provision for doubtful accounts and discounts on reserves for specific customer accounts based on aging of casino receivable balances. The reduction in 1995 operating expenses was also partially offset by an increase in depreciation and amortization as a result of the additional EFX production show equipment in the 1995 period, as well as the completion of the Star Lane Shops retail mall and general property improvements. For the year ended December 31, 1995, the Company incurred a one-time restructuring charge against earnings of $5,942,000. This restructuring charge consisted primarily of employee severance payments related to the Company's overall plan to reduce costs and improve operating efficiencies at MGM Grand Las Vegas. MGM Grand Australia operating expenses were $8,718,000 for the period from the acquisition on September 7, 1995 through December 31, 1995.

Consolidated casino revenues for the year ended December 31, 1995 were $404,742,000 compared with $434,297,000 for the year ended December 31, 1994, representing a decrease of $29,555,000 (6.8%). MGM Grand Las Vegas casino revenues were $397,448,000 for the year ended December 31, 1995 compared with $434,297,000 in 1994, reflecting a decrease of $36,849,000 (8.5%). This decrease in casino revenue was primarily due to an unusually high table game hold percentage in 1994 and a marginal decrease in 1995 slot revenues, offset by an increase in table game drop (excluding baccarat) for the year ended December 31, 1995. The 1995 period reflected the Company's strategy to emphasize the middle market customer activity and reduce overall gaming volatility. MGM Grand Australia casino revenues were $7,294,000 for the period since the acquisition on September 7, 1995. Consolidated room revenues for the year ended December 31, 1995 were $160,470,000, compared with $145,196,000 for the year ended December 31, 1994, representing an increase of $15,274,000 (10.5%). MGM Grand Las Vegas room revenues were $160,052,000 for the year ended December 31, 1995, reflecting an increase of $14,522,000 (10.0%) from $145,530,000 in 1994. The increase in room revenue was primarily due to the increase in the average daily room rate from $86 in 1994 to $98 in 1995, partially offset by a slightly lower occupancy percentage of 90.6% for the year ended December 31, 1995 compared with 92.0% for the year ended December 31, 1994. MGM Grand Australia room revenues were $614,000 for the period since the acquisition on September 7, 1995. Consolidated food and beverage revenues were $89,299,000 for the year ended December 31, 1995, representing a decrease of $2,267,000 (2.5%) from $91,566,000 in 1994. MGM Grand Las Vegas food and beverage revenues were $4,207,000 (4.6%) lower for the year ended December 31, 1995 when compared with 1994. This decrease was attributable to the Company's restructuring plan which converted three restaurants into leased facilities during the last half of 1995. MGM Grand Australia food and beverage revenues were $2,084,000 for the period since acquisition on September 7, 1995. Consolidated entertainment, retail and other revenues were $123,307,000 for the year ended December 31, 1995, reflecting an increase of $549,000 (.4%) from $122,758,000 in 1994. MGM Grand Las Vegas entertainment, retail and other revenues increased $811,000 (.7%) for the year ended December 31, 1995 when compared with 1994, due to the opening of the EFX production show and the addition of the Star Lane Shops retail mall, offset by lower revenue from the Theme Park as well as fewer entertainment and sporting events in the MGM Grand Garden arena. As part of its restructuring plan and in an effort to reduce volatility at the MGM Grand Garden arena, the Company decreased the number of self-sponsored events during 1995 in favor of "four-wall" venues, which transfers the operating risk to the outside show producers. Consolidated operating expenses were $607,321,000 for the year ended December 31, 1995, compared with $604,714,000 for the year ended December 31, 1994, reflecting an increase of $2,607,000 (.4%). MGM Grand Las Vegas operating expenses improved by $8,105,000 (1.3%) in 1995 when compared with 1994, reflecting among other things, the outsourcing of three Company operated restaurants in the second half of 1995, decreased room expenses due to the Company's continuing cost containment efforts, lower Theme Park expenses and fewer MGM Grand Garden arena events. The 1995 cost reductions were partially offset by higher casino expenses reflecting increased national marketing efforts, costs related to the Mike Tyson boxing events held at the MGM Grand Garden arena, expenses related to the EFX production show which opened during March 1995, and an increased provision for doubtful accounts and discounts on reserves for specific customer accounts based on aging of casino receivable balances. The reduction in 1995 operating expenses was also partially offset by an increase in depreciation and amortization as a result of the additional EFX production show equipment in the 1995 period, as well as the completion of the Star Lane Shops retail mall and general property improvements. For the year ended December 31, 1995, the Company incurred a one-time restructuring charge against earnings of $5,942,000. This restructuring charge consisted primarily of employee severance payments related to the Company's overall plan to reduce costs and improve operating efficiencies at MGM Grand Las Vegas. MGM Grand Australia operating expenses were $8,718,000 for the period from the acquisition on September 7, 1995 through December 31, 1995. Consolidated operating profit (before Corporate expense) was $114,522,000 for the year ended December 31, 1995 compared with $137,481,000 for the year ended December 31, 1994, representing a decrease of $22,959,000 (16.7%). The decrease was primarily attributable to MGM Grand Las Vegas, where operating profit of $113,562,000 for the 1995 period fell by $21,633,000 (16.0%) when compared with $135,195,000 for 1994. MGM Grand Australia had an operating profit of $936,000 for the period from the acquisition on

September 7, 1995 to December 31, 1995. 25 MGM Grand, Inc. and Subsidiaries

Interest income and other. Interest income and other was $2,071,000 for the 1995 year versus $5,752,000 for 1994. Interest income was higher during 1994 as a result of the short term investment of undistributed construction funds. Interest expense. Interest expense (net of capitalized interest) was $59,329,000 for 1995, compared with $61,927,000 for 1994. The reduction in interest expense in 1995 was a result of increased 1995 interest capitalization of $4,317,000, offset by an increase in interest expense of $2,307,000 related to MGM Grand Australia. Income taxes. The Company has not recorded a provision for income taxes due to the utilization of tax benefits not realized in prior years, which have offset any provision for the 1995 and 1994 periods (see Note 15). Liquidity and Capital Resources As of December 31, 1996 and 1995, the Company held cash and cash equivalents of $61,412,000 and $110,017,000, respectively. Cash provided by operating activities for 1996 was $245,151,000, compared with $114,544,000 for 1995. During the year ended December 31, 1996, the Company utilized operating cash flow to fund capital expenditures of $84,775,000, including $16,055,000 related to the Master Plan project (see below) and $25,699,000 for general property enhancements and expansions at MGM Grand Las Vegas. Such property improvements included suite and restaurant remodeling (Gatsby's and Brown Derby), various new property signage, the acquisition of two land parcels, and the new "Skycoaster" theme park attraction. MGM Grand Australia expended $13,063,000 related to its renovation program which was completed on June 5, 1996, and which included substantive improvements throughout the property, such as enhanced guest accommodations, casino and restaurant remodels, and other upgrades to public areas. MGM Grand Atlantic City commenced the assemblage of acreage for its new destination resort by expending $29,727,000 for land acquisitions and preconstruction activities. Also during 1996, the Company contributed additional capital investment of $22,500,000 to the NYNY project (see below). On May 6, 1996, the Company announced details for a 30-month, $250,000,000 Master Plan designed to transform MGM Grand Las Vegas into "The City of Entertainment." The Master Plan features a series of integral additions and improvements throughout the 113-acre destination resort property, including refurbishment of the lion entry, the porte cochere, casino areas, luxury suites, parking facilities, and the theme park. In addition, new facilities include a convention center, additional entertainment/retail facilities and a second porte cochere entrance. Approximately $16,055,000 has been expended through December 31, 1996 related to the Master Plan. Capital expenditures in 1995 were $37,447,000, consisting of $30,441,000 for expenditures related to MGM Grand Las Vegas for general property improvements and construction of the Star Lane Shops retail mall, $6,881,000 at MGM Grand Australia for upgraded accommodations, casino and restaurant remodels, and other improvements, and $125,000 related to furniture, fixtures and equipment. Also during 1995, the Company expended $3,050,000 on the MGM Grand - Bally's monorail project, $36,500,000 on the NYNY project and $79,745,000 for the acquisition of MGM Grand Australia (see Note 16). During 1995, MGM Grand Las Vegas also expended $11,409,000 on the EFX production show. Capital expenditures for 1997 are expected to be approximately $203,190,000. MGM Grand Las Vegas expenditures for 1997 are expected to be approximately $98,500,000 related to the Master Plan project and $55,135,000 for general property and equipment improvements. MGM Grand Australia plans to expend approximately $585,000 for general property and equipment improvements. MGM Grand Atlantic City expenditures for 1997 are anticipated to be approximately $48,970,000 for land acquisitions and initial construction activities. On July 2, 1996, the Company completed a public offering (the "Offering") of 8,625,000 shares of common

Interest income and other. Interest income and other was $2,071,000 for the 1995 year versus $5,752,000 for 1994. Interest income was higher during 1994 as a result of the short term investment of undistributed construction funds. Interest expense. Interest expense (net of capitalized interest) was $59,329,000 for 1995, compared with $61,927,000 for 1994. The reduction in interest expense in 1995 was a result of increased 1995 interest capitalization of $4,317,000, offset by an increase in interest expense of $2,307,000 related to MGM Grand Australia. Income taxes. The Company has not recorded a provision for income taxes due to the utilization of tax benefits not realized in prior years, which have offset any provision for the 1995 and 1994 periods (see Note 15). Liquidity and Capital Resources As of December 31, 1996 and 1995, the Company held cash and cash equivalents of $61,412,000 and $110,017,000, respectively. Cash provided by operating activities for 1996 was $245,151,000, compared with $114,544,000 for 1995. During the year ended December 31, 1996, the Company utilized operating cash flow to fund capital expenditures of $84,775,000, including $16,055,000 related to the Master Plan project (see below) and $25,699,000 for general property enhancements and expansions at MGM Grand Las Vegas. Such property improvements included suite and restaurant remodeling (Gatsby's and Brown Derby), various new property signage, the acquisition of two land parcels, and the new "Skycoaster" theme park attraction. MGM Grand Australia expended $13,063,000 related to its renovation program which was completed on June 5, 1996, and which included substantive improvements throughout the property, such as enhanced guest accommodations, casino and restaurant remodels, and other upgrades to public areas. MGM Grand Atlantic City commenced the assemblage of acreage for its new destination resort by expending $29,727,000 for land acquisitions and preconstruction activities. Also during 1996, the Company contributed additional capital investment of $22,500,000 to the NYNY project (see below). On May 6, 1996, the Company announced details for a 30-month, $250,000,000 Master Plan designed to transform MGM Grand Las Vegas into "The City of Entertainment." The Master Plan features a series of integral additions and improvements throughout the 113-acre destination resort property, including refurbishment of the lion entry, the porte cochere, casino areas, luxury suites, parking facilities, and the theme park. In addition, new facilities include a convention center, additional entertainment/retail facilities and a second porte cochere entrance. Approximately $16,055,000 has been expended through December 31, 1996 related to the Master Plan. Capital expenditures in 1995 were $37,447,000, consisting of $30,441,000 for expenditures related to MGM Grand Las Vegas for general property improvements and construction of the Star Lane Shops retail mall, $6,881,000 at MGM Grand Australia for upgraded accommodations, casino and restaurant remodels, and other improvements, and $125,000 related to furniture, fixtures and equipment. Also during 1995, the Company expended $3,050,000 on the MGM Grand - Bally's monorail project, $36,500,000 on the NYNY project and $79,745,000 for the acquisition of MGM Grand Australia (see Note 16). During 1995, MGM Grand Las Vegas also expended $11,409,000 on the EFX production show. Capital expenditures for 1997 are expected to be approximately $203,190,000. MGM Grand Las Vegas expenditures for 1997 are expected to be approximately $98,500,000 related to the Master Plan project and $55,135,000 for general property and equipment improvements. MGM Grand Australia plans to expend approximately $585,000 for general property and equipment improvements. MGM Grand Atlantic City expenditures for 1997 are anticipated to be approximately $48,970,000 for land acquisitions and initial construction activities. On July 2, 1996, the Company completed a public offering (the "Offering") of 8,625,000 shares of common stock (including underwriters' over allotment option to purchase 1,125,000 shares of common stock). Based upon the Offering price of $39.50 per share and associated costs incurred, the net proceeds were approximately $327,000,000. On July 3, 1996, the Company drew down $40,000,000 (including loan origination fees) on the Senior Reducing Revolving Credit Facility (see Note 8), and used the net proceeds of approximately $327,000,000 from the Offering together with cash on hand of $161,000,000 to fund the defeasance of the

MGM Grand Hotel Finance Corp. First Mortgage Notes (see Note 8). On September 20, 1995, bank financing of up to $225,000,000 was completed by New York-New York Hotel and Casino, LLC. ("NYNY LLC"), and in August 1996, the facility was increased to $285,000,000. The first draw down occurred on MGM Grand, Inc. and Subsidiaries 26

September 30, 1995, and as of December 31, 1996, $285,000,000 was outstanding under the facility. On January 21, 1997, NYNY LLC completed equipment financing of $20,000,000 with a financial institution. The Company made capital contributions totaling $22,500,000 to NYNY LLC during the 1996 period, and will contribute additional equity as its share of the amount necessary to fund the remaining construction liabilities, which may be up to approximately $7,000,000. As a lender requirement for the project financing, both the Company and its joint venture partner Primadonna Resorts, Inc. were required to enter into a joint and several completion guarantee, as well as a Keep-Well Agreement (see Note 8). In June 1995, the Company and Bally's completed their joint development of the elevated monorail linking MGM Grand Las Vegas with the corner of Flamingo Road and the Las Vegas Strip. The monorail is a one-mile, highcapacity, transit grade system which cost approximately $25,000,000. The costs were shared equally with Bally's, and each partner contributed approximately $12,500,000 to the joint venture. The Company expects to finance operations and capital expenditures through cash flow from operations, cash on hand, and the bank lines of credit. Safe Harbor Provision The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Annual Report 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 the legalization of gaming in certain jurisdictions) and application for licenses and approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations). 27 MGM Grand, Inc. and Subsidiaries

Consolidated Statements of Operations
(In thousands, except share data) For the years ended December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------Revenues: Casino $ 481,710 $ 404,742 Rooms 174,440 160,470 Food and beverage 78,438 89,299 Entertainment, retail and other 126,475 123,307 ---------------------------------861,063 777,818 Less: Promotional allowances 56,249 55,975 ---------------------------------804,814 721,843 ---------------------------------Expenses:

September 30, 1995, and as of December 31, 1996, $285,000,000 was outstanding under the facility. On January 21, 1997, NYNY LLC completed equipment financing of $20,000,000 with a financial institution. The Company made capital contributions totaling $22,500,000 to NYNY LLC during the 1996 period, and will contribute additional equity as its share of the amount necessary to fund the remaining construction liabilities, which may be up to approximately $7,000,000. As a lender requirement for the project financing, both the Company and its joint venture partner Primadonna Resorts, Inc. were required to enter into a joint and several completion guarantee, as well as a Keep-Well Agreement (see Note 8). In June 1995, the Company and Bally's completed their joint development of the elevated monorail linking MGM Grand Las Vegas with the corner of Flamingo Road and the Las Vegas Strip. The monorail is a one-mile, highcapacity, transit grade system which cost approximately $25,000,000. The costs were shared equally with Bally's, and each partner contributed approximately $12,500,000 to the joint venture. The Company expects to finance operations and capital expenditures through cash flow from operations, cash on hand, and the bank lines of credit. Safe Harbor Provision The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Annual Report 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 the legalization of gaming in certain jurisdictions) and application for licenses and approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations). 27 MGM Grand, Inc. and Subsidiaries

Consolidated Statements of Operations
(In thousands, except share data) For the years ended December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------Revenues: Casino $ 481,710 $ 404,742 Rooms 174,440 160,470 Food and beverage 78,438 89,299 Entertainment, retail and other 126,475 123,307 ---------------------------------861,063 777,818 Less: Promotional allowances 56,249 55,975 ---------------------------------804,814 721,843 ---------------------------------Expenses: Casino 220,870 195,140 Rooms 48,032 44,195 Food and beverage 47,206 57,293 Entertainment, retail and other 89,801 92,667 Provision for doubtful accounts and discounts 38,635 57,683 General and administrative 101,198 99,086 Restructuring costs -5,942 Depreciation and amortization 62,196 55,315 ---------------------------------607,938 607,321 ---------------------------------Operating Profit Before Master Plan Asset Disposition,

Consolidated Statements of Operations
(In thousands, except share data) For the years ended December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------Revenues: Casino $ 481,710 $ 404,742 Rooms 174,440 160,470 Food and beverage 78,438 89,299 Entertainment, retail and other 126,475 123,307 ---------------------------------861,063 777,818 Less: Promotional allowances 56,249 55,975 ---------------------------------804,814 721,843 ---------------------------------Expenses: Casino 220,870 195,140 Rooms 48,032 44,195 Food and beverage 47,206 57,293 Entertainment, retail and other 89,801 92,667 Provision for doubtful accounts and discounts 38,635 57,683 General and administrative 101,198 99,086 Restructuring costs -5,942 Depreciation and amortization 62,196 55,315 ---------------------------------607,938 607,321 ---------------------------------Operating Profit Before Master Plan Asset Disposition, Preopening and Corporate Expense 196,876 114,522 Master Plan asset disposition Preopening and other - unconsolidated affiliate Corporate expense Operating Income Nonoperating Income (Expense): Interest income Interest expense, net of amounts capitalized Other, net 49,401 -7,868 -10,313 10,699 ---------------------------------129,294 103,823 ---------------------------------4,247 2,896 (33,778) (59,329) (612) (825) ---------------------------------(30,143) (57,258) ---------------------------------99,151 46,565 (24,634) ----------------------------------74,517 46,565

Income Before Income Taxes, Discontinued Operations and Extraordinary Item Provision for income taxes Income Before Discontinued Operations and Extraordinary Item Discontinued Operations: Loss from discontinued operations Gain on disposal of discontinued operations Extraordinary Item: Loss on defeasance of debt, net of income tax benefit of $17,710 Net Income Per Share of Common Stock: Income before discontinued operations and extraordinary item Discontinued operations Extraordinary item - loss on defeasance of debt, net of income tax benefit Net Income per share Weighted Average Shares Outstanding

---

---

(30,811) ----------------------------------$ 43,706 $ 46,565 ---------------------------------$ 1.37 -$ 0.96 --

(0.57) ----------------------------------$ 0.80 $ 0.96 ---------------------------------54,235,000 48,544,000 ----------------------------------

The accompanying notes are an integral part of these consolidated financial statements. MGM Grand, Inc. and Subsidiaries 28

Consolidated Balance Sheets
(In thousands, except share data) As of December 31, 1996 - ------------------------------------------------------------------------------------------------------ASSETS Current Assets: Cash and cash equivalents $ 61,412 Accounts receivable, net 80,529 Prepaid expenses 13,208 Inventories 13,520 Deferred tax asset 58,039 Notes receivable ------------------Total current assets 226,708 -----------------Property and Equipment, net 884,750 -----------------Other Assets: Investment in unconsolidated affiliates 72,896 Deposits 15,255 Excess of purchase price over fair market value of net assets acquired, net 39,622 Other assets, net 48,458 -----------------Total other assets 176,231 -----------------$ 1,287,689 -----------------LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 32,995 Income taxes payable 23,653 Current obligation, capital leases 2,769 Current obligation, long term debt 12,906 Accrued interest on long term debt -Other accrued liabilities 118,448 -----------------Total current liabilities 190,771 -----------------Deferred Revenues 6,712 Deferred Income Taxes 38,477 Long Term Obligation, Capital Leases 7,862 Long Term Debt 70,485 Commitments and Contingencies Stockholders' Equity: Common Stock ($.01 par value, 75,000,000 shares authorized, 57,883,766 and 48,774,856 shares issued) 579 Capital in excess of par value 963,688 Note receivable stock sale -Retained earnings (deficit) 13,221 Currency translation adjustment (4,106) -----------------Total stockholders' equity 973,382 -----------------$ 1,287,689 ------------------

The accompanying notes are an integral part of these consolidated financial statements. 29 MGM Grand, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands) For the years ended December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------Cash Flows from Operating Activities: Net income $ 43,706 $ 46,565 Adjustments to reconcile net income to net cash from operating activities:

Consolidated Balance Sheets
(In thousands, except share data) As of December 31, 1996 - ------------------------------------------------------------------------------------------------------ASSETS Current Assets: Cash and cash equivalents $ 61,412 Accounts receivable, net 80,529 Prepaid expenses 13,208 Inventories 13,520 Deferred tax asset 58,039 Notes receivable ------------------Total current assets 226,708 -----------------Property and Equipment, net 884,750 -----------------Other Assets: Investment in unconsolidated affiliates 72,896 Deposits 15,255 Excess of purchase price over fair market value of net assets acquired, net 39,622 Other assets, net 48,458 -----------------Total other assets 176,231 -----------------$ 1,287,689 -----------------LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 32,995 Income taxes payable 23,653 Current obligation, capital leases 2,769 Current obligation, long term debt 12,906 Accrued interest on long term debt -Other accrued liabilities 118,448 -----------------Total current liabilities 190,771 -----------------Deferred Revenues 6,712 Deferred Income Taxes 38,477 Long Term Obligation, Capital Leases 7,862 Long Term Debt 70,485 Commitments and Contingencies Stockholders' Equity: Common Stock ($.01 par value, 75,000,000 shares authorized, 57,883,766 and 48,774,856 shares issued) 579 Capital in excess of par value 963,688 Note receivable stock sale -Retained earnings (deficit) 13,221 Currency translation adjustment (4,106) -----------------Total stockholders' equity 973,382 -----------------$ 1,287,689 ------------------

The accompanying notes are an integral part of these consolidated financial statements. 29 MGM Grand, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(In thousands) For the years ended December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------Cash Flows from Operating Activities: Net income $ 43,706 $ 46,565 Adjustments to reconcile net income to net cash from operating activities: Loss on defeasance of First Mortgage Notes 48,521 --

Consolidated Statements of Cash Flows
(In thousands) For the years ended December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------Cash Flows from Operating Activities: Net income $ 43,706 $ 46,565 Adjustments to reconcile net income to net cash from operating activities: Loss on defeasance of First Mortgage Notes 48,521 -Master Plan asset disposition 49,401 -Gain on disposal of discontinued operations --Amortization of debt offering costs 2,191 3,308 Depreciation and amortization 62,323 55,419 Provision for doubtful accounts and discounts 38,635 57,683 Preopening and other - unconsolidated affiliate 7,868 -Change in assets and liabilities: Accounts receivable (40,605) (40,395) Prepaid expenses (551) 2,589 Inventories (3,283) (3,784) Income taxes payable 21,302 -Deferred income taxes (27,696) (2,034) Accounts payable, accrued liabilities, and other 43,209 (5,863) Currency translation adjustment 130 1,056 ----------------------------------Net cash from operating activities 245,151 114,544 ----------------------------------Cash Flows from Investing Activities: Purchases of property and equipment, net (84,775) (37,447) Acquisition of MGM Grand Australia -(71,942) Dispositions of property and equipment, net 322 488 Change in construction payables (809) (3,915) Note receivable 529 13,796 Investment in unconsolidated affiliates (27,153) (36,500) Deposits and other assets (8,929) (30,514) ----------------------------------Net cash from investing activities (120,815) (166,034) ----------------------------------Cash Flows from Financing Activities: Defeasance of First Mortgage Notes (523,231) -Borrowings from (repayments to) banks and others -78,099 Borrowings under lines of credit 65,262 15,000 Repayments of lines of credit (65,262) (15,000) Issuance of common stock 350,290 7,549 Repurchase of common stock ------------------------------------Net cash from financing activities (172,941) 85,648 ----------------------------------Net Increase (Decrease) in Cash and Cash Equivalents (48,605) 34,158 Cash and Cash Equivalents at Beginning of Year 110,017 75,859 ----------------------------------Cash and Cash Equivalents at End of Year $ 61,412 $ 110,017 -----------------------------------

The accompanying notes are an integral part of these consolidated financial statements. MGM Grand, Inc. and Subsidiaries 30

Consolidated Statements of Stockholders' Equity
(Dollar amounts in thousands) Common Capital in Retained For the years ended December 31, Stock Common Excess of Treasury Earnings 1996, 1995 and 1994 Outstanding Stock Par Value Stock (Deficit) Oth - ------------------------------------------------------------------------------------------------------Balance at December 31, 1993 Issuance of common stock pursuant to employee stock options Repurchase of common stock Net income 48,844,831 $ 506 $ 662,365 $ (29,490) $ (151,626) $

71,479 (991,800) --

1 ---

821 ---

-(27,774) --

--74,576

Consolidated Statements of Stockholders' Equity
(Dollar amounts in thousands) Common Capital in Retained For the years ended December 31, Stock Common Excess of Treasury Earnings 1996, 1995 and 1994 Outstanding Stock Par Value Stock (Deficit) Oth - ------------------------------------------------------------------------------------------------------Balance at December 31, 1993 Issuance of common stock pursuant to employee stock options Repurchase of common stock Net income Balance at December 31, 1994 Issuance of common stock for note receivable Payment received from note receivable Issuance of common stock pursuant to employee stock options Retirement of treasury stock Net income Currency translation adjustment Balance at December 31, 1995 Payment received from note receivable Issuance of common stock pursuant to employee stock options Issuance of common stock Employee stock incentive accrual Tax benefit from stock option exercises Net income Currency translation adjustment Balance at December 31, 1996 48,844,831 $ 506 $ 662,365 $ (29,490) $ (151,626) $

71,479 1 821 --(991,800) --(27,774) -----74,576 ---------------------------------------------------------------------47,924,510 507 663,186 (57,264) (77,050) 618,557 -----15,000 ---(15,0 5,0

231,789 2 2,546 ---(21) (42,243) 42,264 -----46,565 -----1,0 ---------------------------------------------------------------------48,774,856 488 623,489 -(30,485) (8,9 -----10,0

413,670 8,625,000 70,240

4 86 1

4,929 326,735 2,817

----

----

--5,718 ------43,706 -----(5,1 ---------------------------------------------------------------------57,883,766 $ 579 $ 963,688 $ -$ 13,221 $ (4,1 ----------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial statements. 31 MGM Grand, Inc. and Subsidiaries

Notes to Consolidated Financial Statements Note 1. Organization and Basis of Presentation MGM Grand, Inc. (the "Company") is a Delaware corporation incorporated on January 29, 1986. As of December 31, 1996, approximately 61.6% of the outstanding shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda Corporation ("Tracinda"), a Nevada corporation wholly-owned by Kirk Kerkorian. Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the Company owns and operates the MGM Grand Hotel/Casino ("MGM Grand Las Vegas"), a fully integrated hotel/casino and entertainment complex in Las Vegas, Nevada. MGM Grand Hotel Finance Corp. ("MGM Finance"), a wholly-owned subsidiary of the Company, was formed to issue First Mortgage Notes to the public, to incur bank debt and to lend the aggregate proceeds thereof to MGM Grand Hotel, Inc. to finance the construction and opening of MGM Grand Las Vegas. See Note 8 regarding defeasance of MGM Finance First Mortgage Notes. Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the Company owns and operates the MGM Grand Diamond Beach Hotel/Casino in Darwin, Australia ("MGM Grand Australia"), a hotel/casino resort

Notes to Consolidated Financial Statements Note 1. Organization and Basis of Presentation MGM Grand, Inc. (the "Company") is a Delaware corporation incorporated on January 29, 1986. As of December 31, 1996, approximately 61.6% of the outstanding shares of the Company's common stock were owned by Kirk Kerkorian and Tracinda Corporation ("Tracinda"), a Nevada corporation wholly-owned by Kirk Kerkorian. Through its wholly-owned subsidiary, MGM Grand Hotel, Inc., the Company owns and operates the MGM Grand Hotel/Casino ("MGM Grand Las Vegas"), a fully integrated hotel/casino and entertainment complex in Las Vegas, Nevada. MGM Grand Hotel Finance Corp. ("MGM Finance"), a wholly-owned subsidiary of the Company, was formed to issue First Mortgage Notes to the public, to incur bank debt and to lend the aggregate proceeds thereof to MGM Grand Hotel, Inc. to finance the construction and opening of MGM Grand Las Vegas. See Note 8 regarding defeasance of MGM Finance First Mortgage Notes. Through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., the Company owns and operates the MGM Grand Diamond Beach Hotel/Casino in Darwin, Australia ("MGM Grand Australia"), a hotel/casino resort located on 18 acres of beachfront property on the north central coast of Australia. The results of operations of MGM Grand Australia are included from September 7, 1995, the date of acquisition (see Note 16). The Company and Primadonna Resorts, Inc. ("Primadonna") each own 50% of New York-New York Hotel and Casino, LLC. ("NYNY LLC"), which completed development of the $460,000,000 themed destination resort called New York-New York Hotel and Casino in Las Vegas, Nevada ("NYNY") in December 1996. NYNY commenced operations on January 3, 1997. NYNY is located on approximately 20 acres at the northwest corner of Tropicana Avenue and Las Vegas Boulevard, across from MGM Grand Las Vegas. Through its wholly-owned subsidiary MGM Grand Atlantic City, Inc., the Company intends to construct and operate a destination resort hotel/casino, entertainment and retail facility in Atlantic City, New Jersey, at an approximate cost of at least $700,000,000. On July 9, 1996, the Company entered into an agreement with FC Atlantic City Associates, L.P. (an affiliate of the Forest City Ratner Company) to develop approximately 35 acres of land on the Atlantic City Boardwalk. Construction of the project is subject to the receipt of various governmental approvals. The plans for the hotel and casino resort include, among other features, approximately 335,000 square feet of entertainment and retail facilities. On July 24, 1996, the Company was found suitable for licensing by the New Jersey Casino Control Commission. The Company operated MGM Grand Air, a scheduled and charter airline service, through its wholly-owned subsidiary, MGM Grand Air, Inc., from September 1987 until December 31, 1994, when MGM Grand Air was sold (see Note 17). Note 2. Significant Accounting Policies a. Principles of Consolidation -- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments in unconsolidated affiliates which are 50% or less owned are accounted for under the equity method. Significant intercompany accounts are eliminated in consolidation. b. Management's Use of Estimates -- The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. Cash and Cash Equivalents -- Cash and cash equivalents consist of investments in bank certificates of deposit and other interest bearing instruments with original maturities of 90 days or less. Such investments are carried at cost, which approximate market value. d. Receivables -- Receivables are due within one year and are recorded net of amounts estimated to be uncollectible.

e. Inventories -- Inventories are stated at the lower of cost, which is determined generally by the first-in, first-out method, or market. MGM Grand, Inc. and Subsidiaries 32

f. Property and Equipment -- Property and equipment are stated at cost. Maintenance, repairs and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. The Company capitalized interest during the period that MGM Grand Las Vegas was under construction, as well as during periods for other major construction projects. Gains or losses on dispositions of property and equipment are included in the determination of income. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets as follows:
Buildings Furniture, fixtures and equipment Land improvements Leasehold improvements 15 to 40 years 3 to 7 years 10 years 5 to 20 years

g. Excess of Purchase Price over Fair Market Value of Net Assets Acquired -- The excess of purchase price over fair market value of net assets acquired is amortized on a straight-line basis over 40 years. h. Other Assets -- The estimated cost of normal hotel operating quantities (base-stock) of china, silverware, glassware, and utensils is recorded as an asset and is not depreciated. Costs of base-stock replacements are expensed as incurred. Direct costs related to the debt offering and bank financing are being deferred and amortized over the debt repayment periods. Organizational costs are amortized on a straight-line basis over 60 months. i. Revenue Recognition -- Casino revenue is the aggregate of gaming wins less losses. j. Promotional Allowances -- The retail value of accommodations, food and beverage, and other services furnished to hotel/casino guests without charge is included in gross revenue and then deducted as promotional allowances. The estimated retail value of these promotional allowances was $56,249,000, $55,975,000 and $51,622,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The estimated cost of providing such promotional allowances was included in casino expenses as follows:
(In thousands) Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Rooms $ 9,359 $ 8,512 $ 7 Food and beverage 22,688 23,588 24 Other 2,457 3,804 5 ------------------------------------------$ 34,504 $ 35,904 $ 37 -------------------------------------------

k. Currency Translation -- The Company accounts for currency translation in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." The Australian results of operations and the balance sheet are translated from Australian dollars to US dollars. Certain fixed assets and intangibles are valued at historical exchange rates, while other balance sheet accounts are translated at the exchange rate in effect at each year end, and income accounts are translated at the average rate of exchange prevailing during the year. l. Net Income per Common Share -- Net income per common share has been computed based upon the weighted average number of shares of common stock and common stock equivalents, if dilutive, outstanding during each year (54,235,000 in 1996, 48,544,000 in 1995 and 48,988,000 in 1994). m. Capitalized Interest -- The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. The Company capitalizes interest on amounts expended on the project at the Company's weighted average cost of the borrowed funds (see Note 8), and based upon the weighted average

f. Property and Equipment -- Property and equipment are stated at cost. Maintenance, repairs and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. The Company capitalized interest during the period that MGM Grand Las Vegas was under construction, as well as during periods for other major construction projects. Gains or losses on dispositions of property and equipment are included in the determination of income. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets as follows:
Buildings Furniture, fixtures and equipment Land improvements Leasehold improvements 15 to 40 years 3 to 7 years 10 years 5 to 20 years

g. Excess of Purchase Price over Fair Market Value of Net Assets Acquired -- The excess of purchase price over fair market value of net assets acquired is amortized on a straight-line basis over 40 years. h. Other Assets -- The estimated cost of normal hotel operating quantities (base-stock) of china, silverware, glassware, and utensils is recorded as an asset and is not depreciated. Costs of base-stock replacements are expensed as incurred. Direct costs related to the debt offering and bank financing are being deferred and amortized over the debt repayment periods. Organizational costs are amortized on a straight-line basis over 60 months. i. Revenue Recognition -- Casino revenue is the aggregate of gaming wins less losses. j. Promotional Allowances -- The retail value of accommodations, food and beverage, and other services furnished to hotel/casino guests without charge is included in gross revenue and then deducted as promotional allowances. The estimated retail value of these promotional allowances was $56,249,000, $55,975,000 and $51,622,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The estimated cost of providing such promotional allowances was included in casino expenses as follows:
(In thousands) Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Rooms $ 9,359 $ 8,512 $ 7 Food and beverage 22,688 23,588 24 Other 2,457 3,804 5 ------------------------------------------$ 34,504 $ 35,904 $ 37 -------------------------------------------

k. Currency Translation -- The Company accounts for currency translation in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." The Australian results of operations and the balance sheet are translated from Australian dollars to US dollars. Certain fixed assets and intangibles are valued at historical exchange rates, while other balance sheet accounts are translated at the exchange rate in effect at each year end, and income accounts are translated at the average rate of exchange prevailing during the year. l. Net Income per Common Share -- Net income per common share has been computed based upon the weighted average number of shares of common stock and common stock equivalents, if dilutive, outstanding during each year (54,235,000 in 1996, 48,544,000 in 1995 and 48,988,000 in 1994). m. Capitalized Interest -- The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. The Company capitalizes interest on amounts expended on the project at the Company's weighted average cost of the borrowed funds (see Note 8), and based upon the weighted average amount of the Company's outstanding borrowings. Capitalization of interest ceases when the project is substantially completed. 33 MGM Grand, Inc. and Subsidiaries

n. Corporate Expense -- Corporate expense represents unallocated payroll costs, professional fees, and various other expenses not directly related to the Company's hotel/casino operations. In addition, corporate expense includes the costs associated with the Company's evaluation and pursuit of new business opportunities, which are expensed as incurred until development of a specific project has become relatively certain. o. Reclassifications -- Certain reclassifications have been made to conform the prior year with the current year presentation. These reclassifications had no effect on net income. Note 3. Statements of Cash Flows The following supplemental disclosures are provided for the Consolidated Statements of Cash Flows:
In thousands) Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Cash payments made for: Interest, net of amounts capitalized $ 48,155 $ 55,750 $ 58 ------------------------------------------State and federal income taxes $ 3,660 $ 620 $ -------------------------------------------

On June 5, 1995, the Company retired all shares of common stock held in Treasury, which thereupon resumed the status of authorized unissued shares in a non-cash transaction in the amount of $42,264,000. Note 4. Accounts Receivable Components of accounts receivable were as follows:
(In thousands) At December 31, 1996 1995 ----------------------------------------------------------------------------------------Casino $ 102,408 $ 98,878 Hotel 13,286 12,509 Other 267 246 ---------------------------115,961 111,633 Less: Allowance for doubtful accounts and discounts (35,432) (33,074) ---------------------------$ 80,529 $ 78,559 ----------------------------

Credit is issued in exchange for gaming chips at MGM Grand Las Vegas as permitted by the regulations of the Nevada Gaming Commission and the Nevada State Gaming Control Board. The Company extends credit to certain casino patrons, a substantial portion of whom reside in countries other than the United States, following evaluation of credit worthiness. The Company maintains an allowance for doubtful accounts and discounts which is based on management's estimate of the amount expected to be uncollectible considering historical experience and the information management obtains regarding the credit worthiness of the customer. The collectibility of these receivables could be affected by future business or economic trends or other significant events in the countries in which such customers reside. Although management believes the allowance is adequate, it is possible that the estimated amount of cash collections with respect to the casino accounts receivable could change. MGM Grand, Inc. and Subsidiaries 34

Note 5. Property and Equipment Property and equipment consisted of the following:
(In thousands)

Note 5. Property and Equipment Property and equipment consisted of the following:
(In thousands) At December 31, 1996 1995 ----------------------------------------------------------------------------------------Land $ 102,290 $ 99,625 Buildings and improvements 635,238 669,227 Equipment, furniture, fixtures and leasehold improvements 220,379 202,508 Equipment under capital lease 18,054 17,836 Construction in progress 50,797 7,772 -----------------------------1,026,758 996,968 Less: Accumulated depreciation and amortization (142,008) (93,062) -----------------------------$ 884,750 $ 903,906 ------------------------------

Note 6. Investments in Unconsolidated Affiliates The Company has investments in unconsolidated affiliates that are accounted for under the equity method. Under the equity method, original investments are recorded at cost, and are adjusted by the Company's share of earnings, losses and distributions received from and contributions made to these companies. The investment balance also includes interest capitalized during construction. Investments in unconsolidated affiliates consisted of the following:
(In thousands) At December 31, 1996 1995 ----------------------------------------------------------------------------------------New York-New York Hotel and Casino, LLC $ 60,943 $ 40,938 MGM Grand - Bally's Monorail, LLC 11,953 12,673 --------------------------$ 72,896 $ 53,611 ---------------------------

Note 7. Other Accrued Liabilities Other accrued liabilities consisted of the following:
(In thousands) At December 31, 1996 1995 ----------------------------------------------------------------------------------------Accrued salaries and related $ 34,944 $ 29,856 Casino front money 24,796 21,279 Casino chip liability 15,524 5,831 Advance deposits 4,331 5,113 Accrued gaming taxes 7,216 4,168 Other liabilities 31,637 18,548 ---------------------------$ 118,448 $ 84,795 ----------------------------

35 MGM Grand, Inc. and Subsidiaries

Note 8. Long Term Debt Long term debt consisted of the following:

Note 8. Long Term Debt Long term debt consisted of the following:
(In thousands) At December 31, 1996 1995 ----------------------------------------------------------------------------------------Australian Hotel/Casino Loan due December 1, 2000 $ 83,391 $ 78,099 11 3/4% First Mortgage Notes due May 1, 1999 -220,000 12% First Mortgage Notes due May 1, 2002 -253,000 Bank Credit Facility ----------------------------83,391 551,099 Less: Current Maturities (12,906) ---------------------------$ 70,485 $ 551,099 ---------------------------

Total interest incurred during 1996, 1995 and 1994 was $40,801,000, $63,646,000 and $61,927,000, respectively, of which $7,023,000 and $4,317,000 were capitalized in 1996 and 1995, respectively. In 1994, the Company did not capitalize any interest. On July 3, 1996, the Company deposited $523,231,000 (the "Defeasance Deposit") with the Trustee, U.S. Trust of California, to fund the defeasance of MGM Grand Hotel Finance Corp. First Mortgage Notes ("FMN's") in accordance with the terms of the bond indenture. The Defeasance Deposit was made in the form of U.S. Government securities and will be used to fund interest payments on the FMN's through May 1, 1997, the call as of such date of the 11 3/4% FMN's at 101.958% of the outstanding principal, and the call as of such date of the 12% FMN's at 105.333% of the outstanding principal. On October 29, 1996, the liens on the assets of MGM Grand Hotel, Inc. were released and accordingly, the defeasance was finalized. The early extinguishment of the FMN's resulted in an extraordinary loss of approximately $30,811,000, net of income tax benefits of $17,710,000. The First Mortgage Notes Indenture contained various restrictive covenants including the maintenance of certain financial ratios and limitations on additional debt, dividends, stock repurchases, disposition of assets, mergers and similar transactions. At December 31, 1995, MGM Grand Hotel, Inc. was limited to dividend payments of approximately $51,000,000 to the Company under the indenture. On July 1, 1996, the Company secured a new $500,000,000 Senior Reducing Revolving Credit Facility with BA Securities (the "Facility"), an affiliate of Bank of America NT&SA ("BofA"). The Facility was subsequently increased to $600,000,000 in August 1996, and contains various restrictive covenants on the Company, including the maintenance of certain financial ratios and limitations on additional debt, dividends, capital expenditures and disposition of assets. It also restricts acquisitions and similar transactions. Interest on the Facility is based on the bank reference rate or Eurodollar rate. The Facility matures in December 2001. During the year ended December 31, 1996, $61,000,000 was drawn down against the Facility, with $40,000,000 (including loan origination fees on the Facility) of such balance related to the defeasance of the FMN's and $21,000,000 related to acquisitions of property for MGM Grand Atlantic City. As of December 31, 1996, no amounts were outstanding under the Facility. At December 31, 1996, the Company was limited to dividend payments of approximately $100,369,000 under the Facility. On September 7, 1995, the Company completed the acquisition of the Diamond Beach Hotel/Casino in Darwin, Australia (see Note 16). The acquisition cost was financed by an Australian bank facility which provides a total availability of approximately $83,391,000 (AUD$105,000,000) and includes funding for general corporate purposes. Interest on the Australian facility is based on the bank bill rate. The loan agreement contains various restrictive covenants on MGM Grand Australia and the Company, including the maintenance of certain financial ratios and limitations on additional debt, dividends, and disposition of assets. It also restricts acquisitions and similar transactions. The facility matures in December 2000. The indebtedness has been wholly guaranteed by the Company. MGM Grand Australia has a $15,884,000 (AUD$20,000,000) uncommitted standby line of credit, with a funding period of 91 days for working capital purposes. During the year ended December 31, 1996, $4,262,000 (AUD$5,387,000) was borrowed and repaid. No amounts were outstanding under the line of credit as of

December 31, 1996 and 1995, respectively. MGM Grand, Inc. and Subsidiaries 36

Maturities of the Company's long term debt are as follows:
(In thousands) Year Ending December 31, ----------------------------------------------------1997 $ 12,906 1998 12,906 1999 16,877 2000 40,702 Thereafter --------$ 83,391 --------

On September 20, 1995, NYNY LLC (see Note 1) completed its bank financing for up to $225,000,000, which was increased to $285,000,000 during August 1996. The non-revolving construction line of credit converted to a five-year reducing revolver upon commencement of operations of NYNY on January 3, 1997. The Company and Primadonna (the "Partners") guaranteed completion of the project as a condition to facility availability, and have executed a joint and several unlimited Keep-Well Agreement, which provides that in the event of insufficient cash flow from NYNY to comply with financial covenants, the Partners will make cash infusions which are sufficient to bring NYNY LLC into compliance with the financial covenants. The first draw down occurred on September 30, 1995, and as of December 31, 1996, $285,000,000 was outstanding under the facility. On January 21, 1997, NYNY LLC completed an additional $20,000,000 equipment financing with a financial institution. The Company's $60,000,000 bank line of credit for MGM Grand Las Vegas terminated on October 29, 1996. No amounts were outstanding under the line of credit during 1996. During 1995, the Company borrowed and repaid $15,000,000, and as of December 31, 1995, no amounts were outstanding under the line of credit. Note 9. Commitments and Contingencies The Company and its subsidiaries lease buildings and equipment under non-cancelable operating lease agreements which expire through the year 2027. The leases generally provide that the Company pay taxes, insurance and maintenance expenses related to the leased assets. At December 31, 1996, the Company was obligated under non-cancelable operating leases and capital leases to make future minimum lease payments as follows:
(In thousands) Operating Capital Year Ending December 31, Leases Leases ----------------------------------------------------------------------------------------1997 $ 3,151 $ 3,556 1998 4,559 3,962 1999 604 2,187 2000 506 2,763 2001 416 -Thereafter 15,793 ---------------------------Total Minimum Lease Payment $ 25,029 12,468 --------------Amount Representing Interest (1,837) -------Total Obligation Under Capital Leases 10,631 Less: Amount due within one year (2,769) -------Amount due after one year $ 7,862 --------

Maturities of the Company's long term debt are as follows:
(In thousands) Year Ending December 31, ----------------------------------------------------1997 $ 12,906 1998 12,906 1999 16,877 2000 40,702 Thereafter --------$ 83,391 --------

On September 20, 1995, NYNY LLC (see Note 1) completed its bank financing for up to $225,000,000, which was increased to $285,000,000 during August 1996. The non-revolving construction line of credit converted to a five-year reducing revolver upon commencement of operations of NYNY on January 3, 1997. The Company and Primadonna (the "Partners") guaranteed completion of the project as a condition to facility availability, and have executed a joint and several unlimited Keep-Well Agreement, which provides that in the event of insufficient cash flow from NYNY to comply with financial covenants, the Partners will make cash infusions which are sufficient to bring NYNY LLC into compliance with the financial covenants. The first draw down occurred on September 30, 1995, and as of December 31, 1996, $285,000,000 was outstanding under the facility. On January 21, 1997, NYNY LLC completed an additional $20,000,000 equipment financing with a financial institution. The Company's $60,000,000 bank line of credit for MGM Grand Las Vegas terminated on October 29, 1996. No amounts were outstanding under the line of credit during 1996. During 1995, the Company borrowed and repaid $15,000,000, and as of December 31, 1995, no amounts were outstanding under the line of credit. Note 9. Commitments and Contingencies The Company and its subsidiaries lease buildings and equipment under non-cancelable operating lease agreements which expire through the year 2027. The leases generally provide that the Company pay taxes, insurance and maintenance expenses related to the leased assets. At December 31, 1996, the Company was obligated under non-cancelable operating leases and capital leases to make future minimum lease payments as follows:
(In thousands) Operating Capital Year Ending December 31, Leases Leases ----------------------------------------------------------------------------------------1997 $ 3,151 $ 3,556 1998 4,559 3,962 1999 604 2,187 2000 506 2,763 2001 416 -Thereafter 15,793 ---------------------------Total Minimum Lease Payment $ 25,029 12,468 --------------Amount Representing Interest (1,837) -------Total Obligation Under Capital Leases 10,631 Less: Amount due within one year (2,769) -------Amount due after one year $ 7,862 --------

Rental expense on the non-cancelable operating leases was $3,687,000, $3,552,000 and $12,225,000 for the years ending December 31, 1996, 1995 and 1994, respectively. In December 1994 and January 1995, the Company terminated certain operating leases at MGM Grand Las Vegas and purchased the equipment for approximately $42,000,000.

37 MGM Grand, Inc. and Subsidiaries

Note 10. Stockholders' Equity On July 2, 1996, the Company completed a public offering (the "Offering") of 8,625,000 shares of common stock (including an underwriter's over allotment option to purchase 1,125,000 shares of common stock). Based upon an Offering price of $39.50 per share and associated costs incurred, the net proceeds were approximately $327,000,000. The net proceeds from the Offering were used for the defeasance of the MGM Grand Hotel Finance Corp. FMN's (see Note 8). On May 7, 1996, the Company made a commitment to grant 15 shares of Company common stock to each of its employees in exchange for continued active employment through the one year anniversary date of the commitment. As a result of the stock grant commitment, deferred compensation in the amount of $4,982,000 was charged to stockholders' equity and is being amortized to compensation expense monthly over the one year commitment period. As of December 31, 1996, approximately $2,819,000 had been amortized to expense. On May 24, 1995, and as amended on November 27, 1995, the Company and MGM Grand Hotel, Inc. entered into a Promotion Agreement with Don King Productions, Inc. ("DKP"), pursuant to which, among other things: (i) MGM Grand Hotel, Inc. has the exclusive right to present six of Mike Tyson's fights; (ii) MGM Grand Hotel, Inc. made a non-interest bearing working capital advance of $15,000,000 to DKP, to be repaid on January 28, 1998; (iii) the Company sold DKP 618,557 treasury shares of the Company's Common Stock (the "Shares") for $15,000,000, evidenced by a non-interest bearing promissory note which was repaid in three $5,000,000 installments from the proceeds of each of the first three Tyson fights which occurred in the MGM Grand Garden arena; (iv) the Company guaranteed to DKP that the market value of the Shares will equal or exceed $30,000,000 ($48.50 per share) as of January 25, 1998; and (v) the Company and DKP entered into security agreements and a registration rights agreement with respect thereto. The Promotion Agreement has been amended by a Trust Agreement dated as of October 23, 1996, in which the Shares have been placed in the name of, and held by, an independent trustee, pending disposition at the direction of the Company. The Trust Agreement extends the payment date of the working capital advance and the guaranteed share price of $48.50 to March 31, 1998. The Company expensed approximately $2,988,000 and $2,629,000 for the years ended December 31, 1996 and 1995, respectively. At December 31, 1996, the total cash requirement of the guarantee was approximately $8,425,000. Note 11. Stock Option Plan The Company has adopted a nonqualified stock option plan and an incentive stock plan which provides for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations. The aggregate options available under the plans are 5,000,000. The Company had granted options on approximately 4,016,000 shares through December 31, 1996. The plans are administered by a compensation and stock option committee of the Company's Board of Directors. Salaried officers and other key employees of the Company and its subsidiaries are eligible to receive options. The exercise price in each instance is 100% of the fair market value of the Company's common stock on the date of grant. The options have ten-year terms and are exercisable in four and five annual installments. On March 26, 1996, the Compensation and Stock Option Committee of the Board of Directors determined to adjust the vesting provision of the Company's Nonqualified Stock Option Plan and Incentive Stock Option Plan to provide for the vesting of future stock option grants under the plans at 20% on each of the first four anniversary dates of the grant, with full vesting on the fifth anniversary date of the grant. The Compensation and Stock Option Committee also determined that pro-rata vesting at times other than successive anniversary dates of the date of the grant is no longer applicable. Stock option holders with grants dated prior to March 26, 1996 were given the opportunity to accept or decline the new vesting provisions with regard to their existing grants. MGM Grand, Inc. and Subsidiaries 38

Note 10. Stockholders' Equity On July 2, 1996, the Company completed a public offering (the "Offering") of 8,625,000 shares of common stock (including an underwriter's over allotment option to purchase 1,125,000 shares of common stock). Based upon an Offering price of $39.50 per share and associated costs incurred, the net proceeds were approximately $327,000,000. The net proceeds from the Offering were used for the defeasance of the MGM Grand Hotel Finance Corp. FMN's (see Note 8). On May 7, 1996, the Company made a commitment to grant 15 shares of Company common stock to each of its employees in exchange for continued active employment through the one year anniversary date of the commitment. As a result of the stock grant commitment, deferred compensation in the amount of $4,982,000 was charged to stockholders' equity and is being amortized to compensation expense monthly over the one year commitment period. As of December 31, 1996, approximately $2,819,000 had been amortized to expense. On May 24, 1995, and as amended on November 27, 1995, the Company and MGM Grand Hotel, Inc. entered into a Promotion Agreement with Don King Productions, Inc. ("DKP"), pursuant to which, among other things: (i) MGM Grand Hotel, Inc. has the exclusive right to present six of Mike Tyson's fights; (ii) MGM Grand Hotel, Inc. made a non-interest bearing working capital advance of $15,000,000 to DKP, to be repaid on January 28, 1998; (iii) the Company sold DKP 618,557 treasury shares of the Company's Common Stock (the "Shares") for $15,000,000, evidenced by a non-interest bearing promissory note which was repaid in three $5,000,000 installments from the proceeds of each of the first three Tyson fights which occurred in the MGM Grand Garden arena; (iv) the Company guaranteed to DKP that the market value of the Shares will equal or exceed $30,000,000 ($48.50 per share) as of January 25, 1998; and (v) the Company and DKP entered into security agreements and a registration rights agreement with respect thereto. The Promotion Agreement has been amended by a Trust Agreement dated as of October 23, 1996, in which the Shares have been placed in the name of, and held by, an independent trustee, pending disposition at the direction of the Company. The Trust Agreement extends the payment date of the working capital advance and the guaranteed share price of $48.50 to March 31, 1998. The Company expensed approximately $2,988,000 and $2,629,000 for the years ended December 31, 1996 and 1995, respectively. At December 31, 1996, the total cash requirement of the guarantee was approximately $8,425,000. Note 11. Stock Option Plan The Company has adopted a nonqualified stock option plan and an incentive stock plan which provides for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations. The aggregate options available under the plans are 5,000,000. The Company had granted options on approximately 4,016,000 shares through December 31, 1996. The plans are administered by a compensation and stock option committee of the Company's Board of Directors. Salaried officers and other key employees of the Company and its subsidiaries are eligible to receive options. The exercise price in each instance is 100% of the fair market value of the Company's common stock on the date of grant. The options have ten-year terms and are exercisable in four and five annual installments. On March 26, 1996, the Compensation and Stock Option Committee of the Board of Directors determined to adjust the vesting provision of the Company's Nonqualified Stock Option Plan and Incentive Stock Option Plan to provide for the vesting of future stock option grants under the plans at 20% on each of the first four anniversary dates of the grant, with full vesting on the fifth anniversary date of the grant. The Compensation and Stock Option Committee also determined that pro-rata vesting at times other than successive anniversary dates of the date of the grant is no longer applicable. Stock option holders with grants dated prior to March 26, 1996 were given the opportunity to accept or decline the new vesting provisions with regard to their existing grants. MGM Grand, Inc. and Subsidiaries 38

The Company applies Accounting Principles Board Opinion No. 25 and related interpretations for its plans. Accordingly, no compensation costs have been recognized for its plans for 1996, 1995 and 1994. Had the Company accounted for these plans under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income and earnings per share would have

The Company applies Accounting Principles Board Opinion No. 25 and related interpretations for its plans. Accordingly, no compensation costs have been recognized for its plans for 1996, 1995 and 1994. Had the Company accounted for these plans under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
(In thousands) 1996 1995 -----------------------------------------------------------------------Net income: As Reported $ 43,706 $ 46,565 --------------------------Pro Forma $ 34,981 $ 45,751 --------------------------Earnings per share: As Reported $ 0.80 $ 0.96 --------------------------Pro Forma $ 0.65 $ 0.94 ---------------------------

Because the SFAS 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma net income may not be representative of that to be expected in future years. A summary of the status of the Company's Nonqualified stock option plan for each of the years ended December 31, 1996, 1995 and 1994 is presented below (there are no options outstanding under the Incentive Stock Option Plan):
1996 1995 1994 ------------------------------------------------------------------------Weighted Weighted Weig Average Average Ave Shares Exercise Shares Exercise Shares Exer (000's) Price (000's) Price (000's) P --------------------------------------------------------------------------------------------------------Outstanding Beginning of the Year 3,102 $ 22.67 1,815 $ 16.94 1,790 $ 1 Granted 765 $ 35.12 3,261 $ 25.69 285 $ 2 Exercised (414) $ 11.92 (232) $ 11.00 (71) $ 1 Forfeited (240) $ 26.35 (1,742) $ 26.32 (189) $ 1 Expired -$ --$ --$ ---------------Outstanding End of the Year 3,213 $ 27.26 3,102 $ 22.67 1,815 $ 1 ---------------Exercisable at End of Year 220 $ 14.38 493 $ 11.76 446 $ 1 ---------------Weighted Average Fair Value of Options Granted 22.89 13.74 13.14 ----------------

The following table summarizes information about the Nonqualified stock options outstanding at December 31, 1996:
Options Outstanding Options Exercisa ----------------------------------------------------------------Weighted Number Average Weighted Number Weig Outstanding Remaining Average Exercisable Ave at Contractual Exercise at Exer Range of Exercise Prices 12/31/96 Life Price 12/31/96 P --------------------------------------------------------------------------------------------------------$10.25-$20.00 308,000 4.6 years $12.94 180,000 $1 $20.01-$25.00 378,000 8.6 $24.42 -$ $25.01-$30.00 1,936,000 8.9 $26.17 40,000 $2 $30.01-$35.00 25,000 9.2 $34.25 -$ $35.01-$40.00 123,000 9.5 $38.59 -$ $40.01-$45.00 443,000 9.5 $40.98 -$ ----------------------------3,213,000 8.6 $27.28 220,000 $1 -----------------------------

39 MGM Grand, Inc. and Subsidiaries

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1996 and 1995, respectively: risk-free interest rates of 6.1% and 6.4%, respectively; no expected dividend yields for the years presented; expected lives of 6 years for all years; and expected volatility of 39% for all years presented. The Company has agreements with seven executives which provide that, upon a change of control, any unvested stock options covered by such agreements become exercisable. The total number of stock options subject to such agreements is 1,985,000, of which 1,850,000 options become immediately exercisable, and the remaining 135,000 options become exercisable if employment status is diminished within twelve months following a change in control. Effective November, 1996, the Company and MGM Grand Hotel, Inc. adopted an Employee Stock Purchase Plan. The Plan provides eligible employees the opportunity to purchase shares of the Company's Common Stock via payroll deductions. The price for each share of Common Stock is the weighted average price paid for all shares purchased by the Plan Administrator on behalf of the participating employees on the last trading day of each month. The Company and MGM Grand Hotel, Inc. pay the administrative costs of the plan. The plan may be amended or terminated at any time by the Company's Board of Directors or by a committee designated by the Board of Directors. Note 12. Employee Pension and Savings Plans Participation in the MGM Grand Hotel, Inc. 401(k) employee savings plan is available for all full time employees not a part of a bargaining unit. The savings plan allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. MGM Grand Hotel, Inc. matches 25% of employee contributions up to a maximum of 1% of participating employee's eligible gross wages. Additionally, MGM Grand Hotel, Inc. makes contributions to the employees' savings plan based on length of service, which vest over a five-year period. For the periods ended December 31, 1996 and 1995, MGM Grand Hotel, Inc. contributions under this arrangement were $3,060,000 and $3,189,000, respectively. Effective November 1994, the Company and MGM Grand Hotel, Inc. adopted a Nonqualified Deferred Retirement Plan for certain key employees not a part of a collective bargaining unit. The Nonqualified Deferred Retirement Plan allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings, plus interest, as a retirement fund. These deferrals are in addition to those allowed under the MGM Grand Hotel, Inc. 401(k) savings plan. All deferred amounts vest immediately. There are no employer matching contributions made under this plan. The full amount vested in a participant's account will be distributed to a participant following termination of employment, normal retirement or in the event of disability or death. Effective with the September 1995 acquisition of MGM Grand Australia (see Notes 1 and 16), an Australian employee retirement fund was acquired. The fund is subject to the Superannuation Industry (Supervision) Act of 1993, imposing a legal obligation on MGM Grand Australia to contribute to all employees. MGM Grand Australia maintains two categories for the plan, depending on employment status: category (A) for executive employees and category (B) for staff. Death and Disablement benefits are provided for all members; however, category (A) members receive increased coverages under both benefits. MGM Grand Australia contributes 6% of salary to satisfy the Superannuation Guarantee Legislation, and allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. The full amount vested in members' retirement accounts is payable to the member following termination of employment, under certain circumstances or normal retirement. During 1996, MGM Grand Australia contributed under these arrangements $196,000 and $617,000 for the executive employees and staff, respectively. For the period from acquisition on September 7, 1995 to December 31, 1995, MGM Grand Australia contributions under these arrangements were $64,000 and $221,000 for the executive employees and staff, respectively. Note 13. Master Plan Asset Disposition

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1996 and 1995, respectively: risk-free interest rates of 6.1% and 6.4%, respectively; no expected dividend yields for the years presented; expected lives of 6 years for all years; and expected volatility of 39% for all years presented. The Company has agreements with seven executives which provide that, upon a change of control, any unvested stock options covered by such agreements become exercisable. The total number of stock options subject to such agreements is 1,985,000, of which 1,850,000 options become immediately exercisable, and the remaining 135,000 options become exercisable if employment status is diminished within twelve months following a change in control. Effective November, 1996, the Company and MGM Grand Hotel, Inc. adopted an Employee Stock Purchase Plan. The Plan provides eligible employees the opportunity to purchase shares of the Company's Common Stock via payroll deductions. The price for each share of Common Stock is the weighted average price paid for all shares purchased by the Plan Administrator on behalf of the participating employees on the last trading day of each month. The Company and MGM Grand Hotel, Inc. pay the administrative costs of the plan. The plan may be amended or terminated at any time by the Company's Board of Directors or by a committee designated by the Board of Directors. Note 12. Employee Pension and Savings Plans Participation in the MGM Grand Hotel, Inc. 401(k) employee savings plan is available for all full time employees not a part of a bargaining unit. The savings plan allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. MGM Grand Hotel, Inc. matches 25% of employee contributions up to a maximum of 1% of participating employee's eligible gross wages. Additionally, MGM Grand Hotel, Inc. makes contributions to the employees' savings plan based on length of service, which vest over a five-year period. For the periods ended December 31, 1996 and 1995, MGM Grand Hotel, Inc. contributions under this arrangement were $3,060,000 and $3,189,000, respectively. Effective November 1994, the Company and MGM Grand Hotel, Inc. adopted a Nonqualified Deferred Retirement Plan for certain key employees not a part of a collective bargaining unit. The Nonqualified Deferred Retirement Plan allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings, plus interest, as a retirement fund. These deferrals are in addition to those allowed under the MGM Grand Hotel, Inc. 401(k) savings plan. All deferred amounts vest immediately. There are no employer matching contributions made under this plan. The full amount vested in a participant's account will be distributed to a participant following termination of employment, normal retirement or in the event of disability or death. Effective with the September 1995 acquisition of MGM Grand Australia (see Notes 1 and 16), an Australian employee retirement fund was acquired. The fund is subject to the Superannuation Industry (Supervision) Act of 1993, imposing a legal obligation on MGM Grand Australia to contribute to all employees. MGM Grand Australia maintains two categories for the plan, depending on employment status: category (A) for executive employees and category (B) for staff. Death and Disablement benefits are provided for all members; however, category (A) members receive increased coverages under both benefits. MGM Grand Australia contributes 6% of salary to satisfy the Superannuation Guarantee Legislation, and allows participants to defer, on a pretax basis, a portion of their salary and accumulate tax deferred earnings as a retirement fund. The full amount vested in members' retirement accounts is payable to the member following termination of employment, under certain circumstances or normal retirement. During 1996, MGM Grand Australia contributed under these arrangements $196,000 and $617,000 for the executive employees and staff, respectively. For the period from acquisition on September 7, 1995 to December 31, 1995, MGM Grand Australia contributions under these arrangements were $64,000 and $221,000 for the executive employees and staff, respectively. Note 13. Master Plan Asset Disposition During September 1996, the Company determined to write-off various assets with a net book value of $49,401,000 as a result of the MGM Grand Las Vegas Master Plan, associated with the transformation of the facility into "The City of Entertainment." The affected areas include approximately $39,564,000 of costs in MGM Grand Adventures Theme Park to prepare for construction of additional entertainment/retail facilities and a convention

center, and approximately $8,580,000 related to the removal of the lion entrance. In addition, the Company wrote off approximately $1,257,000 representing the cost of certain food court and midway/arcade areas which have been converted into Studio Walk. MGM Grand, Inc. and Subsidiaries 40

Note 14. Company Restructuring Plan On August 1, 1995, the Company announced details of a comprehensive restructuring plan designed to reduce costs and improve efficiency of operations at MGM Grand Las Vegas. This restructuring resulted in a one-time charge against earnings in the third quarter of 1995 totaling $5,942,000, primarily related to employee severance payments. Note 15. Income Taxes The Company accounts for income taxes according to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. At December 31, 1996, the Company believes that it is more likely than not that its deferred tax assets are fully realizable because of the future reversal of existing taxable temporary differences and future projected taxable income. Accordingly, the valuation allowance of $18,013,000 at December 31, 1995, was completely reversed during 1996. The provision (benefit) for income taxes on income from continuing operations before extraordinary item for the years ended December 31, 1996, 1995 and 1994 is as follows:
(In thousands) Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Current - Federal (net of $18,013,000 tax benefit of operating loss carryforwards) $ 31,014 $ 2,034 $ Deferred - Federal (6,380) (2,034) ------------------------------------------Provision for income taxes $ 24,634 $ -$ -------------------------------------------

Reconciliation of the Federal income tax rate and the Company's effective tax rate is as follows:
1996 1995 --------------------------------------------------------------------------------------------------------Federal income tax rate 35.0% 35.0% Permanent and other items 6.2 -Changes in valuation allowance (16.4) (35.0) ( ------------------------------------------Effective tax rate 24.8% -- % -------------------------------------------

As of December 31, 1996, the major tax effected components of the Company's net deferred tax asset (liability) are as follows:
(In thousands) 1996 1995 ----------------------------------------------------------------------------------------Deferred Tax Asset Net operating loss carryforward $ 11,864 $ 45,871 Bad debt reserve 9,123 8,034 Master Plan asset disposition 16,639 -Hotel preopening expenses 8,619 8,860 Loss on defeasance of debt 12,180 -Accruals, reserves and other 4,643 3,479 Tax credit carryforwards 31,488 5,606

Note 14. Company Restructuring Plan On August 1, 1995, the Company announced details of a comprehensive restructuring plan designed to reduce costs and improve efficiency of operations at MGM Grand Las Vegas. This restructuring resulted in a one-time charge against earnings in the third quarter of 1995 totaling $5,942,000, primarily related to employee severance payments. Note 15. Income Taxes The Company accounts for income taxes according to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. At December 31, 1996, the Company believes that it is more likely than not that its deferred tax assets are fully realizable because of the future reversal of existing taxable temporary differences and future projected taxable income. Accordingly, the valuation allowance of $18,013,000 at December 31, 1995, was completely reversed during 1996. The provision (benefit) for income taxes on income from continuing operations before extraordinary item for the years ended December 31, 1996, 1995 and 1994 is as follows:
(In thousands) Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Current - Federal (net of $18,013,000 tax benefit of operating loss carryforwards) $ 31,014 $ 2,034 $ Deferred - Federal (6,380) (2,034) ------------------------------------------Provision for income taxes $ 24,634 $ -$ -------------------------------------------

Reconciliation of the Federal income tax rate and the Company's effective tax rate is as follows:
1996 1995 --------------------------------------------------------------------------------------------------------Federal income tax rate 35.0% 35.0% Permanent and other items 6.2 -Changes in valuation allowance (16.4) (35.0) ( ------------------------------------------Effective tax rate 24.8% -- % -------------------------------------------

As of December 31, 1996, the major tax effected components of the Company's net deferred tax asset (liability) are as follows:
(In thousands) 1996 1995 ----------------------------------------------------------------------------------------Deferred Tax Asset Net operating loss carryforward $ 11,864 $ 45,871 Bad debt reserve 9,123 8,034 Master Plan asset disposition 16,639 -Hotel preopening expenses 8,619 8,860 Loss on defeasance of debt 12,180 -Accruals, reserves and other 4,643 3,479 Tax credit carryforwards 31,488 5,606 --------------------------94,556 71,850 Less: Valuation allowance -(18,013) --------------------------94,556 53,837 --------------------------Deferred Tax Liability Depreciation and amortization (74,994) (61,971) ---------------------------

Net Deferred Tax Asset (Liability)

$ 19,562 $ (8,134) ---------------------------

41 MGM Grand, Inc. and Subsidiaries

At December 31, 1996, the Company had a United States tax return net operating loss carryforward of approximately $27,900,000 which will expire as follows:
Net (In thousands) Operating Loss Year of Expiration Carryforward ------------------------------------------------------------2007 $ 5,000 2008 22,900 -------------$ 27,900 --------------

In addition, the Company has an Australian tax loss of $5,861,000 which does not expire. The Company also has an alternative minimum tax credit carryforward of $29,000,000 which does not expire, and a general business tax credit carryforward of $2,488,000 which expires in different periods through 2011. Note 16. Australian Casino Acquisition On September 7, 1995, the Company, through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., completed the acquisition of MGM Grand Australia, for approximately U.S. $75,971,000. The acquisition costs include $59,972,000 for the purchase of stock and $14,200,000 of debt assumption, and debt and organization costs of $1,799,000. In addition, on October 24, 1995, the Company expended approximately $3,774,000 to acquire the remaining 14.3% interest not already owned in the Territory Property Trust, which owns the land and buildings of MGM Grand Australia. MGM Grand Australia is located on 18 acres of beachfront property on the north central coast of Australia. The resort includes a public and private casino, 97 rooms and suites, restaurants and other facilities. The Company financed the acquisition through an Australian bank facility (see Note 8). The acquisition was accounted for using the purchase method, whereby the assets acquired were recorded at their fair market values. The purchase price allocation was as follows:
(In thousands) ----------------------------------------------------------------Cash $ 7,803 Property, plant and equipment 36,088 Excess of purchase price over fair market value of net assets acquired 40,980 Deferred income taxes (4,226) Net liabilities (900) -------$ 79,745 --------

Concurrent with the closing of the transaction on September 7, 1995, the Company granted to certain of the sellers an option to acquire 22.5% of the stock of the Company's Australian subsidiary. The option, which was granted for a nominal consideration, is exercisable at any time during the third and fourth years following the closing, at an exercise price of approximately $14,400,000 subject to certain adjustments. The option holders also granted to the Company a two-year option to purchase 25% interests in each of Aspinall's Club in London, U.K., and Aspinall Casino SA in Le Touquet, France, with an exercise price in each case based on the amount of the owners' respective investments in such casinos. Note 17. Discontinued Operations/Sale of MGM Grand Air

At December 31, 1996, the Company had a United States tax return net operating loss carryforward of approximately $27,900,000 which will expire as follows:
Net (In thousands) Operating Loss Year of Expiration Carryforward ------------------------------------------------------------2007 $ 5,000 2008 22,900 -------------$ 27,900 --------------

In addition, the Company has an Australian tax loss of $5,861,000 which does not expire. The Company also has an alternative minimum tax credit carryforward of $29,000,000 which does not expire, and a general business tax credit carryforward of $2,488,000 which expires in different periods through 2011. Note 16. Australian Casino Acquisition On September 7, 1995, the Company, through its wholly-owned subsidiary, MGM Grand Australia Pty Ltd., completed the acquisition of MGM Grand Australia, for approximately U.S. $75,971,000. The acquisition costs include $59,972,000 for the purchase of stock and $14,200,000 of debt assumption, and debt and organization costs of $1,799,000. In addition, on October 24, 1995, the Company expended approximately $3,774,000 to acquire the remaining 14.3% interest not already owned in the Territory Property Trust, which owns the land and buildings of MGM Grand Australia. MGM Grand Australia is located on 18 acres of beachfront property on the north central coast of Australia. The resort includes a public and private casino, 97 rooms and suites, restaurants and other facilities. The Company financed the acquisition through an Australian bank facility (see Note 8). The acquisition was accounted for using the purchase method, whereby the assets acquired were recorded at their fair market values. The purchase price allocation was as follows:
(In thousands) ----------------------------------------------------------------Cash $ 7,803 Property, plant and equipment 36,088 Excess of purchase price over fair market value of net assets acquired 40,980 Deferred income taxes (4,226) Net liabilities (900) -------$ 79,745 --------

Concurrent with the closing of the transaction on September 7, 1995, the Company granted to certain of the sellers an option to acquire 22.5% of the stock of the Company's Australian subsidiary. The option, which was granted for a nominal consideration, is exercisable at any time during the third and fourth years following the closing, at an exercise price of approximately $14,400,000 subject to certain adjustments. The option holders also granted to the Company a two-year option to purchase 25% interests in each of Aspinall's Club in London, U.K., and Aspinall Casino SA in Le Touquet, France, with an exercise price in each case based on the amount of the owners' respective investments in such casinos. Note 17. Discontinued Operations/Sale of MGM Grand Air On December 31, 1994, the Company completed the sale of MGM Grand Air for a note receivable totaling approximately $14,325,000, realizing a pretax gain of $8,048,000. As of December 31, 1996, the note had been repaid, and at December 31, 1995, the principal on the note had been reduced to approximately $432,000. The 1994 operating results of MGM Grand Air have been accounted for as discontinued operations, and the financial statements have been restated. For the year ended December 31, 1994, operating results of discontinued operations, excluding the above noted gain, included revenues of $19,535,000 and an operating

discontinued operations, excluding the above noted gain, included revenues of $19,535,000 and an operating loss of $7,012,000. MGM Grand, Inc. and Subsidiaries 42

Note 18. Related-Party Transactions In conjunction with the Company's 50% interest in the MGM Grand-Bally's Monorail, LLC, the Company, through its wholly-owned subsidiary, MGM Grand Hotel, Inc., contributed approximately $1,280,000 and $750,000 to the joint venture as part of its operating contribution during 1996 and 1995, respectively. In August 1995, the Company made a $5,000,000 working capital advance to NYNY. The $5,000,000 advance, together with interest, was repaid during September 1995. The Company, through its wholly-owned subsidiary MGM Grand Hotel, Inc., has entered into an agreement to lease space in NYNY to operate a race book and sports pool. The terms of the lease are for ten years from the commencement date of January 3, 1997, with an option for an additional term of ten years. MGM Grand Hotel, Inc. is obligated to pay to NYNY the greater of a minimum annual rent of $200,000 or percentage rent based upon gross revenue, as defined by the Nevada Gaming Commission and Nevada State Gaming Control Board. The percentage rent is based on a graduated scale of gross revenue at percentages ranging from 12% to 15%. During 1996, no amounts were paid under this agreement. Additionally, MGM Grand Hotel, Inc. leased office facilities to NYNY during 1996 for which it received rental payments of approximately $56,000, and provided various other hotel goods and services for which NYNY paid approximately $85,000. On September 4, 1996, the Company also entered into an agreement with NYNY to provide exclusive floral services through its wholly-owned subsidiary MGM Grand Merchandising, Inc., at rates which management believes are generally comparable to those offered by third parties. No payments were made by NYNY and no services were rendered under the floral service contract during 1996. MGM Grand Hotel, Inc. entered into an agreement with NYNY effective December 14, 1996, whereby it agreed to provide certain of its employees to perform services at NYNY. In exchange, NYNY agreed to reimburse MGM Grand Hotel, Inc. for all payroll and related costs arising from such services, which, during 1996, were immaterial in amount. For the year ended December 31, 1996, the Company and its subsidiaries rented aircraft from Tracinda for various business purposes. The aggregate amount of rental payments were $990,000, and the rent payments were at rates which management believes are generally below those offered by third parties. During 1995, MGM Grand Las Vegas leased an aircraft from Tracinda, with total lease payments of $210,000. MGM Grand Las Vegas also leased Tracinda's Challenger aircraft through a third party operator for $243,000 during 1995. The Company and Tracinda have entered into various other transactions and arrangements which, individually and in the aggregate, are not material. The Company was granted a no-cost option from Tracinda, with an expiration date of September 1, 1995, to purchase approximately 18 acres of undeveloped land across the Las Vegas Strip from MGM Grand Las Vegas. The option, which gave the Company the right to acquire the property at Tracinda's purchase cost of $31,500,000, together with its actual costs incurred in connection with the ownership of the property, plus interest, was exercised on January 5, 1995, for a total cost of approximately $36,500,000. On January 6, 1995, the Company contributed the property to NYNY LLC as its share of the initial capital contribution to the hotel/casino construction project (see Notes 1 and 6). During 1996, the Company contributed an additional $22,500,000 to the NYNY construction project. On March 1, 1994, MGM Grand Hotel, Inc. sold to Tracinda two unused parcels of land (approximately .56 acres total) for $272,950. The Company, based upon appraisals it received, believes that this sale was on terms comparable to what it could have obtained for the land on an arms length basis in an equivalent transaction with a third party. In 1994, MGM Grand Las Vegas reimbursed The Stars' Desert Inn, which was then owned by Tracinda, for its estimated costs of the 1993 testing of a property management computer software system and certain gaming equipment testing, which was approximately $229,000. The Stars' Desert Inn did not exercise an option to retain the computer software system, and retained all revenues generated by the gaming equipment.

Note 18. Related-Party Transactions In conjunction with the Company's 50% interest in the MGM Grand-Bally's Monorail, LLC, the Company, through its wholly-owned subsidiary, MGM Grand Hotel, Inc., contributed approximately $1,280,000 and $750,000 to the joint venture as part of its operating contribution during 1996 and 1995, respectively. In August 1995, the Company made a $5,000,000 working capital advance to NYNY. The $5,000,000 advance, together with interest, was repaid during September 1995. The Company, through its wholly-owned subsidiary MGM Grand Hotel, Inc., has entered into an agreement to lease space in NYNY to operate a race book and sports pool. The terms of the lease are for ten years from the commencement date of January 3, 1997, with an option for an additional term of ten years. MGM Grand Hotel, Inc. is obligated to pay to NYNY the greater of a minimum annual rent of $200,000 or percentage rent based upon gross revenue, as defined by the Nevada Gaming Commission and Nevada State Gaming Control Board. The percentage rent is based on a graduated scale of gross revenue at percentages ranging from 12% to 15%. During 1996, no amounts were paid under this agreement. Additionally, MGM Grand Hotel, Inc. leased office facilities to NYNY during 1996 for which it received rental payments of approximately $56,000, and provided various other hotel goods and services for which NYNY paid approximately $85,000. On September 4, 1996, the Company also entered into an agreement with NYNY to provide exclusive floral services through its wholly-owned subsidiary MGM Grand Merchandising, Inc., at rates which management believes are generally comparable to those offered by third parties. No payments were made by NYNY and no services were rendered under the floral service contract during 1996. MGM Grand Hotel, Inc. entered into an agreement with NYNY effective December 14, 1996, whereby it agreed to provide certain of its employees to perform services at NYNY. In exchange, NYNY agreed to reimburse MGM Grand Hotel, Inc. for all payroll and related costs arising from such services, which, during 1996, were immaterial in amount. For the year ended December 31, 1996, the Company and its subsidiaries rented aircraft from Tracinda for various business purposes. The aggregate amount of rental payments were $990,000, and the rent payments were at rates which management believes are generally below those offered by third parties. During 1995, MGM Grand Las Vegas leased an aircraft from Tracinda, with total lease payments of $210,000. MGM Grand Las Vegas also leased Tracinda's Challenger aircraft through a third party operator for $243,000 during 1995. The Company and Tracinda have entered into various other transactions and arrangements which, individually and in the aggregate, are not material. The Company was granted a no-cost option from Tracinda, with an expiration date of September 1, 1995, to purchase approximately 18 acres of undeveloped land across the Las Vegas Strip from MGM Grand Las Vegas. The option, which gave the Company the right to acquire the property at Tracinda's purchase cost of $31,500,000, together with its actual costs incurred in connection with the ownership of the property, plus interest, was exercised on January 5, 1995, for a total cost of approximately $36,500,000. On January 6, 1995, the Company contributed the property to NYNY LLC as its share of the initial capital contribution to the hotel/casino construction project (see Notes 1 and 6). During 1996, the Company contributed an additional $22,500,000 to the NYNY construction project. On March 1, 1994, MGM Grand Hotel, Inc. sold to Tracinda two unused parcels of land (approximately .56 acres total) for $272,950. The Company, based upon appraisals it received, believes that this sale was on terms comparable to what it could have obtained for the land on an arms length basis in an equivalent transaction with a third party. In 1994, MGM Grand Las Vegas reimbursed The Stars' Desert Inn, which was then owned by Tracinda, for its estimated costs of the 1993 testing of a property management computer software system and certain gaming equipment testing, which was approximately $229,000. The Stars' Desert Inn did not exercise an option to retain the computer software system, and retained all revenues generated by the gaming equipment. Pursuant to an agreement dated December 23, 1996, between MGM Grand Hotel, Inc. and MGM/UA Home Entertainment, Inc. ("MGM/UA"), a wholly owned subsidiary of Metro-Goldwyn-Mayer Inc., a California based motion picture studio in which Tracinda has a 72% ownership interest, MGM Grand Hotel, Inc. can utilize key art and still photographs from certain Metro-Goldwyn-Mayer Inc. and United Artists Corporation motion pictures for the period commencing on December 27, 1996 and ending on July 1, 1997. In exchange, MGM Grand Hotel, Inc. agreed to promote MGM/UA motion picture video cassettes for availability in one or more

retail venues. During December 1996, MGM Grand Hotel, Inc. purchased video cassettes in amounts that are not material. 43 MGM Grand, Inc. and Subsidiaries

Pursuant to a License Agreement between the Company, Metro-Goldwyn-Mayer Inc. and Metro-GoldwynMayer Film Co. dated February 29, 1980, the Company has exclusive rights in perpetuity to use certain trademarks, trade names and logos in connection with the Company's hotel and gaming operations. During the three year periods ended December 31, 1996, 1995 and 1994, the Company and Tracinda have entered into various other transactions and arrangements which, individually and in the aggregate, are not material. Note 19. Industry Segments The Company operates in the Hotel/Casino industry segment through the operations of MGM Grand Las Vegas, which commenced operations on December 18, 1993, MGM Grand Australia, which was acquired on September 7, 1995 (see Note 16), and its 50% share in NYNY which commenced operations on January 3, 1997 (see Note 1). Airline operations have been reclassified for the 1994 year to Discontinued Operations as a result of the sale of the airline (see Note 17). Sales between industry segments are immaterial and generally at prices approximately equal to those charged to unaffiliated customers.
(In thousands) For the Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Net revenues: Hotel/Casino $ 804,814 $ 721,843 $ 742 ------------------------------------------------Operating income (loss): Hotel/Casino $ 196,876 $ 120,464 $ 137 Master Plan asset disposition (49,401) -Corporate expense (10,313) (10,699) (7 Restructuring costs -(5,942) Preopening and other - unconsolidated affiliate (7,868) -------------------------------------------------$ 129,294 $ 103,823 $ 129 ------------------------------------------------Identifiable assets: Hotel/Casino $ 1,254,602 $ 1,250,771 $ 1,088 Discontinued operations - airline --2 Corporate 33,087 31,451 62 ------------------------------------------------$ 1,287,689 $ 1,282,222 $ 1,153 ------------------------------------------------Capital expenditures: Hotel/Casino $ 84,544 $ 37,371 $ 60 Discontinued operations - airline --5 Corporate 231 76 ------------------------------------------------$ 84,775 $ 37,447 $ 65 ------------------------------------------------Depreciation and amortization: Hotel/Casino $ 62,196 $ 55,315 $ 44 Corporate 127 104 ------------------------------------------------$ 62,323 $ 55,419 $ 44 -------------------------------------------------

MGM Grand, Inc. and Subsidiaries 44

Report of Independent Public Accountants To the Board of Directors and Stockholders of MGM Grand, Inc.:

Pursuant to a License Agreement between the Company, Metro-Goldwyn-Mayer Inc. and Metro-GoldwynMayer Film Co. dated February 29, 1980, the Company has exclusive rights in perpetuity to use certain trademarks, trade names and logos in connection with the Company's hotel and gaming operations. During the three year periods ended December 31, 1996, 1995 and 1994, the Company and Tracinda have entered into various other transactions and arrangements which, individually and in the aggregate, are not material. Note 19. Industry Segments The Company operates in the Hotel/Casino industry segment through the operations of MGM Grand Las Vegas, which commenced operations on December 18, 1993, MGM Grand Australia, which was acquired on September 7, 1995 (see Note 16), and its 50% share in NYNY which commenced operations on January 3, 1997 (see Note 1). Airline operations have been reclassified for the 1994 year to Discontinued Operations as a result of the sale of the airline (see Note 17). Sales between industry segments are immaterial and generally at prices approximately equal to those charged to unaffiliated customers.
(In thousands) For the Years Ended December 31, 1996 1995 --------------------------------------------------------------------------------------------------------Net revenues: Hotel/Casino $ 804,814 $ 721,843 $ 742 ------------------------------------------------Operating income (loss): Hotel/Casino $ 196,876 $ 120,464 $ 137 Master Plan asset disposition (49,401) -Corporate expense (10,313) (10,699) (7 Restructuring costs -(5,942) Preopening and other - unconsolidated affiliate (7,868) -------------------------------------------------$ 129,294 $ 103,823 $ 129 ------------------------------------------------Identifiable assets: Hotel/Casino $ 1,254,602 $ 1,250,771 $ 1,088 Discontinued operations - airline --2 Corporate 33,087 31,451 62 ------------------------------------------------$ 1,287,689 $ 1,282,222 $ 1,153 ------------------------------------------------Capital expenditures: Hotel/Casino $ 84,544 $ 37,371 $ 60 Discontinued operations - airline --5 Corporate 231 76 ------------------------------------------------$ 84,775 $ 37,447 $ 65 ------------------------------------------------Depreciation and amortization: Hotel/Casino $ 62,196 $ 55,315 $ 44 Corporate 127 104 ------------------------------------------------$ 62,323 $ 55,419 $ 44 -------------------------------------------------

MGM Grand, Inc. and Subsidiaries 44

Report of Independent Public Accountants To the Board of Directors and Stockholders of MGM Grand, Inc.: We have audited the accompanying consolidated balance sheets of MGM Grand, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

Report of Independent Public Accountants To the Board of Directors and Stockholders of MGM Grand, Inc.: We have audited the accompanying consolidated balance sheets of MGM Grand, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MGM Grand, Inc. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Las Vegas, Nevada January 30, 1997 45 MGM Grand, Inc. and Subsidiaries

Selected Quarterly Financial Results
(In thousands except share data) Quarter For the years ended December 31, 1996 and 1995 ------------------------------------------------------(Unaudited) First Second Third Fourth - ------------------------------------------------------------------------------------------------------1996 Net revenues $ 209,304 $ 190,485 $ 198,433 $ 206,592 Operating profit before non-recurring items and corporate expense 50,734 50,250 46,257 49,635 Operating income 49,223 48,615 (4,808) 36,264 Income (loss) before income taxes, discontinued operations and extraordinary item 34,528 34,331 (6,804) 37,096 Net income (loss) 34,528 20,635 (35,488) 24,031 Per share of common stock: Income (loss) before extraordinary item $ 0.70 $ 0.41 $ (0.08) $ 0.49 Extraordinary item --(0.53) -------------------------------------------------------Net income (loss) $ 0.70 $ 0.41 $ (0.61) $ 0.49 ------------------------------------------------------1995 Net revenues Operating profit before non-recurring items and corporate expense Operating income Income (loss) before income taxes, discontinued operations and extraordinary item Net income (loss) Per share of common stock: Income (loss) before extraordinary item Extraordinary item Net income (loss)

$ 161,885 22,333 20,306

$ 168,397 11,419 8,680

$ 198,281 33,388 28,940

$ 193,280 47,382 45,897

5,525 5,525 $

(6,637) (6,637)

15,870 15,870

31,807 31,807

0.11 $ (0.14) $ 0.33 $ 0.66 ----------------------------------------------------------$ 0.11 $ (0.14) $ 0.33 $ 0.66

Selected Quarterly Financial Results
(In thousands except share data) Quarter For the years ended December 31, 1996 and 1995 ------------------------------------------------------(Unaudited) First Second Third Fourth - ------------------------------------------------------------------------------------------------------1996 Net revenues $ 209,304 $ 190,485 $ 198,433 $ 206,592 Operating profit before non-recurring items and corporate expense 50,734 50,250 46,257 49,635 Operating income 49,223 48,615 (4,808) 36,264 Income (loss) before income taxes, discontinued operations and extraordinary item 34,528 34,331 (6,804) 37,096 Net income (loss) 34,528 20,635 (35,488) 24,031 Per share of common stock: Income (loss) before extraordinary item $ 0.70 $ 0.41 $ (0.08) $ 0.49 Extraordinary item --(0.53) -------------------------------------------------------Net income (loss) $ 0.70 $ 0.41 $ (0.61) $ 0.49 ------------------------------------------------------1995 Net revenues Operating profit before non-recurring items and corporate expense Operating income Income (loss) before income taxes, discontinued operations and extraordinary item Net income (loss) Per share of common stock: Income (loss) before extraordinary item Extraordinary item Net income (loss)

$ 161,885 22,333 20,306

$ 168,397 11,419 8,680

$ 198,281 33,388 28,940

$ 193,280 47,382 45,897

5,525 5,525 $

(6,637) (6,637)

15,870 15,870

31,807 31,807

0.11 $ (0.14) $ 0.33 $ 0.66 ----------------------------------------------------------$ 0.11 $ (0.14) $ 0.33 $ 0.66 -------------------------------------------------------

1996 1995 Common Stock Prices ------------------------------------------------------For the year ended December 31, High Low High Low - ------------------------------------------------------------------------------------------------------First quarter $ 39 3/4 $ 22 3/4 $ 30 3/4 $ 22 3/ Second quarter 47 7/8 38 3/8 32 3/8 26 3/ Third quarter 43 1/4 35 1/2 28 1/2 23 Fourth quarter 45 5/8 34 26 1/4 22 3/

The Company's Common Stock is listed on the New York Stock Exchange. Its symbol is MGG. MGM Grand, Inc. and Subsidiaries 46

Corporate Information Directors and Officers J. Terrence Lanni Director Chairman of the Board Chief Executive Officer Alex Yemenidjian Director President Chief Operating Officer Chief Financial Officer

Corporate Information Directors and Officers J. Terrence Lanni Director Chairman of the Board Chief Executive Officer Alex Yemenidjian Director President Chief Operating Officer Chief Financial Officer Fred Benninger Director Vice Chairman James D. Aljian Director Executive, Tracinda Corporation Terry N. Christensen Director Partner, Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP Glenn A. Cramer Director Former Chairman, Transamerica Airlines Retired Willie D. Davis Director President and Director, All-Pro Broadcasting, Inc. Alexander M. Haig, Jr. Director Chairman Worldwide Associates, Inc. Kirk Kerkorian Director President and Chief Executive Officer Tracinda Corporation Walter M. Sharp Director President, Walter M. Sharp Company Jerome B. York Director Vice Chairman

Tracinda Corporation Scott Langsner Secretary/Treasurer Edward J. Jenkins Vice President Margaret G. Cooper Vice President 47 MGM Grand, Inc. and Subsidiaries

MGM Grand Hotel Senior Officers Daniel M. Wade President Chief Operating Officer Lyn H. Baxter Senior Vice President Operations Cynthia Kiser Murphey Senior Vice President Human Resources and Administration Tom Peterman Senior Vice President General Counsel Greg W. Saunders Senior Vice President Hotel Operations Daniel H. Scott Senior Vice President Chief Financial Officer Richard A. Sturm Senior Vice President Marketing and Entertainment MGM Grand Marketing Robert V. Moon President MGM Grand Development Kenneth A. Rosevear President MGM Grand Merchandising Bob Bowman President

MGM Grand Hotel Senior Officers Daniel M. Wade President Chief Operating Officer Lyn H. Baxter Senior Vice President Operations Cynthia Kiser Murphey Senior Vice President Human Resources and Administration Tom Peterman Senior Vice President General Counsel Greg W. Saunders Senior Vice President Hotel Operations Daniel H. Scott Senior Vice President Chief Financial Officer Richard A. Sturm Senior Vice President Marketing and Entertainment MGM Grand Marketing Robert V. Moon President MGM Grand Development Kenneth A. Rosevear President MGM Grand Merchandising Bob Bowman President MGM Grand Australia Patricia Johnson General Manager Chief Financial Officer Gordon McIntosh Senior Vice President Casino Operations MGM Grand, Inc. and Subsidiaries 48

Transfer Agent and Registrar for Common Stock ChaseMellon Shareholder Services, LLC Shareholder Relations 400 S. Hope Street, 4th Floor Los Angeles, CA 90071 Form 10-K A copy of the Company's annual report on Form 10-K, as filed with the Securities and Exchange Commission, will be furnished without charge to any stockholder upon written request to: Mr. Scott Langsner Secretary/Treasurer MGM Grand, Inc. 3799 Las Vegas Boulevard South Las Vegas, Nevada 89109 Independent Public Accountants Arthur Andersen LLP 3320 W. Sahara Avenue Las Vegas, Nevada 89102 49 MGM Grand, Inc. and Subsidiaries

MGM Grand, Inc. 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-3333 MGM Grand Hotel/Casino 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-1111 Reservations (702) 891-7777 (800) 929-1111 (outside Nevada) MGM Grand Australia Gilruth Avenue Mindil Beach Darwin, Northern Territory 0801 Australia International Number 011 61 89 462 666 MGM Grand, Inc. and Subsidiaries 50

EXHIBIT 21 MGM GRAND, INC.

MGM Grand, Inc. 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-3333 MGM Grand Hotel/Casino 3799 Las Vegas Blvd. South Las Vegas, Nevada 89109 (702) 891-1111 Reservations (702) 891-7777 (800) 929-1111 (outside Nevada) MGM Grand Australia Gilruth Avenue Mindil Beach Darwin, Northern Territory 0801 Australia International Number 011 61 89 462 666 MGM Grand, Inc. and Subsidiaries 50

EXHIBIT 21 MGM GRAND, INC. LIST OF SUBSIDIARIES DECEMBER 31, 1996
STATE OF INCORPORATION ------------Delaware Nevada Nevada Nevada Australia Nevada Nevada

PARENT: SUBSIDIARIES:

NAME -------------------------MGM Grand, Inc. MGM Grand Hotel, Inc. MGM Grand Hotel Finance Corp. Destron, Inc. MGM Grand Australia Pty, Ltd. MGM Grand Merchandising, Inc. MGM Grand Development, Inc.

MGM Grand Atlantic City, Inc.

New Jersey

EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated January 30, 1997, included or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements File Nos. 33-35023, 33-38616, 333-00187 and 333-22957. ARTHUR ANDERSEN LLP

EXHIBIT 21 MGM GRAND, INC. LIST OF SUBSIDIARIES DECEMBER 31, 1996
STATE OF INCORPORATION ------------Delaware Nevada Nevada Nevada Australia Nevada Nevada

PARENT: SUBSIDIARIES:

NAME -------------------------MGM Grand, Inc. MGM Grand Hotel, Inc. MGM Grand Hotel Finance Corp. Destron, Inc. MGM Grand Australia Pty, Ltd. MGM Grand Merchandising, Inc. MGM Grand Development, Inc.

MGM Grand Atlantic City, Inc.

New Jersey

EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated January 30, 1997, included or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements File Nos. 33-35023, 33-38616, 333-00187 and 333-22957. ARTHUR ANDERSEN LLP Las Vegas, Nevada March 20, 1997

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MGM GRAND, INC. 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED

12 MOS DEC 31 1996 JAN 01 1996 DEC 31 1996 61,412 0 115,881 35,352 13,520 226,708 1,026,758 142,008 1,287,689 190,771 0 0 0

EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated January 30, 1997, included or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements File Nos. 33-35023, 33-38616, 333-00187 and 333-22957. ARTHUR ANDERSEN LLP Las Vegas, Nevada March 20, 1997

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MGM GRAND, INC. 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

12 MOS DEC 31 1996 JAN 01 1996 DEC 31 1996 61,412 0 115,881 35,352 13,520 226,708 1,026,758 142,008 1,287,689 190,771 0 0 0 579 972,803 1,287,689 861,063 804,814 0 665,207 10,313 38,635 33,778 99,151 24,634 74,517 0 30,811 0 43,706 .80 0

ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MGM GRAND, INC. 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

12 MOS DEC 31 1996 JAN 01 1996 DEC 31 1996 61,412 0 115,881 35,352 13,520 226,708 1,026,758 142,008 1,287,689 190,771 0 0 0 579 972,803 1,287,689 861,063 804,814 0 665,207 10,313 38,635 33,778 99,151 24,634 74,517 0 30,811 0 43,706 .80 0