-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TmPFYIJXK90gyU3qrqfcfoXnxrOiWiOR8Zg+5y9nSsivodUALN/rUNLQbRLjvEXN MxYvIhsjZNWNLzRw/wGhfA== 0000944209-98-000194.txt : 19980130 0000944209-98-000194.hdr.sgml : 19980130 ACCESSION NUMBER: 0000944209-98-000194 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19980129 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MGM GRAND INC CENTRAL INDEX KEY: 0000789570 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880215232 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: SEC FILE NUMBER: 333-31845 FILM NUMBER: 98516665 BUSINESS ADDRESS: STREET 1: 3799 LAS VEGAS BLVD S CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7028913333 MAIL ADDRESS: STREET 1: PO BOX 98655 CITY: LAS VEGAS STATE: NV ZIP: 89193-8655 FORMER COMPANY: FORMER CONFORMED NAME: GRAND NAME CO DATE OF NAME CHANGE: 19870713 424B2 1 424B2 PROSPECTUS SUPPLEMENT AS FILED PURSUANT TO RULE 424(b)(2) REGISTRATION NO. 333-31845 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED AUGUST 4, 1997) $300,000,000 [LOGO OF MGM GRAND, INC.] 6.95% SENIOR COLLATERALIZED NOTES DUE 2005 --------------------- The 6.95% Senior Collateralized Notes due 2005 (the "Notes") are being offered by MGM Grand, Inc. (the "Company") in an aggregate principal amount of $300,000,000. Interest on the Notes is payable semiannually in arrears on February 1 and August 1 of each year, beginning August 1, 1998, at the rate of 6.95% per annum. The Notes will be guaranteed by certain of the Company's subsidiaries and secured equally and ratably with the Company's bank credit facility (the "Facility"). The Facility is secured by a pledge of substantially all of the Company's assets, subject to certain exceptions, and the Notes will also be initially so secured on a pro rata basis. If the Facility becomes unsecured, the Notes will also become unsecured. See "Description of Notes" herein and "Credit Facility" and "Description of Debt Securities" in the accompanying Prospectus. The Notes will be issued in book-entry form and represented by one or more global notes (a "Global Note") in fully registered form, without coupons, which will be deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company ("DTC") in New York, New York, as depositary for the accounts of its participants. Beneficial interests in the Global Notes will be represented, and transfers thereof will be effected, only through book-entry accounts maintained by DTC and its direct or indirect participants. Initial settlement for the Notes will be made in immediately available funds and secondary market trading activity in beneficial interests therein will therefore settle in such funds. Except in limited circumstances, definitive Notes will not be issued in exchange for beneficial interests in the Global Notes. See "Description of Notes--Book-Entry, Delivery and Form." --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE NEW JERSEY CASINO CONTROL COMMISSION NOR ANY OTHER GAMING AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC (1) DISCOUNT (2) COMPANY (1)(3) - ------------------------------------------------------------------------------- Per Note......................... 98.639% 0.600% 98.039% - ------------------------------------------------------------------------------- Total............................ $295,917,000 $1,800,000 $294,117,000
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Plus accrued interest, if any, from the date of issuance. (2) The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (3) Before deducting estimated expenses of $1,000,000 payable by the Company. --------------------- The Notes are offered by the several Underwriters, subject to prior sale, when, as and if issued and accepted by the Underwriters and certain other conditions. The several Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that the Notes will be delivered in book-entry form only through the facilities of DTC on or about February 2, 1998. BANCAMERICA ROBERTSON STEPHENS DEUTSCHE MORGAN GRENFELL --------------------- CIBC OPPENHEIMER The date of this Prospectus Supplement is January 26, 1998 THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. --------------------- CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING STABILIZING SYNDICATE COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." S-2 THE COMPANY MGM Grand, Inc. (the "Company") is an entertainment, hotel and gaming company headquartered in Las Vegas, Nevada. Through its wholly-owned subsidiaries, the Company owns and operates the MGM Grand Hotel and Casino in Las Vegas ("MGM Grand Las Vegas"), which management believes is the largest hotel/casino in the world, and the MGM Grand Hotel and Casino in Darwin, Australia ("MGM Grand Australia"). The Company also owns a 50% interest in a joint venture that owns and operates New York-New York Hotel and Casino ("New York-New York"), an architecturally distinctive destination resort hotel/casino in Las Vegas. The Company is also planning to construct significant destination resort hotel/casino, entertainment and retail facilities in Atlantic City, New Jersey and Detroit, Michigan. The Company's subsidiary, MGM Grand South Africa, Inc. ("MGM Grand South Africa"), is pursuing up to 15 gaming licenses in the Republic of South Africa, where it currently operates one casino. STRATEGY The Company's strategy is to create unique destination resorts worldwide in selected gaming markets which are designed to provide customers with a total entertainment experience, including: first class accommodations, dining and amenities; exciting production shows, sporting events, concerts and shopping; and attractive gaming facilities. The Company utilizes entertainment themed attractions, including well-known movie characters and settings, to create an exciting environment appealing to all segments of the gaming market and also utilizes targeted marketing programs to attract premium customers. The Company's management team has implemented an operational restructuring program designed to enhance revenues and minimize volatility, reduce operating costs, maintain financial stability, promote the Company's reputation for providing first class entertainment and position the Company for growth by renovating and expanding existing properties and developing new destination resorts. EXISTING PROPERTIES MGM Grand Las Vegas MGM Grand Las Vegas, the Company's flagship property, is a multi-themed destination resort, located on approximately 114 acres on the northeast corner of Las Vegas Boulevard South (the "Strip") and Tropicana Avenue (the "New Four Corners"). MGM Grand Las Vegas creates an exciting and unique gaming and entertainment experience which is intended to appeal to all segments of the Las Vegas market. Management believes MGM Grand Las Vegas is the largest hotel/casino in the world and, because of the quality and variety of its entertainment amenities, is a "must-see" attraction for visitors to Las Vegas. MGM Grand Las Vegas features 5,005 guest rooms and suites, a 171,500 square foot casino with approximately 3,700 slot machines and 160 table games, 11 restaurants, the 16,700 seat MGM Grand Garden Arena and two large showrooms, which feature celebrity entertainers and EFX, a musical and special effects extravaganza production show. MGM Grand Las Vegas received the Mobil Travel Guide's Four Star Rating in 1998, the third consecutive year in which the resort was accorded this honor. MGM Grand Las Vegas has several renowned restaurants, including Emeril's New Orleans Fish House, which was designated by the 1998 Zagat Survey of America's Top Restaurants as the best restaurant in Las Vegas. In an effort to continue a legacy of providing exceptional entertainment through the leveraging of its highly recognizable brand name, the Company has embarked on an extensive transformation of MGM Grand Las Vegas into "The City of Entertainment." The Company's plan (the "Master Plan"), which is budgeted at more than $700 million, calls for a new 1,500 room "Marriott Marquis"; expansion of the resort's casino capacity by nearly 20% to more than 200,000 square feet; "The Mansion at the MGM Grand" offering 30 exclusive suites and villas; a 380,000 square foot state of the art conference center; a 6.6 acre Shangri-La pool and spa complex; significantly expanded and improved parking facilities; and an approximately 45 foot tall new polished bronze lion sculpture on a 25 foot pedestal, which will be the resort's signature, adjoining a re-themed entertainment casino which includes a Rainforest Cafe and Studio 54 nightclub. Substantially all of the transformation will be S-3 completed by December 1998 with the exception of the Marriott Marquis, which is scheduled for completion in December 1999. The Company also plans by the year 2000 to begin construction of a 500 room Ritz-Carlton Hotel at MGM Grand Las Vegas. New York-New York (50%-Owned) The Company is a 50% partner with Primadonna Resorts, Inc. in New York-New York Hotel and Casino, LLC. ("NY-NY LLC"), a joint venture that owns and operates New York-New York. The 47 story destination resort replicates many of Manhattan's landmark buildings and icons, including the Statue of Liberty, the Empire State Building, Central Park, the Brooklyn Bridge and a Coney Island- style roller coaster. Management believes the 2,033 room and suite resort is architecturally the most distinctive property ever built in Las Vegas. The 84,000 square foot casino offers approximately 2,400 slot machines and 70 table games. New York-New York is located on approximately 20 acres at the New Four Corners directly across from MGM Grand Las Vegas. New York-New York has substantially increased the foot traffic at MGM Grand Las Vegas since the two facilities became connected by an extension of the existing elevated pedestrian walkway. MGM Grand Australia MGM Grand Australia is located on 18 acres of beachfront property next to the Arafura Sea on the north central coast in Darwin, Northern Territory, Australia. The resort includes a public and private casino, 96 rooms, restaurants and other facilities. Casino operations include table games, slots ("poker machines") and keno. The Company has positioned MGM Grand Australia as a multi-faceted gaming/entertainment facility for the local market and as an exclusive destination resort for premium international table game customers. MGM Grand South Africa The Company, together with its joint venture partner, Tsogo Sun Gaming & Entertainment ("Tsogo Sun"), intends to apply for up to 15 gaming licenses throughout the Republic of South Africa. MGM Grand South Africa manages a casino in Nelspruit, which began operations on October 15, 1997, in the Mpumalanga Province of the Republic of South Africa. A second casino is scheduled to open in the first quarter of 1998 in Witbank, Mpumalanga Province. The Company earns fees for the development and management of all casino operations of Tsogo Sun, which will provide or procure all of the financing necessary for the hotel/casino projects. DEVELOPMENT OPPORTUNITIES Atlantic City, New Jersey The Company, through its wholly-owned subsidiary, MGM Grand Atlantic City, Inc., intends to create a destination resort hotel/casino in Atlantic City ("MGM Grand Atlantic City") that will be larger and more elaborate than any other facility currently in existence in that market. The Company expects to use its unique entertainment themes extensively at MGM Grand Atlantic City, and plans to offer a wide array of exciting and innovative gaming and non- gaming amenities to its prospective customers. The Company believes that the development and land acquisition costs of the proposed MGM Grand Atlantic City project could be in excess of $700 million and take up to three years to complete once the process of acquiring the necessary land has been finalized. The Company has acquired or has the right to acquire approximately 35 acres of land on the Atlantic City Boardwalk and has entered into an agreement with FC Atlantic City Associates, L.P. (an affiliate of the Forest City Ratner Company) for development. The plans for the hotel and casino resort will include, among other features, entertainment and retail facilities. The design, budget and schedule for development of the project are at a preliminary stage. No assurance can be given that the Company will acquire the necessary property or develop a hotel/casino in Atlantic City, or if it does, as to its ultimate size, configuration or cost. Any development or operation in Atlantic City will be subject to the finalization of the land acquisition process and S-4 the receipt of regulatory approvals. On July 24, 1996, the Company was found suitable for licensing by the New Jersey Casino Control Commission. Detroit, Michigan In November 1997, the Company, along with several partners, was chosen to develop and operate one of three casinos in Detroit, Michigan. The Company anticipates the construction of a $700 million world-class hotel/casino resort with an art deco theme. The approval of the Detroit City Council and the Michigan Gaming Control Board is required prior to the development of each of these three casinos. In an interview in January 1998, the Executive Director of the Michigan Gaming Control Board indicated that it is anticipated that casinos will open in Detroit sometime in the year 2000. S-5 USE OF PROCEEDS The net proceeds from the sale of the Notes, estimated to be approximately $293 million, are expected to be used for general corporate purposes, which may include financing the development and construction of new facilities, additions to working capital, reductions of indebtedness of the Company and its subsidiaries, financing of capital expenditures, potential acquisitions and the repurchase by the Company of its Common Stock. Funds not immediately required for such purposes may be invested in short-term investment grade securities. CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of September 30, 1997 and on an as adjusted basis to give effect to this offering, after deduction of estimated expenses and underwriting discounts and commissions.
SEPTEMBER 30, 1997 --------------------- AS ACTUAL ADJUSTED ---------- ---------- (IN THOUSANDS) Cash and cash equivalents................................ $ 58,993 $ 352,110 ========== ========== Current obligation, long term debt....................... $ 11,767 $ 11,767 ========== ========== Current obligation, capital leases....................... $ 5,182 $ 5,182 ========== ========== Long term debt (less current portion): Credit Facility........................................ $ -- $ -- Australian Hotel/Casino Loan........................... 55,439 55,439 6.95% Senior Collateralized Notes due 2005............. -- 300,000 ---------- ---------- 55,439 355,439 Long term obligation, capital leases..................... 6,073 6,073 Stockholders' equity: Common Stock, $.01 par value; 75,000,000 shares authorized; 57,973,602 issued.................................... 580 580 Capital in excess of par value......................... 966,182 966,182 Retained earnings...................................... 90,826 90,826 Currency translation................................... 3,293 3,293 ---------- ---------- Total stockholders' equity........................... 1,060,881 1,060,881 ---------- ---------- Total capitalization..................................... $1,122,393 $1,422,393 ========== ==========
S-6 SELECTED CONSOLIDATED FINANCIAL INFORMATION The selected consolidated financial information set forth below is qualified in its entirety by, and should be read in conjunction with, the Company's consolidated financial statements and notes thereto incorporated by reference herein. The selected consolidated financial information presented below as of and for the nine months ended September 30, 1996 and 1997 is derived from unaudited consolidated financial statements; however, in the opinion of the Company, all adjustments, consisting of normal recurring adjustments, necessary for the presentation of the Company's financial position and results of operations for such period have been included. Operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for future periods, including the entire year ended December 31, 1997. MGM Grand Las Vegas commenced operations on December 18, 1993. Therefore, the Company does not believe prior period information is meaningful. Certain reclassifications have been made to prior period financial statements to conform with the September 30, 1997 presentation.
NINE YEAR ENDED DECEMBER 31, MONTHS ENDED SEPT. 30, ------------------------------- ------------------------ 1994 1995 1996 1996 1997 --------- --------- --------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA AND RATIOS) REVENUES: Casino................. $ 431,778 $ 401,680 $ 476,685 $ 352,109 $ 335,396 Rooms.................. 145,196 160,470 174,440 130,888 127,420 Food and beverage...... 91,566 89,299 78,438 58,799 69,342 Entertainment, retail and other............. 122,758 123,307 126,875 93,730 86,723 Income from unconsolidated affiliate............. -- -- -- -- 42,351 --------- --------- --------- ----------- ----------- 791,298 774,756 856,438 635,526 661,232 Less: Promotional allowances............ 51,622 55,975 56,249 40,905 46,250 --------- --------- --------- ----------- ----------- 739,676 718,781 800,189 594,621 614,982 OPERATING EXPENSES: Casino................. 185,322 196,665 221,268 161,151 164,480 Rooms.................. 43,838 42,816 46,639 35,571 34,770 Food and beverage...... 65,033 57,516 46,590 35,832 40,949 Entertainment, retail and other............. 113,093 89,820 88,214 63,965 59,981 Provision for doubtful accounts and discounts............. 44,181 57,683 38,635 29,202 22,735 General and administrative........ 106,716 99,119 100,062 75,740 77,616 Depreciation and amortization.......... 44,346 55,315 62,196 46,186 47,626 Restructuring costs.... -- 5,942 -- -- -- --------- --------- --------- ----------- ----------- 602,529 604,876 603,604 447,647 448,157 Operating profit before Master Plan asset disposition, Preopening and Corporate Expense.. 137,147 113,905 196,585 146,974 166,825 Master Plan asset disposition........... -- -- 49,401 49,401 28,566 Preopening and other- unconsolidated affiliate............. -- -- 7,868 -- -- Corporate expense...... 7,432 10,082 10,022 4,543 1,312 --------- --------- --------- ----------- ----------- Operating income..... 129,715 103,823 129,294 93,030 136,947 NONOPERATING INCOME (EXPENSE): Interest income........ 5,544 2,896 4,247 3,873 961 Interest expense, net of capitalized interest(1) (61,927) (59,329) (33,778) (34,008) (1,242) Interest expense from unconsolidated affiliate............. -- -- -- -- (7,519) Other, net............. 208 (825) (612) (840) (649) --------- --------- --------- ----------- ----------- Income from continuing operations before income taxes and extraordinary items.... 73,540 46,565 99,151 62,055 128,498 Provision for income taxes................. -- -- (24,634) (11,569) (46,655) --------- --------- --------- ----------- ----------- Income from continuing operations before extraordinary items.... $ 73,540 $ 46,565 $ 74,517 $ 50,486 $ 81,843 ========= ========= ========= =========== =========== Net income.............. $ 74,576 $ 46,565 $ 43,706 $ 19,675 $ 77,605 ========= ========= ========= =========== =========== Weighted average shares outstanding............ 48,988 48,544 54,235 52,637 58,778 Earnings per share from continuing operations(2).......... $ 1.50 $ 0.96 $ 1.37 $ 0.96 $ 1.39 OTHER DATA: EBITDA(3)............... $ 181,493 $ 169,220 $ 258,781 $ 193,160 $ 214,451 Cash flow from operating activities............. 94,461 114,544 245,151 168,639 115,117 Cash flow from investing activities............. (192,955) (166,034) (120,815) (83,146) (110,838) Cash flow from financing activities............. (36,952) 85,648 (172,941) (132,493) (6,698) MGM Grand Las Vegas average daily room rate ("ADR")................ $ 86 $ 98 $ 101 $ 98 $ 98 MGM Grand Las Vegas occupancy rate......... 94.8% 90.6% 94.7% 96.8% 95.4% New York-New York net revenues(4)............ -- -- -- -- 196,978 New York-New York EBITDA(4).............. -- -- -- -- 101,857 New York-New York ADR... -- -- -- -- $ 96 New York-New York occupancy rate......... -- -- -- -- 98.8% Ratio of earnings to fixed charges(5)....... 2.19 1.65 2.78 2.33 9.36
SEPTEMBER 30, 1997 ---------------------- ACTUAL AS ADJUSTED ---------- ----------- (IN THOUSANDS) SELECTED BALANCE SHEET DATA: Cash and cash equivalents................................ $ 58,993 $ 352,110 Total assets............................................. 1,298,048 1,598,048 Long term debt........................................... 55,439 355,439 Stockholders' equity..................................... 1,060,881 1,060,881
S-7 - -------- (1) Capitalized interest for the years ended December 31, 1996, 1995 and 1994 was $7,023,000, $4,317,000 and $0, respectively. Capitalized interest for the nine months ended September 30, 1997 and 1996 was $5,903,000 and $3,905,000, respectively. (2) Earnings per share for the first two quarters of the year ended December 31, 1995 was a cumulative loss of $0.03. In the third quarter of 1995, the Company announced a restructuring plan to enhance revenues and reduce operating costs. Earnings per share for the third quarter of 1995 was $0.33. Earnings per share for the fourth quarter of 1995, which was the first full quarter in which the benefits of the restructuring were realized, was $0.66. (3) "EBITDA" consists of net income (before extraordinary items, Master Plan asset disposition, Preopening expenses and discontinued operations) plus corporate expense, net interest expense, interest expense from unconsolidated affiliate, taxes, depreciation and amortization and other nonoperating items, net. EBITDA should not be construed as an alternative to operating income as an indicator of the Company's operating performance, or as an alternative to cash flows generated by operating, investing or financing activities as an indicator of cash flows or a measure of liquidity, or as any other measure of performance determined in accordance with generally accepted accounting principles. The Company has presented EBITDA solely as supplemental disclosure because the Company believes that certain investors consider this information useful in the comparison and evaluation of financial performance of companies with substantial depreciation and amortization. (4) New York-New York amounts represent 100% of the operating results, of which the Company has a 50% interest. (5) For purposes of computing the foregoing ratios: (i) "Earnings" consist of income from continuing operations before income taxes and fixed charges, adjusted to exclude capitalized interest, and (ii) "Fixed Charges" consist of interest, whether expensed or capitalized, amortization of debt discount and issuance costs and the Company's proportionate share of the interest cost of 50%-owned joint ventures (such as the limited liability company which owns New York-New York). S-8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1996 Net revenues for the nine months ended September 30, 1997 were $615.0 million, representing an increase of $20.4 million (3.4%) when compared with $594.6 million during the same period in 1996. The increase in net revenues was largely due to income from the Company's 50% ownership in New York-New York and higher food and beverage revenues, partially offset by decreased casino, room, entertainment, retail and other revenues. Consolidated casino revenues for the nine months ended September 30, 1997 were $335.4 million, representing a decrease of $16.7 million (4.7%) when compared with $352.1 million during the same period in the prior year. MGM Grand Las Vegas casino revenues were $315.0 million, representing a decrease of $15.8 million (4.8%) when compared with $330.8 million during the same period in the prior year. The reduction in casino revenues at MGM Grand Las Vegas was a result of lower table games win percentages, and lower slot volume and win percentage. MGM Grand Australia reported casino revenues of $20.4 million, representing a decrease of $0.9 million (4.2%) when compared with $21.3 million during the same period in the prior year, primarily attributable to lower baccarat volume and win partially offset by an increase in slot volume and win along with Northern Territory Keno, which was not operational in the prior year's nine month results. Consolidated room revenues for the period were $127.4 million compared with $130.9 million for the same period in 1996, representing a decrease of $3.5 million (2.7%). MGM Grand Las Vegas room revenues were $125.8 million, representing a decrease of $3.5 million (2.7%) when compared with $129.3 million in the same period of the prior year. The decrease was due to a lower occupancy of 95.4% for the 1997 period when compared with 96.8% in the same period of the prior year. The average daily room rate for the 1997 period of $98 was consistent with the 1996 period. MGM Grand Australia room revenues were $1.8 million for the nine months ended September 30, 1997, representing an increase of $0.2 million (12.5%) when compared with $1.6 million for the prior year period due mainly to the room renovations in the prior year. Consolidated food and beverage revenues for the period were $69.3 million, representing an increase of $10.5 million (17.9%) when compared with $58.8 million for the same period of the prior year. The increase was attributable to MGM Grand Las Vegas, which had food and beverage revenues of $64.3 million during the current period, an increase of $10.2 million (18.9%) when compared with $54.1 million in the same period of 1996. This increase reflects the Company's decision to operate the previously leased Studio Cafe coffee shop. MGM Grand Australia reported food and beverage revenues of $5.2 million, representing an increase of $0.5 million (10.6%) when compared with $4.7 million during the same period in the prior year. Consolidated entertainment, retail and other revenues decreased $7.0 million (7.5%) from $93.7 million in the 1996 period to $86.7 million in the 1997 period. The decrease was attributable to MGM Grand Las Vegas, which had lower theme park and midway/arcade revenues due to downsizing the facilities as well as lower EFX revenues. These decreases were partially offset by increases in MGM Grand Garden Arena revenues and increased revenues from the SkyScreamer thrill ride, which became operational in September 1996. Income from unconsolidated affiliate was $42.4 million for the nine months ended September 30, 1997, representing the Company's 50% share of New York-New York's operating income. The operating results from New York-New York were not consolidated with those of the Company, since consolidation is required only with greater than 50% ownership. Consolidated operating expenses (before Master Plan asset disposition and Corporate expense/income) for the 1997 period were $448.2 million, which were consistent when compared with $447.6 million for the same period in the prior year. The increase was attributable to MGM Grand Las Vegas, offset by decreases at MGM Grand Australia. The increases at MGM Grand Las Vegas were due primarily to increased casino, food and S-9 beverage, and advertising expenses offset by lower expenses related to EFX and midway/arcade operations. Additionally, the provision for doubtful accounts and discounts decreased by $6.5 million at MGM Grand Las Vegas as a result of reduced casino revenues, changes in anticipated collectibility and collections made on previously reserved receivable balances. MGM Grand Australia's operating expenses decreased $4.9 million (17.1%) from $28.7 million in the 1996 period to $23.8 million in the 1997 period as a result of continuing cost containment efforts. Master Plan asset disposition relates to the write-off of various assets related to the transformation of MGM Grand Las Vegas into "The City of Entertainment." The prior year charge of $49.4 million (pre-tax) was recognized when the plan was announced, and the current year charge of $28.6 million (pre-tax) resulted from the increase in the transformation scope from $250.0 million to over $700.0 million. Interest income of $1.0 million for the period ended September 30, 1997 decreased by $2.9 million from $3.9 million in the same period of 1996. The decrease was attributable to lower invested cash balances at MGM Grand Las Vegas during the 1997 period. Interest expense for the nine months ended September 30, 1997 of $1.2 million (net of amounts capitalized) decreased by $32.8 million when compared with $34.0 million in the same period of 1996. The decrease in the 1997 period was primarily due to the defeasance in the 1996 period of the First Mortgage Notes issued by MGM Grand Hotel Finance Corp. (the "First Mortgage Notes"), along with greater capitalization of interest in the current year from continuing construction and development projects. Also, the Company recognized interest expense from its unconsolidated affiliate of $7.5 million during the 1997 period. Income tax provision of $46.7 million has been recorded at a rate of 36.3% for the nine months ended September 30, 1997, compared with $11.6 million in 1996 at a rate of 18.6%. The 1996 rate was lower than 1997, reflecting no provision in the first quarter of 1996 due to the benefit resulting from the reduction of the valuation allowance. Extraordinary loss of $4.2 million, net of income tax benefit, reflects the write-off of unamortized debt costs from the previous $600.0 million credit facility in the 1997 period. The extraordinary loss of $30.8 million, net of income tax benefit, in the prior year represented the loss on defeasance of the First Mortgage Notes. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1997 and December 31, 1996, the Company held cash and cash equivalents of $59.0 million and $61.4 million, respectively. Cash provided by operating activities for the first nine months of 1997 was $115.1 million compared with $168.6 million for the same period of 1996. On May 6, 1996, MGM Grand Las Vegas announced details of a 30 month, $250.0 million Master Plan designed to transform the facility into "The City of Entertainment." The Master Plan, which on June 3, 1997 was enhanced and increased to more than $700.0 million, calls for a new 1,500 room "Marriott Marquis"; expansion of the resort's casino capacity by nearly 20% to more than 200,000 square feet; "The Mansion at the MGM Grand" offering 30 exclusive suites and villas; a 380,000 square foot state of the art conference center; a 6.6 acre Shangri-La pool and spa complex; significantly expanded and improved parking facilities; and an approximately 45 foot tall new polished bronze lion sculpture on a 25 foot pedestal, which will be the resort's signature, adjoining a re-themed entertainment casino which includes a Rainforest Cafe and Studio 54 nightclub. The Company also announced that by the year 2000, it plans to begin construction of a 500 room Ritz-Carlton Hotel at MGM Grand Las Vegas. Approximately $189.3 million is expected to be expended during 1997 related to the Master Plan, of which $73.0 million was expended through September 30, 1997. Capital expenditures during the first nine months of 1997 were $119.0 million, consisting primarily of $28.8 million related to MGM Grand Las Vegas for general property improvements, $73.0 million for the Master Plan project, $1.9 million at MGM Grand Australia for general property improvements and $15.3 million for MGM Grand Atlantic City land acquisition costs and pre- construction activities. Remaining capital expenditures S-10 for 1997, as of September 30, 1997, were approximately $133.6 million, consisting of approximately $116.3 million related to the Master Plan, approximately $8.2 million related to general property improvements for MGM Grand Las Vegas, approximately $8.3 million related to land acquisitions and pre-construction activities for MGM Grand Atlantic City, and approximately $0.8 million for MGM Grand Australia. The Company made a capital contribution of $7.0 million to NY-NY LLC during the first nine months of 1997. As a lender requirement for the project financing, both the Company and its partner, Primadonna Resorts, Inc., were required to enter into a joint and several Keep-Well Agreement. The Company also received $12.6 million in distributions from NY-NY LLC during the nine months ended September 30, 1997 to pay taxes on its allocated share of income. The Company expects to finance operations and capital expenditures through cash flow from operations, cash on hand, the Facility and other bank lines of credit, and the proceeds of this offering. SAFE HARBOR PROVISION The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Prospectus Supplement 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 the requirement to apply for licenses and approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations). S-11 REGULATION AND LICENSING NEVADA The ownership and operation of casino gaming facilities in Clark County, Nevada, are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local regulations. The Company's gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), and the Clark County Liquor and Gaming Licensing Board (the "CCLGLB"). The Nevada Commission, the Nevada Board, and the CCLGLB are collectively referred to as the "Nevada Gaming Authorities." The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Any change in such laws, regulations and procedures could have an adverse effect on the Company's gaming operations. The Company's wholly-owned subsidiary, MGM Grand Hotel, Inc., operates a casino and is required to be licensed by the Nevada Gaming Authorities. The gaming license requires the periodic payment of fees and taxes and is not transferable. MGM Grand Hotel, Inc. is also licensed as a manufacturer and distributor of gaming devices, and as the operator of the race book and sports pool at New York-New York. The Company is required to be licensed as one of the two managers of New York-New York. The Company is also required to be registered by the Nevada Commission as a publicly traded corporation ("Registered Corporation") and as such, it is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, MGM Grand Hotel, Inc. or NY-NY LLC without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company, MGM Grand Hotel, Inc. and NY-NY LLC have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada. The Nevada Commission may, in its discretion, require the holder of any debt security, such as the Notes, of a Registered Corporation to file an application, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The Company may not make a public offering of any securities, including the Notes, without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful. S-12 On July 24, 1997, the Nevada Commission granted the Company prior approval to make public offerings of securities, including the Notes, for a period of two years, subject to certain conditions (the "Shelf Approval"). The Shelf Approval also applies to any affiliated company wholly-owned by the Company (a "Gaming Affiliate") which is already a Registered Corporation or would become a publicly traded corporation because of such public offering. The Shelf Approval also includes approval for MGM Grand Hotel, Inc. to guarantee any security issued by, or to hypothecate its assets to secure the payment or performance of any obligations issued by, the Company or a Gaming Affiliate pursuant to a public offering by the Company or a Gaming Affiliate under the Shelf Approval. In addition, the Shelf Approval includes approval for the Company or a Gaming Affiliate to place restrictions upon the transfer of, and to enter into agreements not to encumber, the equity securities of MGM Grand Hotel, Inc., pursuant to a public offering made by the Company or a Gaming Affiliate under the Shelf Approval. However, the Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board. The Shelf Approval does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. Changes in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he or she obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and the Nevada Commission concerning a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process of the transaction. Consistent with the foregoing, the Indenture governing the Notes will provide that such holder and beneficial owner thereof, by accepting any of the Notes, shall be deemed to have agreed that if the Nevada Gaming Authorities require that a person who is a holder or beneficial owner of the Notes must be licensed, qualified or found suitable under applicable Nevada Gaming Laws, such holder or beneficial owner shall apply for a license, qualification or finding of suitability within the required time period. If such person fails to apply or become licensed or qualified or is not found suitable (in each case, a "failure of compliance"), the Company shall have the right, at its option, (i) to require such person to dispose of its Notes or beneficial interest therein within 30 days of receipt of notice of the Company's election or such earlier date as may be requested or prescribed by the Nevada Gaming Authorities; or (ii) to redeem the Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the earlier of the redemption date or the date of the failure of compliance, which may be less than 30 days following the notice of redemption if so requested or prescribed by the Nevada Gaming Authorities. The Company shall also have the right under the Indenture to call for the redemption of the Notes from any holder or beneficial owner at any time to prevent the loss or material impairment of a gaming license or an application for a gaming license at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the earlier of the redemption date or the date of the failure of compliance, which may be less than 30 days following the notice of redemption if so requested or prescribed by the Nevada Gaming Authorities. The Company shall notify the Trustee under the Indenture of any such redemption as soon as practicable. The Company shall not be responsible for any costs or expenses any such holder or beneficial owner may incur in connection with its application for a license, qualification or finding of suitability. For a more detailed description of the various applicable Nevada gaming regulatory requirements, see "Business--Hotels and Gaming--Nevada Government Regulation" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. S-13 NEW JERSEY The ownership and operation of hotel/casino facilities and gaming activities in Atlantic City, New Jersey are subject to extensive state regulation under the New Jersey Casino Control Act (the "New Jersey Act") and the regulations ("Regulations") of the New Jersey Casino Control Commission (the "New Jersey Commission") and other applicable laws. In order to operate a hotel/casino facility in New Jersey, MGM Grand Atlantic City, Inc. must obtain a license from the New Jersey Commission and obtain numerous other licenses, permits or approvals from other state as well as local governmental authorities. The New Jersey Act also established the New Jersey Division of Gaming Enforcement (the "New Jersey Division") to investigate all license applications, enforce the provisions of the New Jersey Act and Regulations and prosecute all proceedings for violations of the New Jersey Act and Regulations before the New Jersey Commission. The New Jersey Commission has broad discretion regarding the issuance, renewal, revocation and suspension of casino licenses. The New Jersey Act and Regulations concern primarily the good character, honesty, integrity and financial stability of casino licensees, their intermediary and holding companies, their employees, their security holders and others financially interested in casino operations; financial and accounting practices used in connection with casino operations; rules of games, levels of supervision of games and methods of selling and redeeming chips; manner of granting credit, duration of credit and enforceability of gaming debts; and distribution of alcoholic beverages. The Company's wholly-owned subsidiary, MGM Grand Atlantic City, Inc., has applied to be licensed by the New Jersey Commission to operate a casino, and the Company has applied to be approved as a qualified holding company. On July 24, 1996, the Company and MGM Grand Atlantic City, Inc. and their then officers, directors, and 5% or greater shareholders were found suitable for licensing by the New Jersey Commission. These findings of suitability are subject to review and revision by the New Jersey Commission based upon a change in any material fact that is relevant to the findings. The New Jersey Act further provides that each person who directly or indirectly holds any beneficial interest or ownership of the securities issued by a casino licensee or any of its intermediary or holding companies, those persons who, in the opinion of the New Jersey Commission, have the ability to control the casino licensee or its intermediary or holding companies or elect a majority of the board of directors of said companies, other than a banking or other licensed lending institution which makes a loan or holds a mortgage or other lien acquired in the ordinary course of business, lenders and underwriters of said companies are required to be qualified by the New Jersey Commission. However, with respect to a publicly traded holding company such as the Company, a waiver of qualification may be granted by the New Jersey Commission, with the concurrence of the Director of the New Jersey Division, if the New Jersey Commission determines that said persons or entities are not significantly involved in the activities of MGM Grand Atlantic City, Inc. and, in the case of security holders, do not have the ability to control the Company or elect one or more of its directors. There exists a rebuttable presumption that any person holding 5% or more of the equity securities of a casino licensee's intermediary or holding company or a person having the ability to elect one or more of the directors of such a company has the ability to control the company and thus must obtain qualification from the New Jersey Commission. Notwithstanding this presumption of control, the New Jersey Act provides for a waiver of qualification for passive "institutional investors," as defined by the New Jersey Act, if the institutional investor purchased publicly traded securities for investment purposes only and where such securities constitute (i) less than 10% of the equity securities of a casino licensee's holding or intermediary company or (ii) debt securities of a casino licensee's holding or intermediary company representing a percentage of the outstanding debt of such company not exceeding 20% or a percentage of any issue of the outstanding debt of such company not exceeding 50%. The waiver of qualification is subject to certain conditions including, upon request of the New Jersey Commission, filing a certified statement that the institutional investor has no intention of influencing or affecting the affairs of the issuer, except that an institutional investor holding voting securities shall be permitted to vote on matters put to a vote of the holders of outstanding voting securities. Additionally, a waiver of qualification may also be granted to institutional investors holding a higher percentage of securities of a casino licensee's holding or intermediary company upon a showing of good cause. S-14 The New Jersey Act requires the certificate of incorporation of a publicly traded holding company to provide that any securities of such corporation are held subject to the condition that if a holder is found to be disqualified by the New Jersey Commission pursuant to the New Jersey Act, such holder shall dispose of his interest in such company. Accordingly, the Company amended its Certificate of Incorporation to provide that a holder of the Company's securities must dispose of such securities if the holder is found disqualified under the New Jersey Act. In addition, the Company amended its Certificate of Incorporation to provide that the Company may redeem the stock of any holder found to be disqualified. If the New Jersey Commission should find a security holder to be unqualified to be a holder of securities of a casino licensee or holding company, not only must the disqualified holder dispose of such securities but, in addition, commencing on the date the New Jersey Commission serves notice upon such a company of the determination of disqualification, it shall be unlawful for the disqualified holder (i) to receive any dividends or interest upon any such securities, (ii) to exercise, directly or through any trustee or nominee, any right conferred by such securities, or (iii) to receive any remuneration in any form from the licensee for services rendered or otherwise. If the New Jersey Commission should find a security holder to be unqualified to be a holder of securities of a casino licensee or holding company, the New Jersey Commission shall take any necessary action to protect the public interest including the suspension or revocation of the casino license except that if the disqualified person is the holder of securities of a publicly traded holding company, the New Jersey Commission shall not take action against the casino license if (i) the holding company has the corporate charter provisions concerning divestiture of securities by disqualified owners required by the New Jersey Act, (ii) the holding company has made good faith efforts including the pursuit of legal remedies to comply with any order of the New Jersey Commission, and (iii) the disqualified holder does not have the ability to control the company or elect one or more members of the company's board of directors. If, after licensure, the New Jersey Commission determines that MGM Grand Atlantic City, Inc. has violated the New Jersey Act or Regulations, or if any security holder of the Company or MGM Grand Atlantic City, Inc. who is required to be qualified under the New Jersey Act is found to be disqualified but does not dispose of the securities, MGM Grand Atlantic City, Inc. could be subject to fines or its license could be suspended or revoked. If MGM Grand Atlantic City, Inc.'s license is revoked after issuance, the New Jersey Commission could appoint a conservator to operate and to dispose of any hotel/casino facilities of MGM Grand Atlantic City, Inc. Net proceeds of a sale by a conservator and net profits of operations by a conservator (at least up to an amount equal to a fair return on MGM Grand Atlantic City, Inc.'s investment which is reasonable for casinos or hotels) would be paid to the Company. The New Jersey Act imposes an annual tax of eight percent on gross casino revenues (as defined in the New Jersey Act). In addition, casino licensees are required to invest one and one-quarter percent of gross casino revenues for the purchase of bonds to be issued by the Casino Reinvestment Development Authority or make other approved investments equal to that amount. In the event the investment requirement is not met, the casino licensee is subject to a tax in the amount of two and one-half percent on gross casino revenues. The New Jersey Commission has established fees for the issuance or renewal of casino licenses and casino hotel alcoholic beverage licenses and an annual license fee on each slot machine. In addition to compliance with the New Jersey Act and Regulations relating to gaming, any facility built in Atlantic City by MGM Grand Atlantic City, Inc. or any other subsidiary of the Company must comply with the New Jersey and Atlantic City laws and regulations relating to, among other things, the Coastal Area Facilities Review Act, construction of buildings, environmental considerations, and the operation of hotels. MICHIGAN The State of Michigan has enacted the Michigan Gaming Control and Revenue Act (the "Michigan Act") which subjects the ownership and operation of casino gaming facilities to extensive state licensing and regulatory requirements. The Michigan Act also authorizes local regulation of casino gaming facilities by the City of S-15 Detroit, provided that any such local ordinances regulating casino gaming are consistent with the Michigan Act and rules promulgated to implement it. The Michigan Act creates the Michigan Gaming Control Board (the "Board") and authorizes it to grant casino licenses to not more than three applicants who have entered into development agreements with the City of Detroit. The Board is granted extensive authority to conduct background investigations and determine the suitability of casino license applicants, affiliated companies, officers, directors, or managerial employees of applicants and affiliated companies and persons or entities holding a one percent or greater direct or indirect interest in an applicant or affiliated company. Institutional investors holding less than certain specified amounts of debt or equity securities are exempted from meeting the suitability requirements of the Michigan Act, provided such securities are issued by a publicly traded corporation, such as the Company, and the securities were purchased for investment purposes only and not for the purpose of influencing or affecting the affairs of the issuer. The Michigan Act imposes the burden of proof on the applicant for a casino license to establish its suitability to receive and hold the license. The applicant must establish its suitability as to integrity, moral character and reputation, business probity, financial ability and experience, responsibility, and other criteria deemed appropriate by the Board. A casino license is valid for a period of one year and the Board may refuse to renew it upon a determination that the licensee no longer meets the requirements for licensure. The Board may, among other things, revoke, suspend or restrict a casino license. Substantial fines or forfeiture of assets for violations of gaming laws or rules may also be levied against a casino licensee. In the event that a casino license is revoked or suspended for more than 120 days, the Michigan Act provides for the appointment of a conservator who, among other things, is required to sell or otherwise transfer the assets of the casino licensee or former licensee to another person or entity who meets the requirements of the Michigan Act for licensure. The Board recently approved administrative rules (the "Proposed Rules") to implement the terms of the Michigan Act. The Proposed Rules are currently being reviewed by the Governor's Office of Regulatory Reform and the Legislative Services Bureau of the Michigan Legislature for certification. After certification, they will be submitted to the Joint Rules Committee of the Michigan Legislature for review and approval. The Proposed Rules are subject to modification at any time prior to their final adoption by the Board. S-16 DESCRIPTION OF NOTES The Notes offered hereby constitute a series of Debt Securities (which are more fully described in the accompanying Prospectus) to be issued pursuant to an indenture (the "Indenture") between the Company and PNC Bank, National Association, as trustee (the "Trustee"). The following description of the particular terms of the Notes supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities set forth in the Prospectus, to which description reference is hereby made. The terms of the Notes include those provisions contained in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"). The Notes are subject to all such terms, and holders of Notes are referred to the Indenture and the TIA for a statement thereof. The following summary of certain provisions of the Indenture does not purport to be complete and is subject to and qualified in its entirety by reference to the Indenture, including the definitions therein of certain defined terms used below and not otherwise defined below. Copies of the Indenture and the Notes are available for inspection at the office of the Trustee located at PNC Bank, National Association, Corporate Trust Operations, Level B, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2702. GENERAL The Notes will be direct obligations of the Company, guaranteed pursuant to guarantees as provided in the Indenture (the "Guarantees") by each of the Company's Subsidiaries other than the Excluded Subsidiaries (the "Guarantors"). The Notes and Guarantees will be secured by a pledge of substantially all of the assets of the Company and the Guarantors, excluding the Company's interest in the Excluded Subsidiaries. See "--Security" below. Approval by the Nevada Gaming Authorities of the Guarantees and the Collateral therefor (except the Conditional Collateral) was included in the Shelf Approval. See "Regulation and Licensing--Nevada." The payment of the principal of, premium, if any, and interest on the Notes shall be pari passu in right of payment to the Facility, which presently provides a $1.25 billion credit facility, which may be increased to $1.5 billion under its existing terms. The lenders under the Facility also have a security interest in the Collateral, which is pari passu with that of the Trustee. Such security interests may also be pari passu with security interests that may secure any other series of Debt Securities that may hereafter be issued pursuant to an indenture (as more fully described in the accompanying Prospectus), in an aggregate principal amount not exceeding $200,000,000 (the "Additional Pari Passu Notes"). The Notes and Guarantees can become unsecured, at the Company's option, if the Facility (and any such Additional Pari Passu Notes) contemporaneously become unsecured and each of the unsecured Facility and Notes receive investment grade ratings from both Moody's and Standard & Poor's (and the Company obtains confirmation that such release of collateral will not result in a reduction below the respective rating issued by either such entity as of the date of issuance of the Notes). MGM Grand Detroit, LLC will not initially be a Guarantor and the Indenture provides that no investment will be made in it until it becomes a Guarantor. As provided in its guarantee of the Facility, the Guarantee of MGM Grand Detroit, LLC, and the pledge of its assets, will be limited to the amount of proceeds, if any, made available to MGM Grand Detroit, LLC. The Notes will be limited to $300,000,000 aggregate principal amount and will mature on February 1, 2005. The Notes will be issued only in fully registered book-entry form without coupons in denominations of $1,000 and integral multiples thereof, except under the limited circumstances described below under "--Book-Entry, Delivery and Form." Reference is made to the section entitled "Description of Debt Securities" in the accompanying Prospectus and "--Additional Covenants of the Company" below for a description of the covenants applicable to the Notes. Compliance with such covenants generally may not be waived by the Trustee unless the holders of at least a majority in principal amount of all outstanding Notes consent to such waiver; provided, however, that the Company need not comply with such covenants in the event it elects to comply with the defeasance or covenant defeasance provisions of the Indenture described under "Description of Debt Securities--Defeasance of Debt Securities or Certain Covenants in Certain Circumstances" in the accompanying Prospectus. The Indenture does not contain any limitation on the amount of the Company's indebtedness, including the indebtedness under the Facility that is secured by the Collateral on a pari passu basis. Except as described under S-17 "Description of Debt Securities--Merger, Consolidation or Sale of Assets" in the accompanying Prospectus or "--Additional Covenants of the Company" below and except for the liens provided by the Collateral Documents, the Indenture does not contain any other provisions that would afford holders of the Notes protection in the event of (i) a highly leveraged or similar transaction involving the Company, (ii) a change of control, or (iii) a reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect the holders of the Notes. In addition, subject to the limitations set forth under "Description of Debt Securities--Merger, Consolidation or Sale of Assets" in the accompanying Prospectus, under "-- Additional Covenants of the Company" below and under the Collateral Documents, the Company may, in the future, enter into certain transactions such as the sale of all or substantially all of its assets or the merger or consolidation of the Company with another entity that would increase the amount of the Company's indebtedness or substantially reduce or eliminate the Company's assets, which may have an adverse effect on the Company's ability to service its indebtedness, including the Notes. INTEREST AND MATURITY The Notes will pay interest semiannually at a rate of 6.95% per annum from the date of issuance of the Notes (the "Issue Date") until maturity. Interest on the Notes will accrue from the most recent Interest Payment Date to which interest has been paid, or if no interest has been paid, from the Issue Date. Interest shall be payable semiannually in arrears on February 1 and August 1 of each year, commencing August 1, 1998 (each an "Interest Payment Date"), to the person in whose name the Note is registered (a "Noteholder") at the close of business on the preceding January 15 or July 15, as the case may be, next preceding such Interest Payment Date. Principal of and premium, if any, and interest on the Notes will be payable, and the transfer of the Notes may be registered, at the office of the Trustee in Pittsburgh, Pennsylvania. In the event the Company elects to defease the Notes pursuant to the defeasance provisions of the Indenture as described in the accompanying Prospectus under "Description of Debt Securities--Defeasance of Debt Securities or Certain Covenants in Certain Circumstances," the interest rate in effect for the Notes on the date of the irrevocable deposit of the money and/or U.S. Government Obligations as trust funds in trust for the benefit of the holders of the Notes shall be the rate used by the Company in calculating the requisite interest and principal payments necessary to defease the Notes (the "Defeasance Coupon"). The Adjusted Coupon and the Defeasance Coupon shall not thereafter be affected by any change in rating. The Notes will mature on February 1, 2005. Except as described under "Description of Debt Securities--Mandatory Disposition Pursuant to Gaming Laws" in the accompanying Prospectus or under "--Optional Redemption" or "-- Additional Covenants of the Company--Special Asset Sales" below, the Notes are not subject to any redemption or sinking fund provisions. OPTIONAL REDEMPTION The Notes will be redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to the greater of (i) 100% of the principal amount of such Notes or (ii) as determined by a Quotation Agent, the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in such case, accrued interest thereon to the date of redemption. Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Notes to be redeemed. Unless the Company defaults in payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on and after the redemption date. SECURITY The Notes and Guarantees will be secured by a first priority security interest in substantially all of the assets of the Company and the Company's Subsidiaries, including real estate, fixed assets, capital stock of Subsidiaries, accounts, inventory, intellectual property rights and other intangible assets now in existence or hereinafter S-18 acquired (the "Collateral"), other than assets of MGM Grand Detroit, LLC (until it is a Guarantor) and the Excluded Subsidiaries and stock of Excluded Subsidiaries and provided that the Collateral shall not include the stock of MGM Grand Hotel, Inc., a Nevada corporation, unless and until the requisite governmental consents for a pledge of such stock are obtained (the "Conditional Collateral"). If the Company fails to obtain all necessary governmental consents and to provide such pledge by July 30, 1998, then the interest rate borne by the Notes shall be increased by one-quarter of one percent per annum, retroactive from the date of original issuance of the Notes and continuing until such date on which such pledge is completed or the pledge of such stock that secures the Facility is released. The Company and the Guarantors will enter into security agreements, pledge agreements, a deed of trust, a mortgage and certain other collateral assignment agreements (collectively, the "Collateral Documents") providing for the grant of a security interest in or pledge of the Collateral to the Trustee, as collateral agent (in such capacity, the "Collateral Agent"), for the benefit of the holders of the Notes. Such pledges and security interests will secure the payment and performance when due of all of the obligations of the Company and the Guarantors under the Indenture, the Guarantees and the Notes as provided in the Collateral Documents. Such Liens shall be on a pari passu basis with the Liens securing the Facility (and, if issued, any Additional Pari Passu Notes). The Trustee, on behalf of the Noteholders, will enter into an intercreditor agreement with the Administrative Agent under the Facility relating to the parties' respective rights to collateral and certain other matters (the "Intercreditor Agreement") and a similar agreement with the trustee under the indenture for the Additional Pari Passu Notes, if issued. The Collateral Documents set forth provisions under which the Collateral Agent will be entitled to foreclose on the Collateral following an Event of Default. Holders of the Notes may not enforce the Collateral Documents. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power under the Collateral Documents. Upon the full and final payment and performance of all obligations of the Company under the Indenture and the Notes, the Collateral Documents shall terminate and the Collateral shall be released. In addition, the Indenture and the Collateral Documents provide that, if the Liens under the Facility on any Collateral are released, the Collateral Agent will release the Liens on such Collateral under the Collateral Documents, provided, that (i) if such Disposition is not a Permitted Disposition, a pro rata amount of proceeds may be required to be offered to redeem Notes, either at the time of such release or thereafter (see "--Special Asset Sales" below), (ii) pari passu liens securing the Notes will be required on any proceeds or substitute Collateral securing the Facility and (iii) the Collateral Agent shall have received all documentation required by the TIA therefor. At the Company's option, the Liens securing the Notes and Guarantees will be released on any date (the "Collateral Release Date") the Company delivers notice to the Collateral Agent requesting such release and including letters from Moody's and Standard & Poor's indicating that the unsecured Notes and Facility receive investment grade ratings from both such entities and such release of Collateral will not result in a reduction below the respective rating issued by either such entity as of the date of issuance of the Notes and a letter from the Administrative Agent under the Facility confirming that the Liens securing the Facility will be released concurrently with the release of the Liens securing the Notes and Guarantees (and evidence satisfactory to the Trustee that any Liens securing any Additional Pari Passu Notes are being concurrently released). If thereafter the unsecured credit rating assigned to the Notes by Standard & Poor's or Moody's is reduced below BBB- or Baa3, respectively (a "Collateral Event"), the Company and the Guarantors will within 30 days (or at such later time as all requisite approvals of Gaming Authorities are obtained) grant Liens on their respective assets and properties (excluding interests in the Excluded Subsidiaries) to secure the Notes and Guarantees under documentation to be developed as provided under the Indenture. Such Liens shall be on a pari passu basis with any Liens securing the Facility (and any Additional Pari Passu Notes). The right of the Collateral Agent to realize upon and sell the Collateral is likely to be significantly impaired by applicable bankruptcy and insolvency laws if a proceeding under such laws were commenced in respect of S-19 the Company or any Guarantor. Such laws may impose limitations or prohibitions on the exercise of rights and remedies under the Collateral Documents for a substantial or indefinite period of time. In any foreclosure sale, licensing requirements under the Nevada Gaming Laws may limit the number of potential bidders and may delay the sale of the Collateral, either of which could adversely affect the sale price of the Collateral. In addition, the sale, disposition or distribution of Collateral consisting of slot machines or other gaming devices is subject to the prior approval of the Nevada Board. See "Regulation and Licensing--Nevada." During the pendency of any foreclosure proceeding, the Collateral Agent could seek the appointment of a receiver through a petition to the appropriate Nevada state court for the taking of possession of the Collateral. The receiver may be required to obtain the approval of Nevada Gaming Authorities to continue gaming operations until the foreclosure sale. If the Collateral Agent acquired the Collateral in a foreclosure sale, it may contract for the operation of the Collateral by an independent operator who would be required to comply with the licensing requirements and other restrictions imposed by the Nevada Gaming Authorities, pursuant to an arrangement under which the holders of the Notes would not share in the profits or losses of gaming operations. In addition, if the Collateral Agent acquires and operates the Collateral, the Collateral Agent and the holders of the Notes will, if they share in the profits and losses, and may, in any event, be required to comply with the licensing requirements under the Nevada Gaming Laws. In addition, if a Guarantor or the Company becomes subject to the licensing or other gaming law requirements of jurisdictions other than Nevada (including New Jersey or Michigan), the gaming laws of such jurisdictions could impose restrictions, including restrictions analogous to those imposed by the Nevada Gaming Laws, on the Collateral Agent's ability to foreclose and realize on Collateral located in such jurisdictions. ADDITIONAL COVENANTS OF THE COMPANY Reference is made to the section entitled "Description of Debt Securities" in the accompanying Prospectus for a description of certain covenants applicable to the Notes. In addition to the foregoing, the following covenants of the Company will apply to the Notes for the benefit of the holders of the Notes: Limitation on Liens. The Indenture will provide that the Company will not, and will not permit any Subsidiary (other than any Excluded Subsidiary) to, create, incur, issue, assume or guarantee any Indebtedness of the Company or any Subsidiary secured by a Lien upon any Principal Property, or upon shares of capital stock or evidences of Indebtedness issued by any such Subsidiary which owns or leases a Principal Property and which are owned by the Company or any such Subsidiary (whether such Principal Property, shares or evidences of Indebtedness are now owned or are hereafter acquired by the Company), without making effective provision to secure all of the Notes or Guarantees, as the case may be, then outstanding by such Lien, equally and ratably with (or prior to) any and all other Indebtedness thereby secured, so long as such Indebtedness shall be so secured. The foregoing restrictions shall not apply, however, to: (a) Liens existing on the date of original issuance of the Notes; (b) Liens affecting property of a corporation or other entity existing at the time it becomes a Subsidiary of the Company or at the time it is merged into or consolidated with the Company or a Subsidiary of the Company (provided that such Liens are not incurred in connection with, or in contemplation of, such entity becoming a Subsidiary or such merger or consolidation and do not extend to or cover any property or assets of the Company, or any Guarantor other than the property of the entity so acquired); (c) Liens on property existing at the time of acquisition thereof or incurred to secure payment of all or a part of the purchase price of property (including without limitation the cost of improvements or construction of property) or to secure indebtedness incurred prior to, at the time of or within 24 months after the acquisition for the purpose of financing all or part of the purchase price (including without limitation the cost of improvements or construction) thereof (provided that such Liens do not extend to or cover any property or assets of the Company or any Guarantor other than the property so acquired); (d) Liens to secure Indebtedness of limited liability companies, joint ventures, partnerships or corporations which are less than wholly-owned by the Company and for its subsidiaries ("Non-Wholly Owned Entities"), to the extent such Liens are solely on property or assets of, or equity interests in, such Non-Wholly Owned Entities; and (e) any extension, renewal, replacement or refunding of any Lien referred to in the foregoing clauses (a) through (d), provided, however, that the aggregate principal amount of Indebtedness secured thereby and not otherwise authorized by the foregoing clauses shall not exceed the aggregate principal amount of Indebtedness, plus any premium or a payable in connection with any such extension, renewal, replacement or refunding, so secured at the time of such extension, renewal, replacement or refunding. S-20 Notwithstanding the foregoing, the Company and such Subsidiaries may create, incur, issue, assume or guarantee Indebtedness secured by Liens without equally and ratably securing the Notes then outstanding, provided, that at the time of such creation, incurrence, issuance, assumption or guarantee, after giving effect thereto and to the retirement of any Indebtedness which is concurrently being retired, the aggregate amount of all outstanding Indebtedness secured by Liens so incurred (other than those Liens permitted by the preceding paragraph), together with all outstanding Attributable Value of all sale and leaseback transactions permitted by the last paragraph under "Limitation on Sale and Leaseback Transactions" below, does not exceed 15% of the Consolidated Net Tangible Assets of the Company. The Indenture will also provide that the Company will not, and will not permit any Subsidiary to, (i) prior to the Collateral Release Date (or thereafter if a Collateral Event has occurred and the Collateral Release Date has not again occurred), create, incur or suffer to exist any Lien upon any of their properties or assets (including without limitation capital stock) that secures the Facility, without making effective provision to secure all of the Notes and Guarantees then outstanding by such Lien, equally and ratably with (or prior to) the Facility, so long as the Facility shall be so secured or (ii) create, acquire or have any Subsidiary that is not an Excluded Subsidiary without making effective provision for such Subsidiary to become a Guarantor under the Indenture. Limitation on Sale and Leaseback Transactions. The Indenture will provide that, after the Collateral Release Date, sale and leaseback transactions by the Company or any Subsidiary (other than any Excluded Subsidiary) involving any Principal Property are prohibited unless the Company or such Subsidiary shall apply, or cause to be applied, to the retirement of its secured Indebtedness within 120 days after the effective date of the sale and leaseback transaction, an amount not less than the greater of (i) the Net Proceeds of the sale of the Principal Property leased pursuant to such arrangement or (ii) the fair market value of the Principal Property so leased. This restriction will not apply to a sale and leaseback transaction involving the taking back of a lease for a period of less than three years or occurring during such time as a Collateral Event has occurred and the Collateral Release Date has not again occurred. Any portion of such Net Proceeds remaining after retirement of all secured Indebtedness of the Company or such Subsidiary shall be released from the restrictions described in this paragraph. Notwithstanding the restrictions described above, the Company or any such Subsidiary may enter into a sale and leaseback transaction without being subject to the requirements of the immediately preceding paragraph, provided, that at the time of such transaction, after giving effect thereto, the Attributable Value thereof, together with all Indebtedness secured by Liens permitted pursuant to the Indenture as described above under "Limitation on Liens" (other than those Liens permitted by the second paragraph under "Limitation on Liens" above, and other than the Attributable Value of the sale and leaseback transactions permitted by the preceding paragraph) does not exceed 15% of the Consolidated Net Tangible Assets of the Company or if the sale and leaseback transaction would be a Permitted Disposition. Special Asset Sales. The Indenture will provide that, prior to the Collateral Release Date (or thereafter if a Collateral Event has occurred and the Collateral Release Date has not again occurred) the Company will not, and will not permit any of its Subsidiaries (other than any Excluded Subsidiary) to, consummate any Disposition of Collateral that is not a Permitted Disposition ( a "Special Asset Sale") unless (i) no Default or Event of Default exists or is continuing immediately prior to or after giving effect to such Special Asset Sale; (ii) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Special Asset Sale at least equal to the fair value (evidenced by an Officers' Certificate delivered to the Trustee) of the assets sold or otherwise disposed of and (iii) at least 80% of the consideration therefor received by the Company or such Subsidiary is in the form of Cash Equivalents; provided that (x) the amount of any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets, (y) the amount of any notes or other obligations received by the Company or any such Subsidiary from such transferee that are immediately converted by the Company or such Subsidiary into cash or as to which the Company or such Subsidiary has received at or prior to the consummation of the Special Asset Sale a commitment from a nationally recognized investment, merchant or commercial bank to convert into cash within 90 days of the consummation of such Special Asset Sale unless not actually converted into cash within such 90-day period (to the extent of the cash received or receivable pursuant S-21 to any such commitment) and (z) an amount equal to the fair value (evidenced by an Officers' Certificate delivered to the Trustee) of operating assets to be used or useful in the business of the Company or any Subsidiary with respect to which the Trustee has received a first priority fully perfected security interest will be deemed to be Cash Equivalents for purposes of this provision. For purposes of the following paragraph and clause (iii) of this paragraph, an Event of Loss suffered by the Company or any of such Subsidiaries shall constitute a Special Asset Sale and the Company will be required to apply the Net Proceeds from such Event of Loss as set forth below. Prior to the Collateral Release Date (or thereafter if a Collateral Event has occurred and the Collateral Release Date has not again occurred), and subject to the first sentence of the next paragraph, within 24 months after the receipt of any Net Proceeds from any Special Asset Sale (including from an Event of Loss), the Company or any such Subsidiary may (i) apply an amount equal to such Net Proceeds to (a) the making of capital expenditures or the acquisition of tangible assets, in each case, that is used or useful in any business of the Company or such Subsidiary, and/or (b) acquisitions of publicly traded securities of gaming, hotel or related companies upon consummation of which the Trustee will have received a fully perfected security interest (pari passu with (or prior to) Liens securing the Facility) in the property, securities or assets acquired by the Company or such Subsidiary in connection therewith, (ii) contractually commit to apply such Net Proceeds to the payment of either the purchase price of publicly traded securities of gaming, hotel or related companies or the costs of construction of real property improvements of property used or useful in any business of the Company or such Subsidiary or (iii) segregate a portion of such Net Proceeds as a reserve account against budgeted costs of construction of real property improvements of any property used or useful in any business of the Company or such Subsidiary provided construction of such improvements has begun at the time of such segregation, in each case with respect to which the Trustee will have received or retained a fully perfected security interest (pari passu with (or prior to) Liens securing the Facility (and the Additional Pari Passu Notes, if any)). Pending the final application (which, for purposes of clauses (ii) and (iii) of the preceding sentence shall be deemed to occur upon payment of such Net Proceeds pursuant to the contractual commitment or for such budgeted costs referred to therein) of any such Net Proceeds, the Company will invest such Net Proceeds in Cash Equivalents held in an account in which the Trustee shall have a security interest (pari passu with (or prior to) Liens securing the Facility (and the Additional Pari Passu Notes, if any)); provided that, pending such final application (and without reducing the required amount of such final application), the Company may obtain a release from such invested Cash Equivalents to repay revolving loans under the Facility, in an aggregate amount that does not include any of the Pro Rata Amount of Net Proceeds and provided that the interests of the Administrative Agent on behalf of the Facility in the remaining Cash Equivalents are correspondingly reduced. A Pro Rata Amount of any Net Proceeds from Special Asset Sales that are not applied, segregated or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." Notwithstanding the foregoing paragraphs, if prior to the Collateral Release Date (or thereafter if a Collateral Event has occurred and the Collateral Release Date has not again occurred) a Special Asset Sale occurs that results in a repayment of obligations under the Facility while a default exists thereunder (without regard to any waiver of defaults that may be given in connection with such repayment) or results in a reduction in aggregate commitments under the Facility, a Pro Rata Amount of Net Proceeds from such Special Asset Sale will be deemed to constitute "Excess Proceeds" upon such repayment or reduction. When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Company will be required to make an offer to all holders of Notes to purchase Notes (an "Asset Sale Offer"), in an amount equal to the maximum principal amount of Notes that may be prepaid, purchased or redeemed out of the Excess Proceeds (less a pro rata portion attributable to any Additional Pari Passu Notes, if any, and less the amount of any optional redemption (see "Optional Redemption" above) made by the Company after such Asset Sale and before such Asset Sale Offer that has not otherwise reduced any calculation of Excess Proceeds), at a price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase (plus any additional amount as would be payable if such offer were made as an optional redemption), in accordance with the procedures set forth in the Indenture. To the extent that the aggregate amount of Notes is less than the Excess Proceeds attributable to the Notes, the Company may use any remaining Excess Proceeds for general corporate S-22 purposes. If the aggregate principal amount of Notes surrendered by holders thereof exceeds the amount of Excess Proceeds attributable to the Notes, the Trustee shall select the Notes in such manner as it shall deem fair and appropriate. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. If the Collateral Release Date occurs, any pledged Collateral shall be released and any obligation to make an Asset Sale Offer shall terminate. The Company will comply with the requirements of Rule 14e-1 promulgated under the Exchange Act and any other securities law and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes pursuant to any mandatory purchase offer. Prior to the Collateral Release Date (or thereafter if a Collateral Event has occurred and the Collateral Release Date has not again occurred), the Company also will not, and will not permit any Subsidiary to, directly or indirectly, sell any capital stock of a Guarantor except pursuant to a sale of all of the capital stock of such Guarantor or issue any capital stock of any Guarantor to any person other than the Company or another Guarantor. The Indenture further provides that, in the event all of the stock of a Guarantor is sold (other than to the Company or an Affiliate of the Company), the Guarantor whose stock is so sold shall be released from its Guarantee and Collateral Documents, provided the sale of such stock is otherwise permitted by the Indenture and the Company complies with any applicable requirements described under "Special Asset Sales" above with respect to the proceeds of such sale of stock. SUPPLEMENTAL EVENTS OF DEFAULT Reference is made to the section entitled "Description of Debt Securities" in the accompanying Prospectus for a description of events of default applicable to the Notes under the Indenture. In addition to such events of default, the following events shall each constitute an event of default applicable to the Notes under the Indenture: (i) failure of the Company or any Guarantor to pay when due (after applicable grace periods as provided in any applicable instrument governing such debt) the principal of, or acceleration of, any Indebtedness by the Company or any Guarantor having an aggregate principal amount outstanding equal to at least $25 million, if such Indebtedness is not discharged, or such acceleration is not annulled, within 30 days after written notice as provided in the Indenture; (ii) entry of final judgments against the Company or any Guarantor which remain undischarged for a period of 60 days, provided that the aggregate of all such judgments exceeds $25 million and the judgments remain undischarged for 60 days after notice and (iii) the occurrence of a License Revocation (defined below) which continues for a period of more than 90 consecutive days. SUPPLEMENTAL MODIFICATION OR WAIVER PROVISIONS Reference is made to the section entitled "Modification and Waiver" in the accompanying Prospectus for a description of provisions pertaining to modifications or waivers of the Indenture. In addition to the other modifications or waivers specified therein that require the consent of each affected holder of the Notes, a release of any Guarantor (except in accordance with the provisions of the Indenture or the Collateral Documents) requires the consent of each affected holder of Notes. A release of all or substantially all of the Collateral from the Lien of the Indenture or the Collateral Documents (except in accordance with the provisions of the Indenture or Collateral Documents) requires the consent of holders of not less than two- thirds in principal amount of the outstanding Notes. COMPLIANCE WITH GAMING LAWS Each holder of a Note, by accepting any Note, shall be deemed to have agreed to be bound by the requirements imposed on holders of debt securities of the Company by the gaming authority of any jurisdiction of which the Company or any of its subsidiaries conducts or proposes to conduct gaming activities. For a description of the regulatory requirements applicable to the Company, see "Regulation and Licensing" herein and "Business--Hotels and Gaming--Nevada Government Regulation" and "Business--MGM Grand Atlantic City--New Jersey Government Regulation" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 incorporated by reference herein. S-23 CERTAIN DEFINITIONS "Adjusted Treasury Rate" means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date, plus 0.15%. "Administrative Agent" means Bank of America National Trust and Savings Association, in its capacity as Administrative Agent under the Facility (and its successors and assigns from time to time). "Attributable Value" with respect to any sale and leaseback transaction that is subject to the restrictions described under "--Limitation on Sale and Leaseback Transactions" means the present value of the minimum rental payments called for during the term of the lease (including any period for which such lease has been extended), determined in accordance with generally accepted accounting principles, discounted at a rate that, at the inception of the lease, the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased assets. "Cash Equivalents" shall have the meaning set forth from time to time in the Facility. "Comparable Treasury Issue" means the United States Treasury security selected by a Quotation Agent as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes. "Comparable Treasury Price" means, with respect to any redemption date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day preceding such redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, (A) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations or (B) if the Company obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such Quotations. "Consolidated Net Tangible Assets" of the Company means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any Indebtedness having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Company but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with generally accepted accounting principles. "Disposition" shall have the meaning set forth in the Facility as in effect on the date hereof. "Event of Loss" means, with respect to any property or asset, any loss, destruction or damage of or to such property or asset, or any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, if the sale of such property or asset, for the amount attributable to such loss, destruction, damage, condemnation, seizure or taking, would not be a Permitted Disposition. "Excluded Subsidiary" means NY-NY, LLC, MGM Grand-Bally's Monorail Limited Liability Company and MGM Grand Australia, Inc. and the Company's non-U.S. subsidiaries and their U.S. holding companies, provided such holding companies have no other assets or operations and provided that if any Excluded Subsidiary becomes subject to the covenants in the Facility applicable to Restricted Subsidiaries or grants any Liens to secure the Facility, such Excluded Subsidiary will thereafter not be an Excluded Subsidiary. S-24 "Facility" means the Amended and Restated Loan Agreement dated as of July 17, 1997 among the Company, MGM Grand Atlantic City, Inc., the banks, managing agents and co-agents named therein and the Administrative Agent (and their successors and assigns from time to time party thereto), including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, in each case as amended, modified, renewed, extended, refunded, replaced or refinanced from time to time. "Indebtedness" means notes, bonds, debentures or other similar evidences of indebtedness for borrowed money or any guarantee of any of the foregoing. "License Revocation" means the revocation, failure to renew or suspension of, or the appointment of a receiver, supervisor or similar official with respect to, any casino, gambling or gaming license issued by any Gaming Authority covering MGM Grand Las Vegas, or after the completion date for any Material Project, each Guarantor which owns any material portion of that Material Project. "Lien" means any mortgage, pledge, lien, encumbrance or other security interest, in each case to secure payment of Indebtedness. "Material Project" means, as of each date of determination, (a) MGM Grand Atlantic City, and (b) each other casino, hotel and/or entertainment complex project proposed by Borrower or any Guarantor which at that date has a development and capital expenditure budget in excess of $250,000,000. "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Special Asset Sale or Event of Loss (including without limitation any cash received upon the sale or other disposition of any non-cash consideration received in any Special Asset Sale or Event of Loss and insurance proceeds), net of the direct costs relating to such Special Asset Sale or Event of Loss (including without limitation legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than the Facility) secured by a Lien on the asset or assets that were the subject of such Special Asset Sale and any reserve established by the Company or any of its Subsidiaries in accordance with generally accepted accounting principles against any liabilities associated with such Special Asset Sale and retained by the Company or any of its Subsidiaries, as the case may be, after such Special Asset Sale. "Permitted Disposition" means a Disposition of the type that is permitted under Section 6.2 of the Facility as in effect on the date hereof, without regard to any waiver by the lenders under the Facility of any default or event of default that exists or would result from such Disposition. "Principal Property" means any real estate or other physical facility or depreciable asset or securities acquired with the proceeds of Special Asset Sales, the net book value of which on the date of determination exceeds the greater of $25 million or 2% of the Consolidated Net Tangible Assets of the Company. "Pro Rata Amount" means, with respect to any Special Asset Sale, the amount of Net Proceeds from such Special Asset Sale multiplied by a fraction, the numerator of which is the aggregate amount of outstanding obligations under the Notes and the Indenture (and under the Additional Pari Passu Notes, if any) immediately before such Asset Sale and the denominator of which is the sum of the numerator plus the aggregate amount of outstanding obligations under the Facility immediately before such Asset Sale. "Quotation Agent" means one of the Reference Treasury Dealers appointed by the Company and certified to the Trustee by the Company. "Reference Treasury Dealer" means each of BancAmerica Robertson Stephens, Deutsche Morgan Grenfell and CIBC Oppenheimer and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government Securities dealer in New York City (a "Primary Treasury Dealer"), the Company shall substitute therefor another Primary Treasury Dealer and certify same to the Trustee; and any other Primary Treasury Dealer selected by the Company and certified to the Trustee by the Company. S-25 "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and certified to the Trustee by the Company, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day preceding such redemption date. "Subsidiary" means any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation is, at the time, directly or indirectly, owned by the Company or by one or more Subsidiaries thereof, or by the Company and one or more Subsidiaries. BOOK-ENTRY, DELIVERY AND FORM Except as set forth below, the Notes will initially be issued in the form of one or more Registered Notes in global form (the "Global Notes"). Each Global Note will be deposited on the date of the closing of the sale of the Notes (the "Closing Date") with, or on behalf of, DTC, as depositary (the "Depositary"), and registered in the name of Cede & Co., as nominee of the Depositary. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of the securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. The Company expects that pursuant to procedures established by the Depositary (i) upon deposit of the Global Notes, the Depositary will credit the accounts of participants designated by the Underwriters with an interest in the applicable Global Notes and (ii) ownership of the Notes evidenced by the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of Participants), the Participants and the Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own and that security interests in negotiable instruments can only be perfected by delivery of certificates representing the instruments. Consequently, the ability to transfer Notes evidenced by the Global Notes will be limited to such extent. So long as the Depositary or its nominee is the registered owner of a Note, the Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by the Global Notes for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Notes in certificated form ("Certificated Notes"), and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. As a result, the ability of a person having a beneficial interest in Notes represented by a Global Note to pledge such interest to persons or entities that do not participate in the Depositary's system, or to otherwise take actions with respect to such interest, may be affected by the lack of a physical certificate evidencing such interest. S-26 Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Notes by the Depositary, or for maintaining, supervising or reviewing any records of the Depositary relating to such Notes. Payments with respect to the principal of, premium, if any, and interest on, any Note represented by a Global Note registered in the name of the Depositary or its nominee on the applicable record date will be payable by the Trustee to, or at the direction of, the Depositary or its nominee in its capacity as the registered holder of the Global Note representing such Notes under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names the Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes (including principal, premium, if any, or interest), or to immediately credit the accounts of the relevant Participants with such payment, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the Global Note as shown on the records of the Depositary. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Participants or the Indirect Participants. Certificated Notes If (i) the Company notifies the Trustee in writing that the Depositary is no longer willing or able to act as a depositary and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in certificated form under the Indenture, then, upon surrender by the Depositary of the applicable Global Notes, Certificated Notes will be issued to each person that the Depositary identifies as the beneficial owner of the Notes represented by such Global Notes. In addition, subject to certain conditions, any person having a beneficial interest in a Global Note may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of Certificated Notes. Upon any such issuance, the Trustee is required to register such Certificated Notes in the name of such person or persons (or the nominee of any thereof), and cause the same to be delivered thereto. Neither the Company nor the Trustee shall be liable for any delay by the Depositary or any Participant or Indirect Participant in identifying the beneficial owners of the Notes, and the Company and the Trustee may conclusively rely on, and shall be protected in relying on, instructions from the Depositary for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Notes to be issued). The information in this section concerning the Depositary and the Depositary's book-entry system has been obtained from sources that the Company believes to be reliable. The Company will have no responsibility for the performance by the Depositary or its Participants of their respective obligations as described hereunder or under the rules and procedures governing their respective operations. SAME-DAY FUNDS SETTLEMENT AND PAYMENT Settlement for the Notes will be made by the Underwriters (as defined herein) in immediately available funds. Payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, and interest) will be made in immediately available funds to the accounts specified by the Depositary. With respect to Notes represented by Certificated Notes, the Company will make all payments of principal, premium, if any, and interest, by mailing a check to the registered address of each holder of such Notes. The Notes will trade in the Depositary's Same-Day Funds Settlement System until maturity, or until the Notes are issued in certificated form, and secondary market trading activity in the Notes will therefore be required by the Depositary to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the Notes. S-27 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion is a summary of certain Federal income tax consequences expected to result from the purchase, ownership and disposition of the Notes by holders acquiring the Notes on original issue for cash. This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations, judicial authority and administrative rulings and practice, any of which may be altered with retroactive effect thereby changing the Federal income tax consequences discussed below. There can be no assurance that the Internal Revenue Service ("IRS") will not take a contrary view, and no ruling from the IRS has been or will be sought. The tax treatment of a holder of Notes may vary depending upon such holder's particular situation. Certain holders (including, but not limited to, certain financial institutions, insurance companies, broker-dealers, foreign corporations, nonresident alien individuals and persons holding the Notes as part of a "straddle," "hedge" or "conversion transaction") may be subject to special rules not discussed below. This discussion is limited to holders who will hold the Notes as "capital assets" (generally, property held for investment) within the meaning of Section 1221 of the Code. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS. RECOGNITION OF INTEREST INCOME A holder of Notes will recognize interest income with respect to the Notes at the time it is received or accrued depending upon the holder's normal method of accounting. Because the stated redemption price at maturity of the Notes will not exceed their issue price by more than 1/4 of 1% of their stated redemption price at maturity multiplied by the number of full years until such maturity, the Notes will be considered issued without original issue discount for Federal income tax purposes. SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION In general, a holder of a Note will recognize gain or loss upon the sale, retirement or other taxable disposition of such Note in an amount equal to the difference between (i) the amount of cash and the fair market value of property received in exchange therefor (except to the extent attributable to the payment of accrued interest, which generally will be taxable to a holder as ordinary income) and (ii) the holder's adjusted tax basis in such Note. A holder's tax basis in a Note generally will be equal to the price paid for such Note. Any gain or loss recognized on the sale, retirement, or other taxable disposition of a Note generally will be capital gain or loss. The capital gain or loss will be midterm if the Note had been held for more than 12 months and long term if the Note had been held for more than 18 months. BACKUP WITHHOLDING A holder of Notes may be subject to backup withholding at the rate of 31% with respect to interest paid on, and gross proceeds from a sale of, the Notes unless (i) such holder is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder of Notes who does not provide the Company with his or her correct taxpayer identification number may be subject to penalties imposed by the IRS. The Company will report to the holders of the Notes and the IRS the amount of any "reportable payments" (including any interest paid or accrued on the Notes) and any amount withheld with respect to the Notes during the calendar year. ACQUISITION PREMIUM In general, a Holder that purchases a Note for an amount over the face amount of the Note has the option of (a) amortizing the amount of the premium until maturity of the Note and correspondingly reducing the Holder's basis in the Note by the amortized amount, or (b) treating the amount of the premium as part of the basis of the Notes. S-28 MARKET DISCOUNT In general, a Note will be treated as purchased at a market discount (a "Market Discount Note") if the amount for which a Holder purchased the Note is less than the Note's issue price. Generally, the issue price of a Note will be the first price at which a substantial amount of Notes included in the issue of which the Note is a part is sold to other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers. Any gain recognized on the maturity or disposition of a Market Discount Note will be treated as ordinary income to the extent that such gain does not exceed the market discount on such Note. Alternatively, a Holder of a Market Discount Note can elect to include the market discount ratably in income. S-29 UNDERWRITING Subject to the terms and conditions set forth in the purchase agreement (the "Underwriting Agreement"), the Company has agreed to sell to each of the underwriters named below (the "Underwriters"), and each of such Underwriters has severally agreed to purchase, the principal amount of the Notes set forth opposite its name below.
PRINCIPAL UNDERWRITER AMOUNT ----------- ------------ BancAmerica Robertson Stephens.................................... $100,000,000 Deutsche Morgan Grenfell Inc...................................... 100,000,000 CIBC Oppenheimer Corp............................................. 100,000,000 ------------ Total........................................................... $300,000,000 ============
Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all of the Notes, if any are taken. The Underwriters propose to offer the Notes in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement and in part to certain securities dealers at such price less a concession of 0.35% of the principal amount of the Notes. The Underwriters may allow, and such dealers may reallow, a concession not to exceed 0.25% of the principal amount of the Notes to certain brokers and dealers. After the Notes are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Underwriters. The Notes are a new issue of securities with no established trading market. The Company has been advised by the Underwriters that the Underwriters intend to make a market in the Notes but they are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes. The Underwriters may engage in stabilizing and syndicate covering transactions in accordance with Rule 104 under the Exchange Act. Rule 104 permits stabilizing bids to purchase the security so long as bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of Notes in the open market after the distribution has been completed in order to cover syndicate short positions. Stabilizing and syndicate covering transactions may cause the price of the Notes to be higher than it would otherwise be in the absence of such transactions. These transactions, if commenced, may be discontinued at any time. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. LEGAL MATTERS Certain legal matters relating to the issuance and sale of the Notes will be passed upon for the Company by Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, Los Angeles, California. Certain legal matters relating to the offering will be passed upon for the Underwriters by Gibson, Dunn & Crutcher LLP, Los Angeles, California. Certain legal matters with respect to Nevada law will be passed upon by Lionel Sawyer & Collins, Las Vegas, Nevada and with respect to New Jersey law by Sterns & Weinroth, A Professional Corporation, Atlantic City, New Jersey. S-30 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE OFFERED SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR IN THE AFFAIRS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES SINCE THE RESPECTIVE DATES OF THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT. -------------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ----- The Company............................................................. S-3 Use of Proceeds......................................................... S-6 Capitalization.......................................................... S-6 Selected Consolidated Financial Information............................. S-7 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................... S-9 Regulation and Licensing................................................ S-12 Description of Notes.................................................... S-17 Certain Federal Income Tax Considerations............................... S-28 Underwriting............................................................ S-30 Legal Matters........................................................... S-30 PROSPECTUS Available Information................................................... 2 Incorporation of Certain Documents by Reference......................... 3 The Company............................................................. 4 Credit Facility......................................................... 4 Use of Proceeds......................................................... 5 Ratio of Earnings to Fixed Charges...................................... 5 Description of Debt Securities.......................................... 5 Description of Common Stock............................................. 12 Trustee Stockholder..................................................... 13 Plan of Distribution.................................................... 13 Legal Matters........................................................... 14 Experts................................................................. 14
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- [LOGO OF MGM GRAND, INC.] $300,000,000 6.95% SENIOR COLLATERALIZED NOTES DUE 2005 -------------------- PROSPECTUS SUPPLEMENT JANUARY 26, 1998 -------------------- BANCAMERICA ROBERTSON STEPHENS DEUTSCHE MORGAN GRENFELL CIBC OPPENHEIMER - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----