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                                                                    Exhibit 10.4
                             EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") is entered into as of June 1, 2000,
by and between MGM GRAND, INC., a Delaware corporation ("Employer"), and James
J. Murren, ("Employee").

1.   Employment.  Employer hereby employs Employee, and Employee hereby accepts
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     employment by Employer, as President and Chief Financial Officer (which
     titles may be changed (but not to a lower status) by Employer in its sole
     discretion) to perform such executive, managerial or administrative duties
     as Employer may specify from time to time. In construing the provisions of
     this Agreement, Employer shall include all of Employer's subsidiary, parent
     and affiliated corporations and entities. During the Specified Term,
     Employer agrees to take all steps necessary to include Employee as a member
     of management's slate of nominees for election as a member of Employer's
     Board of Directors and to maintain Employee's position as a member of the
     Executive Committee. During the Specified Term, Employee shall report
     directly to the Chairman of the Board of Directors of Employer.

2.   Term.  This Agreement shall commence on June 1, 2000 (the "Commencement
     ----
     Date"), and continue through and including June 1, 2004 (the "Specified
     Term").

3.   Compensation.  Employee shall receive a minimum annual salary of $800,000,
     ------------
     commencing on the Commencement Date. Employee shall also be eligible to
     receive fringe benefits commensurate with Employer's other employees in
     comparable executive positions, and reimbursement for all reasonable
     business and travel expenses incurred by Employer in performing the duties
     hereunder, payable in accordance with Employer's customary practices.
     Employee's performance may be reviewed periodically. Employee is eligible
     for consideration for a discretionary raise and/or promotion by Employer in
     its sole and absolute discretion. Commencing with the Employer's fiscal
     year ending on December 31, 2000, Employee shall be entitled to an annual
     bonus ("Bonus") determined pursuant to Employer's Annual Performance-Based
     Incentive Plan for Executive Officers, or any successor plan (the "Bonus
     Plan") with Employee's participation to be determined on a pro rata basis
     to the extent the termination date of this Agreement does not coincide with
     the end of a fiscal year of Employer. Employee shall also be eligible to
     receive additional bonuses as determined by Employer in its sole and
     absolute discretion.

4.   Extent of Services.  The Employee agrees that the duties and services to be
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     performed by Employee shall be performed exclusively for Employer. Employee
     further agrees to perform such duties in an efficient, trustworthy and
     businesslike manner. The Employee agrees not to render to others any
     service of any kind whether or not for compensation, or to engage in any
     other business activity whether or not for compensation, that is similar to
     or conflicts with the performance of Employee's duties under this
     Agreement, without the approval of

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     the Executive Committee of the Board of Directors of Employer. Subject to
     the above-referenced discretion of the Executive Committee, it is
     understood that Employee may continue to serve in the capacities specified
     on Exhibit D hereto.

5.   Policies and Procedures.  In addition to the terms herein, Employee agrees
     -----------------------
     to be bound by Employer's policies and procedures as they may be amended by
     Employer from time to time. In the event the terms in this Agreement
     conflict with Employer's policies and procedures, the terms herein shall
     take precedence. Employer recognizes that it has a responsibility to see
     that its employees understand the adverse effects that problem gambling and
     underage gambling can have on individuals and the gaming industry as a
     whole. Employee acknowledges having read Employer's policies, procedures
     and manuals and agrees to abide by the same, including but not limited to
     Employer's policy of prohibiting underage gaming and supporting programs to
     treat compulsive gambling.

6.   Licensing Requirements.  Employee acknowledges that Employer is engaged in
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     a business that is or may be subject to and exists because of privileged
     licenses issued by governmental authorities in Nevada, Michigan,
     Mississippi, New Jersey, Australia, South Africa, and other jurisdictions
     in which Employer is engaged or has applied, or during the Specified Term
     may apply, to engage in the gaming business. If requested to do so by
     Employer, Employee shall apply for and obtain any license, qualification,
     clearance or the like which shall be requested or required of Employee by
     any regulatory authority having jurisdiction over Employer. If Employee
     fails to satisfy such requirement, or if Employer is directed to cease
     business with Employee by any such authority, or if Employer shall
     determine, in Employer's sole and exclusive judgment, that Employee was, is
     or might be involved in, or is about to be involved in, any activity,
     relationship(s) or circumstances which could or does jeopardize Employer's
     business, reputation or such licenses of Employer, or if any such license
     is threatened to be, or is, denied, curtailed, suspended or revoked as a
     result of Employer's continued employment of Employee, this Agreement may
     be terminated by Employer and the parties' obligations and responsibilities
     shall be determined by the provisions of Paragraph 10(a).

7.   Additional Consideration.  Employee has received as consideration for this
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     Agreement, in addition to the Compensation stated in Paragraph 3 above, the
     sum of $30,000 (the "Additional Compensation"). Employee represents and
     warrants that such consideration is reasonable, adequate and sufficient for
     Employee's agreement to the terms contained herein, including but not
     limited to the undertakings stated in Paragraphs 4, 6 and 8.

8.   Restrictive Covenants.
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     (a)  Competition.  Employee acknowledges that, in the course of Employee's
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          responsibilities hereunder, Employee will form relationships and
          become acquainted with certain confidential and proprietary
          information as further defined in Paragraph 8(b). Employee further
          acknowledges that such relationships and information are valuable to
          the Employer and that the restrictions on future employment, if any,
          are reasonably necessary in order for Employer to remain competitive
          in the gaming industry. In consideration for the Compensation and
          Additional Consideration hereunder, and in recognition of Employer's
          heightened need for protection from abuse of relationships formed or
          information obtained before and during the Specified Term of the
          Employee's employment hereunder, Employee covenants and agrees that,
          except as otherwise provided herein, in the event Employee is not
          employed by Employer for the entire Specified Term, then for the
          twelve (12) month period immediately following separation from active
          employment, or for such shorter period remaining in the Specified Term
          should Employee separate from active employment with less than twelve
          (12) months remaining in the Specified Term (the "Restricted Period"),
          Employee shall not directly or indirectly be employed by, provide
          consultation or other services to, engage in, participate in or
          otherwise be connected in any way with any firm, person, corporation
          or other entity which is either directly, indirectly or through an
          affiliated company, engaged in non-restricted gaming in the State of
          Nevada, or in or within a 150 mile radius of any other jurisdiction in
          which Employer during the Restricted Period is operating or has
          applied for a gaming license ("Competitor"). The covenants under this
          Paragraph include but are not limited to Employee's covenant not to:

          (i)   Make known to any third party the names and addresses of any of
                the customers of the Employer, or any other information
                pertaining to those customers.

          (ii)  Call on, solicit and/or take away, or attempt to call on,
                solicit and/or take away, any of the customers of the Employer,
                either for Employee's own account or for any third party.

          (iii) Call on, solicit and/or take away, any potential or prospective
                customer of the Employer, on whom the Employee called or with
                whom Employee became acquainted during employment (either before
                or during the Specified Term) by the Employer, either for
                Employee's own account or for any third party).

          (iv)  Approach or solicit any employee of the Employer with a view
                towards enticing such employee to leave the employ of the
                Employer to work for the Employee or for any third party, or
                hire any employee of the Employer, without the prior written
                consent of the Employer, such consent to be within Employee's
                sole discretion.

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     (b)  Confidentiality. Employee further covenants and agrees that Employee
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          shall not at any time during the Specified Term or thereafter, without
          Employer's prior written consent, disclose to any other person or
          business entities any trade secret (as that term is defined on Exhibit
          A attached hereto) or proprietary or other confidential information
          concerning Employer, including without limitation, Employer's
          customers and its casino, hotel and marketing practices, procedures,
          management policies or any other information regarding the Employer
          which is not already and generally known to the public or to
          Competitors or available to interested persons. Employee further
          covenants and agrees that Employee shall not at any time during the
          Specified Term, or thereafter, without the Employer's prior written
          consent, utilize any such trade secrets or proprietary or confidential
          information in any way, other than in connection with employment
          hereunder. Not by way of limitation but by way of illustration,
          Employee agrees that such trade secrets and proprietary or
          confidential information specifically include but are not limited to
          those documents and reports described on Exhibit B.

     (c)  Employer's Property. Employee hereby confirms that such trade secrets,
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          proprietary or confidential information and all information concerning
          customers who utilize the goods, services or facilities of Employer
          and any hotel and/or casino owned, operated or managed by Employer
          constitute Employer's exclusive property (regardless of whether
          Employee possessed or claims to have possessed such information prior
          to the date hereof). Employee agrees that upon termination of active
          employment under this Agreement, Employee shall promptly return to the
          Employer all notes, notebooks, memoranda, computer disks, and any
          other similar repositories of information (regardless of whether
          Employee possessed such information prior to the date hereof)
          containing or relating in any to the trade or business secrets or
          proprietary and confidential information of the Employer, including
          but not limited to the documents referred to in Paragraph 8(b). Such
          repositories of information also include but are not limited to any
          so-called personal files or other personal data compilations in any
          form, which in any manner contain any trade secrets or proprietary or
          confidential information of the Employer.

     (d)  Notice to Employee. Employee agrees to notify Employer immediately of
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          any employers for whom Employee works during the Specified Term or
          within the Restricted Period. Employee further agrees to promptly
          notify Employer, during Employee's employment with Employer, of any
          contacts made by non-restricted gaming licensees which concern or
          relate to an offer of future employment (or consulting services) to
          Employee.

     (e)  The covenants contained in this Paragraph 8 shall survive the
          termination of this Agreement.

9.   Representations.  Employee hereby represents, warrants and agrees with
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     Employer that:

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     (a)  The covenants and agreements contained in Paragraphs 4 and 8 above are
          reasonable in their geographic scope, duration and content; the
          Employer's agreement to employ the Employee and a portion of the
          compensation and consideration to be paid to Employee under Paragraphs
          3 and 7 hereof, are in partial consideration for such covenants; the
          Employee shall not raise any issue of the reasonableness of the
          geographic scope, duration or content of such covenants in any
          proceeding to enforce such covenants; and such covenants shall survive
          the termination of this Agreement, in accordance with such terms;

     (b)  The enforcement of any remedy under this Agreement will not prevent
          Employee from earning a livelihood, because Employee's past work
          history and abilities are such that Employee can reasonably expect to
          find work in other areas and lines of business;

     (c)  The covenants and undertakings stated in Paragraphs 4, 6 and 8 above
          are essential for the Employer's reasonable protection; and

     (d)  Employer has reasonably relied on these representations, warranties
          and agreements by Employee.

     Additionally, the Employee agrees that in the event of Employee's breach of
     any covenants set forth in Paragraphs 4 and 8 above, the Employer shall be
     entitled to a pro rata refund of the payment made to Employee pursuant to
     Paragraph 7, and may seek to enforce such covenants through any equitable
     remedy, including specific performance or injunction, without out waiving
     any claim for damages. In any such event, the Employee waives any claim
     that the Employer has an adequate remedy at law.

10.  Termination.
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     (a)  This Agreement may be terminated by Employer at any time during the
          Specified Term hereof for good cause. Upon any such termination,
          Employer shall have no further liability or obligations whatsoever to
          Employee hereunder except as provided under subparagraphs 10(a)(i)[a]
          and 10(a)(i)[b] and except that (x) if termination is pursuant to
          subparagraphs 10(a)(ii) or (iii), Employee shall be entitled to
          receive so much of the stock from the Executive Stock Option Plan as
          had vested pursuant to unexercised stock options which were vested as
          of the date of termination, upon compliance by the Employee with all
          the terms and conditions required to exercise such options, and (y) if
          termination is pursuant to subparagraphs 10(a)(i)[a] or 10(a)(i)[b],
          Employee (or his beneficiary if the termination is pursuant to
          subparagraph 10(a)(i)[a]) shall be entitled to receive so much of the
          stock from the Executive Stock Option Plan pursuant to unexercised
          stock options which would have been vested as of the first anniversary
          of the date of termination, upon

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          compliance by Employee (or his beneficiary) with all of the terms and
          conditions required to exercise such options. Good cause shall be
          defined as:

          (i)  Employee's death or disability, which is hereby defined to
               include incapacity for medical reasons certified to by a licensed
               physician which precludes the Employee from performing the
               essential functions of Employee's duties hereunder for a
               substantially consecutive period of six (6) months or more;

               (a)  In the event of Employee's death during the term of this
                    Agreement, Employee's beneficiary (as designated by Employee
                    on the Employer's benefit records) shall be entitled to
                    receive (x) Employee's salary through Employee's death (to
                    the extent not previously paid) and for a twelve (12) month
                    period following Employee's death, such amount to be paid at
                    regular payroll intervals, (y) any Bonus attributable to the
                    most recently completed fiscal year of Employer (to the
                    extent not previously paid), and (z) an additional amount
                    equal to what Employee's Bonus would have been for the
                    fiscal year in which Employee's death occurs, pro rated
                    through the date of Employee's death, which additional
                    amount shall be paid to Employee's beneficiary at such time
                    as Employer pays bonuses to its other senior executives with
                    respect to such fiscal year (but not later than March 31
                    following the end of such fiscal year).

               (b)  In the event that this Agreement is terminated by Employer
                    due to Employee's disability, as provided under subparagraph
                    10(a)(i), Employer shall pay to Employee or his beneficiary
                    in the event of Employee's death during the period in which
                    payments are being made) (x) Employee's salary through the
                    date of termination (to the extent not previously paid), and
                    for an additional twelve (12) month period following the
                    date of termination, such amount to be paid at regular
                    payroll intervals, net of payments received by Employee from
                    any short term disability policy which is either self-
                    insured by Employer or the premiums of which were paid by
                    Employer, (y) any Bonus attributable to the most recently
                    completed fiscal year of Employer (to the extent not
                    previously paid), and (z) an additional amount equal to what
                    Employee's Bonus would have been for the fiscal year in
                    which Employee's termination occurs, pro rated through the
                    date of termination, which additional amount shall be paid
                    at such time as Employer pays bonuses to its other senior
                    executives with respect to the fiscal year in which
                    Employee's termination occurs (but not later than March 31
                    following the end of such fiscal year).

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     (ii)   Employee's failure to abide by Employer's policies and procedures,
            misconduct, insubordination, inattention to Employer's business,
            failure to perform the duties required of Employee up to the
            standards established by the Chairman of the Board of Directors of
            Employer applicable to senior management of Employer, or other
            material breach of this Agreement, after being provided with written
            notice of such matters and a reasonable opportunity to cure (if
            curable); or

     (iii)  Employee's failure or inability to satisfy the requirements stated
            in Paragraph 6 above.

(b)  This Agreement may be terminated by Employer at any time during the
     Specified Term hereof, without cause upon written notice to Employee. Upon
     such termination, Employer shall treat Employee as an inactive employee
     and, as its sole liability to Employee arising from such termination,
     Employer shall provide Employee (or his beneficiary in the event of
     Employee's death during the Specified Term) with the following compensation
     and benefits ("Termination Benefits"):

     (i)    Employer shall continue to pay Employee's salary and continue to
            provide Employee's benefits (excluding eligibility for flex time and
            new stock option grants, but including the continued vesting of
            previously granted stock options, if any), through the period
            remaining in the Specified Term;

     (ii)   Employee shall be entitled to receive so much stock from the
            Executive Stock Option Plan pursuant to unexercised stock options as
            are or subsequently become vested through the period remaining in
            the Specified Term upon compliance by the Employee with all the
            terms and conditions required to exercise such options; and

     (iii)  Employer shall pay Employee an additional amount equal to what
            Employee's Bonus would have been for the fiscal year in which
            Employee's termination occurs, pro rated through the date of
            termination. Such additional amount shall be paid at such time as
            bonuses are paid to other senior executives of the Employer with
            respect to such fiscal year or years (but not later than March 31
            following the end of such fiscal year).

     Notwithstanding anything herein to the contrary but subject to Paragraph
     8(a), while Employee is in an inactive status Employee may be employed by
     or provide consultation services to any person or entity, provided that
     Employer shall be entitled to offset the salary provided for in
     subparagraph 10(b)(i)) being paid by Employer during the Specified Term by
     the compensation and/or consultant's fee being paid to Employee by any such
     person or entity, and provided further, that Employer shall not be required
     to continue to provide benefits from and after the time and to the extent
     that

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          Employee is entitled to receive such benefits from any such person or
          entity. Employee shall promptly notify Employer of his employment or
          agreement to provide consulting services during the specified term.

     (c)  Employee may terminate this Agreement for good cause. For purposes of
          this Paragraph 10(c), good cause shall mean:

          (i)   the failure of Employer to pay Employee any compensation when
                due, save and except a "Disputed Claim" to compensation;

          (ii)  a material reduction in the scope of duties, responsibilities or
                authority of Employee, any change in Employee's line of
                reporting, any reduction in Employee's salary, or any treatment
                of Employee under the Bonus Plan which is materially adverse and
                discriminatory to Employee as compared to the treatment afforded
                to other senior executive officers of the Employer; or

          (iii) a purported termination by Employer of Employee pursuant to
                Paragraph 10(a) and it is subsequently determined pursuant to
                the procedures set forth in Paragraph 11 that grounds for
                termination pursuant to Paragraph 10(a) were not present at the
                time of Employer's termination of Employee.

          For any termination under this Paragraph 10(c), Employee shall give
          Employer thirty (30) days advance written notice specifying the facts
          and circumstances of Employer's breach. During such thirty (30) day
          period, Employer may cure the breach, if curable, in which event the
          termination pursuant to this Paragraph 10(c) shall be ineffective and
          this Agreement shall remain in full force and effect. In the event
          during such thirty (30) day period Employer declares in writing that
          it disputes the existence of a breach or Employee declares in writing
          that the cure of such breach by Employer is insufficient, this
          Agreement shall continue in full force until the dispute is resolved
          in accordance with Paragraph 11. As a result of any termination under
          this Paragraph 10(c), Employee shall be entitled to receive the
          Termination Benefits. Employee shall have no further claim against
          Employer arising out of such breach.

     (d)  Employee shall also have the right to terminate Employee's employment
          without cause upon thirty (30) days advance written notice to
          Employer. Upon any such termination Employer shall have no further
          liability or obligations whatsoever to Employee hereunder, except that
          Employee shall be entitled to receive

          (i)  so much of the stock from the Executive Stock Option Plan
               pursuant to unexercised stock options as had been vested as of
               the date of termination, upon compliance by the Employee with all
               the terms and conditions required to exercise such option;

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          (ii)   all salary through and including the date of termination; and

          (iii)  any Bonus attributable to the most recently completed fiscal
                 year of Employer (to the extent not previously paid).

     (e)  In the event there is a change in control of Employer, if such change
          of control is a result of a sale or exchange of outstanding common
          stock of Employer to a third party, and as a result thereof the
          ownership by Kirk Kerkorian, Tracinda Corporation and/or their
          affiliates of the voting stock of the acquiring or surviving entity
          (after completion of the transactions set forth in the sale or
          exchange agreement documents, including without limitation, subsequent
          stock buybacks contemplated in such transactions), represents in the
          aggregate less than twenty percent (20%) of the voting power of the
          voting stock of such entity, as distinguished from a change in control
          resulting from the issuance of Treasury shares or from any other
          transaction ("Change of Control"), then upon the effective date of the
          Change of Control ("Effective Date"):

          (i)    All of Employee's unvested stock options shall become fully
                 vested, provided that Employee shall have the right to elect
                 (by notifying the Employer in writing as set forth on Exhibit
                 C) that all or any portion of Employee's unvested stock options
                 shall not become fully vested upon a Change of Control.

          (ii)   If the Change of Control results from an exchange of
                 outstanding common stock as a result of which the common stock
                 of Employer is no longer publicly held, then from and after the
                 Effective Date upon exercise of such stock options, Employee
                 (or his beneficiary in the event of his death subsequent to the
                 Effective Date) shall be entitled to receive the per share
                 consideration (cash, stock or otherwise) which the holders of
                 Employer common stock received in such exchange. For example,
                 if immediately prior to the Effective Date, Employee has
                 options to acquire 5,000 shares of Employer's common stock and
                 the exchange of stock is one share of common stock of Employer
                 for two shares of common stock of the acquiring entity, then
                 Employee's options shall be converted into options to acquire,
                 upon payment of the exercise price, 10,000 shares of the
                 acquiring entity's common stock.

          (iii)  If the Change of Control results from a sale of Employer's
                 outstanding common stock for cash with the result that
                 Employer's common stock is no longer publicly held, then from
                 and after the Effective Date, upon exercise of such stock
                 options, Employee (or his beneficiary in the event of his death
                 subsequent to the Effective Date) shall be entitled to receive
                 cash equal to the difference between the price per share of
                 common stock paid by the acquiring entity for Employer's shares
                 of common ("Purchase Price") and the price per share at which
                 the options were granted ("Strike Price"). For example, if
                 immediately prior to the Effective Date, Employee has options
                 to acquire 2,000 shares of

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               Employer common stock at a Strike Price of $35, and the Purchase
               Price was $40, then Employee would be entitled to receive $10,000
               in full satisfaction of such options (2,000 shares times $5 per
               share).

     (f)  No termination of this Agreement shall extinguish such rights as
          Employee may have under applicable law or Employer's incorporation
          documents or bylaws to be indemnified in his capacity as an officer or
          director of Employer.

11.  Disputed Claim/Arbitration.  A "Disputed Claim" occurs when Employee
     --------------------------
     maintains pursuant to Paragraph 10(c) that Employer has breached its
     obligations to Employee (or failed to timely cure such breach) and Employer
     has denied such breach (or claimed to have effected a cure thereof). In
     such event, the Disputed Claim shall be resolved by arbitration
     administered by the American Arbitration Association under its National
     Rules for the Resolution of Employment Disputes. Any arbitration under this
     paragraph shall take place in Las Vegas, Nevada. Until the arbitration
     process is finally resolved in the Employee's favor and Employer fails to
     satisfy such award within thirty (30) days of its entry, no "for good
     cause" termination within the meaning of Paragraph 10(c) exists with
     respect to the Disputed Claim. Nothing herein shall preclude or prohibit
     Employer or Employee from invoking the provisions of Paragraph 10(b), or
     Employee invoking the provisions of Paragraph 10(d), or of either party
     seeking or obtaining injunctive or other equitable relief. In the event of
     a purported termination of Employee by Employer pursuant to Paragraph 10(a)
     which is disputed by Employee pursuant to Paragraph 10(c), if Employee
     prevails in the arbitration Employee shall not be entitled to
     reinstatement, but shall be entitled to the Termination Benefits. To the
     extent Employer shall not have paid Termination Benefits during the period
     of such dispute and Employee is the prevailing party in such arbitration,
     in addition to any other award, Employee shall be entitled to interest at
     nine percent (9%) per annum on such unpaid Termination Benefits.

12.  Severability.  If any provision hereof is unenforceable, illegal, or
     ------------
     invalid for any reason whatsoever, such fact shall not affect the remaining
     provisions hereof, except in the event a law or court decision, whether on
     application for declaration, or preliminary injunction or upon final
     judgment, declares one or more of the provisions of this Agreement that
     impose restrictions on Employee unenforceable or invalid because of the
     geographic scope or time duration of such restriction. In such event,
     Employer shall have the option:

     (a)  To deem the invalidated restrictions retroactively modified to provide
          for the maximum geographic scope and time duration which would make
          such provisions enforceable and valid; or

     (b)  To terminate this Agreement pursuant to Paragraph 10(b).

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     Exercise of any of these options shall not affect Employer's right to seek
     damages or such additional relief as may be allowed by law in respect to
     any breach by Employee of the enforceable provisions of this Agreement.

13.  Travel and Related Matters.    During the Specified Term, it is anticipated
     --------------------------
     that Executive will be required to travel extensively on behalf of the
     Employer. Such travel, if by air, shall be on Employer provided aircraft,
     or if commercial airlines are used, on a first-class basis (or best
     available basis, if first class is not available).

14.  Attorneys' Fees.  In the event suit is brought to enforce, or to recover
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     damages suffered as a result of breach of this Agreement, or there is an
     arbitration pursuant to Paragraph 11 the prevailing party shall be entitled
     to recover its reasonable attorneys' fees and costs of suit.

15.  No Waiver of Breach or Remedies.  No failure or delay on the part of
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     Employer or Employee in exercising any right, power or remedy hereunder
     shall operate as a waiver thereof nor shall any single or partial exercise
     of any such right, power or remedy preclude any other or further exercise
     thereof or the exercise of any other right, power or remedy hereunder. The
     remedies herein provided are cumulative and not exclusive of any remedies
     provided by law.

16.  Amendment or Modification.  No amendment, modification, termination or
     -------------------------
     waiver of any provision of this Agreement shall be effective unless the
     same shall be in writing and signed by the Employer's Chairman of the Board
     of Directors and Employee, nor consent to any departure by the Employee
     from any of the terms of this Agreement shall be effective unless the same
     is signed by the Employer's Chairman of the Board of Directors. Any such
     waiver or consent shall be effective only in the specific instance and for
     the specific purpose for which given.

17.  Governing Law.  The laws of the State of Nevada shall govern the validity,
     -------------
     construction and interpretation of this Agreement, and except for Disputed
     Claims, the courts of the State of Nevada shall have exclusive jurisdiction
     over any claim with respect to this Agreement.

18.  Number and Gender.  Where the context of this Agreement requires the
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     singular shall mean the plural and vice versa and references to males shall
     apply equally to females and vice versa.

19.  Headings.  The headings in this Agreement have been included solely for
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     convenience of reference and shall not be considered in the interpretation
     or construction of this Agreement.

20.  Assignment.  This Agreement is personal to Employee and may not be
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     assigned.

21.  Successors and Assigns.  This Agreement shall be binding upon the
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     successors and assigns of Employer.

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22.  Prior Agreements.  This Agreement shall supersede and replace any and all
     ----------------
     other employment agreements which may have been entered into by and between
     the parties.

23.  Non-Involvement of Tracinda.  The parties acknowledge that neither Kirk
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     Kerkorian nor Tracinda Corporation, individually or collectively, is a
     party to this Agreement or any agreement provided for herein. Accordingly,
     the parties hereby agree that in the event (i) there is any alleged breach
     or default by any party under this Agreement or any agreement provided for
     herein, or (ii) any party has any claim arising from or relating to any
     such agreement, no party, nor any party claiming through such party, shall
     commence any proceedings or otherwise seek to impose any liability
     whatsoever against Kirk Kerkorian or Tracinda Corporation by reason of such
     alleged breach, default or claim.

     IN WITNESS WHEREOF, Employer and Employee have entered into this Agreement
in Las Vegas, Nevada on June 1, 2000.

EMPLOYEE:                                   EMPLOYER - MGM GRAND, INC.

/s/ James J. Murren                   By: /s/ J. Terrence Lanni
---------------------                     --------------------------
JAMES J. MURREN                       Title: J. TERRENCE LANNI,
                                             CHAIRMAN OF THE BOARD
                                             OF DIRECTORS

                                       12
<PAGE>

                                  EXHIBIT "A"

     Trade secret means information, including a formula, pattern, compilation,
program, device, method, technique or process, that derives economic value,
present or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain any economic
value from its disclosure or use.

                                       13
<PAGE>

                                  EXHIBIT "B"

     Name of Report                                     Generated By
----------------------------------------------------------------------------
Including, but not limited to:

Baccarat Pit Discrepancy Report                     Casino Marketing Analyst
Commission Summary Report                           Casino Marketing Analyst
Customer W/L Discrepancy Report                     Casino Marketing Analyst
Int'l Marketing Detailed Budget Summaries           Casino Marketing Analyst
Arrival Report                                      International Marketing
Departure Report                                    International Marketing
Daily Game Report                                   Casino Audit
Department Financial Statement                      Finance
$10K Over High Action Play Report                   Customer Analysis Dept.
$50K Over High Action Play Report                   Customer Analysis Dept.
International Market Segment Report                 Customer Analysis Dept.
Collection Aging Report(s)                          Collection Department
Accounts Receivable Aging                           Finance
Marketing Report                                    Finance
Daily Player Action Report                          Casino Operations

                                       14
<PAGE>

                                  EXHIBIT "C"

James J. Murren                                                  June 1, 2000

Dear Jim:

     This letter will supplement the employment agreement, dated June 1, 2000,
between you and MGM Grand, Inc. (the "Agreement"). Notwithstanding anything
contained in the Agreement to the contrary, if you so elect, all or any portion
of your unvested stock options shall not become fully vested upon a Change of
Control (as defined in the Agreement) of MGM Grand, Inc. Any such election shall
be effective upon written notice to MGM Grand, Inc. at or prior to the Effective
Date (as defined in the Agreement) of any such Change of Control.

     Except as specifically modified hereby, the terms and conditions of the
Agreement shall remain in full force and effect.

                                  Sincerely,

                                  MGM GRAND, INC.

                                  By: /s/ J. Terrence Lanni
                                      ------------------------
                                      J. Terrence Lanni,
                                      Chairman of the Board
                                        of Directors

AGREED TO AND ACKNOWLEDGED

/s/ James Murren                  Dated: June 1, 2000
--------------------------
JAMES MURREN

                                       15
<PAGE>

                                  EXHIBIT "D"

                         PERMITTED OUTSIDE ACTIVITIES

                                       16<PAGE>
                                                                    EXHIBIT 10.5

                             EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") is entered into as of June 1, 2000,
by and between MGM GRAND, INC., a Delaware corporation ("Employer"), and Gary N.
Jacobs, ("Employee").

1.   Employment. Employer hereby employs Employee, and Employee hereby accepts
     ----------
     employment by Employer, as Executive Vice President and General Counsel
     (which titles may be changed (but not to a lower status) by Employer in its
     sole discretion) to perform such executive, managerial or administrative
     duties as Employer may specify from time to time. In construing the
     provisions of this Agreement, Employer shall include all of Employer's
     subsidiary, parent and affiliated corporations and entities. Employer
     represents and warrants to Employee that its Board of Directors has elected
     Employee to serve as a member of Employee's Board of Directors, effective
     as of the Commencement Date (as hereinafter defined). During the Specified
     Term, Employer agrees to take all steps necessary to include Employee as a
     member of management's slate of nominees for election as a member of
     Employer's Board of Directors. During the Specified Term, Employee shall
     report directly to the Chairman of the Board of Directors of Employer and
     shall be invited to attend all meetings of the Executive Committee.

2.   Term. This Agreement shall commence on June 1, 2000 (the "Commencement
     ----
     Date"), and continue through and including June 1, 2004 (the "Specified
     Term").

3.   Compensation. Employee shall receive a minimum annual salary of $500,000,
     ------------
     commencing on the Commencement Date. Employee shall also be eligible to
     receive fringe benefits commensurate with Employer's other employees in
     comparable executive positions, and reimbursement for all reasonable
     business and travel expenses incurred by Employer in performing the duties
     hereunder, payable in accordance with Employer's customary practices.
     Employee's performance may be reviewed periodically. Employee is eligible
     for consideration for a discretionary raise and/or promotion by Employer in
     its sole and absolute discretion. Commencing with the Employer's fiscal
     year ending on December 31, 2000, Employee shall be entitled to an annual
     bonus ("Bonus") determined pursuant to Employer's Annual Performance-Based
     Incentive Plan for Executive Officers, or any successor plan (the "Bonus
     Plan") with Employee's participation to be determined on a pro rata basis
     to the extent the termination date of this Agreement does not coincide with
     the end of a fiscal year of Employer. Employee shall also be eligible to
     receive additional bonuses as determined by Employer in its sole and
     absolute discretion. For the calendar year ending December 31, 2000,
     Employee shall receive a Bonus of not less than $500,000.

4.   Extent of Services. The Employee agrees that the duties and services to be
     ------------------
     performed by Employee shall be performed exclusively for Employer. Employee
     further agrees to perform such duties in an efficient, trustworthy and
     businesslike manner. The Employee agrees not

                                       1
<PAGE>

     to render to others any service of any kind whether or not for
     compensation, or to engage in any other business activity whether or not
     for compensation, that is similar to or conflicts with the performance of
     Employee's duties under this Agreement, without the approval of the
     Executive Committee of the Board of Directors of Employer. Subject to the
     above-referenced discretion of the Executive Committee, it is understood
     that Employee may continue to serve in the capacities specified on Exhibit
     D hereto.

5.   Policies and Procedures. In addition to the terms herein, Employee agrees
     -----------------------
     to be bound by Employer's policies and procedures as they may be amended by
     Employer from time to time. In the event the terms in this Agreement
     conflict with Employer's policies and procedures, the terms herein shall
     take precedence. Employer recognizes that it has a responsibility to see
     that its employees understand the adverse effects that problem gambling and
     underage gambling can have on individuals and the gaming industry as a
     whole. Employee acknowledges having read Employer's policies, procedures
     and manuals and agrees to abide by the same, including but not limited to
     Employer's policy of prohibiting underage gaming and supporting programs to
     treat compulsive gambling.

6.   Licensing Requirements. Employee acknowledges that Employer is engaged in a
     ----------------------
     business that is or may be subject to and exists because of privileged
     licenses issued by governmental authorities in Nevada, Michigan,
     Mississippi, New Jersey, Australia, South Africa, and other jurisdictions
     in which Employer is engaged or has applied, or during the Specified Term
     may apply, to engage in the gaming business. If requested to do so by
     Employer, Employee shall apply for and obtain any license, qualification,
     clearance or the like which shall be requested or required of Employee by
     any regulatory authority having jurisdiction over Employer. If Employee
     fails to satisfy such requirement, or if Employer is directed to cease
     business with Employee by any such authority, or if Employer shall
     determine, in Employer's sole and exclusive judgment, that Employee was, is
     or might be involved in, or is about to be involved in, any activity,
     relationship(s) or circumstances which could or does jeopardize Employer's
     business, reputation or such licenses of Employer, or if any such license
     is threatened to be, or is, denied, curtailed, suspended or revoked as a
     result of Employer's continued employment of Employee, this Agreement may
     be terminated by Employer and the parties' obligations and responsibilities
     shall be determined by the provisions of Paragraph 10(a).

7.   Additional Consideration. Employee has received as consideration for this
     ------------------------
     Agreement, in addition to the Compensation stated in Paragraph 3 above, the
     sum of $30,000 (the "Additional Compensation"). Employee represents and
     warrants that such consideration is reasonable, adequate and sufficient for
     Employee's agreement to the terms contained herein, including but not
     limited to the undertakings stated in Paragraphs 4, 6 and 8.

                                       2
<PAGE>

8.   Restrictive Covenants.
     ---------------------

     (a)  Competition. Employee acknowledges that, in the course of Employee's
          -----------
          responsibilities hereunder, Employee will form relationships and
          become acquainted with certain confidential and proprietary
          information as further defined in Paragraph 8(b). Employee further
          acknowledges that such relationships and information are valuable to
          the Employer and that the restrictions on future employment, if any,
          are reasonably necessary in order for Employer to remain competitive
          in the gaming industry. In consideration for the Compensation and
          Additional Consideration hereunder, and in recognition of Employer's
          heightened need for protection from abuse of relationships formed or
          information obtained before and during the Specified Term of the
          Employee's employment hereunder, Employee covenants and agrees that,
          except as otherwise provided herein, in the event Employee is not
          employed by Employer for the entire Specified Term, then for the
          twelve (12) month period immediately following separation from active
          employment, or for such shorter period remaining in the Specified Term
          should Employee separate from active employment with less than twelve
          (12) months remaining in the Specified Term (the "Restricted Period"),
          Employee shall not directly or indirectly be employed by, provide
          consultation or other services to, engage in, participate in or
          otherwise be connected in any way with any firm, person, corporation
          or other entity which is either directly, indirectly or through an
          affiliated company, engaged in non-restricted gaming in the State of
          Nevada, or in or within a 150 mile radius of any other jurisdiction in
          which Employer during the Restricted Period is operating or has
          applied for a gaming license ("Competitor"). The covenants under this
          Paragraph include but are not limited to Employee's covenant not to:

          (i)   Make known to any third party the names and addresses of any of
                the customers of the Employer, or any other information
                pertaining to those customers.

          (ii)  Call on, solicit and/or take away, or attempt to call on,
                solicit and/or take away, any of the customers of the Employer,
                either for Employee's own account or for any third party.

          (iii) Call on, solicit and/or take away, any potential or prospective
                customer of the Employer, on whom the Employee called or with
                whom Employee became acquainted during employment (either before
                or during the Specified Term) by the Employer, either for
                Employee's own account or for any third party).

          (iv)  Approach or solicit any employee of the Employer with a view
                towards enticing such employee to leave the employ of the
                Employer to work for the Employee or for any third party, or
                hire any employee of the Employer,

                                       3
<PAGE>

                without the prior written consent of the Employer, such consent
                to be within Employee's sole discretion.

     (b)  Confidentiality. Employee further covenants and agrees that Employee
          ---------------
          shall not at any time during the Specified Term or thereafter, without
          Employer's prior written consent, disclose to any other person or
          business entities any trade secret (as that term is defined on Exhibit
          A attached hereto) or proprietary or other confidential information
          concerning Employer, including without limitation, Employer's
          customers and its casino, hotel and marketing practices, procedures,
          management policies or any other information regarding the Employer
          which is not already and generally known to the public or to
          Competitors or available to interested persons. Employee further
          covenants and agrees that Employee shall not at any time during the
          Specified Term, or thereafter, without the Employer's prior written
          consent, utilize any such trade secrets or proprietary or confidential
          information in any way, other than in connection with employment
          hereunder. Not by way of limitation but by way of illustration,
          Employee agrees that such trade secrets and proprietary or
          confidential information specifically include but are not limited to
          those documents and reports described on Exhibit B.

     (c)  Employer's Property. Employee hereby confirms that such trade secrets,
          -------------------
          proprietary or confidential information and all information concerning
          customers who utilize the goods, services or facilities of Employer
          and any hotel and/or casino owned, operated or managed by Employer
          constitute Employer's exclusive property (regardless of whether
          Employee possessed or claims to have possessed such information prior
          to the date hereof). Employee agrees that upon termination of active
          employment under this Agreement, Employee shall promptly return to the
          Employer all notes, notebooks, memoranda, computer disks, and any
          other similar repositories of information (regardless of whether
          Employee possessed such information prior to the date hereof)
          containing or relating in any to the trade or business secrets or
          proprietary and confidential information of the Employer, including
          but not limited to the documents referred to in Paragraph 8(b). Such
          repositories of information also include but are not limited to any so
          called personal files or other personal data compilations in any form,
          which in any manner contain any trade secrets or proprietary or
          confidential information of the Employer.

     (d)  Notice to Employee. Employee agrees to notify Employer immediately of
          ------------------
          any employers for whom Employee works during the Specified Term or
          within the Restricted Period. Employee further agrees to promptly
          notify Employer, during Employee's employment with Employer, of any
          contacts made by non-restricted gaming licensees which concern or
          relate to an offer of future employment (or consulting services) to
          Employee.

                                       4
<PAGE>

     (e)  The covenants contained in this Paragraph 8 shall survive the
          termination of this Agreement.

9.   Representations. Employee hereby represents, warrants and agrees with
     ---------------
     Employer that:

     (a)  The covenants and agreements contained in Paragraphs 4 and 8 above are
          reasonable in their geographic scope, duration and content; the
          Employer's agreement to employ the Employee and a portion of the
          compensation and consideration to be paid to Employee under Paragraphs
          3 and 7 hereof, are in partial consideration for such covenants; the
          Employee shall not raise any issue of the reasonableness of the
          geographic scope, duration or content of such covenants in any
          proceeding to enforce such covenants; and such covenants shall survive
          the termination of this Agreement, in accordance with such terms;

     (b)  The enforcement of any remedy under this Agreement will not prevent
          Employee from earning a livelihood, because Employee's past work
          history and abilities are such that Employee can reasonably expect to
          find work in other areas and lines of business;

     (c)  The covenants and undertakings stated in Paragraphs 4, 6 and 8 above
          are essential for the Employer's reasonable protection; and

     (d)  Employer has reasonably relied on these representations, warranties
          and agreements by Employee.

     Additionally, the Employee agrees that in the event of Employee's breach of
     any covenants set forth in Paragraphs 4 and 8 above, the Employer shall be
     entitled to a pro rata refund of the payment made to Employee pursuant to
     Paragraph 7, and may seek to enforce such covenants through any equitable
     remedy, including specific performance or injunction, without out waiving
     any claim for damages. In any such event, the Employee waives any claim
     that the Employer has an adequate remedy at law.

10.  Termination.
     -----------

     (a)  This Agreement may be terminated by Employer at any time during the
          Specified Term hereof for good cause. Upon any such termination,
          Employer shall have no further liability or obligations whatsoever to
          Employee hereunder except as provided under subparagraphs 10(a)(i)[a]
          and 10(a)(i)[b] and except that (x) if termination is pursuant to
          subparagraphs 10(a)(ii) or (iii), Employee shall be entitled to
          receive so much of the stock from the Executive Stock Option Plan as
          had vested pursuant to unexercised stock options which were vested as
          of the date of termination, upon compliance by the Employee with all
          the terms and conditions required to exercise such options, and (y) if
          termination is pursuant to subparagraphs 10(a)(i)[a] or

                                       5
<PAGE>

     10(a)(i)[b], Employee (or his beneficiary if the termination is pursuant to
     subparagraph 10(a)(i)[a]) shall be entitled to receive so much of the stock
     from the Executive Stock Option Plan pursuant to unexercised stock options
     which would have been vested as of the first anniversary of the date of
     termination, upon compliance by Employee (or his beneficiary) with all of
     the terms and conditions required to exercise such options. Good cause
     shall be defined as:

     (i)  Employee's death or disability, which is hereby defined to include
          incapacity for medical reasons certified to by a licensed physician
          which precludes the Employee from performing the essential functions
          of Employee's duties hereunder for a substantially consecutive period
          of six (6) months or more;

          [a]  In the event of Employee's death during the term of this
               Agreement, Employee's beneficiary (as designated by Employee on
               the Employer's benefit records) shall be entitled to receive (x)
               Employee's salary through Employee's death (to the extent not
               previously paid) and for a twelve (12) month period following
               Employee's death, such amount to be paid at regular payroll
               intervals, (y) any Bonus attributable to the most recently
               completed fiscal year of Employer (to the extent not previously
               paid), and (z) an additional amount equal to what Employee's
               Bonus would have been for the fiscal year in which Employee's
               death occurs, pro rated through the date of Employee's death,
               which additional amount shall be paid to Employee's beneficiary
               at such time as Employer pays bonuses to its other senior
               executives with respect to such fiscal year (but not later than
               March 31 following the end of such fiscal year).

          [b]  In the event that this Agreement is terminated by Employer due to
               Employee's disability, as provided under subparagraph 10(a)(i),
               Employer shall pay to Employee or his beneficiary in the event of
               Employee's death during the period in which payments are being
               made) (x) Employee's salary through the date of termination (to
               the extent not previously paid), and for an additional twelve
               (12) month period following the date of termination, such amount
               to be paid at regular payroll intervals, net of payments received
               by Employee from any short term disability policy which is either
               self-insured by Employer or the premiums of which were paid by
               Employer, (y) any Bonus attributable to the most recently
               completed fiscal year of Employer (to the extent not previously
               paid), and (z) an additional amount equal to what Employee's
               Bonus would have been for the fiscal year in which Employee's
               termination occurs, pro rated through the date of termination,
               which additional amount shall be paid at such time as Employer
               pays bonuses to its other senior executives with respect to the

                                       6
<PAGE>

                     fiscal year in which Employee's termination occurs (but not
                     later than March 31 following the end of such fiscal year).

          (ii)  Employee's failure to abide by Employer's policies and
                procedures, misconduct, insubordination, inattention to
                Employer's business, failure to perform the duties required of
                Employee up to the standards established by the Chairman of the
                Board of Directors of Employer applicable to senior management
                of Employer, or other material breach of this Agreement, after
                being provided with written notice of such matters and a
                reasonable opportunity to cure (if curable); or

          (iii) Employee's failure or inability to satisfy the requirements
                stated in Paragraph 6 above.

     (b)  This Agreement may be terminated by Employer at any time during the
          Specified Term hereof, without cause upon written notice to Employee.
          Upon such termination, Employer shall treat Employee as an inactive
          employee and, as its sole liability to Employee arising from such
          termination, Employer shall provide Employee (or his beneficiary in
          the event of Employee's death during the Specified Term) with the
          following compensation and benefits ("Termination Benefits"):

          (i)   Employer shall continue to pay Employee's salary and continue to
                provide Employee's benefits (excluding eligibility for flex time
                and new stock option grants, but including the continued vesting
                of previously granted stock options, if any), through the period
                remaining in the Specified Term;

          (ii)  Employee shall be entitled to receive so much stock from the
                Executive Stock Option Plan pursuant to unexercised stock
                options as are or subsequently become vested through the period
                remaining in the Specified Term upon compliance by the Employee
                with all the terms and conditions required to exercise such
                options; and

          (iii) Employer shall pay Employee an additional amount equal to what
                Employee's Bonus would have been for the fiscal year in which
                Employee's termination occurs, pro rated through the date of
                termination. Such additional amount shall be paid at such time
                as bonuses are paid to other senior executives of the Employer
                with respect to such fiscal year or years (but not later than
                March 31 following the end of such fiscal year).

          Notwithstanding anything herein to the contrary but subject to
          Paragraph 8(a), while Employee is in an inactive status Employee may
          be employed by or provide consultation services to any person or
          entity, provided that Employer shall be entitled to offset the salary
          provided for in subparagraph 10(b)(i)) being paid by Employer

                                       7
<PAGE>

          during the Specified Term by the compensation and/or consultant's fee
          being paid to Employee by any such person or entity, and provided
          further, that Employer shall not be required to continue to provide
          benefits from and after the time and to the extent that Employee is
          entitled to receive such benefits from any such person or entity.
          Employee shall promptly notify Employer of his employment or agreement
          to provide consulting services during the specified term.

     (c)  Employee may terminate this Agreement for good cause. For purposes of
          this Paragraph 10(c), good cause shall mean:

          (i)   the failure of Employer to pay Employee any compensation when
                due, save and except a "Disputed Claim" to compensation;

          (ii)  a material reduction in the scope of duties, responsibilities or
                authority of Employee, any change in Employee's line of
                reporting, any reduction in Employee's salary, or any treatment
                of Employee under the Bonus Plan which is materially adverse and
                discriminatory to Employee as compared to the treatment afforded
                to other senior executive officers of the Employer; or

          (iii) a purported termination by Employer of Employee pursuant to
                Paragraph 10(a) and it is subsequently determined pursuant to
                the procedures set forth in Paragraph 11 that grounds for
                termination pursuant to Paragraph 10(a) were not present at the
                time of Employer's termination of Employee.

          For any termination under this Paragraph 10(c), Employee shall give
          Employer thirty (30) days advance written notice specifying the facts
          and circumstances of Employer's breach. During such thirty (30) day
          period, Employer may cure the breach, if curable, in which event the
          termination pursuant to this Paragraph 10(c) shall be ineffective and
          this Agreement shall remain in full force and effect. In the event
          during such thirty (30) day period Employer declares in writing that
          it disputes the existence of a breach or Employee declares in writing
          that the cure of such breach by Employer is insufficient, this
          Agreement shall continue in full force until the dispute is resolved
          in accordance with Paragraph 11. As a result of any termination under
          this Paragraph 10(c), Employee shall be entitled to receive the
          Termination Benefits. Employee shall have no further claim against
          Employer arising out of such breach.

     (d)  Employee shall also have the right to terminate Employee's employment
          without cause upon thirty (30) days advance written notice to
          Employer. Upon any such termination Employer shall have no further
          liability or obligations whatsoever to Employee hereunder, except that
          Employee shall be entitled to receive

          (i)   so much of the stock from the Executive Stock Option Plan
                pursuant to unexercised stock options as had been vested as of
                the date of termination,

                                       8
<PAGE>

                 upon compliance by the Employee with all the terms and
                 conditions required to exercise such option;

          (ii)   all salary through and including the date of termination; and

          (iii)  any Bonus attributable to the most recently completed fiscal
                 year of Employer (to the extent not previously paid).

     (e)  In the event there is a change in control of Employer, if such change
          of control is a result of a sale or exchange of outstanding common
          stock of Employer to a third party, and as a result thereof the
          ownership by Kirk Kerkorian, Tracinda Corporation and/or their
          affiliates of the voting stock of the acquiring or surviving entity
          (after completion of the transactions set forth in the sale or
          exchange agreement documents, including without limitation, subsequent
          stock buybacks contemplated in such transactions), represents in the
          aggregate less than twenty percent (20%) of the voting power of the
          voting stock of such entity, as distinguished from a change in control
          resulting from the issuance of Treasury shares or from any other
          transaction ("Change of Control"), then upon the effective date of the
          Change of Control ("Effective Date"):

               (i)   All of Employee's unvested stock options shall become fully
                     vested, provided that Employee shall have the right to
                     elect (by notifying the Employer in writing as set forth on
                     Exhibit C) that all or any portion of Employee's unvested
                     stock options shall not become fully vested upon a Change
                     of Control.

               (ii)  If the Change of Control results from an exchange of
                     outstanding common stock as a result of which the common
                     stock of Employer is no longer publicly held, then from and
                     after the Effective Date upon exercise of such stock
                     options, Employee (or his beneficiary in the event of his
                     death subsequent to the Effective Date) shall be entitled
                     to receive the per share consideration (cash, stock or
                     otherwise) which the holders of Employer common stock
                     received in such exchange. For example, if immediately
                     prior to the Effective Date, Employee has options to
                     acquire 5,000 shares of Employer's common stock and the
                     exchange of stock is one share of common stock of Employer
                     for two shares of common stock of the acquiring entity,
                     then Employee's options shall be converted into options to
                     acquire, upon payment of the exercise price, 10,000 shares
                     of the acquiring entity's common stock.

               (iii) If the Change of Control results from a sale of Employer's
                     outstanding common stock for cash with the result that
                     Employer's common stock is no longer publicly held, then
                     from and after the Effective Date, upon exercise of such
                     stock options, Employee (or his beneficiary in the event of
                     his death subsequent to the Effective Date) shall be
                     entitled to receive cash equal to the difference between
                     the price per share of common stock paid by the acquiring

                                       9
<PAGE>

                     entity for Employer's shares of common ("Purchase Price")
                     and the price per share at which the options were granted
                     ("Strike Price"). For example, if immediately prior to the
                     Effective Date, Employee has options to acquire 2,000
                     shares of Employer common stock at a Strike Price of $35,
                     and the Purchase Price was $40, then Employee would be
                     entitled to receive $10,000 in full satisfaction of such
                     options (2,000 shares times $5 per share).

     (f)  No termination of this Agreement shall extinguish such rights as
          Employee may have under applicable law or Employer's incorporation
          documents or bylaws to be indemnified in his capacity as an officer or
          director of Employer.

11.  Disputed Claim/Arbitration. A "Disputed Claim" occurs when Employee
     --------------------------
     maintains pursuant to Paragraph 10(c) that Employer has breached its
     obligations to Employee (or failed to timely cure such breach) and Employer
     has denied such breach (or claimed to have effected a cure thereof). In
     such event, the Disputed Claim shall be resolved by arbitration
     administered by the American Arbitration Association under its National
     Rules for the Resolution of Employment Disputes. Any arbitration under this
     paragraph shall take place in Las Vegas, Nevada. Until the arbitration
     process is finally resolved in the Employee's favor and Employer fails to
     satisfy such award within thirty (30) days of its entry, no "for good
     cause" termination within the meaning of Paragraph 10(c) exists with
     respect to the Disputed Claim. Nothing herein shall preclude or prohibit
     Employer or Employee from invoking the provisions of Paragraph 10(b), or
     Employee invoking the provisions of Paragraph 10(d), or of either party
     seeking or obtaining injunctive or other equitable relief. In the event of
     a purported termination of Employee by Employer pursuant to Paragraph 10(a)
     which is disputed by Employee pursuant to Paragraph 10(c), if Employee
     prevails in the arbitration Employee shall not be entitled to
     reinstatement, but shall be entitled to the Termination Benefits. To the
     extent Employer shall not have paid Termination Benefits during the period
     of such dispute and Employee is the prevailing party in such arbitration,
     in addition to any other award, Employee shall be entitled to interest at
     nine percent (9%) per annum on such unpaid Termination Benefits.

12.  Severability. If any provision hereof is unenforceable, illegal, or invalid
     ------------
     for any reason whatsoever, such fact shall not affect the remaining
     provisions hereof, except in the event a law or court decision, whether on
     application for declaration, or preliminary injunction or upon final
     judgment, declares one or more of the provisions of this Agreement that
     impose restrictions on Employee unenforceable or invalid because of the
     geographic scope or time duration of such restriction. In such event,
     Employer shall have the option:

     (a)  To deem the invalidated restrictions retroactively modified to provide
          for the maximum geographic scope and time duration which would make
          such provisions enforceable and valid; or

     (b)  To terminate this Agreement pursuant to Paragraph 10(b).

                                       10
<PAGE>

     Exercise of any of these options shall not affect Employer's right to seek
     damages or such additional relief as may be allowed by law in respect to
     any breach by Employee of the enforceable provisions of this Agreement.

13.  Relocation Expenses. Employer shall provide Employee with relocation
     -------------------
     benefits and/or reimburse Employer for relocation expenses consistent with
     Employer's policies applicable to senior executives.

14.  Travel and Related Matters. During the Specified Term, it is anticipated
     --------------------------
     that Executive will be required to travel extensively on behalf of the
     Employer. Such travel, if by air, shall be on Employer provided aircraft,
     or if commercial airlines are used, on a first-class basis (or best
     available basis, if first class is not available).

15.  Attorneys' Fees. In the event suit is brought to enforce, or to recover
     ---------------
     damages suffered as a result of breach of this Agreement, or there is an
     arbitration pursuant to Paragraph 11 the prevailing party shall be entitled
     to recover its reasonable attorneys' fees and costs of suit.

16.  No Waiver of Breach or Remedies. No failure or delay on the part of
     -------------------------------
     Employer or Employee in exercising any right, power or remedy hereunder
     shall operate as a waiver thereof nor shall any single or partial exercise
     of any such right, power or remedy preclude any other or further exercise
     thereof or the exercise of any other right, power or remedy hereunder. The
     remedies herein provided are cumulative and not exclusive of any remedies
     provided by law.

17.  Amendment or Modification. No amendment, modification, termination or
     -------------------------
     waiver of any provision of this Agreement shall be effective unless the
     same shall be in writing and signed by the Employer's Chairman of the Board
     of Directors and Employee, nor consent to any departure by the Employee
     from any of the terms of this Agreement shall be effective unless the same
     is signed by the Employer's Chairman of the Board of Directors. Any such
     waiver or consent shall be effective only in the specific instance and for
     the specific purpose for which given.

18.  Governing Law. The laws of the State of Nevada shall govern the validity,
     -------------
     construction and interpretation of this Agreement, and except for Disputed
     Claims, the courts of the State of Nevada shall have exclusive jurisdiction
     over any claim with respect to this Agreement.

19.  Number and Gender. Where the context of this Agreement requires the
     -----------------
     singular shall mean the plural and vice versa and references to males shall
     apply equally to females and vice versa.

20.  Headings. The headings in this Agreement have been included solely for
     --------
     convenience of reference and shall not be considered in the interpretation
     or construction of this Agreement.

21.  Assignment. This Agreement is personal to Employee and may not be assigned.
     ----------

                                       11
<PAGE>

22.  Successors and Assigns. This Agreement shall be binding upon the successors
     ----------------------
     and assigns of Employer.

23.  Prior Agreements. This Agreement shall supersede and replace any and all
     ----------------
     other employment agreements which may have been entered into by and between
     the parties.

24.  Non-Involvement of Tracinda. The parties acknowledge that neither Kirk
     ---------------------------
     Kerkorian nor Tracinda Corporation, individually or collectively, is a
     party to this Agreement or any agreement provided for herein. Accordingly,
     the parties hereby agree that in the event (i) there is any alleged breach
     or default by any party under this Agreement or any agreement provided for
     herein, or (ii) any party has any claim arising from or relating to any
     such agreement, no party, nor any party claiming through such party, shall
     commence any proceedings or otherwise seek to impose any liability
     whatsoever against Kirk Kerkorian or Tracinda Corporation by reason of such
     alleged breach, default or claim.

     IN WITNESS WHEREOF, Employer and Employee have entered into this Agreement
in Las Vegas, Nevada on June 1, 2000.

EMPLOYEE:                                        EMPLOYER - MGM GRAND, INC.

/s/ Gary N. Jacobs                           /s/ J. Terrence Lanni
-------------------------                By:
                                            ------------------------------------
GARY N. JACOBS                           Title:  J. TERRENCE LANNI,
                                                 CHAIRMAN OF THE BOARD
                                                 OF DIRECTORS

                                       12
<PAGE>

                                  EXHIBIT "A"

     Trade secret means information, including a formula, pattern, compilation,
program, device, method, technique or process, that derives economic value,
present or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain any economic
value from its disclosure or use.

                                       13
<PAGE>

                                  EXHIBIT "B"

     Name of Report                                    Generated By
________________________________________________________________________________
Including, but not limited to:

Baccarat Pit Discrepancy Report                     Casino Marketing Analyst
Commission Summary Report                           Casino Marketing Analyst
Customer W/L Discrepancy Report                     Casino Marketing Analyst
Int'l Marketing Detailed Budget Summaries           Casino Marketing Analyst
Arrival Report                                      International Marketing
Departure Report                                    International Marketing
Daily Game Report                                   Casino Audit
Department Financial Statement                      Finance
$10K Over High Action Play Report                   Customer Analysis Dept.
$50K Over High Action Play Report                   Customer Analysis Dept.
International Market Segment Report                 Customer Analysis Dept.
Collection Aging Report(s)                          Collection Department
Accounts Receivable Aging                           Finance
Marketing Report                                    Finance
Daily Player Action Report                          Casino Operations

                                       14
<PAGE>

                                  EXHIBIT "C"

Gary N. Jacobs                                                      June 1, 2000

Dear Gary:

     This letter will supplement the employment agreement, dated June 1, 2000,
between you and MGM Grand, Inc. (the "Agreement"). Notwithstanding anything
contained in the Agreement to the contrary, if you so elect, all or any portion
of your unvested stock options shall not become fully vested upon a Change of
Control (as defined in the Agreement) of MGM Grand, Inc. Any such election shall
be effective upon written notice to MGM Grand, Inc. at or prior to the Effective
Date (as defined in the Agreement) of any such Change of Control.

     Except as specifically modified hereby, the terms and conditions of the
Agreement shall remain in full force and effect.

                                    Sincerely,

                                    MGM GRAND, INC.

                                    By: /s/ J. Terrence Lanni
                                       --------------------------------
                                       J. Terrence Lanni,
                                       Chairman of the Board
                                        of Directors

AGREED TO AND ACKNOWLEDGED

/s/ Gary N. Jacobs

-----------------------------    Dated: June 1, 2000
Gary N. Jacobs

                                       15
<PAGE>

                                  EXHIBIT "D"

                         PERMITTED OUTSIDE ACTIVITIES

1.   Employee may remain "Of Counsel" to his law firm, Christensen, Miller,
     Fink, Jacobs, Glaser, Weil & Shapiro, LLP, and provide certain legal and
     consulting services to such firm so long as such services do not interfere
     with Employee's performance of his obligations to Employer. Employee's name
     may remain in the name of the firm, and Employee may retain an office at
     such firm.

2.   Member, Board of Directors and Executive Committee of The InterGroup
     Corporation (NASDAQ - NSM).

3.   Presently, Secretary, Youbet.com, Inc. (NASDAQ - NMS). I anticipate
     resigning from that position by not later than June 30, 2000.

4.   Member, Board of Directors (including Executive Committee) of
     PharmaDetailing.com, Inc., a privately held company.

5.   Member, Advisory Board, Stonegate Partners, L.L.C., Boston, Massachusetts,
     an investment banking firm involved in raising private equity.

6.   Member, Board of Directors of Lasers for Construction, Inc., a privately
     held company.

7.   Member, Board of Trustees of Natural History Museum of Los Angeles
     Foundation (including various committee assignments).

8.   Member, Board of Overseers, Brandeis University Graduate School of
     International Economics and Finance (including various committee
     assignments).

9.   Executive Board Member, The American Jewish Committee, Los Angeles Chapter.

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