-----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, OBnDs4pMvDgscUMrK0QgFakAatBDj6SD46JJLIBcJGCOWTlEtEE6EQiH/LcSRpaC CzUZF/F9h6KabOpZqhAC/Q== 0000912057-02-017828.txt : 20020501 0000912057-02-017828.hdr.sgml : 20020501 ACCESSION NUMBER: 0000912057-02-017828 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANDALAY RESORT GROUP CENTRAL INDEX KEY: 0000725549 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880121916 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08570 FILM NUMBER: 02629419 BUSINESS ADDRESS: STREET 1: 3950 LAS VEGAS BLVD S CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7027340410 FORMER COMPANY: FORMER CONFORMED NAME: CIRCUS CIRCUS ENTERPRISES INC DATE OF NAME CHANGE: 19920703 10-K 1 a2077883z10-k.htm 10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-8570

MANDALAY RESORT GROUP
(Exact name of Registrant as specified in its charter)

Nevada State (or other jurisdiction of incorporation or organization)		88-0121916 (I.R.S. Employer Identification No.)
3950 Las Vegas Boulevard South, Las Vegas, Nevada (Address of principal executive offices)		89119 (Zip Code)

Registrant's telephone number, including area code: (702) 632-6700

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on which Registered
Common Stock, $.01²/3 Par Value		New York Stock Exchange and Pacific Exchange
Common Stock Purchase Rights		New York Stock Exchange and Pacific Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

The aggregate market value of the voting stock of the Registrant held by persons other than the Registrant's directors and executive officers as of April 22, 2002 (based upon the last reported sale price on the New York Stock Exchange on such date) was $2,022,845,589.

The number of shares of Registrant's Common Stock, $.01²/3 par value, outstanding at April 22, 2002: 68,316,988

DOCUMENTS INCORPORATED BY REFERENCE

PART III—Portions of the Registrant's definitive proxy statement in connection with the annual meeting of stockholders to be held on June 20, 2002, are incorporated by reference into Items 10 through 13, inclusive.

PART I

ITEM 1. BUSINESS.

In this report, when we use the terms "we," "our" and "us," we are referring to Mandalay Resort Group and its majority owned subsidiaries as a combined entity, except where it is clear that reference is only to Mandalay Resort Group. When we use the term "Mandalay," it refers only to Mandalay Resort Group, unless the context otherwise requires. These terms, as used in this report, do not include our unconsolidated joint ventures, unless the context otherwise requires. Except as otherwise indicated, cross references in this report are to sections in this Item 1.

Overview

We are one of the largest hotel-casino operators in the United States in terms of guest rooms and casino square footage. Our "Mandalay Mile" is the largest scaled hotel-casino resort development in Las Vegas, the world's largest gaming market. This "Mandalay Mile" consists of three interconnected megaresorts on 230 acres, including our flagship property, Mandalay Bay. We and the joint ventures in which we participate operate a total of 16 properties with more than 27,000 guest rooms and more than one million square feet of casino space in Nevada, Mississippi, Illinois and Michigan. Of these properties, 12 are wholly owned and have more than 22,400 guest rooms and more than 800,000 square feet of casino space. In addition, we own a 50% interest in each of three joint venture casino properties that have approximately 4,700 guest rooms and more than 200,000 square feet of casino space and a 53.5% interest in a fourth joint venture casino with approximately 75,000 square feet of casino space.

We have provided below information as of January 31, 2002 about our properties and those of the joint ventures in which we participate. Except as otherwise indicated, we wholly own and operate these properties.

Location/Property		Guest Rooms	Approximate Casino Square Footage	Slots(1)	Gaming Tables(2)	Parking Spaces
Las Vegas, Nevada
	Mandalay Bay(3)	3,643	135,000	2,083	128	7,000
	Luxor	4,408	120,000	2,007	104	3,200
	Excalibur	4,002	110,000	2,199	72	4,000
	Circus Circus	3,744	109,000	2,176	78	4,700
	Monte Carlo (50% Owned)	3,002	90,000	2,032	73	4,000
	Slots-A-Fun	—	16,700	566	22	—
Reno, Nevada
	Circus Circus	1,572	60,000	1,608	73	3,000
	Silver Legacy (50% Owned)	1,711	85,000	2,127	82	1,800
Laughlin, Nevada
	Colorado Belle	1,226	64,000	1,225	39	1,700
	Edgewater	1,450	44,000	1,199	36	2,300
Jean, Nevada
	Gold Strike	812	37,000	821	17	2,100
	Nevada Landing	303	36,000	805	17	1,400
Henderson, Nevada
	Railroad Pass	120	21,000	354	7	600
Tunica County, Mississippi
	Gold Strike	1,149	48,000	1,425	46	1,400
Detroit, Michigan
	MotorCity Casino (53.5% Owned)(4)	—	75,000	2,501	106	3,800
Elgin, Illinois
	Grand Victoria (50% Owned)	—	36,000	1,050	45	2,300

Total		27,142	1,086,700	24,178	945	43,300

(1): Includes slot machines and other coin-operated devices.
(2): Generally includes blackjack ("21"), craps, pai gow poker, Caribbean stud poker, wheel of fortune and roulette. Mandalay Bay and MotorCity Casino also offer baccarat.
(3): This property includes a Four Seasons Hotel with 424 guest rooms that we own and Four Seasons Hotels Limited manages.
(4): This property is being operated pending the construction of a permanent hotel-casino facility.

Property Descriptions

We are providing below, by market, additional information concerning the properties we operate and those operated by the joint ventures in which we are a participant.

Las Vegas, Nevada

Our Mandalay Mile, a 230-acre development situated at the south end of the Las Vegas Strip, is the site of our newest resort as well as our two largest resorts. Mandalay Bay and our other Mandalay Mile resorts, Luxor and Excalibur, function as a cluster of interconnected entertainment destinations with more than 12,000 guest rooms and more than 360,000 square feet of casino space that have no similarly scaled competition in the United States. Mandalay Bay, Luxor and Excalibur are connected by

a monorail system as well as a climate-controlled walkway. Our Mandalay Mile, which has approximately one mile of frontage on the Las Vegas Strip, is a "Strip within the Strip" that offers our guests three distinctively themed hotel-casinos, complemented by an array of restaurants, shops and entertainment venues catering to a broad spectrum of Las Vegas visitors. Our most recently completed entertainment venue is Shark Reef at Mandalay Bay, an aquarium exhibit, which opened in June 2000 and is cross-marketed to guests at all of the hotel-casinos within our Mandalay Mile.

Mandalay Bay. Mandalay Bay, our newest megaresort, is located on approximately 60 acres on the Las Vegas Strip, adjacent to our Luxor property and is the first major resort on the Las Vegas Strip to greet visitors arriving in Las Vegas on I-15, the primary thoroughfare between Las Vegas and southern California. The 43-story South Seas themed hotel-casino resort, which opened in March 1999, has 3,643 guest rooms, including a Four Seasons Hotel with 424 guest rooms that provides visitors with the only luxury "five-diamond" hospitality experience in Las Vegas. Mandalay Bay's attractions include an 11-acre tropical lagoon featuring a sand-and-surf beach and a three-quarter-mile lazy river ride. The property also features 13 restaurants such as Charlie Palmer's Aureole, Wolfgang Puck's Trattoria Del Lupo, China Grill, Red Square and Border Grill, as well as a House of Blues nightclub and restaurant, including its signature Foundation Room situated on the resort's top floor. Additional amenities include a 125,000-square-foot convention facility and a 30,000-square-foot spa. The property offers multiple entertainment venues that include Shark Reef at Mandalay Bay featuring sharks and rare sea predators, a 1,700-seat showroom, the rumjungle nightclub and a 12,000-seat special events arena that features entertainment and sporting events.

We have commenced construction of a convention and meeting complex located adjacent to the existing Mandalay Bay Conference Center. The complex will include more than one million square feet of exhibit space. Upon completion of the project, Mandalay Bay will offer a total of almost two million gross square feet of conference and exhibit space. Following the events of September 11, construction on the facility was temporarily suspended. We have resumed construction, and the facility is currently expected to open in January 2003. The cost of the convention center, excluding land, preopening expenses and capitalized interest, is estimated to be $235 million. As of January 31, 2002, we had incurred costs of $61.6 million related to this project.

Luxor. This property is an Egyptian-themed hotel and casino complex situated on 64 acres of our Mandalay Mile, between Mandalay Bay and Excalibur. The resort features a 30-story pyramid and two 22-story hotel towers. Luxor offers 20,000 square feet of convention space, a 20,000-square-foot spa, a 1,200-seat showroom featuring the off-Broadway show "Blue Man Group" which opened in March 2000, a nightclub, and food and entertainment venues on three different levels beneath a soaring hotel atrium. The pyramid's guest rooms can be reached from the four corners of the building by state-of-the-art "inclinators" which travel at a 39-degree angle. Above the pyramid's casino, the property offers a special format motion base ride and an IMAX 2D/3D theater. Luxor's other public areas include a buffet with a seating capacity of approximately 800, eight restaurants including three gourmet restaurants, as well as a snack bar, a food court featuring national fast food franchises, several cocktail lounges and a variety of specialty shops.

Excalibur. This property is a castle-themed hotel and casino complex situated on a 53-acre site immediately to the north of Luxor. Excalibur's public areas include a Renaissance fair, a medieval village, an amphitheater with a seating capacity of nearly 1,000 where nightly mock jousting tournaments and costume drama are presented, two dynamic motion theaters, various artisans' booths and medieval games of skill. In addition, Excalibur has a buffet restaurant with a seating capacity of approximately 1,000, six themed restaurants, as well as several snack bars, cocktail lounges and a variety of specialty shops.

Circus Circus-Las Vegas. This property, which is our original resort, is a circus-themed hotel and casino complex situated on approximately 69 acres on the north end of the Las Vegas Strip. From a

"Big Top" above the casino, Circus Circus-Las Vegas offers its guests a variety of circus acts performed daily, free of charge. A mezzanine area overlooking the casino has a circus midway with carnival-style games and an arcade that offers a variety of amusements and electronic games. Also available to the guests at Circus Circus-Las Vegas are four specialty restaurants, a buffet with a seating capacity of approximately 1,000, a coffee shop, four fast food snack bars, several cocktail bars and a variety of gift shops and specialty shops. The Adventuredome, covering approximately five acres, offers theme park entertainment that includes a high-speed, double-loop, double-corkscrew roller coaster, a coursing river flume ride on white-water rapids, an IMAX motion base ride, several rides and attractions designed for preschool age children, themed carnival-style midway games, a state-of-the-art arcade, a 65-foot waterfall, animated life-size dinosaurs, food kiosks and souvenir shops, all in a climate- controlled setting under a giant space-frame dome. Circus Circus-Las Vegas also offers accommodations for approximately 400 recreational vehicles at the property's Circusland Recreational Vehicle Park.

Monte Carlo (50% owned). Through wholly owned subsidiaries, we are a 50% participant with MRGS, a subsidiary of MGM MIRAGE, in our Las Vegas joint venture, Victoria Partners, which owns Monte Carlo, a hotel and casino resort situated on 46 acres with approximately 600 feet of frontage on the Las Vegas Strip. We are the managing partner of this joint venture. Monte Carlo is situated between Bellagio, a 3,000-room resort owned and operated by MGM MIRAGE and connected to Monte Carlo by a monorail, and New York-New York, a 2,000-room hotel-casino resort owned by MGM MIRAGE. Monte Carlo's casino reflects a palatial style reminiscent of the Belle Epoque, the French Victorian architecture of the late 19th century. Amenities at Monte Carlo include three specialty restaurants, including the popular Andre's gourmet restaurant, a buffet, a coffee shop, a food court, a microbrewery which features live entertainment, approximately 15,000 square feet of meeting and banquet space and tennis courts. A 1,200-seat replica of a plush vaudeville theater, including a balcony and proscenium arch, features an elaborately staged show of illusions by the world-renowned magician, Lance Burton.

Reno, Nevada

Circus Circus-Reno. This property is a circus-themed hotel and casino complex situated in downtown Reno, Nevada. Like its sister property in Las Vegas, Circus Circus-Reno offers its guests a variety of circus acts performed daily, free of charge. A mezzanine area has a circus midway with carnival-style games and an arcade that offers a variety of amusements and electronic games. The property also has two specialty restaurants, a buffet with a seating capacity of approximately 450, a coffee shop, a deli/bakery, a fast food snack bar, cocktail lounges, a gift shop and specialty shops.

Silver Legacy (50% owned). Through a wholly owned subsidiary, we are a 50% participant with Eldorado Limited Liability Company in Circus and Eldorado Joint Venture, a Nevada general partnership which owns and operates Silver Legacy, a hotel-casino and entertainment complex situated on two city blocks in downtown Reno, Nevada. Silver Legacy is situated between our Circus Circus-Reno and the Eldorado Hotel & Casino, which is owned and operated by an affiliate of our joint venture partner at Silver Legacy. Silver Legacy's casino and entertainment complex is connected with Circus Circus-Reno and the Eldorado at the mezzanine level by enclosed climate-controlled skyways above the streets between the respective properties. The property's exterior is themed to evoke images of historical Reno. At the main pedestrian entrances to the casino (located on all four sides of the complex), patrons enter by passing store fronts reminiscent of turn-of-the-century Reno. Silver Legacy's attractions include a 120-foot tall mining rig, which is situated over a replica of a silver mine and extends up from the center of the casino floor into a 180-foot diameter dome structure. Silver Legacy also features four restaurants and several bars, a 25,000-square-foot special events center, custom retail shops, a health spa and an outdoor pool and sun deck. Circus and Eldorado Joint Venture's executive committee, which functions in a manner similar to a corporation's board of directors, is responsible for overseeing the performance of Silver Legacy's management. Under the terms of the joint venture agreement, we appoint three of the executive committee's five members.

Laughlin, Nevada

Laughlin is situated on the Colorado River at the southern tip of Nevada approximately 90 miles south of Las Vegas.

Colorado Belle. This property is situated on a 22-acre site on the bank of the Colorado River (with nearly 1,080 feet of river frontage) in Laughlin, Nevada. Colorado Belle, which features a 600-foot replica of a Mississippi riverboat, includes a 350-seat buffet, a coffee shop, three specialty restaurants, a microbrewery, fast food snack bars and cocktail lounges, as well as a gift shop and other specialty shops.

Edgewater. This property is situated on a 16-acre site adjacent to Colorado Belle with nearly 1,640 feet of frontage on the Colorado River. Edgewater's facilities include a specialty restaurant, a coffee shop, a 600-seat buffet, a snack bar and cocktail lounges.

Jean, Nevada

Jean is located between Las Vegas and southern California, approximately 25 miles south of Las Vegas and 12 miles north of the California-Nevada state line. Jean attracts gaming customers almost entirely from the large number of people traveling between Las Vegas and southern California on Interstate-15, the principal highway between Las Vegas and southern California which passes directly through Jean.

Gold Strike-Jean. This property is an "Old West" themed hotel-casino located on approximately 51 acres of land on the east side of Interstate-15. The property has, among other amenities, a swimming pool and spa, several restaurants, a banquet center which is equipped to serve 260 people, a gift shop and an arcade. The casino has a stage bar with regularly scheduled live entertainment and a casino bar.

Nevada Landing. This property is a turn-of-the-century riverboat themed hotel-casino located on approximately 55 acres of land across Interstate-15 from Gold Strike. Nevada Landing includes a 70-seat Chinese restaurant, a full-service coffee shop, a buffet with a seating capacity of 140, a snack bar, a gift shop, a swimming pool and spa and a 300-guest banquet facility.

Henderson, Nevada

Henderson is a suburb located southeast of Las Vegas.

Railroad Pass. This property is situated on approximately 56 acres along US-93, the direct route between Las Vegas and Phoenix, Arizona. The property includes, among other amenities, two full-service restaurants, a buffet, a gift shop, two bars, a swimming pool and a banquet facility that will accommodate approximately 200 guests. In contrast with our other Nevada properties, Railroad Pass caters to local residents, particularly from Henderson, who may prefer the informal atmosphere and easy access of Railroad Pass over the casinos on the Las Vegas Strip.

Tunica County, Mississippi

Tunica County is located 20 miles south of Memphis, Tennessee on the Mississippi River. Tunica County attracts customers from Mississippi and surrounding states, including cities such as Memphis, Tennessee and Little Rock, Arkansas.

Gold Strike-Tunica. This property is a dockside casino situated on a 24-acre site along the Mississippi River in Tunica County, approximately three miles west of Mississippi State Highway 61 (a major north/south highway connecting Memphis with Tunica County) and 20 miles south of Memphis. The property features an 800-seat showroom, a coffee shop, a specialty restaurant, a 300-seat buffet, a

snack bar and several cocktail lounges. Gold Strike-Tunica is part of a three-casino development covering approximately 72 acres. The other two casinos are owned and operated by unaffiliated third parties. We also own an undivided one-half interest in an additional 388 acres of land which may be used for future development.

Detroit, Michigan

MotorCity Casino (53.5% owned). On December 14, 1999, along with our joint venture partner, Atwater Casino Group, we opened MotorCity Casino, a temporary casino facility in Detroit, Michigan, which is being operated pending the construction of a permanent hotel-casino. The temporary facility includes, in addition to a 75,000-square-foot casino, five restaurants and a 3,800-space parking facility. The site of the permanent facility has not yet been determined, but the facility is expected to include hotel rooms, larger casino space, convention space, retail space and dining and entertainment facilities. The cost of the permanent facility, which cannot be determined at this time, will depend on a number of factors, including the decision whether we expand the temporary facility or build on a new site and the ultimate design and schedule for completion of the facility. We are committed to contribute 20% of the development costs of any permanent facility in the form of an additional investment in the joint venture and the joint venture will seek to borrow the balance of the cost. We chose to participate in this project due to Detroit's strong demographics and limited competition and to further diversify our cash flow stream.

The current development agreement for Detroit provides that Mandalay will guarantee completion of the project and will enter into a keep-well guarantee with the city, pursuant to which we could be required to contribute additional funds, if and as needed, to continue operation of the permanent facility for a period of two years. When the permanent facility is completed and opened, we will manage the property and will receive a management fee for our services from the Detroit joint venture.

The ability to construct, open and operate the planned permanent facility is contingent upon the receipt of all necessary gaming approvals and satisfaction of other conditions. See "Regulation and Licensing—Michigan Gaming Laws."

Various lawsuits have been filed in the state and federal courts challenging the constitutionality of the Detroit Casino Development Competitive Selection Process Ordinance and the Michigan Gaming Control and Revenue Act, and seeking to appeal the issuance of a certificate of suitability and casino license to MotorCity Casino. For information concerning these legal proceedings, see "Detroit Litigation" in Item 3 of this report.

Elgin, Illinois

Grand Victoria (50% owned). Through a wholly owned subsidiary, we are a 50% participant with RBG, L.P., an affiliate of Hyatt Development Corporation, in a joint venture which owns and operates Grand Victoria. Grand Victoria is a Victorian themed riverboat casino and land-based entertainment complex in Elgin, Illinois, a suburb approximately 40 miles northwest of downtown Chicago. The two-story vessel is 420 feet in length and 110 feet in width, and provides a maximum 80,000 square feet of casino space, approximately 36,000 square feet of which was being used as of January 31, 2002. As a result of gaming legislation enacted in June 1999, the boat now offers dockside gaming, which means its operation is no longer restricted by fixed cruising schedules. In addition to the boat, a dockside complex with an approximately 83,000-square-foot pavilion has an approximately 400-seat buffet, a 76-seat fine dining restaurant, a VIP lounge, three movie theaters and a gift shop. Grand Victoria is strategically located in Elgin among the residential suburbs of Chicago, with nearby freeway access and direct train service from downtown Chicago. Grand Victoria is located approximately 20 miles and 40 miles, respectively, from its nearest competitors in Aurora, Illinois and Joliet, Illinois, and holds one of only nine riverboat gaming licenses currently granted state-wide. Recently passed legislation in Illinois would allow a casino in Rosemont, approximately 16 miles from Grand Victoria. This legislation is

being challenged in court. Repeal of this legislation would also repeal dockside gaming. We manage the Grand Victoria, subject to the oversight of an executive committee which functions in a manner similar to a corporation's board of directors. Each joint venture partner is equally represented on the executive committee.

Marketing

We have historically followed a marketing and operating philosophy which has emphasized high-volume business by providing moderately priced hotel rooms, food and beverage and alternative entertainment in combination with our gaming operations. With the opening of Mandalay Bay, which was designed to attract a higher income customer than we had previously targeted, and to a lesser extent at Luxor, we have begun to serve higher income casino customers and to host conventions. Our philosophy remains one of providing the best value in each of the market segments where we compete.

Our Mandalay Mile provides us with a unique cross-marketing opportunity where we promote the restaurants, entertainment and other amenities located throughout the Mandalay Mile properties—Mandalay Bay, Luxor and Excalibur—to each other as well as to our other properties located outside the Mandalay Mile. In the cross-marketing of our properties, we utilize a variety of means including video screens, in-room brochures and displays located within each property and in the skyway and monorail systems that connect the Mandalay Mile properties.

In November 2001, we unveiled One Club, our player affinity program that allows cash and complimentary awards to be accumulated and redeemed in realtime across multiple properties. Our properties in Las Vegas, Laughlin, and Reno, Nevada and Tunica County, Mississippi are currently linked through the One Club system, and we anticipate that the system will be companywide (excluding Silver Legacy, which will not be a participant in the system) by the end of fiscal 2003. We believe the One Club system will help us expand our customer database, enabling us to better target our marketing efforts. We also believe One Club encourages repeat visitation to our properties and further encourages customers to visit our other properties through the seamless use of their One Club card.

Mandalay Bay. Mandalay Bay, which opened March 2, 1999, contributed 22% of our revenues in the year ended January 31, 2002 (and 22% in each of the years ended January 31, 2001 and 2000, respectively). This property offers a level of entertainment and hotel accommodations which is designed to draw a higher-income customer than we had historically targeted. Designed with a South Seas theme, Mandalay Bay offers its guests internationally renowned restaurants which provide a wide variety of dining options. Mandalay Bay's entertainment attractions include an 11-acre lagoon with a surfing beach and a lazy river ride, Shark Reef at Mandalay Bay, a House of Blues, rumjungle, a 1,700-seat showroom and a 12,000-seat special events arena where brand-name entertainment and sporting events are offered. Additional features include a 125,000-square-foot convention facility and a 30,000-square-foot spa.

We have commenced construction of a convention and meeting complex located adjacent to the existing Mandalay Bay Conference Center. The complex will include more than one million square feet of exhibit space. Upon completion of the project, Mandalay Bay will offer a total of almost two million gross square feet of conference and exhibit space. Following the events of September 11, construction on the facility was temporarily suspended. We resumed construction in the first quarter of fiscal 2003, with the facility currently expected to open in January 2003. The cost of the convention center, excluding land, preopening expenses and capitalized interest, is estimated to be $235 million. As of January 31, 2002, we had incurred costs of $61.6 million related to this project.

The convention center complex will further enhance our ability to attract higher-income customers to and bolster room rates at both Mandalay Bay and Luxor, particularly during the slower midweek period.

Luxor. Luxor contributed 15% of our revenues in the year ended January 31, 2002 (and 16% and 17%, respectively, in the years ended January 31, 2001 and 2000). This property offers a level of entertainment and hotel accommodations which is designed to attract the top segment of the middle-income stratum of customers. Designed with an Egyptian theme and highly decorated rooms, Luxor's 30-story pyramid offers its guests a tri-level entertainment area, including an IMAX theater, dynamic motion rides, a popular nightclub and theatrical revues. This property also has 20,000 square feet of convention space, a 1,200-seat showroom featuring the unique, off-Broadway show "Blue Man Group," which opened in March 2000, and a spa.

Excalibur. Excalibur contributed 12% of our revenues in the year ended January 31, 2002 (and 12% and 14%, respectively, in the years ended January 31, 2001 and 2000). This property attracts customers by offering guest rooms, food and entertainment at medium prices. By way of entertainment, the medieval castle-themed Excalibur offers a medieval village, an amphitheater where mock tournaments and costume drama are presented, dynamic motion theaters, various artisans' booths and medieval games of skill.

Circus Circus-Las Vegas and Circus Circus-Reno. Circus Circus-Las Vegas and Circus Circus-Reno together contributed 15% of our revenues in the year ended January 31, 2002 (and 15% and 18%, respectively, in the years ended January 31, 2001 and 2000). Each of these properties has a popular buffet, attractive because of its variety, quality and low price. From a "Big Top" above the casino, each of these properties offers a variety of circus acts performed free of charge to the public on a daily basis. A mezzanine area overlooking each casino has a circus midway with carnival-style games and an arcade that offers a variety of amusements and electronic games. The Adventuredome, an enclosed and climate-controlled five-acre structure, offers additional theme park attractions at Circus Circus-Las Vegas.

Colorado Belle and Edgewater. The Colorado Belle and Edgewater together contributed 6% of our revenues in the year ended January 31, 2002 (and 7% and 8%, respectively, in the years ended January 31, 2001 and 2000). These properties offer quality rooms, food and entertainment at moderate prices. The Colorado Belle offers a classic Mississippi riverboat theme, complete with a 60-foot paddle wheel. The Edgewater's southwestern motif provides a relaxing atmosphere to enjoy that property's casino and other facilities. Connected by a scenic walkway, the two resorts form an inviting shoreline along the Colorado River.

Gold Strike and Nevada Landing. Gold Strike and Nevada Landing together contributed 3% of our revenues in the year ended January 31, 2002 (and 3% and 4%, respectively, in the years ended January 31, 2001 and 2000). These properties are located on opposite sides of I-15, the primary thoroughfare between Las Vegas and southern California, approximately 25 miles south of Las Vegas and 12 miles north of the California-Nevada border. The properties are conveniently located at the only highway interchange within 12 miles in either direction and are strategically positioned to attract visitors from the large number of people traveling to and from Las Vegas.

Gold Strike-Tunica. Gold Strike-Tunica contributed 5% of our revenues in the year ended January 31, 2002 (and 5% and 6%, respectively, in the years ended January 31, 2001 and 2000). Gold Strike-Tunica, our only wholly owned casino outside of Nevada, is part of an integrated three casino development (Casino Center) that provides patrons with the opportunity to visit any of the three casinos without driving, a unique experience in the Tunica County market.

MotorCity Casino. MotorCity Casino, which opened December 14, 1999, contributed 15% of our revenues in the year ended January 31, 2002 (and 13% and 2%, respectively, in the years ended January 31, 2001 and 2000). MotorCity Casino is a temporary casino facility and is one of only three licensees in Detroit, Michigan. Designed with a classic automobile theme, MotorCity Casino offers its guests four floors of gaming, dining and entertainment experiences.

We maintain an active media advertising program through radio, television, billboards and printed publications primarily in Nevada, California and Arizona for our Nevada properties and in the Memphis area for our Gold Strike-Tunica property. In addition, we advertise on and allow patrons to make room reservations via the Internet, where we believe we are in the forefront of our competition. We also offer complimentary hotel accommodations, meals and drinks to selected customers. See also "Competition—Methods By Which We Compete."

Operations and Cost Controls

The primary source of our revenues is casinos, although our hotels, restaurants, bars, shops, midway games and other entertainment attractions and other services are an important adjunct to the casinos.

The following table sets forth the contribution to our net revenues on a dollar and percentage basis of our major activities for each of our three most recent fiscal years.

		Year Ended January 31,
		2002				2001				2000
		(Dollars in thousands)
Revenues:(1)
	Casino(2)	$	1,201,707	48.8	%	$	1,221,595	48.9	%	$	925,499	45.7	%
	Rooms(3)		581,551	23.6	%		611,352	24.5	%		534,132	26.4	%
	Food and beverage(3)		410,276	16.7	%		418,081	16.8	%		346,647	17.1	%
	Other(3)		332,253	13.5	%		299,753	12.0	%		251,509	12.4	%
	Earnings of unconsolidated affiliates		113,287	4.6	%		114,645	4.6	%		98,627	4.9	%

			2,639,074	107.2	%		2,665,426	106.8	%		2,156,414	106.5	%
Less:
	Complimentary allowances(3)		177,275	7.2	%		169,642	6.8	%		131,509	6.5	%

Net revenues		$	2,461,799	100.0	%	$	2,495,784	100.0	%	$	2,024,905	100.0	%

(1): Includes operations of Silver City to October 31, 1999, operations of Mandalay Bay from March 2, 1999 and MotorCity Casino from December 14, 1999.
(2): Casino revenues are the net difference between the sums received as winnings and the sums paid as losses, less incentives provided to customers in the form of discounts and the value of points earned under our player club.
(3): Rooms, Food and beverage and Other include the retail value of services which are provided to casino customers and others on a complimentary basis. Such amounts are then deducted as complimentary allowances to arrive at net revenue.

We maintain stringent cost controls which historically have been exemplified by a general policy of offering minimal credit to gaming customers at our properties. Since its opening in March 1999, Mandalay Bay has extended credit to gaming customers on a selective basis in an effort to appeal to a broader segment of the gaming market. We had begun following this policy at Luxor during fiscal 1998. As a result, while our other properties continue to offer minimal credit, credit play now represents a more significant portion of the volume of table games play at Mandalay Bay and, to a lesser extent, at Luxor. See Note 2 of Notes to Consolidated Financial Statements in Item 8 of this report.

We maintain strict controls over the issuance of credit and aggressively pursue collection of customer debts. These collection efforts are similar to those used by most large corporations, including the mailing of statements and delinquency notices, personal and other contacts, the use of outside collection agencies and civil litigation. Nevada gaming debts evidenced by written credit instruments are

enforceable under the laws of Nevada. All other states are required to enforce a judgment on a gaming debt entered in Nevada pursuant to the Full Faith and Credit Clause of the United States Constitution. Gaming debts are not legally enforceable in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States. While the portion of our accounts receivable that is owed by foreign customers is not currently material, to the extent we hold obligations of foreign customers, the collectibility of those debts may be affected by a number of factors, including changes in currency exchange rates and economic conditions in the customers' home countries.

Our current operations at each of our casinos are conducted 24 hours a day, every day of the year, with the exception of Grand Victoria which operates 22 hours a day, every day of the year. We emphasize courteous and prompt service to our customers and aspire to a high standard of excellence in all of our operations.

We do not consider our business to be highly seasonal, although our operating income is typically somewhat lower in the fourth quarter, affected by slower travel leading up to the holiday period. While our business is not considered to be highly seasonal, our results from quarter-to-quarter are more event driven than a lot of other businesses. Special events such as a championship boxing match or a concert, or visits by high-budget players, or the timing of holidays, or even bad weather can impact our results for the respective periods during which such events occur.

In connection with our gaming activities, we follow a policy of stringent controls and cross checks on the recording of all receipts and disbursements. The audit and cash controls we have developed and utilize include the following:

•: locked cash boxes;
•: independent counters;
•: checkers and observers to perform the daily cash and coin counts;
•: floor observation of the gaming areas;
•: closed-circuit television observation of certain areas;
•: computer tabulation of receipts and disbursements for each of our slot machines, tables and other games; and
•: the rapid analysis and resolution of discrepancies or deviations from normal performance.

Expansion Activities

As in the past, we will continue to evaluate potential new investments as opportunities arise. New investments may involve the expansion of existing facilities or the development of new properties. Projects may be undertaken in Nevada, where all but one of our wholly owned operating properties are currently located, or in other jurisdictions within the United States or abroad where gaming has been legalized. Our new investments may be in properties that are wholly owned and operated by us, or may be in properties that are developed, owned and/or operated through joint ventures with one or more other parties.

Mandalay Mile. We are currently constructing a 1.8 million square-foot convention and meeting complex on our Mandalay Mile, which is the site of Mandalay Bay, our most recently completed resort, as well as our Luxor and Excalibur properties. The new facility will be located adjacent to the existing Mandalay Bay Conference Center. Upon completion of the new facility, which will include more than one million square feet of exhibit space, Mandalay Bay will offer a total of almost two million gross square feet of conference and exhibit space. Following the events of September 11, construction on the new facility was temporarily suspended. We have resumed construction, and the facility is currently

expected to open in January 2003. The cost of the convention center, excluding land, preopening expenses and capitalized interest, is estimated to be $235 million. As of January 31, 2002, we had incurred costs of $61.6 million related to this project. At this time, we have not determined the timing, scope or design of any additional development on our Mandalay Mile.

Detroit, Michigan. For information concerning the planned construction of a hotel-casino in downtown Detroit, Michigan, see "Property Descriptions—Detroit, Michigan."

Construction Risks. Any major construction project that we, or any joint venture in which we own an interest, may undertake will involve many risks, including potential shortages of materials and labor, work stoppages, labor disputes, weather interference, unforeseen engineering, environmental or geological problems and unanticipated cost increases, any of which could give rise to delays or cost overruns. Construction, equipment or staffing requirements or problems or difficulties in obtaining any of the requisite licenses, permits, allocations or authorizations from regulatory authorities could increase the cost or delay the construction or opening of the facilities or otherwise affect the planned design and features. It is possible that any budget and construction plans developed for a project may be changed for competitive or other reasons. In addition, construction by our Detroit joint venture of a proposed hotel-casino in downtown Detroit, Michigan is dependent on the approval of the Detroit City Council to allow the permanent facility to be built on the temporary casino site or the acquisition of a permanent site at another location and the satisfactory resolution of pending litigation. See "Detroit Litigation" in Item 3 of this report. Accordingly, there can be no assurance as to the commencement or successful completion of any projects that we, or any joint venture in which we are a participant, may undertake, including the one contemplated by the Detroit joint venture.

Competition

General

The hotel and casino industry is very competitive and the level of competition has increased as gaming has expanded dramatically in the United States in recent years. Forms of gaming include:

•: riverboats;
•: dockside gaming facilities;
•: Native American gaming ventures;
•: land-based casinos;
•: state-sponsored lotteries;
•: off-track wagering;
•: Internet gaming; and
•: card parlors.

Since 1990, when there were casinos in only three states (excluding casinos on Native American lands), gaming has spread to a number of additional states. In addition, other states have considered, or may in the future consider, legalizing casino gaming in specific geographic areas within their states.

Many Native American tribes throughout the United States, including tribes in California and Arizona, conduct casino gaming and other Native American tribes are either in the process of establishing or are considering establishing gaming at additional locations. On March 7, 2000, California voters approved Proposition 1A which amended the California constitution and legalized "Nevada-style" gaming on Native American reservations. The passage of this amendment has allowed the expansion of existing Native American gaming operations, as well as the opening of new Native American gaming facilities, in California. Additionally, numerous California tribes have announced that

they intend to open gaming facilities. Most existing Native American gaming facilities in California are modest compared to the larger Las Vegas and Reno casinos. However, numerous Native American tribes have announced that they are in the process of developing or are considering establishing large-scale hotel and gaming facilities in California. We believe the operation of Native American casinos in California and Arizona has impacted our gaming operations in Nevada, particularly our properties in Reno, Laughlin and Jean. The competitive impact on Nevada gaming establishments, in general, and our operations, in particular, from the continued growth of gaming in jurisdictions outside Nevada cannot be determined at this time. We believe that the continued growth of casino gaming in markets close to Nevada, such as California and Arizona, and the expansion of the types of gaming permitted in California under Proposition 1A, could have an adverse impact on our operations and, depending on the nature, location and extent of those operations outside of Nevada, the impact could be material.

Methods By Which We and Our Joint Ventures Compete

The principal methods by which we compete are through the quality of amenities at our properties, the value of the experience we offer our guests, the location of our resorts and our marketing programs.

We, and the joint ventures in which we participate, compete within each of our markets by developing, owning and operating gaming resorts that we believe will be viewed by tourists as "must see" properties. In pursuing this competitive strategy, we and our joint ventures have developed properties that are distinctively themed and that we believe provide customers with a memorable experience. To enhance our competitive position at our properties, we also offer the respective entertainment options, dining venues and other attractions described above under the caption "Property Descriptions."

The strategic locations of our resort properties in all of the markets in which we compete, particularly those properties which are interconnected along Mandalay Mile, are also a key competitive advantage. In Las Vegas, for example, our Mandalay Mile properties are located off the first major freeway exit coming from Southern California, in addition to being located only a short distance from the airport.

We also compete by seeking to provide at each of our resorts a quality experience which represents an attractive value for our guests. While our properties compete with each other to some extent, in Las Vegas, where most of our larger properties are located, we compete as a company for all segments of the market by offering an array of properties ranging from Circus Circus-Las Vegas, which is directed to the more budget-minded guest, to Mandalay Bay, which is directed to the high-end of the market. With the opening of Mandalay Bay, which includes a Four Seasons hotel, we increased our commitment to providing additional amenities for our upscale clientele and expanded our target market to include premium clientele.

Information About the Markets Where We Operate

We believe Mandalay is one of the four largest hotel/casino operators in the U.S., in terms of revenues, room base and casino space.

Set forth below is additional information concerning the competitive conditions in the markets where we and our joint ventures operate, as well as information concerning our position in those markets.

Las Vegas, Nevada. We are one of the three largest casino operators in Las Vegas, which together make up nearly two-thirds of this market. We are the second largest hotel operator in Las Vegas (with four of our resorts ranking among the five largest in Las Vegas) in terms of the number of guest rooms. Our Las Vegas operations, which are conducted from properties located along the Las Vegas Strip, compete with a large number of other hotel-casinos in the Las Vegas area. Currently there are over 25 hotel-casinos, including our own, that are located on or near the Las Vegas Strip. Our Las Vegas operations also compete with a dozen major hotel-casinos located in downtown Las Vegas, approximately five miles from the center of the Strip, and other hotel-casinos elsewhere in the Las Vegas area, including our own Railroad Pass in the suburb of Henderson. To a lesser extent, our Las Vegas properties also compete with casino and hotel properties in other parts of Nevada, including Laughlin, Reno and along I-15 (the principal highway between Las Vegas and southern California) near the California-Nevada state line. Our Las Vegas casinos also compete with Native American casinos in southern California (the principal source of business for Las Vegas casinos, including our own) and central Arizona and, to a lesser extent with casinos in other parts of the country.

In recent years, casino and guest room capacity increased significantly in the Las Vegas market. During the period from October 1998 through August 2000, five major hotel-casino resorts, including our own Mandalay Bay, opened on the Las Vegas Strip. As a result of these openings, the number of guest rooms increased by approximately 15,000, including those at Mandalay Bay. During calendar 2001, the number of guest rooms in Las Vegas increased by approximately 2,300, or approximately 2%. Additional new hotel-casinos and expansion projects at existing Las Vegas properties have been proposed, and it is anticipated that others will be. The impact on our future operations of Las Vegas' increased hotel and casino capacity and any capacity subsequently opened in or around Las Vegas cannot be determined at this time, nor can we determine at this time the impact on our future operations in Las Vegas of any additional growth in Native American gaming, particularly in southern California and Arizona.

The three resorts located on our Mandalay Mile, which is the site of our newest resort as well as our two largest ones, also compete with other Las Vegas properties by offering their guests the ability to experience three distinctively themed resorts that are conveniently connected by a monorail system as well as a climate-controlled skyway system with strategically positioned moving walkways.

Our new convention center complex, described above under the caption "Property Descriptions—Mandalay Bay," will further enhance our ability to attract higher-income customers to and bolster room rates at both Mandalay Bay and Luxor, particularly during the slower mid-week period.

Reno, Nevada. Circus Circus-Reno, our only wholly owned resort in Reno, competes principally with eight other hotel-casinos that, like Circus Circus-Reno, each generates at least $36 million in annual gaming revenues, including Silver Legacy, a hotel-casino complex with 1,711 guest rooms, which is 50% owned by one of our wholly owned subsidiaries. Circus Circus-Reno and Silver Legacy have almost 3,300 rooms combined, or over 20% of the total rooms base in Reno. Circus Circus-Reno and Silver Legacy also compete with numerous other smaller casinos in the greater Reno area and, to a lesser extent, with casinos and hotels in Lake Tahoe and other parts of Nevada and Native American casinos in northern California and the Northwest. The Reno market has begun to encounter increased competition from Native American casinos in northern California. Following the approval of Proposition 1A, these Native American casinos began adding more and newer (i.e., more competitive) slot machines, which has had a negative impact on our Reno area properties, and numerous Native American tribes are at various stages of planning new or further expanded facilities and some have

announced that they are in the process of developing or are considering establishing large-scale hotel and gaming facilities in northern California.

Laughlin, Nevada. In Laughlin, the Colorado Belle and the Edgewater, which together accounted for approximately 25% of the rooms in Laughlin as of January 31, 2002, compete with eight other Laughlin casinos. The Colorado Belle and Edgewater have approximately 108,000 square feet of casino space combined, over 20% of the total in Laughlin. They also compete with the hotel-casinos in Las Vegas and those on I-15 (the principal highway between Las Vegas and southern California) near the California-Nevada state line, as well as a growing number of Native American casinos in Laughlin's regional market. The expansion of hotel and casino capacity in Las Vegas in recent years and the growth of Native American casinos in central Arizona and southern California have had a negative impact on Colorado Belle and Edgewater, by drawing visitors from the Laughlin market. This has, in turn, resulted in increased competition among Laughlin properties for a reduced number of visitors which contributes to generally lower revenues and profit margins at Colorado Belle and Edgewater.

Jean, Nevada. Our Jean, Nevada properties, Gold Strike and Nevada Landing, are located on I-15 (the principal highway between Las Vegas and southern California), approximately 25 miles south of Las Vegas and 12 miles north of the California-Nevada border, where their nearest competitor is located. These properties attract their customers almost entirely from the people traveling between Las Vegas and southern California. Accordingly, these properties compete with the large concentration of hotel, casino and other entertainment options available in Las Vegas as well as three hotel-casinos located at the California-Nevada border. They also compete with the growing number of Native American casinos in southern California which has had a negative impact on their operations. As a result of the downturn in operating results, we recognized an impairment loss in the current fiscal year. See Note 1 of Notes to Consolidating Financial Statements in Item 8 of this report. At this time, we cannot determine the impact of the continued growth of Native American gaming in southern California on our operations at the Jean properties, although we believe these properties will continue to encounter increasing competition as a result of such growth.

Tunica County, Mississippi. Gold Strike-Tunica competes with nine other casinos in Tunica County, Mississippi, including a hotel-casino which is closer to Memphis, the largest city in Tunica County's principal market, than any of the other facilities currently in operation in Tunica County. Gold Strike-Tunica's hotel tower provides this property with the second largest number of guest rooms in the Tunica County market. We believe the slow economy has had a more pronounced effect on this region, creating heightened competition for business.

Elgin, Illinois. Grand Victoria is a 50% owned Victorian themed riverboat casino and land-based entertainment complex in Elgin, Illinois, a suburb approximately 40 miles northwest of downtown Chicago. Grand Victoria holds one of only nine riverboat gaming licenses currently granted in Illinois, and produces the highest casino revenues of any riverboat in that market (based on results for calendar 2001). It is located approximately 20 miles and 40 miles, respectively, from its nearest competitors in Aurora, Illinois and Joliet, Illinois. Recently passed legislation in Illinois would allow a casino in Rosemont, approximately 16 miles from Grand Victoria. This legislation is being challenged in court. Repeal of this legislation would also repeal dockside gaming.

Detroit, Michigan. MotorCity Casino, a 53.5% owned temporary casino in Detroit, Michigan, is one of three licensed casinos in Detroit. In addition to the other two Detroit casinos, MotorCity Casino competes with a government-owned casino and a racetrack which has an estimated 2,000 slot machines, each of which is located in Windsor, Ontario, directly across the Detroit River from Detroit. A number of Native American casinos are currently operating in central and northern Michigan, but the nearest of these casinos is approximately 150 miles from Detroit.

Regulation and Licensing

Each of our casinos, including those owned and operated by the joint ventures in which we participate, is subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdiction where located or docked. Set forth below is a discussion of the applicable gaming laws and regulations of each jurisdiction where gaming is conducted by us or by a joint venture in which we participate.

Nevada Gaming Laws

The ownership and operation of casino gaming facilities in the State of Nevada, such as the Nevada gaming facilities we and the joint ventures in which we participate own and operate, are subject to the Nevada Gaming Control Act and the regulations promulgated under this Act and various local regulations. Our Nevada gaming operations and those of its Nevada joint ventures are subject to the licensing and regulatory control of the Nevada Gaming Commission, the Nevada State Gaming Control Board and, depending on the facility's location, the Clark County Liquor and Gaming Licensing Board or the City of Reno, which we refer to collectively 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:

•: the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;
•: the establishment and maintenance of responsible accounting practices and procedures;
•: the maintenance of effective controls over the financial practices of licensees, including the establishment of 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;
•: the prevention of cheating and fraudulent practices; and
•: providing a source of state and local revenues through taxation and licensing fees.

Changes in these laws, regulations and procedures could have an adverse affect on our gaming operations.

Each of Mandalay's subsidiaries that currently operates a casino in Nevada 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. Mandalay is required to be registered by the Nevada Gaming Commission as a publicly traded corporation and as such, is required periodically to submit detailed financial and operating reports to the Nevada Gaming Commission and furnish any other information that the Nevada Gaming Commission may require. No person may become a stockholder of, or receive any percentage of profits from, a licensed casino without first obtaining licenses and approvals from the Nevada Gaming Authorities. We have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, Mandalay or any of its licensed subsidiaries in order to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. Mandalay and its licensed subsidiaries' officers, directors and key employees must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require

submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay for all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with Mandalay or any licensed subsidiary, Mandalay and the licensed subsidiary would have to sever all relationships with that person. In addition, the Nevada Gaming Commission may require Mandalay or a licensed subsidiary to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

Mandalay and all of its licensed subsidiaries are required to submit detailed financial and operating reports to the Nevada Gaming Commission. Substantially all of our or our licensed subsidiaries' material loans, leases, sales of securities and similar financing transactions must be reported to, or approved by, the Nevada Gaming Commission.

If the Nevada Gaming Commission determined that Mandalay or a licensed subsidiary violated the Nevada Gaming Control Act, it could limit, condition, suspend or revoke our gaming licenses. In addition, Mandalay, the licensed subsidiary, and the persons involved could be subject to substantial fines for each separate violation of the Nevada Gaming Control Act at the discretion of the Nevada Gaming Commission. Further, a supervisor could be appointed by the Nevada Gaming Commission to operate a licensed subsidiary's gaming establishment and, under specified circumstances, earnings generated during the supervisor's appointment, except for the reasonable rental value of the premises, could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license of a licensed subsidiary and the appointment of a supervisor could, or revocation of any gaming license would, have a material adverse effect on our gaming operations.

Any beneficial holder of our common stock, or any of our other voting securities, regardless of the number of shares owned, may be required to file an application, be investigated and have that person's suitability as a beneficial holder of our voting securities determined if the Nevada Gaming Commission has reason to believe that the ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.

The Nevada Gaming Control Act requires any person who acquires a beneficial ownership of more than 5% of Mandalay's voting securities to report the acquisition to the Nevada Gaming Commission. The Nevada Gaming Control Act requires that beneficial owners of more than 10% of Mandalay's voting securities apply to the Nevada Gaming Commission for a finding of suitability within thirty days after the Chairman of the Nevada State Gaming Control Board mails the written notice requiring such filing. An "institutional investor," as defined in the Nevada Act, which acquires beneficial ownership of more than 10%, but not more than 15%, of Mandalay's voting securities may apply to the Nevada Gaming Commission for a waiver of a finding of suitability if the institutional investor holds Mandalay's voting securities for investment purposes only. An institutional investor will be deemed to hold Mandalay's voting securities for investment purposes if it acquired and holds Mandalay's voting securities in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly:

•: the election of a majority of the members of Mandalay's board of directors;
•: any change in Mandalay's corporate charter, bylaws, management, policies or operations, or any of its gaming affiliates; or
•: any other action which the Nevada Gaming Commission finds to be inconsistent with holding Mandalay's voting securities for investment purposes only.

Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:

•: voting on all matters voted on by stockholders;
•: making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and
•: other activities as the Nevada Gaming Commission may determine to be consistent with investment intent.

If the beneficial holder of Mandalay's voting securities who must be found suitable is a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Gaming Commission or by the Chairman of the Nevada State Gaming Control Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of Mandalay's voting securities beyond the period of time as may be prescribed by the Nevada Gaming Commission may be guilty of a criminal offense. Mandalay will be subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with it or a licensed subsidiary, it:

•: pays that person any dividend or interest upon any of Mandalay's voting securities;
•: allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person;
•: pays remuneration in any form to that person for services rendered or otherwise; or
•: fails to pursue all lawful efforts to require the unsuitable person to relinquish the voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value.

Additionally, the Clark County Liquor and Gaming Licensing Board has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming licensee.

The Nevada Gaming Commission may, in its discretion, require the holder of any debt security of a registered publicly traded corporation to file applications, be investigated and be found suitable to own the debt security of the registered corporation. If the Nevada Gaming Commission determines that a person is unsuitable to own the security, then under the Nevada Gaming Control Act, the registered publicly traded corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Gaming Commission, it:

•: pays to the unsuitable person any dividend, interest or any distribution whatsoever;
•: recognizes any voting right by the unsuitable person in connection with the securities;
•: pays the unsuitable person remuneration in any form; or
•: makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

Mandalay is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada

Gaming Authorities. A failure to make the disclosure may be grounds for finding the record holder unsuitable. Mandalay is also required to render maximum assistance in determining the identity of the beneficial owner of any of our voting securities. The Nevada Gaming Commission has the power to require our stock certificates to bear a legend indicating that the securities are subject to the Nevada Gaming Control Act. To date, the Nevada Gaming Commission has not imposed that requirement on us.

Mandalay may not make a public offering of its securities without the prior approval of the Nevada Gaming Commission if it intends to use the securities or the proceeds from the offering to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for those purposes or for similar transactions. On January 25, 2001, the Nevada Gaming Commission granted Mandalay prior approval to make public offerings for a period of two years, subject to some conditions, which we refer to as the "shelf approval." The shelf approval also applies to any company that Mandalay wholly owns which is a publicly traded corporation or would become a publicly traded corporation pursuant to a public offering. The shelf approval also includes approval for our registered and licensed subsidiaries to guarantee any security issued by, and to hypothecate their assets to secure the payment or performance of any obligations evidenced by a security issued by, Mandalay or an affiliate in a public offering under the shelf registration. The shelf approval also includes approval to place restrictions upon the transfer of and enter into agreements not to encumber the equity securities of the licensed subsidiaries, which we refer to as "stock restrictions." The shelf approval, however, may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada State Gaming Control Board. The shelf approval does not constitute a finding, recommendation or approval of the Nevada Gaming Authorities as to the accuracy or adequacy of the prospectus or other disclosure document by which securities are offered or the investment merits of such securities.

A person must obtain prior approval of the Nevada Gaming Commission with respect to a change in control in Mandalay through:

•: merger;
•: consolidation;
•: stock or asset acquisitions;
•: management or consulting agreements; or
•: any act or conduct by a person whereby the person obtains control of Mandalay.

Entities seeking to acquire control of a registered publicly traded corporation must satisfy the Nevada State Gaming Control Board and Nevada Gaming Commission in a variety of stringent standards before assuming control of the registered corporation. The Nevada Gaming 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 relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licenses, and registered publicly-traded corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Gaming Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to:

•: assure the financial stability of corporate gaming operators and their affiliates;
•: preserve the beneficial aspects of conducting business in the corporate form; and

•: promote a neutral environment for the orderly governance of corporate affairs.

Approvals may be required from the Nevada Gaming Commission before Mandalay can make exceptional repurchases of voting securities above their current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by our board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control of Mandalay.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the licensed subsidiaries respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either:

•: a percentage of the gross revenues received;
•: the number of gaming devices operated; or
•: the number of table games operated.

A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling or serving of food or refreshments or the selling of merchandise. Nevada corporate licensees that hold a license as an operator of a slot machine route, or a manufacturer's or distributor's license, also pay fees and taxes to the State of Nevada. The licensed subsidiaries currently pay monthly fees to the Nevada Gaming Commission equal to a maximum of 6.25% of gross revenues.

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with those persons (collectively, "licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada State Gaming Control Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada State Gaming Control Board of the licensee's participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Gaming Commission. Thereafter, licensees are required to comply with the reporting requirements imposed by the Nevada Gaming Control Act. A licensee is also subject to disciplinary action by the Nevada Gaming Commission if it:

•: knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation;
•: fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations;
•: engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or
•: employs, contracts with or associates with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.

The sale of alcoholic beverages at establishments operated by a licensed subsidiary is subject to licensing, control and regulation by applicable local regulatory agencies. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any license, and any disciplinary action could, and revocation would, have a material adverse affect upon the operations of the licensed subsidiary.

Mississippi Gaming Laws

Mandalay conducts its Mississippi gaming operations through a Mississippi subsidiary, Circus Circus Mississippi, Inc. ("CCMI"), which owns and operates the Gold Strike Casino Resort in Tunica

County, Mississippi. The ownership and operation of casino facilities in Mississippi are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission and the Mississippi State Tax Commission.

The Mississippi Gaming Control Act, which legalized dockside casino gaming in Mississippi, was enacted on June 29, 1990. Although not identical, the Mississippi Gaming Control Act is similar to the Nevada Gaming Control Act. Effective October 29, 1991, the Mississippi Gaming Commission adopted regulations in furtherance of the Mississippi Gaming Control Act (the "regulations"), which are also similar in many respects to the Nevada gaming regulations.

The laws, regulations and supervisory procedures of Mississippi and the Mississippi Gaming Commission seek to:

•: prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity;
•: establish and maintain responsible accounting practices and procedures;
•: maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and making periodic reports to the Mississippi Gaming Commission;
•: prevent cheating and fraudulent practices;
•: provide a source of state and local revenues through taxation and licensing fees; and
•: ensure that gaming licensees, to the extent practicable, employ Mississippi residents.

The regulations are subject to amendment and interpretation by the Mississippi Gaming Commission. Changes in Mississippi law or the regulations or the Mississippi Gaming Commission's interpretations thereof may limit or otherwise materially affect the types of gaming that may be conducted, and could have a material adverse affect on Mandalay and CCMI's Mississippi gaming operations.

The Mississippi Gaming Control Act provides for legalized dockside gaming at the discretion of the 14 counties that either border the Gulf Coast or the Mississippi River, but only if the voters in these counties have not voted to prohibit gaming in that county. As of April 1, 2002, dockside gaming was permissible in nine of the 14 eligible counties in the state and gaming operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren and Washington counties. Under Mississippi law, gaming vessels must be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River, or in the waters of the State of Mississippi lying south of the state in eligible counties along the Mississippi Gulf Coast. The law permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. There are no limitations on the number of gaming licenses which may be issued in Mississippi. The legal age for gaming in Mississippi is 21.

Mandalay and its Mississippi licensee subsidiary CCMI are subject to the licensing and regulatory control of the Mississippi Gaming Commission. Mandalay is registered under the Mississippi Gaming Control Act as a publicly-traded corporation of CCMI and is required to periodically submit detailed financial, operating and other reports to the Mississippi Gaming Commission and furnish any other information which the Mississippi Gaming Commission may require. If we are unable to satisfy the registration requirements of the Mississippi Gaming Control Act, Mandalay and CCMI cannot own or operate gaming facilities in Mississippi. CCMI also is required to periodically submit detailed financial, operating and other reports to the Mississippi Gaming Commission and the Mississippi State Tax Commission and to furnish any other information required thereby.

CCMI must maintain a gaming license from the Mississippi Gaming Commission to operate a casino in Mississippi. Gaming licenses require the periodic payment of fees and taxes and are not transferable. Gaming licenses are issued for a maximum term of three years and must be renewed periodically thereafter. CCMI received its Mississippi gaming license on August 18, 1994 and renewals on August 19, 1996, August 20, 1998 and August 21, 2000. No person may become a stockholder of or receive any percentage of profits from a licensed subsidiary of a holding company without first obtaining licenses and approvals from the Mississippi Gaming Commission.

Certain of Mandalay's officers, directors and employees and the officers, directors and key employees of CCMI who are actively and directly engaged in the administration or supervision of gaming in Mississippi must be found suitable or be licensed by the Mississippi Gaming Commission. Mandalay believes it and CCMI have applied for all necessary findings of suitability with respect to these persons, although the Mississippi Gaming Commission, in its discretion, may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with Mandalay or CCMI may be required to be found suitable, in which case those persons must pay the costs and fees associated with the investigation. A finding of suitability requires submission of detailed personal and financial information followed by a thorough investigation. There can be no assurance that a person who is subject to a finding of suitability will be found suitable by the Mississippi Gaming Commission. The Mississippi Gaming Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Findings of suitability must be periodically renewed.

Changes in certain licensed positions must be reported to the Mississippi Gaming Commission. In addition to its authority to deny an application for a finding of suitability, the Mississippi Gaming Commission has jurisdiction to disapprove a change in a licensed position. The Mississippi Gaming Commission has the power to require Mandalay and CCMI to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in their capacities.

Employees associated with gaming must obtain work permits that are subject to immediate suspension. The Mississippi Gaming Commission will refuse to issue a work permit to a person convicted of a felony and it may refuse to issue a work permit to a gaming employee if the employee has committed various misdemeanors or knowingly violated the Mississippi Gaming Control Act or for any other reasonable cause.

At any time, the Mississippi Gaming Commission has the power to investigate and require a finding of suitability of any of Mandalay's record or beneficial stockholders, regardless of the percentage of ownership. Mississippi law requires any person who acquires more than 5% of the common stock of a publicly-traded corporation registered with the Mississippi Gaming Commission to report the acquisition to the Mississippi Gaming Commission, and that person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than 10% of the common stock of such a company, as reported to the Mississippi Gaming Commission, must apply for a finding of suitability by the Mississippi Gaming Commission and must pay the costs and fees that the Mississippi Gaming Commission incurs in conducting the investigation. The Mississippi Gaming Commission has generally exercised its discretion to require a finding of suitability of any beneficial owner of more than 5% of a registered public or private company's common stock. However, the Mississippi Gaming Commission has adopted a policy that may permit institutional investors to own beneficially up to 15% of a registered public or private company's common stock without a finding of suitability.

Under certain circumstances, an "institutional investor," as defined by the Mississippi Gaming Commission's Policy on Findings of Suitability of Institutional Shareholders (adopted January 20, 2000 and amended June 21, 2001), which acquires more than 10% but not more than 15% of a registered

public or private company's voting securities, may apply to the Executive Director of the Mississippi Gaming Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered public or private company, any change in the registered public or private company's corporate charter, bylaws, management, policies or operations of the registered public or private company or any of its gaming affiliates, or any other action which the Mississippi Gaming Commission finds to be inconsistent with holding the registered public or private company's voting securities for investment purposes only. Activities that are not deemed to be inconsistent with holding voting securities for investment purposes only include:

•: voting, directly or indirectly through the delivery of a proxy furnished by the board of directors, on all matters voted upon by the holders of such voting securities;
•: serving as a member of any committee of creditors or security holders;
•: nominating any candidate for election or appointment to the board of directors in connection with a debt restructuring;
•: accepting appointment or election (or having a representative accept appointment or election) as a member of the board of directors in connection with a debt restructuring and serving in that capacity until the conclusion of the member's term;
•: making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and
•: such other activities as the Mississippi Gaming Commission may determine to be consistent with such investment intent.

If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The Mississippi Gaming Commission may at any time dissolve, suspend, condition, limit or restrict a finding of suitability to own Mandalay's equity interests for any cause it deems reasonable.

Mandalay may be required to disclose to the Mississippi Gaming Commission upon request the identities of the holders of any debt or other securities. In addition, under the Mississippi Gaming Control Act the Mississippi Gaming Commission may, in its discretion:

•: require holders of debt securities of registered corporations to file applications;
•: investigate the holders; and
•: require the holders to be found suitable to own the debt securities.

Although the Mississippi Gaming Commission generally does not require the individual holders of obligations such as notes to be investigated and found suitable, the Mississippi Gaming Commission retains the discretion to do so for any reason, including but not limited to a default, or where the holder of the debt instrument exercises a material influence over the gaming operations of the entity in question. Any holder of debt or equity securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Gaming Commission in connection with the investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Mississippi Gaming Commission may be found unsuitable. Any person

found unsuitable and who holds, directly or indirectly, any beneficial ownership of Mandalay's securities beyond the time that the Mississippi Gaming Commission prescribes, may be guilty of a misdemeanor. Mandalay is subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder, a holder of debt securities or to have any other relationship with Mandalay or CCMI, Mandalay:

•: pays the unsuitable person any dividend, interest or other distribution whatsoever;
•: recognizes the exercise, directly or indirectly, of any voting rights conferred through such securities held by the unsuitable person;
•: pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in limited and specific circumstances;
•: makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction; or
•: fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value.

CCMI must maintain in Mississippi a current ledger with respect to the ownership of its equity securities and Mandalay must maintain in Mississippi a current list of its stockholders which must reflect the record ownership of each outstanding share of any equity security issued by Mandalay. The ledger and stockholder lists must be available for inspection by the Mississippi Gaming Commission at any time. If any of Mandalay's securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Gaming Commission. A failure to make that disclosure may be grounds for finding the record holder unsuitable. Mandalay must also render maximum assistance in determining the identity of the beneficial owner.

The Mississippi Gaming Control Act requires that the certificates representing securities of a registered publicly-traded corporation bear a legend to the general effect that the securities are subject to the Mississippi Gaming Control Act and the regulations of the Mississippi Gaming Commission. The Mississippi Gaming Commission has granted Mandalay a waiver of this legend requirement. The Mississippi Gaming Commission has the power to impose additional restrictions on Mandalay and the holders of its securities at any time.

Substantially all loans, leases, sales of securities and similar financing transactions by a licensed gaming subsidiary must be reported to or approved by the Mississippi Gaming Commission. A licensed gaming subsidiary may not make a public offering of its securities, but may pledge or mortgage casino facilities if it obtains the prior approval of the Mississippi Gaming Commission. Mandalay may not make a public offering of its securities without the prior approval of the Mississippi Gaming Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for those purposes. The approval, if given, does not constitute a recommendation or approval of the accuracy or adequacy of the prospectus or the investment merits of the securities subject to the offering. On February 18, 2002, the Mississippi Gaming Commission granted Mandalay a waiver of the prior approval requirement for its securities offerings for a period of two years, subject to certain conditions. The waiver may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Executive Director of the Mississippi Gaming Commission.

Under the regulations of the Mississippi Gaming Commission, CCMI may not guarantee a security issued by Mandalay pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by Mandalay, without the prior

approval of the Mississippi Gaming Commission. Similarly, Mandalay may not pledge the stock or other ownership interests of CCMI, nor may the pledgee of these ownership interests foreclose on the pledge, without the prior approval of the Mississippi Gaming Commission. Moreover, restrictions on the transfer of an equity security issued by CCMI and agreements not to encumber such securities granted by Mandalay are ineffective without the prior approval of the Mississippi Gaming Commission. The waiver of the prior approval requirement for Mandalay's securities offerings received from the Mississippi Gaming Commission on February 18, 2002 includes a waiver of the prior approval requirement for such guarantees, pledges and restrictions of CCMI, subject to certain conditions.

Mandalay cannot change its control through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover without the prior approval of the Mississippi Gaming Commission. The Mississippi Gaming 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 relating to the transaction.

The Mississippi Legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Mississippi and corporations whose stock is publicly-traded that are affiliated with those licensees, may be injurious to stable and productive corporate gaming. The Mississippi Gaming Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Mississippi's gaming industry and to further Mississippi's policy to:

•: assure the financial stability of corporate gaming operators and their affiliates;
•: preserve the beneficial aspects of conducting business in the corporate form; and
•: promote a neutral environment for the orderly governance of corporate affairs.

Mandalay may be required to obtain approval from the Mississippi Gaming Commission before it may make exceptional repurchases of voting securities in excess of the current market price of its common stock (commonly called "greenmail") or before it may consummate a corporate acquisition opposed by management. The regulations will also require prior approval by the Mississippi Gaming Commission if Mandalay adopts a plan of recapitalization proposed by its board of directors opposing a tender offer made directly to the stockholders for the purpose of acquiring control of Mandalay.

Neither Mandalay nor CCMI may engage in gaming activities in Mississippi while Mandalay, CCMI and/or persons found suitable to be associated with the gaming license of CCMI conduct gaming operations outside of Mississippi without approval of the Mississippi Gaming Commission. The Mississippi Gaming Commission may require means for it to have access to information concerning Mandalay's and Mandalay's affiliates' out-of-state gaming operations. Mandalay received waivers of foreign gaming approval from the Mississippi Gaming Commission for the conduct of gaming operations in Nevada, Indiana, Louisiana, Illinois, New Jersey, Michigan and Ontario, Canada, and may be required to obtain the approval or a waiver of such approval from the Mississippi Gaming Commission before engaging in any additional future gaming operations outside of Mississippi.

If the Mississippi Gaming Commission decides that a licensed gaming subsidiary violated a gaming law or regulation, the Mississippi Gaming Commission could limit, condition, suspend or revoke the license of the subsidiary. In addition, we, the licensed subsidiary and the persons involved could be subject to substantial fines for each separate violation. A violation under any of Mandalay's other operating subsidiaries' gaming licenses may be deemed a violation of CCMI's gaming license. Because of a violation, the Mississippi Gaming Commission could attempt to appoint a supervisor to operate the casino facilities. Limitation, conditioning or suspension of CCMI's gaming license or Mandalay's registration as a publicly-traded corporation of CCMI, or the appointment of a supervisor could, and revocation of any gaming license or registration would, materially adversely affect Mandalay's Mississippi gaming operations.

A licensed gaming subsidiary must pay license fees and taxes, computed in various ways depending on the type of gaming involved, to the State of Mississippi and to the county or city in which the licensed gaming subsidiary conducts operations. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon:

•: a percentage of the gross gaming revenues received by the casino operation;
•: the number of slot machines operated by the casino; and
•: the number of table games operated by the casino.

The license fee payable to the State of Mississippi is based upon "gaming receipts," generally defined as gross receipts less payouts to customers as winnings, and equals:

•: 4% of gaming receipts of $50,000 or less per month;
•: 6% of gaming receipts over $50,000 and less than $134,000 per month; and
•: 8% of gaming receipts over $134,000 per month.

These license fees are allowed as a credit against our Mississippi income tax liability for the year paid. The gross revenue fee imposed by the Mississippi cities and counties in which casino operations are located is in addition to the fees payable to the State of Mississippi and equals approximately 4% of the gaming receipts.

The Mississippi Gaming Commission adopted a regulation in 1994 requiring as a condition of licensure or license renewal that a gaming establishment's plan include a 500-car parking facility in close proximity to the casino complex and infrastructure facilities which will amount to at least 25% of the casino cost. Infrastructure facilities are defined in the regulation to include a hotel with at least 250 rooms, theme park, golf course and other similar facilities. With the opening of its resort hotel and other amenities in 1998, CCMI is in compliance with this requirement. On January 21, 1999, the Mississippi Gaming Commission adopted an amendment to this regulation which increased the infrastructure requirement to 100% from the existing 25%; however, the regulation grandfathers existing licensees and applies only to new casino projects and casinos that are not operating at the time of acquisition or purchase, and would therefore not apply to CCMI.

Both the local jurisdiction and the Alcoholic Beverage Control Division of the Mississippi State Tax Commission license, control and regulate the sale of alcoholic beverages by CCMI. The Gold Strike Casino Resort owned and operated by CCMI is in an area designated as a special resort area, which allows casinos located therein to serve alcoholic beverages on a 24-hour basis. The Alcoholic Beverage Control Division requires that the key officers and managers of Mandalay and CCMI and all owners of more than 5% of CCMI's equity submit detailed personal, and in some instances, financial information to the Alcoholic Beverage Control Division and be investigated and licensed. All such licenses are non-transferable. The Alcoholic Beverage Control Division must approve changes in key positions. The Alcohol Beverage Control Division has the full power to limit, condition, suspend or revoke any license for the service of alcoholic beverages or to place a licensee on probation with or without conditions. Any disciplinary action could, and revocation would, have a material adverse affect upon the casino's operations.

Illinois Gaming Laws

We are subject to the jurisdiction of the Illinois gaming authorities as a result of our 50% interest in Grand Victoria Riverboat Casino based in Elgin, Illinois.

In February 1990, the State of Illinois legalized riverboat gambling. The Illinois Riverboat Gambling Act (the "Illinois Act") authorizes the five-member Illinois Gaming Board (the "Illinois Board") to issue up to ten riverboat gaming owners' licenses on navigable streams within or forming a

boundary of the State of Illinois except for Lake Michigan and any waterway in Cook County, which includes Chicago. Pursuant to the initial Illinois Act, a licensed owner who holds greater than a 10% interest in one riverboat operation, could hold no more than a 10% interest in any other riverboat operation. In addition, the initial Illinois Act restricted the location of certain of the ten owners' licenses. Four of the licenses were to be located on the Mississippi River, one license was to be at a location on the Illinois River south of Marshall County and one license had to be located on the Des Plaines River in Will County. The remaining licenses were not restricted as to location. Currently, nine owner's licenses are in operation in Alton, Aurora, East Peoria, East St. Louis, Elgin, Metropolis, Rock Island and two licenses in Joliet. The tenth license, which was initially granted to an operator in East Dubuque, was not renewed by the Illinois Board and has been the subject of on-going litigation.

Furthermore, under the initial Illinois Act, no gambling could be conducted while a riverboat was docked. A gambling excursion could last no more than four hours, and a gaming excursion was deemed to have started when the first passenger boarded a riverboat. Gaming could continue during passenger boarding for a period of up to 30 minutes. Gaming was also allowed for a period of up to 30 minutes after the gangplank or its equivalent was lowered, thereby allowing passengers to exit the riverboat. During the 30-minute exit time period, new passengers were not allowed to board the riverboat. Although riverboats were mandated to cruise, there were certain exceptions. If a riverboat captain reasonably determined that either it was unsafe to transport passengers on the waterway due to inclement weather or the riverboat had been rendered temporarily inoperable by unforeseeable mechanical or structural difficulties or river icing, the riverboat could remain dockside or return to the dock. In those situations, a gaming excursion could begin or continue while the gangplank or its equivalent was raised and remained raised, in which event the riverboat was not considered docked. If a gaming excursion had to begin or continue with the gangplank or its equivalent raised, and the riverboat did not leave the dock, entry of new patrons on to the riverboat was prohibited until the completion of the excursion.

In June of 1999, amendments to the Illinois Act were passed by the legislature and signed into law by the Governor. The amended Illinois Act redefined the conduct of gaming in the state. Pursuant to the amended Illinois Act, riverboats can conduct gambling without cruising and passengers can enter and leave a riverboat at any time. In addition, riverboats may now be located upon any water within Illinois and not just navigable waterways. There is no longer any prohibition of a riverboat being located in Cook County. Riverboats are now defined as self-propelled excursion boats or permanently moored barges. The amended Illinois Act requires that only three, rather than four owner's licenses, be located on the Mississippi River. The 10% ownership prohibition has also been removed. Therefore, subject to certain Illinois Board rules, individuals or entities could own more than one riverboat operation.

The amended Illinois Act also allows for the relocation of a riverboat home dock. A licensee that was not conducting riverboat gambling on January 1, 1998, may apply to the Illinois Board for renewal and approval of relocation to a new home dock and the Illinois Board shall grant the application and approval of the new home dock upon the licensee providing to the Illinois Board authorization from the new dockside community. Pursuant to the amended Illinois Act, the former owner and operator of the East Dubuque riverboat has applied for renewal of its license and to relocate its operation to Rosemont, Illinois. The Illinois Board recently voted to deny this renewal application. Pursuant to Illinois Board rules, this entity filed a Request for Hearing, thereby challenging the Illinois Board's action. Therefore, this license may be the subject of on-going litigation. Any licensee that relocates in accordance with the provisions of the amended Illinois Act, must attain a level of at least 20% minority ownership of such a gaming operation.

The constitutionality of the amended Illinois Act was challenged. The lawsuit was dismissed because the court determined that the plaintiff lacked standing to challenge the amended act. The Plaintiff has appealed this decision. Because there is no assurance that the circuit court decision will be

affirmed on appeal. If there is on-going litigation, there is no assurance that the amended Illinois Act will be upheld as constitutional. If the amended Illinois Act is deemed unconstitutional, all of the new provisions would no longer be in effect. Specifically, in that situation, riverboats would have to return to cruising in order to conduct gaming.

The Illinois Act strictly regulates the facilities, persons, associations and practices related to gaming operations. The Illinois Act grants the Illinois Board specific powers and duties, and all other powers necessary and proper to fully and effectively execute the Illinois Act for the purpose of administering, regulating and enforcing the system of riverboat gaming. The Illinois Board has authority over every person, association, corporation, partnership and trust involved in riverboat gaming operations in the State of Illinois.

The Illinois Act requires the owner of a riverboat gaming operation to hold an owner's license issued by the Illinois Board. Each owner's license permits the holder to own up to two riverboats, however, gaming participants are limited to 1,200 for any owner's license. The number of gaming participants will be determined by the number of gaming positions available. Gaming positions are counted as follows:

•: electronic gaming devices positions will be determined as 90% of the total number of devices available for play;
•: craps tables will be counted as having ten gaming positions; and
•: games utilizing live gaming devices, except for craps, will be counted as having five gaming positions.

Each owner's license initially runs for a period of three years. Thereafter, the license must be renewed annually. Under the amended Illinois Act, the Board may renew an owner's license for up to four years. An owner licensee is eligible for renewal upon payment of the applicable fee and a determination by the Illinois Board that the licensee continues to meet all of the requirements of the Illinois Act and Illinois Board rules. The owner's license for Grand Victoria Riverboat Casino was issued in October 1994 and was valid for three years. Since that time, the license has been renewed annually, and in October 2000, the license was renewed for four years. An ownership interest in an owner's license may not be transferred or pledged as collateral without the prior approval of the Illinois Board.

Pursuant to the amended Illinois Act, which lifted the 10% ownership prohibition, the Illinois Board established certain rules to effectuate this statutory change. In deciding whether to approve direct or indirect ownership or control of an owner's license, the Illinois Board shall consider the impact of any economic concentration of the ownership or control. No direct or indirect ownership or control may be approved which will result in undue economic concentration of the ownership of a riverboat gambling operation in Illinois. Undue economic concentration means that a person or entity would have actual or potential domination of riverboat gambling in Illinois sufficient to:

•: substantially impede or suppress competition among holders of owner's licenses;
•: adversely impact the economic stability of the riverboat casino industry in Illinois; or
•: negatively impact the purposes of the Illinois Act, including tourism, economic development, benefits to local communities and state and local revenues.

The Illinois Board will consider the following criteria in determining whether the approval of the issuance, transfer or holding of a license will create undue economic concentration:

•: percentage share of the market presently owned or controlled by the person or entity;

•: estimated increase in the market share if the person or entity is approved to hold the owner's license;
•: relative position of other persons or entities that own or control owner's licenses in Illinois;
•: current and projected financial condition of the riverboat gaming industry;
•: current market conditions, including proximity and level of competition, consumer demand, market concentration and any other relevant characteristics of the market;
•: whether the license to be approved has separate organizational structures or other independent obligations;
•: potential impact on the projected future growth and development of the riverboat gambling industry, the local communities in which licenses are located and the State of Illinois;
•: barriers to entry into the riverboat gambling industry and if the approval of the license will operate as a barrier to new companies and individuals desiring to enter the market;
•: whether the approval of the license is likely to result in enhancing the quality and customer appeal of products and services offered by riverboat casinos in order to maintain or increase their respective market shares;
•: whether a restriction on the approval of the additional license is necessary in order to encourage and preserve competition in casino operations; and
•: any other relevant information.

The Illinois Act does not limit the maximum bet or per patron loss. Minimum and maximum wagers on games are set by the owner licensee. Wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager and wagers may only be received from a person present on the riverboat. With respect to electronic gaming devices, the payout percentage may not be less than 80% nor more than 100%.

An admission tax is imposed on the owner of a riverboat operation. Under the amended Illinois Act, a $2.00 admission tax is imposed for each admission to a riverboat casino. Additionally, a wagering tax is imposed on the adjusted gross receipts, as defined in the Illinois Act, of a riverboat operation. As of January 1, 1998, the wagering tax is as follows:

•: 15% of adjusted gross receipts up to and including $25,000,000;
•: 20% of adjusted gross receipts in excess of $25,000,000 but not exceeding $50,000,000;
•: 25% of adjusted gross receipts in excess of $50,000,000 but not exceeding $75,000,000;
•: 30% of adjusted gross receipts in excess of $75,000,000 but not exceeding $100,000,000; and
•: 35% of adjusted gross receipts in excess of $100,000,000.

The owner licensee is required, on a daily basis, to wire the wagering tax payment to the Illinois Board.

In addition to owner's licenses, the Illinois Board also requires licensing for all vendors of gaming supplies and equipment and for all employees of a riverboat gaming operation. The Illinois Board is authorized to conduct investigations into the conduct of gaming and into alleged violations of the Illinois Act and the Illinois Board rules. Employees and agents of the Illinois Board have access to and may inspect any facilities relating to the riverboat gaming operation.

A holder of any license is subject to imposition of fines, suspension or revocation of such license, or other action for any act or failure to act by himself or his agents or employees, that is injurious to the public health, safety, morals, good order and general welfare of the people of the State of Illinois,

or that would discredit or tend to discredit the Illinois gaming industry or the State of Illinois. Any riverboat operations not conducted in compliance with the Illinois Act may constitute an illegal gaming place and consequently may be subject to criminal penalties, including possible seizure, confiscation and destruction of illegal gaming devices and seizure and sale of riverboats and dock facilities to pay any unsatisfied judgment that may be recovered and any unsatisfied fine that may be levied. The Illinois Act also provides for civil penalties, equal to the amount of gross receipts derived from wagering on the gaming, whether unauthorized or authorized, conducted on the day of any violation. The Illinois Board may revoke or suspend licenses, as the Illinois Board may see fit and in compliance with applicable laws of the State of Illinois regarding administrative procedures and may suspend an owner's license, without notice or hearing, upon a determination that the safety or health of patrons or employees is jeopardized by continuing a riverboat's operation. The suspension may remain in effect until the Illinois Board determines that the cause for suspension has been abated and it may revoke the owner's license upon a determination that the owner has not made satisfactory progress toward abating the hazard.

If the Illinois Board has suspended, revoked or refused to renew the license of an owner or if a riverboat gambling operation is closing and the owner is voluntarily surrendering its owner's license, the Illinois Board may petition the local circuit court in which the riverboat is situated for appointment of a receiver. The circuit court shall have sole jurisdiction over any and all issues pertaining to the appointment of a receiver. The Illinois Board shall specify the specific powers, duties and limitations for the receiver, including but not limited to the authority to:

•: hire, fire, promote and discipline personnel and retain outside employees or consultants;
•: take possession of any and all property, including but not limited to its books, records, papers;
•: preserve and/or dispose of any and all property;
•: continue and direct the gaming operations under the monitoring of the Board;
•: discontinue and dissolve the operation;
•: enter into and cancel contracts;
•: borrow money and pledge, mortgage or otherwise encumber the property;
•: pay all secured and unsecured obligations;
•: institute or define actions by or on behalf of the holder of an Owner's license; and
•: distribute earnings derived from gaming operations in the same manner as admission wagering taxes are distributed under Sections 12, 13 of the Riverboat Gambling Act.

The Illinois Board shall submit at least three nominees to the court. The nominees may be individuals or entities selected from an Illinois Board approved list of pre-qualified receivers who meet the same criteria for a finding of preliminary suitability for licensure under Illinois Board Rules, Sections 3000.230(c)(2)(B) and (C). In the event that the Illinois Board seeks the appointment of a receiver on a emergency basis, the Illinois Board shall issue a Temporary Operating Permit to the receiver appointed by the court. A receiver, upon appointment by the court, shall before assuming his or her duties, execute and post the same bond as an owner's licensee pursuant to Section 10 of the Illinois Act.

The receiver shall function as an independent contractor, subject to the direction of the court. However, the receiver shall also provide to the Illinois Board regular reports and provide any information deemed necessary for the Illinois Board to ascertain the receiver's compliance with all applicable rules and laws. From time to time, the Illinois Board may, at its sole discretion, report to the court on the receiver's level of compliance and any other information deemed appropriate for disclosure to the court. The term and compensation of the receiver shall be set by the court. The

receiver shall provide to the court and the Illinois Board at least 30 days written notice of any intent to withdraw from the appointment or to seek modification of the appointment. Except as otherwise provided by action to the Illinois Board the gaming operation shall be deemed a licensed operation subject to all rules of the Illinois Board during the tenure of any receivership

The Illinois Board requires that a "Key Person" of an owner licensee submit a Personal Disclosure or Business Entity Form and be investigated and approved by the Illinois Board. The Illinois Board shall certify for each applicant for or holder of an owner's license each position, individual or Business Entity that is to be approved by the Board and maintain suitability as a Key Person.

With respect to an applicant for or the holder of an owner's license, a Key Person shall include:

•: any Business Entity and any individual with an ownership interest or voting rights of more than 5% in the licensee or applicant and the trustee of any trust holding such ownership interest or voting rights;
•: the directors of the licensee or applicant and its chief executive officer, president and chief operating officer or their functional equivalents; and
•: all other individuals or Business Entities that, upon review of the applicant's or licensees Table of Organization, Ownership and Control the Board determines hold a position or a level of ownership, control or influence that is material to the regulatory concerns and obligations of the Illinois Board for the specified licensee or applicant.

In order to assist the Illinois Board in its determination of Key Persons, applicants for or holders of an owner's license must provide to the Illinois Board a Table of Organization, Ownership and Control (the "Table"). The Table must identify in sufficient detail the hierarchy of individuals and Business Entities that, through direct or indirect means, manage, own or control the interest and assets of the applicant or licensee holder. If a Business Entity identified in the Table is a publicly traded company, the following information must be provided in the Table:

•: the name and percentage of ownership interest of each individual or Business Entity with ownership of more than 5% of the voting shares of the entity, to the extent this information is known or contained in Schedule 13D or 13G SEC filings;
•: to the extent known, the names and percentage of interest of ownership of persons who are relatives of one another and who together (as individuals or through trusts) exercise control over or own more than 10% of the voting shares of the entity; and
•: any trust holding more than 5% ownership or voting interest in Mandalay, to the extent this information is known or contained in Schedule 13D or 13G SEC filings.

The Table may be disclosed under the Freedom of Information Act.

Each owner licensee must provide a means for the economic disassociation of a Key Person in the event such economic disassociation is required by an order of the Illinois Board. Based upon findings from an investigation into the character, reputation, experience, associations, business probity and financial integrity of a Key Person, the Illinois Board may enter an order upon the licensee or require the economic disassociation of the Key Person.

Furthermore, each applicant or owner licensee must disclose the identity of every person, association, trust or corporation having a greater than 1% direct or indirect pecuniary interest in an owner licensee or in the riverboat gaming operation with respect to which the license is sought. The Illinois Board may also require an applicant or owner licensee to disclose any other principal or investor and require the investigation and approval of these individuals.

The Illinois Board (unless the investor qualifies as an institutional investor) requires a Personal Disclosure Form or a Business Entity Form from any person or entity who or which, individually or in

association with others, acquires directly or indirectly, beneficial ownership of more than 5% of any class of voting securities or non-voting securities convertible into voting securities of a publicly-traded corporation which holds an ownership interest in the holder of an owner's license. If the Illinois Board denies an application for such a transfer and if no hearing is requested, the applicant for the transfer of ownership interest must promptly divest those shares in the publicly-traded parent corporation. The holder of an owner's license would not be able to distribute profits to a publicly-traded parent corporation until such shares have been divested. If a hearing is requested, the shares need not be divested and profits may be distributed to a publicly-held parent corporation pending the issuance of a final order from the Illinois Board.

An institutional investor that individually or jointly with others, cumulatively acquires, directly or indirectly, 5% or more of any class of voting securities of a publicly-traded licensee or a licensee's publicly-traded parent corporation shall, within no less than ten days after acquiring these securities, notify the Administrator of the Board of such ownership and shall provide any additional information as may be required. If an institutional investor (as specified above) acquires 10% or more of any class of voting securities of a publicly-traded licensee or a licensee's publicly-traded parent corporation it shall file an Institutional Investor Disclosure Form within 45 days after acquiring this level of ownership interest. The owner licensee shall notify the Administrator as soon as possible after it becomes aware that it or its parent is involved in an ownership acquisition by an institutional investor. The institutional investor also has an obligation to notify the Administrator of its ownership interest.

In addition to Institutional Investor Disclosure Forms, certain other forms may be required to be submitted to the Illinois Board. An owner-licensee must submit a Marketing Agent Form to the Illinois Board for each Marketing Agent with whom it intends to do business. A Marketing Agent is a person or entity, other than a junketeer or an employee of a riverboat gaming operation, who is compensated by the riverboat gaming operation in excess of $100 per patron per trip for identifying and recruiting patrons. Key Persons of owner-licensees must submit Trust Identification Forms for trusts, excluding land trusts, for which they are a grantor, trustee or beneficiary each time such a trust relationship is established, amended or terminated.

Applicants for and holders of an owner's license are required to obtain formal approval from the Illinois Board for changes in the following areas:

•: Key Persons;
•: type of entity;
•: equity and debt capitalization of the entity;
•: investors and/or debt holders;
•: source of funds;
•: applicant's economic development plan;
•: riverboat capacity or significant design change;
•: gaming positions;
•: anticipated economic impact; or
•: agreements, oral or written, relating to the acquisition or disposition of property (real or personal) of a value greater than $1 million.

A holder of an owner's license is allowed to make distributions to its stockholders only to the extent that the distribution would not impair the financial viability of the gaming operation. Factors to be considered by the licensee will include but not be limited to the following:

•: cash flow, casino cash and working capital requirements;

•: debt service requirements, obligations and covenants associated with financial instruments;
•: requirements for repairs and maintenance and capital improvements;
•: employment or economic development requirements of the Act; and
•: a licensee's financial projections.

The Illinois Board may waive any licensing requirement or procedure provided by rule if it determines that the waiver is in the best interests of the public and the gaming industry. Also, the Illinois Board may, from time to time, amend or change its rules.

From time to time, various proposals have been introduced in the Illinois legislature that, if enacted, would affect the taxation, regulation, operation or other aspects of the gaming industry or Mandalay. Some of this legislation, if enacted, could adversely affect the gaming industry or Mandalay. No assurance can be given whether such or similar legislation will be enacted.

Uncertainty exists regarding the Illinois gambling regulatory environment due to limited experience in interpreting the Illinois Act.

Michigan Gaming Laws

Mandalay is subject to regulation by the Michigan Gaming Control Board ("Michigan Board") pursuant to the Michigan Gaming Control and Revenue Act ("Michigan Act") as a result of ownership of 53.5% of Detroit Entertainment, L.L.C., a Michigan limited liability company, which operates MotorCity Casino.

The qualification standards established by the Michigan Act and Rules are very comprehensive. A burden of proof by "clear and convincing evidence" is placed upon the applicant. The focus of these standards is suitability as to:

•: character;
•: reputation;
•: integrity;
•: business probity;
•: experience;
•: ability;
•: financial ability and responsibility; and
•: any other criteria considered appropriate by the Michigan Board.

MotorCity Casino's casino license is a one-year license. The license will be renewed by the Michigan Board on an annual basis if the Michigan Board determines that MotorCity Casino continues to meet all requirements established by the Michigan Act and Rules. MotorCity Casino has timely filed its Casino License Annual Renewal Report with the Michigan Board. Action on the license renewal is currently pending before the Michigan Board. The Michigan Board staff has advised MotorCity Casino that its casino license remains in effect while the Michigan Board completes its normal and customary processing procedures for a casino license renewal. No assurances can be given regarding when the Michigan Board will act on the license renewal or what action the Michigan Board will take in connection with the license renewal.

The Michigan Act permits the licensing and operation of up to three casinos in any Michigan city that meets certain requirements. At the present time, the only city in Michigan that meets these requirements is Detroit. To date, three casino licenses have been issued.

The Michigan Board is composed of five persons. It has the authority to:

•: enforce the provisions of the Michigan Act;
•: license casinos in accordance with the provisions of the Michigan Act; and
•: regulate all aspects of the operation of casinos licensed by the Michigan Board.

The Michigan Board's jurisdiction extends to every person and business entity involved in casino gaming operations governed by the Michigan Act and Rules. The Michigan Act and Rules strictly regulate all aspects of the ownership and operation of casinos licensed under the Michigan Act. This includes regulation of:

•: all related buildings, facilities, bars, restaurants, hotels, cocktail lounges, retail establishments, arenas and rooms functionally or physically connected to the casino; and
•: any other facility located in the city of Detroit that is under the control of the casino licensee or an affiliated company.

Collectively, the Michigan Act calls all of these buildings, facilities and other amenities the "Casino Enterprise."

The Michigan Board, the Michigan Attorney General and the Michigan State Police have been assigned to investigate and inspect the casinos licensed under the Michigan Act. These employees have the right to inspect all facilities relating to the Casino Enterprise.

The Michigan Act and Rules require that "Key Persons" meet the requirements set forth in the Michigan Act and Rules. Key Persons include:

•: officers, directors, trustees, partners and proprietors of a casino licensee or an affiliate or holding company of a casino licensee that has control of a casino licensee;
•: a person that holds a combined direct, indirect or attributed debt or equity interest of more than 5% in a person that holds a casino license;
•: a person that holds a combined direct, indirect or attributed equity interest of more than 5% in a person that holds a casino license;
•: a managerial employee of an affiliate or holding company that has control of a person that holds a casino license; and
•: various management level employees of the casino licensee.

The Michigan Act defines "control" of a casino licensee as having greater than 15% direct or indirect pecuniary interest in the casino licensee. Mandalay has control of MotorCity Casino.

Key Persons are required to timely file and update qualification information with the Michigan Board and then be approved by the Michigan Board.

The Michigan Act and Rules require compliance with qualification standards for obtaining and retaining a direct or indirect ownership interest in a casino and for transferring an ownership interest in a casino. Owners are required to timely file and update information required to be submitted to the Michigan Board.

The Michigan Board can require compliance with the qualification and approval standards whenever the Michigan Board determines that it is in the best interests of the Michigan casino

regulatory process to do so regardless of the amount of direct or indirect beneficial ownership interest involved or the nature of the ownership interest.

The Michigan Act and Rules distinguish between shareholders of a privately owned company and shareholders of a publicly traded company for qualification purposes. Shareholders of a privately owned company who directly or indirectly beneficially own 1% or more of a casino licensee or casino license applicant must submit qualification information to the Michigan Board and be approved by the Michigan Board. Shareholders that own more than 5% of a publicly traded company that owns 1% or more of one of the Detroit casinos must submit and update qualification information to the Michigan Board. Mandalay owns more than 1% of MotorCity Casino and, therefore, each shareholder that owns more than 5% of the shares of Mandalay is subject to the qualification requirements established by the Michigan Act and Rules.

There are special rules for an "institutional investor" that has invested in a publicly traded company that owns 1% or more of a Detroit casino or a Michigan casino license applicant.

The Michigan Board is currently taking the position that an institutional investor that individually or, in association with others, directly or indirectly holds or acquires beneficial ownership of more than 5% of Mandalay must notify the Michigan Board of its interest in Mandalay within 10 business days after the institutional investor acquires more than a 5% interest in Mandalay or files a Form 13-D or 13-G with the SEC. The institutional investor may be required by the Michigan Board to supply additional information to the Michigan Board. The Michigan Board may require the institutional investor to be found suitable.

An institutional investor that individually or, in association with others, directly or indirectly holds or acquires beneficial ownership of more than a 5% interest but less than a 10% interest in Mandalay may request from the Michigan Board a waiver of the eligibility and suitability requirements if the institutional investor purchased the interest in Mandalay for investment purposes only and not for the purpose of influencing or affecting the affairs of Mandalay, MotorCity Casino or its affiliates. In order to obtain the waiver, the institutional investor must complete and file with the Michigan Board a Michigan Institutional Investor Waiver Form 206C.

An institutional investor that individually or, in association with others, directly or indirectly holds or acquires beneficial ownership of more than a 10% interest but not more than a 15% interest in Mandalay may request from the Michigan Board a waiver of the eligibility and suitability requirements if the institutional investor purchased the interest in Mandalay for investment purposes only and not for the purpose of influencing or affecting the affairs of Mandalay, MotorCity Casino or its affiliates. In order to obtain the waiver, the institutional investor must complete and file with the Michigan Board a Michigan Institutional Investor Waiver Form NON 206C. The Michigan Rules require that an institutional investor within these ownership parameters must disclose detailed information concerning the institutional investor.

An institutional investor that individually or, in association with others, directly or indirectly holds or acquires beneficial ownership of more than a 15% interest in Mandalay is required to file qualification information with the Michigan Board within 45 days after acquiring the interest and is required to meet qualification and approval standards.

The Michigan Act and Rules regulate an institutional investor owning debt securities of a casino licensee's affiliates. An institutional investor may be required to meet the Michigan Act's qualification standards if the institutional investor:

•: owns or acquires beneficial ownership of 10% or more of debt securities of a casino licensee's affiliate or affiliated company which are related in any way to the financing of the casino licensee; or

•: owns or acquires beneficial ownership of more than 50% of any issue of the outstanding debt of the casino licensee's affiliate or affiliated company.

An institutional investor that owns or acquires beneficial ownership of more than 5% but less than 10% of debt securities of a casino licensee's affiliate or affiliated company which are in any way related to the financing of the casino licensee may be granted a waiver of the eligibility and suitability requirements of the Michigan Act and Michigan Rules if:

•: the debt securities do not represent more than 20% of the outstanding debt of the casino licensee's affiliate or affiliated company; or
•: the debt securities represent not more than 50% of any issue of the outstanding debt of the casino licensee's affiliate or affiliated company; and
•: the debt securities are those of a publicly traded corporation and were purchased for investment purposes only.

The Michigan Act and Rules regulate the transfer of a direct or indirect interest in a casino licensee. The Michigan Board must be notified in advance of any proposed transfer of a direct or indirect interest. If the proposed transfer involves more than a 1% direct or indirect interest, the proposed transfer may not be consummated until the transfer has been approved by the Michigan Board. In all events, the parties proposing to engage in the transfer action should determine the applicable requirements of the Michigan Act and Rules before completing the transfer transaction.

Formal notice of certain events must be given to and approval obtained from the Michigan Board by the casino licensee or applicant and any of their affiliates or holding companies whenever any of the following events occur:

•: a change of a Key Person;
•: a change in entity;
•: a change in equity or debt capitalization of the entity;
•: a change in investors subject to the Michigan Act and Michigan Rules;
•: a change in debt holders subject to the Michigan Act and Michigan Rules;
•: a change in source of funds; or
•: related party transactions exceeding $250,000 in a 12-month period.

The Michigan Act declares that a person or entity that is required to meet the Michigan Act's suitability standards will not be eligible if any of the following circumstances exist:

•: the applicant has been convicted of a felony anywhere in the United States;
•: the applicant has been convicted of a misdemeanor involving gambling, theft, fraud or dishonesty or convicted of violation of a local ordinance involving gambling, theft, fraud or dishonesty that substantially corresponds to a misdemeanor;
•: the applicant has submitted an application that contains false information;
•: the applicant or affiliate owns more than a 10% ownership interest in any entity holding a casino license issued under the Michigan Act;
•: the applicant holds any elective office in the United States (with certain minor exceptions), is an employee of any gaming regulatory body in the United States or is employed by a governmental unit of the State of Michigan;

•: the Michigan Board concludes that the applicant lacks the requisite suitability as to integrity, moral character and reputation, personal and business probity, financial ability and experience, responsibility or means to develop, construct, operate or maintain the casino; or
•: the applicant fails to meet other criteria considered appropriate by the Michigan Board that are not arbitrary, capricious or contrary to the provisions of the Michigan Act.

The Michigan Act prohibits casino licensees and applicants and certain related persons from making contributions to candidates for state or local office in the State of Michigan and to committees supporting any such candidates during various periods, including periods prior to licensure. The political contribution restriction applies to casino license applicants, casino licensees and all of the following persons and entities:

•: any person or entity that holds at least a 1% interest in the casino licensee or Casino Enterprise;
•: any person who is an officer or managerial employee of the casino licensee or Casino Enterprise;
•: any person who is an officer of the person who holds at least a 1% interest in the casino licensee or Casino Enterprise; and
•: any person that is an independent committee of the casino licensee or Casino Enterprise.

The Michigan Act also applies this restriction to spouses, parents, children and spouses of children of persons holding an interest in the casino licensee or Casino Enterprise. However, the portion of the political contribution restriction relating to spouses, parents, children and spouses of children has been declared unconstitutional by Attorney General Frank Kelley in Attorney General Opinion No. 7002 issued on December 17, 1998 in those instances where the contribution is not a willful attempt to evade the political contribution restrictions contained in the Michigan Act.

The penalties for violation of the political contribution restriction includes fines, imprisonment or both.

If a shareholder who is required to submit qualification information to the Michigan Board is not approved by the Michigan Board, the shareholder must promptly dispose of all ownership interest in the shares.

If a person who seeks to acquire shares is a person who is required to submit qualification information to the Michigan Board and the person does not obtain approval for the acquisition from the Michigan Board, the person may not acquire the shares and must promptly dispose of all interest in the shares.

If a Key Person who is required to submit qualification information to the Michigan Board is not approved by the Michigan Board, the Key Person must promptly cease all involvement in the Michigan Casino Enterprise.

As required under the Michigan Act, MotorCity Casino has a Development Agreement with the City of Detroit, which is currently in effect. Over the course of our negotiations with the City regarding a permanent facility, which are currently ongoing, the term of the Development Agreement has been extended by a series of amendments, most recently from April 30, 2002 to June 15, 2002.

MotorCity Casino has constructed a temporary casino in accordance with the terms of the Development Agreement. This temporary casino opened on December 14, 1999. Under a plan agreed to by the City of Detroit development authorities but not yet approved by the Detroit City Council, we would expand our temporary facility into a permanent facility by adding hotel rooms, expanding our gaming areas, adding additional restaurants, retail space, convention space and other amenities. There can be no assurance that the Detroit City Council will approve the proposed plan, in which event the existing agreement to build a permanent casino at a different location would remain in effect.

The Development Agreement entered into between the City of Detroit and Detroit Entertainment, L.L.C. has numerous terms and conditions relating to the following:

•: the construction of the temporary and permanent casino;
•: the employment of Detroit residents, minorities and women to staff the operation of the temporary and permanent casinos; and
•: the use of Detroit based, minority and woman owned vendors and suppliers.

MotorCity Casino has agreed to exercise its reasonable best efforts to comply with vendor and supplier use and hiring goals. Failure to comply with the terms of the Development Agreement could adversely affect its casino license.

Michigan law requires that any person who holds a "Casino Interest" must file a registration form with the Michigan Secretary of State not later than 5 days after obtaining the Casino Interest. A person who violates this registration requirement for more than 30 days is subject to being charged with a misdemeanor and a fine of not more than $1,000. The Casino Interest registration requirement is completely separate and apart from the eligibility and qualification requirements established by the Michigan Act and Michigan Rules. A person holding a Casino Interest includes:

•: a person who holds at least a 1% interest in a casino licensee or a Casino Enterprise;
•: a person who is a partner, officer or key or managerial employee of the casino licensee or Casino Enterprise; and
•: a person who is an officer of the person who holds at least a 1% interest in the casino licensee or Casino Enterprise.

A "person" includes any individual and legal entity.

Michigan law also applies the "Casino Interest" registration requirement to the spouse and children of persons holding a Casino Interest. However, the Michigan Secretary of State has ruled that the "Casino Interest" registration requirement does not apply to spouses and children based upon Michigan Attorney General Opinion No. 7053 issued on May 3, 2000. Michigan Attorney General Opinion No. 7053 was issued based upon Michigan Attorney General Opinion No. 7002 issued on December 17, 1998, which declared the portion of the Michigan Act's political contribution restrictions unconstitutional as to spouses and children (among others) where the political contribution is not a willful attempt to evade the political contribution restrictions contained in the Michigan Act.

The Casino Interest Registration Form may be obtained from the Michigan Secretary of State in Lansing, Michigan.

The Michigan Act and Rules establish extensive requirements and procedures relating to all of the following:

•: operation of casino games;
•: ownership records;
•: reporting of transactions;
•: handling of money;
•: extending credit;
•: accounting and auditing;
•: internal control systems; and
•: compliance reporting.

The Michigan Act and Rules do not limit the maximum bet or per person loss. No person under the age of 21 years is permitted to wager in a casino licensed under the Michigan Act. MotorCity Casino may operate 24 hours a day, 7 days a week. MotorCity Casino is subject to regulation by the Michigan Liquor Control Commission. The Michigan Act subjects MotorCity Casino to five forms of gaming taxes and fees:

•: a nonrefundable license application fee of $50,000;
•: a $25,000 casino license fee, which is payable annually;
•: a wagering tax equal to 18% of adjusted gross receipts;
•: an annual municipal services fee in an amount equal to the greater of 1.25% of adjusted gross receipts or $4,000,000; and
•: the payment of all regulatory and enforcement costs, including compulsive gaming programs, casino related programs and activities, casino related services provided by the Michigan Attorney General and casino related expenses of the Michigan State Police up to a combined total annual maximum charge of $25,000,000 in the first year of casino operations for all casinos licensed under the Michigan Act. This maximum amount is adjusted annually by the Detroit Consumer Price Index.

No casino licensed under the Michigan Act is liable for the payment of more than ¹/3 of the total annual assessment. This fee is placed into a services fee fund. This service fee fund is prohibited from exceeding $65,000,000. If this service fee fund exceeds $65,000,000, any amount in excess of $65,000,000 must be credited towards the annual payments the casinos licensed under the Michigan Act are required to make to the service fee fund.

The five forms of fees and taxes listed above are in addition to the taxes, fees and assessments customarily paid by business entities in the State of Michigan and the City of Detroit.

The holder of a casino license issued under the Michigan Act is subject to a variety of penalties for violation of the Michigan Act or Rules. The penalties include, but are not necessarily limited to, the following:

•: monetary fines;
•: suspension of the casino license;
•: revocation of the casino license;
•: civil penalties of up to $10,000 or the amount of daily gross receipts derived from wagering on gaming on the day of the violation, whichever is greater;
•: criminal penalties;
•: seizure and/or destruction of gaming equipment;
•: seizure and/or sale of gaming operations;
•: imposition of a conservatorship; and
•: imposition of restrictions or conditions on gaming operations by the Michigan Board.

The Michigan Board is required to comply with the Michigan Act, the Michigan Rules, the Michigan Administrative Procedures Act and other applicable laws and regulations. The Michigan Board may suspend a casino operator's license, without notice or hearing, upon a determination that:

•: the safety or health of patrons or employees would be threatened by the continued operation of the casino; or

•: the action is necessary for the immediate preservation of the integrity of casino gaming, public peace, health, safety, morals, good order or general welfare.

The Michigan Board may waive any licensing requirement or procedures provided by the Michigan Rules provided that the waiver does not violate the Michigan Act. Any such waiver must be based upon a determination by the Michigan Board that the waiver is in the best interests of the public and the gaming industry.

The Michigan Board may amend or change the Michigan Rules provided that the amendment or change complies with the Michigan Act and other applicable Michigan law.

Uncertainty exists regarding the Michigan gaming regulatory environment due to the limited experience in interpreting the Michigan Act and the Michigan Rules. The Michigan Act and Michigan Rules are evolving pursuant to an ongoing regulatory, legislative and judicial process. Therefore, the Michigan Act and Michigan Rules are subject to and, in all probability will, change with the maturation of casino gaming regulated by the Michigan Act.

Various regulatory proposals have been and, in all likelihood, will continue to be discussed by the Detroit City Council concerning the regulation of casinos in the City of Detroit. Legislation proposed to or by the Detroit City Council, if enacted, could adversely affect the gaming industry, Detroit Entertainment, L.L.C. or Mandalay. No assurance can be given whether additional ordinances will be enacted and what effect such ordinances could have on the operation of casinos in the City of Detroit.

From time to time various proposals have been introduced in the Michigan legislature which relate to casino gaming in Detroit. Some of the proposals, if enacted, would affect the taxation, regulation, operation or other aspects of the gaming industry, Detroit Entertainment, L.L.C. or Mandalay. No assurance can be given whether additional legislation will be enacted and what effect such legislation could have on the operation of casinos in the City of Detroit.

If it is ultimately determined that either the Michigan Act or the Detroit ordinance is defective, this could result in the termination of the license to operate our temporary casino or otherwise adversely impact our ability to continue to operate that facility and could prevent or otherwise adversely impact our ability to construct, open or operate our proposed permanent hotel-casino in downtown Detroit. This may have an impact upon the validity of the Development Agreement entered into between the City of Detroit and Detroit Entertainment, L.L.C., and the casino license issued to Detroit Entertainment, L.L.C.

Litigation challenging the condemnation of real property by the City of Detroit for the permanent casino construction site near the Detroit Riverfront has been initiated. As a result of this litigation, 47 pending land condemnations initiated by the City of Detroit have been dismissed. The litigation surrounding the condemnation of land near the Detroit Riverfront for use in construction of the permanent casinos in the City of Detroit could substantially delay the construction of the permanent casino by Detroit Entertainment, L.L.C. The Mayor of Detroit has entered into negotiations with the three casino licensees, including MotorCity Casino, regarding placement of the permanent casinos. The Mayor of Detroit has proposed that MotorCity Casino be permitted to develop its permanent casino at or near the site of MotorCity Casino's temporary casino. This proposal must be approved by the Detroit City Council. No assurance can be given regarding what action, if any, the Detroit City Council will take regarding the Mayor of Detroit's proposal. In addition, no assurance can be given regarding the location of the permanent casino, the final cost for construction of the permanent casino or when, or whether, the permanent casino will be constructed.

Other Gaming Jurisdictions

We may expand our operations in the future to include gaming operations in jurisdictions other than those in which our activities and those of the joint ventures in which we participate are currently conducted. As a result, we and/or one or more joint ventures in which we participate may become subject to comprehensive gaming and other regulations in additional jurisdictions. Such regulations may be similar to, and could be more restrictive than, those currently applicable to us, our joint ventures and our officers, directors, employees and persons associated with us.

Other Laws and Regulations

Each of the casino hotels and the riverboat and dockside casinos described in this report is subject to extensive state and local regulations and, on a periodic basis, must obtain various other licenses and permits, including those required to sell alcoholic beverages. We believe that we and the joint ventures in which we participate have obtained all required licenses and permits and that our businesses and those of our joint ventures are conducted in substantial compliance with applicable laws.

The National Gambling Impact Study Commission's Recommendations

On April 28, 1999, the National Gambling Impact Study Commission established by the United States Congress to conduct a comprehensive study of the social and economic impact of gaming in the United States voted to recommend that the expansion of gambling be curtailed. In June 1999, the National Commission issued a final report of its findings and conclusions, together with recommendations for legislative and administrative actions, including a recommendation to restrict legal gaming to those at least 21 years of age. Any additional regulation of the gaming industry which may result from the National Commission's report may have an adverse affect on the gaming industry, including Mandalay.

Internal Revenue Service Regulations

The Internal Revenue Service requires operators of casinos located in the United States to file information returns for U.S. citizens, including names and addresses of winners, for keno, bingo and slot machine winnings in excess of stipulated amounts. The Internal Revenue Service also requires operators to withhold taxes on some keno, bingo and slot machine winnings of nonresident aliens. We are unable to predict the extent, to which these requirements, if extended, might impede or otherwise adversely affect operations of, and/or income from, the other games.

Regulations adopted by the Financial Crimes Enforcement Network of the Treasury Department and the gaming regulatory authorities in some of the jurisdictions in which we operate casinos, or in which we may apply for licensing to operate a casino, require the reporting of currency transactions in excess of $10,000 occurring within a gaming day, including identification of the patron by name and social security number. This reporting obligation began in May 1985 and may have resulted in the loss of gaming revenues to jurisdictions outside the United States which are exempt from the ambit of these regulations.

Employees and Labor Relations

At January 31, 2002, we and the joint ventures in which we participate employed approximately 33,300 persons. As of January 31, 2002, approximately 42% of these employees were employed pursuant to the terms of collective bargaining agreements. The agreement with the Hotel Employees and Restaurant Employees International Union covering approximately 10,000 of our employees at our six Las Vegas Strip properties expires May 31, 2002, and a new agreement is currently being negotiated. The union's collective bargaining agreements with other major Las Vegas operators also expire May 31, 2002. The union has indicated that it is currently planning a strike authorization vote on May 15, 2002

that would authorize its negotiating committee to call a strike after the current contract expires (if the parties are not successful negotiating a new contract) without requiring a second vote by union members. There can be no assurances as to our ability to successfully negotiate a new contract to avoid a work stoppage. The last work stoppage experienced at any property we own or at any property owned by any joint venture in which we participate was an industry-wide strike in 1975. The contracts with our other major unions have remaining terms ranging from one to four years.

Certain states in which gaming has been legalized have established community commitment and similar laws or requirements which require that a specified percentage of employees of gaming ventures be residents of the community or state in which the gaming venture is located or meet certain other criteria. These laws could affect our ability to attract and retain qualified employees for gaming operations we or joint ventures in which we participate conduct outside Nevada.

Factors that May Affect Our Future Results

(Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

Certain information included in this report and other materials filed or to be filed by Mandalay with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us, including our 2002 Annual Report to Stockholders) contains or may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements can be identified by the fact that they do not relate strictly to historical or current facts. We have based these forward-looking statements on our current expectations about future events. These forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance and business, including:

•: statements relating to our business strategy;
•: our current and future development plans; and
•: statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan" or similar expressions.

Such statements include information relating to plans for future expansion and other business development activities as well as capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition. From time to time, oral or written forward-looking statements are also included in Mandalay's periodic reports on Forms 10-Q and 8-K, press releases and other materials released to the public.

Any or all of the forward-looking statements in this report, in Mandalay's Annual Report to Stockholders for fiscal 2002 and in any other public statements we make may turn out to be wrong. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this report, such as government regulation and the competitive environment, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in Mandalay's subsequent reports to the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K should be consulted. The following discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business includes factors we believe could cause our actual results to differ materially from expected and historical results. Other factors beyond those listed below

could also adversely affect us. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

•: As described under "Competition," we and the joint ventures in which we participate operate in a very competitive environment, particularly in Las Vegas. To the extent that hotel and/or casino capacity is expanded by others in one or more of the markets where we and/or our joint ventures operate, the increased competition could adversely impact our future operations.
•: Legalization of gaming in any additional jurisdictions from which our properties or those of one of our joint ventures draw their visitors, including jurisdictions near our joint venture properties located near Detroit, Michigan and Elgin, Illinois, or the establishment of new large-scale gaming operations on nearby Native American reservations, could adversely affect our operations and/or those of one or more of our joint ventures.
•: On March 7, 2000, California voters approved an amendment to the California constitution that gave Native American tribes in California the right to conduct gaming operations offering a limited number of slot machines and a range of house-banked card games. At this time, we cannot determine the future growth of Native American gaming in California or the impact of such growth on our Nevada operations and those of our Nevada joint ventures.
•: As discussed under "Regulation and Licensing," our gaming operations and the gaming operations of the joint ventures in which we participate are highly regulated by governmental authorities in Nevada, Mississippi, Illinois and Michigan. We will also become subject to regulation in any other jurisdiction where we or any joint venture in which we participate conduct gaming in the future. Any regulation in other jurisdictions may or may not be similar to that in Nevada, Mississippi, Illinois and Michigan.
•: In Mississippi, in three separate instances in 1998 and 1999, referenda were proposed which, if approved, would have amended the Mississippi constitution to ban gaming in Mississippi and would have required all currently legal gaming entities to cease operations within two years of the ban. All three of the proposed referenda have been ruled illegal by Mississippi state trial court judges. The proponents of the most recent referendum appealed the trial court ruling, which was affirmed by the Mississippi Supreme Court. Any such referendum must be approved by the Mississippi Secretary of State and signatures of approximately 91,700 registered voters must be gathered and certified in order for such a proposal to be included on a statewide ballot for consideration by the voters. An affirmative vote representing both a majority of the votes cast with respect to the initiative and at least 40% of the voters casting votes on any matter in the election is required to pass any Mississippi initiative. The next election for which the proponents could attempt to place such a proposal on the ballot would be in November 2003. At this time, we cannot predict whether such a referendum will appear on a ballot or the likelihood of such a referendum being approved by the voters. If such a referendum were passed and gaming was prohibited in Mississippi, it would have a material adverse effect on our Mississippi gaming operations.
•: Changes in applicable laws or regulations could have a significant effect on our operations and those of the gaming joint ventures in which we participate. As a result of federal legislation passed in 1996, the National Gambling Impact Study Commission conducted a two-year study of the gaming industry in the United States and reported its findings and recommendations to Congress in June 1999. It is possible that this report may result in additional regulation and taxation of the gaming industry.
•: Our operations and those of the joint ventures in which we participate are affected by changes in local and national general economic and market conditions in the locations where those operations are conducted and where customers live.

•: Our Nevada properties and those of the two Nevada joint ventures in which we participate are affected by economic conditions in California. Our operations at Mandalay Bay may also be susceptible to the effects of economic conditions in the Far East, from where a majority of our high-end players originate.
•: During the past year, utility costs in California and Nevada increased significantly and areas of California experienced mandated periods without electrical power, commonly referred to as "blackouts," necessitated by power shortages. Elimination of the power shortages which have caused the recent rate increases and blackouts require longer-term solutions which will be complicated by continued population growth in the southwestern United States, including California and Nevada. Further rate increases and/or blackouts, should they occur in California and/or Nevada, could have a material negative effect on our operations and the operations of the Nevada joint ventures in which we participate.
•: We and the joint ventures in which we participate are large consumers of electricity and other energy. Accordingly, the substantial increases in energy costs which occurred at our Nevada properties over the past year and any additional increases that may occur may have a negative impact on our future operating results. Additionally, higher energy and gasoline prices which affect our customers may adversely impact the number of customers who visit our properties and those of our joint ventures and adversely impact our revenues.
•: The interstate highway between southern California, where a large number of our customers reside, and Las Vegas has experienced long traffic delays during peak periods. Such delays may affect the number of customers who visit our properties in southern Nevada.
•: Any construction, including the convention center currently being constructed at Mandalay Bay and the permanent facility our Detroit joint venture proposes to build, can be affected by a number of factors, including delays in obtaining necessary governmental permits and approvals and legal challenges. Changes may be made in the scope of a project, budgets and schedules for competitive, aesthetic or other reasons, and these changes may also result from circumstances beyond our control. These circumstances include weather interference, shortages of materials and labor, work stoppages, labor disputes, unforeseen engineering, environmental or geological problems and unanticipated cost increases. Any of these circumstances could give rise to delays in the completion of any project we or any joint venture in which we participate may undertake and/or cost overruns.
•: The gaming industry represents a significant source of tax revenues to the state, county and local jurisdictions in which gaming is conducted. From time to time, various state and federal legislators and officials have proposed changes in tax laws, or in the administration of the laws, affecting the gaming industry. Proposals in recent years that have not been enacted included a federal gaming tax and increases in state or local taxes.
•: We believe that our recorded tax balances are adequate. However, it is not possible to determine with certainty the likelihood of possible changes in the tax laws or their administration. These changes, if adopted, could have a material negative effect on our operating results and the operating results of joint ventures in which we participate.
•: The interest rate on a portion of our long-term debt is subject to fluctuation based on changes in short-term interest rates and the ratings which national rating agencies assign to outstanding debt securities. In addition, we may incur additional debt, all or a portion of which may be at interest rates that are subject to fluctuation. Interest expense could increase as a result of these factors.
•: Claims have been brought against us in various legal proceedings, and additional legal and tax claims may arise from time to time. While we believe that the ultimate disposition of current

matters will not have a material impact on our financial condition or results of operations, it is possible that our cash flows and results of operations could be affected from time to time by the resolution of one or more of these contingencies. See the further discussion under "Legal Proceedings" in Item 3 of this report.

•: The terrorist attacks of September 11, 2001 adversely impacted our operations and these attacks as well as any similar attacks and/or future security alerts could have a material adverse effect on our future operations.
•: There is intense competition to attract and retain management and key employees in the gaming industry. Our business or the business of the joint ventures in which we participate could be adversely affected in the event of the inability to recruit or retain key personnel.
•: Any significant interruption in, or interference with, operations at one or more of our properties, or those of the joint ventures in which we participate, whether caused by a work stoppage or otherwise, could adversely impact our operations.

ITEM 2. PROPERTIES.

Mandalay Bay. We own approximately 60 acres of land, with approximately 1,300 feet of frontage, on the Las Vegas Strip and Mandalay Bay which is situated on the site. For additional information concerning Mandalay Bay, see "Overview" and "Property Descriptions—Las Vegas, Nevada—Mandalay Bay" in Item 1 of this report.

Luxor and Excalibur. We own a 117-acre parcel on the southwest corner of the intersection of the Las Vegas Strip and Tropicana Avenue, with approximately 2,400 feet of frontage on the Las Vegas Strip, that includes, Excalibur, which is situated on the northern portion of the parcel, and Luxor, which is situated on such site to the south of Excalibur. For additional information concerning Luxor and Excalibur, see "Overview" and "Property Descriptions—Las Vegas, Nevada—Luxor" and —Excalibur" in Item 1 of this report.

Circus Circus-Las Vegas. We own approximately 69 acres of land, with approximately 375 feet of frontage on the Las Vegas Strip, and Circus Circus-Las Vegas which is situated on the site. For additional information concerning Circus Circus-Las Vegas, see "Overview" and "Property Descriptions—Las Vegas, Nevada—Circus Circus-Las Vegas" in Item 1 of this report.

Circus Circus-Reno. Circus Circus-Reno is situated on a three-block area in downtown Reno, of which approximately 90% is owned by us and the remainder is held under two separate leases, which expire in 2032 and 2033, respectively. For additional information concerning Circus Circus-Reno, see "Overview" and "Property Descriptions—Reno, Nevada—Circus Circus-Reno" in Item 1 of this report.

Colorado Belle. We own approximately 22 acres on the bank of the Colorado River in Laughlin, Nevada and the Colorado Belle which is situated on the site. For additional information concerning the Colorado Belle Hotel and Casino, see "Overview" and "Property Descriptions—Laughlin, Nevada—Colorado Belle" in Item 1 of this report.

Edgewater. Adjacent to the site of the Colorado Belle, we own approximately 16 acres on the bank of the Colorado River in Laughlin, Nevada, and the Edgewater Hotel and Casino which is situated on the site. For additional information concerning the Edgewater Hotel and Casino, see "Overview" and "Property Descriptions—Laughlin, Nevada—Edgewater" in Item 1 of this report.

Gold Strike. We own approximately 51 acres and the Gold Strike Hotel & Gambling Hall, which is situated on the site, located on the east side of I-15 in Jean, Nevada, approximately 12 miles from the California/Nevada border and 25 miles from Las Vegas. For additional information concerning

Gold Strike, see "Overview" and "Property Descriptions—Jean, Nevada—Gold Strike-Jean" in Item 1 of this report.

Nevada Landing. We own approximately 55 acres and the Nevada Landing Hotel & Casino, which is situated on the site, located on the west side of I-15 in Jean, Nevada. For additional information concerning Nevada Landing, see "Overview" and "Property Descriptions—Jean, Nevada—Nevada Landing" in Item 1 of this report.

Railroad Pass. We own approximately 56 acres and the Railroad Pass Hotel & Casino, which is situated on the site, located on US-93 in Henderson, Nevada. For additional information concerning Railroad Pass, see "Overview" and "Property Descriptions—Henderson, Nevada—Railroad Pass" in Item 1 of this report.

Gold Strike-Tunica. We own approximately 24 acres in Tunica County, Mississippi and Gold Strike- Tunica, which is situated on the site. We also own an undivided 50% interest in an additional 388-acre site which is owned jointly with another unaffiliated gaming company. For additional information concerning Gold Strike-Tunica, see "Overview" and "Property Descriptions—Tunica County, Mississippi—Gold Strike-Tunica" in Item 1 of this report.

MotorCity Casino. We hold a 53.3% interest in the joint venture that owns and operates MotorCity Casino, a temporary casino facility. MotorCity Casino and its related amenities are located on approximately 12 acres of land which we own or lease in Detroit, Michigan, near the downtown area. The joint venture owns approximately 10 additional acres of undeveloped land in the vicinity of MotorCity Casino. For additional information concerning MotorCity Casino, see "Overview" and "Property Descriptions—Detroit, Michigan—MotorCity Casino" in Item 1 of this report.

Other Real Property. Slots-A-Fun is situated on a 30,000-square-foot parcel that we own and has approximately 100 feet of frontage on the Las Vegas Strip.

We own approximately 37 acres of unimproved land at the south end of the Las Vegas Strip, including 22 acres located immediately south of Mandalay Bay and the site on which we are constructing a new convention center, and approximately 15 acres located across the Las Vegas Strip from Luxor.

We own 60 acres of land in Jean, Nevada to the north of Gold Strike and approximately 89 acres of land in Sloan, Nevada off of I-15. Sloan is located between Jean and Las Vegas.

We also own or lease, or have options and/or agreements to purchase or lease, certain other improved and unimproved properties which are not deemed to be material to us.

As of January 31, 2002, none of the aforementioned properties we own was subject to any encumbrance securing the repayment of indebtedness.

Joint Venture Interests. Mandalay, either directly or through wholly owned subsidiaries, owns:

•: a 50% interest in the Elgin joint venture entity which owns and operates Grand Victoria, a riverboat casino and land-based entertainment complex in Elgin, Illinois;
•: a 50% interest in the joint venture entity which owns and operates Monte Carlo, a hotel-casino complex on the Las Vegas Strip;
•: a 50% interest in the joint venture entity which owns and operates Silver Legacy, a hotel-casino in Reno, Nevada; and
•: a 53.5% interest in the joint venture entity which owns and operates MotorCity Casino, a temporary casino in Detroit, Michigan.

Reference is made to the information concerning these joint venture properties appearing under the captions "Overview" and "Property Descriptions" in Item 1 of this report, which information is hereby incorporated in this Item 2 by this reference.

The following table sets forth for each of our joint venture properties the principal amount of indebtedness secured by encumbrances on that property as of January 31, 2002.

Property	Amount
	(in millions)
Silver Legacy	$	146.5	*
Monte Carlo		87.0
MotorCity Casino		64.0
Grand Victoria		—

*: On March 5, 2002, Silver Legacy issued $160 million of 10¹/8% Mortgage Notes due 2012. Contemporaneously with the issuance of the notes, Silver Legacy entered into a new senior secured credit facility, comprised of a $20 million revolving credit facility and a $20 million amortizing term loan. The net proceeds of the note offering, combined with draws under the new credit facility, were used to repay the prior credit facility ($152.3 million) and to fund a $30 million distribution to the Silver Legacy partners ($20 million of which was distributed to Mandalay). Immediately following the transactions, total long-term debt of Silver Legacy was approximately $187 million, all of which was secured by encumbrances on substantially all of Silver Legacy's assets.

ITEM 3. LEGAL PROCEEDINGS.

Slot Machine Litigation

On April 26, 1994, William H. Poulos brought a class action in the U.S. District Court for the Middle District of Florida, Orlando Division captioned William H. Poulos, et al. v. Caesars World, Inc. et al., against 41 manufacturers, distributors and casino operators of video poker and electronic slot machines, including Mandalay. On May 10, 1994, another plaintiff filed a class action complaint in the United States District Court for the Middle District of Florida in William Ahearn, et al. v. Caesars World, Inc. et al. alleging substantially the same allegations against 48 defendants, including Mandalay. On September 26, 1995, a third action was filed against 45 defendants, including Mandalay, in the U.S. District Court for the District of Nevada in Larry Schreier, et al. v. Caesars World, Inc. et al. The court consolidated the three cases in the U.S. District Court for the District of Nevada under the case captioned William H. Poulos, et al. v. Caesars World, Inc. et al.

The consolidated complaints allege that the defendants are involved in a scheme to induce people to play electronic video poker and slot machines based on false beliefs regarding how such machines operate and the extent to which a player is likely to win on any given play. The actions included claims under the Federal Racketeering Influenced and Corrupt Organizations Act, as well as claims of common law fraud, unjust enrichment and negligent misrepresentation, and seek unspecified compensatory and punitive damages. A motion for class certification was filed in March 1998. The plaintiffs have filed supplemental authorities in support of the motion for class certification and defendants have responded to those authorities. The plaintiffs' motion for class certification has been fully briefed and is pending before the court for a ruling. The court had previously stayed all discovery as to the merits of this case pending determination of the motion for class certification. However, on March 27, 2002, the court announced that it would permit merit discovery limited only to those particular casinos which the named plaintiffs identify as places where they played video poker or electronic slot machines. Otherwise, merit discovery has been stayed. We are aware that the named

plaintiffs contend that they played video poker or electronic slot machines at Circus Circus-Las Vegas. Thus, merit discovery can begin as to that property.

Detroit Litigation

In Lac Vieux Desert Band of Lake Superior Chippewa Indians v. The Michigan Gaming Control Board et al., originally filed on February 26, 1997, the Lac Vieux Band of Lake Superior Chippewa Indians has sought to challenge the validity of the Michigan Gaming Control and Revenue Act (the "Michigan Act") and the City of Detroit's Casino Development Competitive Selection Process Ordinance (the "Ordinance"). On October 31, 1997, the United States District Court for the Western District of Michigan issued an opinion holding that the Lac Vieux Band lacked standing to challenge the Michigan Act and the Ordinance on First Amendment and Equal Protection grounds. In a decision issued on April 12, 1999, the United States Court of Appeals for the Sixth Circuit affirmed the District Court's determination that the Lac Vieux Band lacked standing to challenge the Michigan Act. However, the Sixth Circuit reversed the District Court's determination that (i) the Lac Vieux Band lacked standing to challenge the Ordinance, (ii) the First Amendment is not implicated in the Ordinance, and (iii) a rational basis review rather than a strict scrutiny review should be applied in determining the merits of the Lac Vieux equal protection claim regarding the Ordinance. The Sixth Circuit remanded the case to the District Court for further proceedings consistent with the Sixth Circuit's decision. On July 17, 2000, the District Court found in favor of the Defendants as to all matters remanded by the Sixth Circuit Court of Appeals. The Lac Vieux Band appealed the District Court's decision to the Sixth Circuit Court of Appeals which found that the Ordinance in its current form was unconstitutional and remanded the case to the District Court. The plaintiff is taking the position in the District Court that all three Detroit casino licenses, including the MotorCity Casino license, should be rebid in a new competitive selection process and, in addition, that pending completion of the rebidding process, all three casinos should be placed in conservatorship under the Michigan Act. MotorCity Casino and the other two Detroit casinos have each filed briefs with the District Court stating that, for various legal and equitable reasons, the plaintiff is not entitled to the relief it has requested. The matter is presently pending before the District Court which has declared that "the Ordinance in its current form is unconstitutional." The effect of the rulings in this case is uncertain. The plaintiff has also requested the Michigan Gaming Control Board to place the three Detroit casinos, including MotorCity Casino, into conservatorship under the Michigan Act. The Michigan Gaming Control Board has taken the ruling of the Sixth Circuit Court of Appeals and the plaintiff's request under advisement without comment. The plaintiff filed a lawsuit on April 12, 2002, against the Michigan Gaming Control Board in the Circuit Court of Gogebic County, Michigan, seeking to compel the Board to place the three Detroit casinos into conservatorship. While Mandalay is not a party, our Detroit Joint Venture has intervened in the Lac Vieux lawsuit. Depending on the eventual outcome of this litigation, the continued operation of our Detroit joint venture's temporary facility, and/or its ability to retain its certificate of suitability and casino license for its permanent facility, could be adversely affected or even precluded.

On February 13, 2002, John Ren filed suit in the Circuit Court of Wayne County, Michigan against our Detroit joint venture and the other two casino operations in Detroit. The plaintiff purports to represent himself and a class consisting of all persons who lost money and/or incurred debts that remain unpaid at any of the three Detroit casinos. Relying on the Sixth Circuit Court of Appeal's Lac Vieux decision, the plaintiff alleges that the three casinos have been operating illegally and continue to do so. The relief sought by the plaintiff includes an injunction to restrain the three casinos from remaining open until properly licensed, compensatory damages, and disgorgement of all profits "unjustly obtained." On April 9, 2002, the Wayne County Circuit Court dismissed the plaintiff's lawsuit. The plaintiff has the right to appeal the dismissal of the lawsuit.

Our Detroit joint venture continues to operate MotorCity Casino. However, any future ruling by the court in either lawsuit or by the Michigan Gaming Control Board, as well as an adverse ruling in other lawsuits, could affect the joint venture's operation of the temporary facility, as well as its ability to retain its certificate of suitability and casino license for its permanent facility. No assurance can be given regarding the timing or outcome of any of these proceedings.

We are defendants in various other pending lawsuits. In management's opinion, the ultimate outcome of such lawsuits will not have a material adverse effect on our results of operations or our financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matter was submitted to a vote of Mandalay's security holders during the fourth quarter of the fiscal year ended January 31, 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Price Range of Common Stock. Mandalay's common stock is listed on the New York Stock Exchange and on the Pacific Exchange and traded under the symbol MBG. The following table sets forth, for the fiscal quarters shown, the low and high sale prices for the common stock on the New York Stock Exchange Composite Tape.

Fiscal 2002	Low		High
First Quarter	$	18.79	$	23.95
Second Quarter	$	23.35	$	27.89
Third Quarter	$	13.90	$	25.60
Fourth Quarter	$	16.16	$	27.39

Fiscal 2001	Low		High
First Quarter	$	12.88	$	19.44
Second Quarter	$	18.50	$	24.94
Third Quarter	$	19.00	$	28.38
Fourth Quarter	$	18.00	$	22.44

Holders. On April 22, 2002 there were 2,966 holders of record of Mandalay's common stock.

Dividends. During fiscal 2001 and fiscal 2002, Mandalay did not pay any cash dividend on its common stock, which is Mandalay's only outstanding class of equity securities. While we did not pay any cash dividends during those periods, we did make payments to our stockholders in the form of the payments we made for shares of Mandalay common stock we purchased pursuant to our share repurchase authorizations. For information concerning our recent share repurchase activity and our current share repurchase authorizations, reference is made to the discussion appearing in Item 7 of this report in the "Financial Position and Capital Resources" section of our Management's Discussion and Analysis of Financial Condition and Results of Operations under the captions "Share Repurchases" and "Equity Forward Agreements."

ITEM 6. SELECTED FINANCIAL DATA.

	Year ended January 31,
	2002		2001		2000		1999		1998
	(amounts in thousands, except per share amounts)
Operating Results:(1)
Net Revenues	$	2,461,799	$	2,495,784	$	2,024,905	$	1,454,465	$	1,335,686
Income from operations		351,060		431,534		273,736		242,779		236,500
Pretax income		93,006		194,392		103,116		140,815		147,922
Net income		53,044		119,700		42,163		85,198		89,908
Basic earnings per share	$	.73	$	1.53	$	.47	$	.90	$	.95
Diluted earnings per share	$	.71	$	1.50	$	.46	$	.90	$	.94
Balance Sheet Data:
Total assets	$	4,037,034	$	4,248,266	$	4,329,476	$	3,869,707	$	3,263,548
Long-term debt		2,482,087		2,623,597		2,691,292		2,259,149		1,788,818
Stockholders' equity		940,609		1,068,940		1,187,780		1,157,628		1,123,749

(1): Mandalay Bay opened on March 2, 1999 and MotorCity Casino opened on December 14, 1999. Silver City, a small casino on the Las Vegas Strip, was operated under a lease which expired October 31, 1999.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Fiscal 2002 Compared with Fiscal 2001

SIGNIFICANT FACTORS AFFECTING RESULTS OF OPERATIONS IN FISCAL 2002

September 11, 2001

The terrorist attacks of September 11, 2001, had a pronounced effect on our operating results for the year ended January 31, 2002. This effect was felt primarily at our Las Vegas properties, which generate approximately two-thirds of our operating income. Our Las Vegas properties, with almost 19,000 hotel rooms, are dependent on air travel for a significant portion of their customers. This is particularly true at our more upscale resorts, Mandalay Bay and Luxor, where over 50% of the hotel customers arrive via plane. As a result of the terrorist attacks, air travel plummeted nationally. Passenger counts at McCarran International Airport in Las Vegas fell almost 20% over the last four months of 2001, leading to an overall 4.5% decline for the year. Visitor volume to Las Vegas declined 2.3% in 2001, despite being up 1% for the year-to-date period prior to September 11. The decreases in air traffic and visitor volume caused declines in the number of customers staying at and visiting our Las Vegas properties. This situation was particularly acute immediately following the attacks, when occupancy levels at our Las Vegas properties fell to the mid-60% range, compared to a normal occupancy above 90%. These factors led to declines in revenues and operating income at our Las Vegas properties during the fiscal year.

Our operations in Reno, Laughlin and Jean, Nevada, were not as vulnerable to the aftermath of September 11. These markets are essentially drive-in markets. While air traffic fell sharply following the attacks, automobile traffic to Laughlin and Jean actually rose, while traffic to Reno showed a modest drop.

Our joint venture properties in Elgin, Illinois, and Detroit, Michigan, did not reflect any adverse impact from the terrorist attacks, as their revenues and operating income after September 11 were higher than they had been in the previous year. These properties serve essentially locals markets (a majority of our customers live within a relatively short distance of the properties) and so were minimally affected by travel concerns in the aftermath of the attacks. Detroit also benefitted from the temporary closure of the U.S./Canadian border immediately following the terrorist attacks (and from subsequently increased security), which impeded access from the U.S. to a competing property in Windsor, Ontario.

In response to the terrorist attacks, we took several steps to minimize their effect on our operations and our financial position. We temporarily (until February 2002) suspended construction of our new convention center at Mandalay Bay (see "Financial Position and Capital Resources" for more details); delayed or suspended all other discretionary capital spending; and laid off a portion of our workforce. We laid off approximately 4,500 employees at the beginning of October (out of a total workforce of over 30,000 employees, including those at our joint ventures), mostly at our Las Vegas properties. Additionally, wage levels were frozen for nonunion personnel and bonuses were reduced for many management level employees. We also made several financing decisions designed to enhance our liquidity, such as amending our credit facilities to ease financial covenants, issuing additional senior subordinated notes and entering into additional operating lease arrangements. (See "Financial Position and Capital Resources" for additional details regarding these financing activities.) We cannot predict the extent to which the events of September 11 will continue to directly or indirectly impact our operating results in the future, nor can we predict the extent to which future security alerts and/or additional terrorist attacks may impact our operations.

Economic Recession

Historically, there has not been a high correlation between economic conditions and our operating results. This has been true with respect to the overall U.S. economy and also the regional economies from which we derive a substantial portion of our customers (e.g., California). However, we believe the broad economic recession that affected the country throughout most of 2001 and into 2002, and that was exacerbated by the terrorist attacks on September 11, contributed to the downturn in our results for fiscal 2002.

Expansion of Native American Gaming

On March 7, 2000, California voters approved Proposition 1A, which amended the California constitution and legalized "Nevada-style" gaming on Native American reservations. The passage of this amendment has allowed the expansion of existing Native American gaming operations, as well as the opening of new ones. Significant expansion occurred in the latter part of fiscal 2001 and the early part of fiscal 2002. The result has been a decline in operating results at our properties in the secondary markets of Reno, Laughlin and Jean, Nevada. The impact of expanded Native American gaming has been particularly significant at the Gold Strike and Nevada Landing in Jean, and was the principal factor behind the impairment loss that was recognized at those properties in fiscal 2002 (see discussion under "Results of Operations"). While most existing Native American gaming facilities in California are modest compared to our Nevada casinos, numerous Native American tribes have announced they are developing or are considering establishing large-scale hotel and gaming facilities in California. Numerous other tribes are at various stages of planning new or expanded facilities. The continued growth of Native American gaming establishments in California (as well as elsewhere in the country) could have a material adverse effect on our operations.

RESULTS OF OPERATIONS

Earnings per Share

For the year ended January 31, 2002, we reported net income of $53.0 million, or $.71 per diluted share, versus $119.7 million, or $1.50 per diluted share, for the year ended January 31, 2001.

The decrease in earnings per share was attributable primarily to an impairment loss of $52.0 million in fiscal 2002 related to the write-down of the carrying value of our two Jean properties, Gold Strike and Nevada Landing. This write-down reflects the downturn in operating results at these properties over the past few years due to the continued expansion of Native American casinos in California. The write-down was made in accordance with Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"). Of the $52.0 million write-down, $17.9 million represented goodwill. Results for fiscal 2002 also include preopening expenses of $2.2 million related to the new convention center currently under construction at Mandalay Bay.

Fiscal 2002 earnings were affected as well by the September 11 attacks, the recession, the expansion of Native American gaming and higher utility costs. Utility costs rose $12.7 million, or 28%, at our wholly owned properties, with most of the increase attributable to our Las Vegas Strip properties. Utility costs were higher due to the spillover effect from the California energy crisis.

The negative effect of all of the above factors on our earnings per share was partially offset by a lower number of average diluted shares outstanding (74.5 million in fiscal 2002 versus 79.7 million in fiscal 2001) due to our purchase of shares. See "Financial Position and Capital Resources" for a discussion of our share purchase activity.

Results for fiscal 2001 included preopening expenses of $1.8 million related to the Shark Reef at Mandalay Bay, which opened June 20, 2000. Results also included $3.6 million in income related to reducing a liability assumed when the Mandalay Bay site was acquired in 1995.

Revenues

Revenues decreased $34.0 million, or 1%, for the year ended January 31, 2002. The decrease was due primarily to the effect of September 11 on our Las Vegas Strip properties, whose revenues were down $33.6 million, or 2% (including our 50% share of the operating income of Monte Carlo). Revenues also declined at our other Nevada properties, mainly because of expanded Native American gaming in California. In Reno revenues decreased $6.2 million, or 4% (including our 50% share of the operating income of Silver Legacy); in Laughlin they were down $11.5 million, or 7%; and in Jean they were down $14.4 million, or 17%. These declines were partially offset by a $33.5 million, or 10%, increase in revenues at MotorCity Casino in Detroit, Michigan.

Casino Revenues

Casino revenues declined $19.9 million, or 2%, in fiscal 2002. Casino revenues declined at all of our major wholly owned properties due to the impact of the significant factors discussed previously. These declines were partially offset by a $35.4 million, or 11%, increase in casino revenues at MotorCity Casino.

Room Revenues

Room revenues fell $29.8 million, or 5%, in fiscal 2002. Our Las Vegas properties experienced strong growth in revenue per available room ("REVPAR") through the first part of the year, mainly as a result of increases in room rates. However, following September 11, occupancy rates declined dramatically and room rates were discounted in order to stimulate demand. As a result, REVPAR fell noticeably in the last quarter of the year. The following table compares average room rates, occupancy and REVPAR at our major wholly owned properties:

	FYE 1/31/2002						FYE 1/31/2001
	Avg. Rate		Occ.%		REVPAR		Avg. Rate		Occ.%		REVPAR
Mandalay Bay	$	167	80	%	$	134	$	154	86	%	$	133
Luxor	$	98	83	%	$	81	$	98	93	%	$	92
Excalibur	$	70	92	%	$	64	$	70	94	%	$	66
Circus Circus — Las Vegas	$	55	89	%	$	49	$	57	95	%	$	54
Circus Circus — Reno	$	54	81	%	$	44	$	53	82	%	$	43
Colorado Belle	$	31	80	%	$	25	$	30	84	%	$	25
Edgewater	$	30	78	%	$	23	$	27	85	%	$	23
Gold Strike — Tunica	$	62	78	%	$	48	$	69	76	%	$	52
Weighted average all wholly owned properties	$	81	83	%	$	67	$	79	89	%	$	70
Weighted average wholly owned Las Vegas Strip properties	$	95	86	%	$	82	$	93	92	%	$	85

Food and Beverage Revenues

Food and beverage revenues decreased $7.8 million, or 2%, in fiscal 2002, attributable principally to the impact that September 11 had on our Las Vegas Strip properties.

Other Revenues

Other revenues rose $32.5 million, or 11%, in fiscal 2002. Other revenues come principally from amusements, retail stores and entertainment. Most of the increase was due to the success of Blue Man Group, the unique off-Broadway production which debuted in March 2000 at Luxor. The April 2001 opening of our new production, "Storm," in the Mandalay Bay Showroom also contributed to the increase, as did the Shark Reef at Mandalay Bay (which opened June 2000).

Earnings of Unconsolidated Affiliates

We record our 50% share of the operating income of our unconsolidated joint ventures (Grand Victoria, Monte Carlo and Silver Legacy) as revenue under "Earnings of Unconsolidated Affiliates." (Results from the 53.5%-owned MotorCity Casino are consolidated for financial reporting purposes.) Earnings of unconsolidated affiliates decreased $1.4 million, or 1%, in fiscal 2002. Decreases in results at Monte Carlo and Silver Legacy were largely offset by an increase at Grand Victoria.

Income from Operations

For the year ended January 31, 2002, income from operations declined $80.5 million, or 19%, from the previous year. The composite operating margin in fiscal 2002 was 14.3% versus 17.3% in fiscal 2001. The previously discussed impairment loss of $52.0 million recognized at our Jean properties was a principal cause of the declines in operating income and operating margin. Our Las Vegas Strip properties also contributed to the declines, as the effects of September 11 depressed results in that market, particularly in the hotel department where our operating margins are typically the highest. The table below summarizes operating results by property and is followed by a discussion of operating results by market.

	FYE 1/31/2002								FYE 1/31/2001
	Operating Income			Depreciation		EBITDA(1)			Operating Income			Depreciation		EBITDA(1)
	(in millions)
Mandalay Bay	$	41.6		$	43.4	$	85.0		$	38.4		$	40.8	$	79.2
Luxor		74.9			33.8		108.7			85.9			37.3		123.2
Excalibur		67.6			17.9		85.5			79.0			16.9		95.9
Circus Circus — Las Vegas(2)		39.8			23.0		62.8			47.7			23.6		71.3
Gold Strike — Tunica		11.0			12.8		23.8			19.4			12.8		32.2
Colorado Belle/Edgewater		10.5			11.5		22.0			13.6			11.3		24.9
Circus Circus — Reno		14.4			9.2		23.6			18.9			9.8		28.7
Gold Strike properties(3)		(55.6	)		10.2		(45.4	)		7.7			10.4		18.1
MotorCity Casino(4)		72.2			39.1		111.3			49.3			37.5		86.8
Unconsolidated joint ventures(5)		107.1			6.5		113.6			108.5			6.5		115.0
Other		(3.7	)		0.9		(2.8	)		(4.9	)		0.3		(4.6	)

Subtotal		379.8			208.3		588.1			463.5			207.2		670.7
Corporate expense		(28.7	)		7.7		(21.0	)		(32.0	)		10.8		(21.2	)

Total	$	351.1		$	216.0	$	567.1		$	431.5		$	218.0	$	649.5

(1): Earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is included because, as in other entertainment industries, many investors consider it a key benchmark, since it factors out the impact of depreciation and goodwill amortization, the principal noncash expenses affecting our income. EBITDA is not an accepted measure of performance under GAAP and should not be considered an alternative to GAAP measures of performance.

(2): Includes Circus Circus — Las Vegas and Slots-A-Fun.
(3): Includes Gold Strike, Nevada Landing and Railroad Pass.
(4): MotorCity Casino is 53.5%-owned and its operations are consolidated for financial reporting purposes.
(5): Includes Monte Carlo, Grand Victoria and Silver Legacy, each of which is 50%-owned.

Las Vegas

Our Las Vegas properties (including our 50% share of Monte Carlo) posted an overall decrease in operating income of $32.5 million, or 11%, for fiscal 2002. At Mandalay Bay, operating income rose $3.2 million, or 8%, due primarily to increases in room rates that were achieved during the first part of the fiscal year, prior to the events of September 11. Because of the upscale clientele at this property, it possesses greater pricing leverage than our other properties. Operating income at our other Las Vegas properties declined for the year, tracking the lower revenues that followed September 11. At Excalibur operating income was down $11.4 million, or 14%; at Luxor it was down $11.0 million, or 13%; and at Circus Circus it was off by $7.9 million, or 17%. The contribution from Monte Carlo also declined, falling $5.4 million, or 14%, for the year.

Reno

Operating income from our Reno properties (including our 50% share of Silver Legacy) was down $5.5 million, or 15%, in fiscal 2002, despite the presence in Reno of the men's national bowling tournament. Operating results at our Reno properties have been adversely impacted by the expansion of Native American gaming in California and the northwestern U.S. The events of September 11 also contributed to the decline in operating income.

Laughlin

Our two Laughlin properties, Colorado Belle and Edgewater, posted a combined decrease in operating income of $3.1 million, or 23%, for fiscal 2002. While REVPAR was flat, casino revenues decreased 8%. Like the Reno market, Laughlin is facing increased competition from Native American casinos in its primary feeder markets in Arizona and southern California.

Other Markets

In Detroit, Michigan, MotorCity Casino generated operating income of $72.2 million, an increase of 46% over the prior year. Results at this property have steadily improved since its December 1999 opening. The property also benefitted from the temporary closure of the U.S./Canadian border immediately following the September 11 attacks. This measure, along with subsequently increased security, impeded access from the U.S. to a competing property in Windsor, Ontario. We believe MotorCity Casino has been able to attract a significant number of customers who previously frequented the competing property in Windsor. See "Financial Position and Capital Resources" for additional details regarding our Detroit operation.

In Tunica County, Mississippi, operating income at Gold Strike decreased $8.4 million, or 43%, during fiscal 2002. We believe the slow economy has had a more pronounced effect on this region, and especially on Memphis, Tennessee, which accounts for over half the property's customer base.

The contribution to income from operations from Grand Victoria (a 50%-owned riverboat casino in Elgin, Illinois) increased $5.0 million, or 9%, for fiscal 2002. This market was apparently not negatively impacted by the terrorist attacks on September 11. It may have actually benefitted to the extent potential customers in this market were less willing to travel outside the region.

Depreciation and Amortization

For fiscal 2002, depreciation and amortization expense was $216.0 million versus $218.0 million in fiscal 2001. These amounts include goodwill amortization of $11.8 million in each year. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 provides that goodwill will no longer be amortized, but will instead be reviewed for impairment upon adoption and at least annually thereafter. SFAS 142 took effect for the company beginning February 1, 2002. We have begun our review of existing goodwill for impairment. After the review is complete, any impairment will be recognized as a cumulative effect of a change in accounting principle in the quarter ended April 30, 2002. For fiscal 2003, we estimate that our depreciation expense will be approximately $175 million.

Interest Expense

In fiscal 2002, interest expense (excluding interest expense of unconsolidated joint ventures and without reduction for capitalized interest) increased $0.8 million over fiscal 2001. The increase was due to the issuance of $500 million principal amount of 10¹/4% Senior Subordinated Notes in July 2000, the issuance of $200 million principal amount of 9¹/2% Senior Notes in August 2000, and the issuance of $300 million principal amount of 9³/8% Senior Subordinated Notes in December 2001. The net proceeds from these offerings were used to pay down lower-cost borrowings outstanding under our bank facility. The higher interest rates on the notes we issued were largely offset by lower average interest rates on our bank facility, as well as lower average borrowings outstanding.

We recorded interest expense related to unconsolidated joint ventures of $8.5 million in fiscal 2002 compared with $11.3 million in the prior year. These amounts reflect our 50% share of the interest expense of Silver Legacy and Monte Carlo. The decrease was attributable primarily to lower average interest rates.

On March 5, 2002, Silver Legacy issued $160 million of 10¹/8% Mortgage Notes due 2012. Contemporaneously with the issuance of the notes, Silver Legacy entered into a new senior secured credit facility, comprised of a $20 million revolving credit facility and a $20 million amortizing term loan. The net proceeds of the note offering, combined with draws under the new credit facility, were used to repay the prior credit facility ($152.3 million)and to fund a $30 million distribution to the Silver Legacy partners ($20 million of which was distributed to Mandalay). Immediately following the transactions, total long-term debt for Silver Legacy was approximately $187 million.

At January 31, 2002, long-term debt (including current portion) stood at $2.52 billion compared to $2.67 billion at January 31, 2001. The fiscal 2002 total included $64.0 million of debt related to MotorCity Casino, while the fiscal 2001 total included $127.0 million of debt related to MotorCity. Capitalized interest was $1.0 million in fiscal 2002 compared to $1.6 million in the previous year. Capitalized interest in fiscal 2002 related primarily to the new convention center at Mandalay Bay. Capitalized interest in the prior year was associated with the Shark Reef at Mandalay Bay.

Income Taxes

The effective tax rates for fiscal 2002 and fiscal 2001 were 43.0% and 38.4%. These rates reflect the corporate statutory rate of 35% plus the effect of various nondeductible expenses, primarily the amortization of goodwill. The higher rate in fiscal 2002 was due to the impairment loss of $52.0 million. As previously discussed, $17.9 million of this loss represented the write-off of goodwill, which is not deductible for tax purposes. For fiscal 2003, we estimate our effective tax rate will be 36%-37%, with the reduction attributable to the elimination of goodwill amortization pursuant to SFAS 142, as discussed previously.

Fiscal 2001 Compared with Fiscal 2000

RESULTS OF OPERATIONS

Earnings per Share

For the year ended January 31, 2001, we reported net income of $119.7 million, or $1.50 per diluted share, versus $42.2 million, or $.46 per diluted share, for the year ended January 31, 2000.

The increase in earnings was due mostly to strong operating performances at our Las Vegas Strip properties and at Grand Victoria in Elgin, Illinois. MotorCity Casino, our 53.5%-owned joint venture in Detroit, Michigan, was also a factor, as it contributed a full year of operations in fiscal 2001 against less than two months of operations in fiscal 2000 (the casino opened December 14, 1999). Higher interest expense, stemming from higher average debt outstanding and higher average interest rates, offset some of the operating gains. Share purchases also benefitted earnings per share comparisons, as average diluted shares outstanding decreased to 79.7 million from 91.9 million in the prior year.

Results for fiscal 2001 include preopening expenses of $1.8 million related to our saltwater aquarium attraction, the Shark Reef at Mandalay Bay, which opened June 20, 2000. Results for fiscal 2001 also include $3.6 million in income related to reducing a liability assumed when the Mandalay Bay site was acquired in 1995. Results for fiscal 2000 include preopening expenses of $83.0 million related primarily to Mandalay Bay and MotorCity Casino (including the write-off of $33.8 million of previously capitalized preopening costs) and the write-off of $5.4 million related to a timeshare project we decided not to pursue.

Revenues

Revenues for fiscal 2001 increased $470.9 million, or 23%, from the prior year. The increase was attributable primarily to MotorCity Casino, which generated revenues of $330.1 million in fiscal 2001 versus $38.8 million in fiscal 2000, when it was open only one month. Mandalay Bay, which was open an additional month in fiscal 2001, also contributed in a significant fashion, with a revenue increase of $99.0 million, or 22%.

Casino Revenues

Casino revenues rose $296.1 million, or 32%, during fiscal 2001 due primarily to a full year of operations at MotorCity Casino. Casino revenues at that property rose to $309.0 million from $35.9 million the previous year. Meanwhile, casino revenues at our Las Vegas Strip properties rose a combined 4%. The increase was driven by Mandalay Bay, whose casino revenues grew $19.3 million, or 11%, mainly because of the additional month of operations and an upturn in high-budget play.

Room Revenues

Room revenues in fiscal 2001 rose $77.2 million, or 14%. The growth came principally from our Las Vegas Strip properties, whose revenue per available room ("REVPAR") increased $9 over the prior year. Mandalay Bay again led the way, with an average room rate of $154 compared to $128 in the prior year. The growth in REVPAR was driven by increased demand stemming from a continued rise

in the number of visitors to Las Vegas (up 6% for calendar year 2000). The following table compares average room rates, occupancy and REVPAR at our major wholly owned properties:

	FYE 1/31/2001						FYE 1/31/2000
	Avg. Rate		Occ.%		REVPAR		Avg. Rate		Occ.%		REVPAR
Mandalay Bay	$	154	86	%	$	133	$	128	84	%	$	108
Luxor	$	98	93	%	$	92	$	90	92	%	$	82
Excalibur	$	70	94	%	$	66	$	67	92	%	$	62
Circus Circus — Las Vegas	$	57	95	%	$	54	$	56	96	%	$	54
Circus Circus — Reno	$	53	82	%	$	43	$	49	84	%	$	41
Colorado Belle	$	30	84	%	$	25	$	29	85	%	$	24
Edgewater	$	27	85	%	$	23	$	27	83	%	$	23
Gold Strike — Tunica	$	69	76	%	$	52	$	69	72	%	$	50
Weighted average all wholly owned properties	$	79	89	%	$	70	$	71	88	%	$	63
Weighted average wholly owned Las Vegas Strip properties	$	93	92	%	$	85	$	83	91	%	$	76

Food and Beverage Revenues

Food and beverage revenues increased $71.4 million, or 21%, from the previous year. This increase was driven largely by a full year of operations at MotorCity Casino, where food and beverage revenues increased $41.5 million over the prior year. Also stimulating food and beverage revenues were selective price increases at our Las Vegas Strip properties.

Other Revenues

Other revenues rose $48.2 million, or 19%, in fiscal 2001. Other revenues come principally from amusements, retail stores and entertainment. Most of the increase was attributable to Luxor, where these revenues rose $19.6 million due primarily to the success of Blue Man Group, our unique off-Broadway production which debuted in March 2000. The Shark Reef at Mandalay Bay, another instant success, opened in June 2000 and contributed to a $14.4 million increase in other revenues at the property.

Earnings of Unconsolidated Affiliates

We record our share of the operating income of our unconsolidated joint ventures (Grand Victoria, Monte Carlo and Silver Legacy) as revenue under "Earnings of Unconsolidated Affiliates." (Results for MotorCity Casino are consolidated for financial reporting purposes.) Earnings of unconsolidated affiliates increased $16.0 million in fiscal 2001, with most of the increase attributable to the 50%-owned Grand Victoria. The contribution from this property increased $10.7 million, or 23%, from fiscal 2000. This property benefitted from more profitable dockside gaming operations throughout all of fiscal 2001, whereas it was limited to cruising operations in the first half of fiscal 2000.

Income from Operations

For the year ended January 31, 2001, income from operations rose $157.8 million, or 58%, from the previous year. The composite operating margin was 17.3% versus 13.5% in fiscal 2000. Our Las Vegas Strip properties, along with MotorCity Casino and Grand Victoria, were the principal drivers of

this growth. The table below summarizes operating results by property and is followed by a discussion of operating results by market.

	FYE 1/31/2001								FYE 1/31/2000
	Operating Income			Depreciation		EBITDA(1)			Operating Income			Depreciation		EBITDA(1)
	(in millions)
Mandalay Bay	$	38.4		$	40.8	$	79.2		($	4.7	)	$	33.9	$	29.2
Luxor		85.9			37.3		123.2			67.3			36.8		104.1
Excalibur		79.0			16.9		95.9			67.2			16.6		83.8
Circus Circus — Las Vegas(2)		47.7			23.6		71.3			38.7			24.0		62.7
Gold Strike — Tunica		19.4			12.8		32.2			21.2			13.4		34.6
Colorado Belle/Edgewater		13.6			11.3		24.9			18.7			10.7		29.4
Circus Circus — Reno		18.9			9.8		28.7			14.9			10.8		25.7
Gold Strike properties(3)		7.7			10.4		18.1			12.2			10.4		22.6
MotorCity Casino(4)		49.3			37.5		86.8			1.8			5.9		7.7
Unconsolidated joint ventures(5)		108.5			6.5		115.0			92.5			6.5		99.0
Other		(4.9	)		0.3		(4.6	)		(24.5	)		0.2		(24.3	)

Subtotal		463.5			207.2		670.7			305.3			169.2		474.5
Corporate expense		(32.0	)		10.8		(21.2	)		(31.6	)		9.1		(22.5	)

Total	$	431.5		$	218.0	$	649.5		$	273.7		$	178.3	$	452.0

(1): Earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is included because, as in other entertainment industries, many investors consider it a key benchmark, since it factors out the impact of depreciation and goodwill amortization, the principal noncash expenses affecting our income. EBITDA is not an accepted measure of performance under GAAP and should not be considered an alternative to GAAP measures of performance.
(2): Includes Circus Circus — Las Vegas and Slots-A-Fun.
(3): Includes Gold Strike, Nevada Landing and Railroad Pass.
(4): MotorCity Casino is 53.5%-owned and its operations are consolidated for financial reporting purposes.
(5): Includes Monte Carlo, Grand Victoria and Silver Legacy, each of which is 50%-owned.

Las Vegas

Our Las Vegas properties (including our 50% share of Monte Carlo) posted an overall increase in operating income of $90.3 million, or 46%, during fiscal 2001. This increase was driven by an uptrend in the number of visitors to the Las Vegas Strip, as discussed previously. At Mandalay Bay, operating income rose $43.1 million in fiscal 2001. Mandalay Bay benefitted from an extra month of operations in fiscal 2001 compared to the prior year (the property opened March 2, 1999). Mandalay Bay's fiscal 2000 operating income was also affected by preopening expenses. At Luxor, operating income rose $18.6 million, or 28%. Meanwhile, operating income at Excalibur rose $11.8 million, or 17%; while at Circus Circus — Las Vegas it rose $9.0 million, or 23%. The contribution from Monte Carlo also rose, up $7.8 million, or 26%, compared with the prior year.

Reno

Circus Circus posted an increase in operating income of $4.0 million, or 27%. Meanwhile, our share of operating income from Silver Legacy declined $2.5 million from fiscal 2000 (see note below).

Fiscal 2001 results were boosted by a national bowling tournament which Reno hosts two out of every three years. The city hosted the women's national tournament from March through July 2000, but did not host any tournament in the prior year. This contributed to modest increases in casino revenues and REVPAR at both properties. We believe the Reno market encountered increased competition from Native American casinos in northern California. In the latter half of fiscal 2001, following the passage of Proposition 5, these Native American casinos began adding more and newer (i.e., more competitive) slot machines.

NOTE: In fiscal 2000, we recorded approximately two-thirds of Silver Legacy's operating income as a priority return on our investment. In fiscal 2001, we recorded our normal 50% share of Silver Legacy's operating income. Had we recorded 50% of Silver Legacy's operating income in fiscal 2000 instead of two-thirds, our share of operating income from Silver Legacy would have increased by $2.0 million instead of declining by $2.5 million.

Laughlin

Our two Laughlin properties, Colorado Belle and Edgewater, together posted a decrease in operating income of $5.1 million, or 27%, for fiscal 2001. While REVPAR was essentially flat for the year, casino revenues were down 2%. Like the Reno market, Laughlin is facing increased competition from Native American casinos in its primary feeder markets in Arizona and southern California. Furthermore, a lack of health care options in this small community contributed to a 20% rise in health care costs.

Other Markets

In Detroit, Michigan, MotorCity Casino delivered operating income of $49.3 million in fiscal 2001 compared to $1.8 million in fiscal 2000. This comparison reflects a full 12 months of operation in fiscal 2001 as against one and one-half months in fiscal 2000.

In Tunica County, Mississippi, operating income at Gold Strike decreased $1.8 million, or 9%, during fiscal 2001. Growth in this market continued to slow as competition for business heightened leading to a flattening of results.

The contribution to income from operations by Grand Victoria (a 50%-owned riverboat casino in Elgin, Illinois) grew by $10.7 million, or 25%. This property benefitted from more profitable dockside gaming operations throughout all of fiscal 2001, whereas it was limited to cruising operations in the first half of fiscal 2000.

Depreciation and Amortization

In fiscal 2001, depreciation and amortization expense rose $39.7 million, to $218.0 million. This increase derived primarily from the addition of MotorCity Casino.

Interest Expense

In fiscal 2001, interest expense (excluding interest expense of unconsolidated joint ventures and without reduction for capitalized interest) climbed $46.2 million. The increase was due partially to higher average borrowings (approximately $2.8 billion in fiscal 2001 against approximately $2.5 billion in fiscal 2000), which were partly related to the purchase of approximately 14.5 million shares of our common stock during fiscal 2001. Average borrowings also increased due to borrowings associated with MotorCity Casino. Additionally, interest expense reflected higher interest rates on our credit line borrowings, as well as the effect of the issuance of $500 million principal amount of 10¹/4% Senior Subordinated Notes in July 2000 and the issuance of $200 million principal amount of 9¹/2% Senior

Notes in August 2000. The proceeds from these two offerings were used to pay down borrowings outstanding under our credit facility.

At January 31, 2001, long-term debt (including current portion) stood at $2.67 billion compared to $2.70 billion at January 31, 2000. The fiscal 2001 total included $127.0 million of debt related to MotorCity Casino, while the fiscal 2000 figure included $150.0 million of debt related to MotorCity. Capitalized interest was $1.6 million in fiscal 2001 compared to $11.0 million in fiscal 2000. Capitalized interest was higher in the prior year due to the inclusion of one month of capitalized interest on Mandalay Bay, which opened March 2, 1999.

We recorded interest expense related to unconsolidated joint ventures of $11.3 million in fiscal 2001 compared with $11.1 million in the previous year. These amounts reflect our 50% share of the interest expense of Silver Legacy and Monte Carlo.

Income Taxes

The effective tax rates for fiscal 2001 and fiscal 2000 were 38.4% and 39.1%. These rates reflect the corporate statutory rate of 35% plus the effect of various nondeductible expenses, primarily the amortization of goodwill.

FINANCIAL POSITION AND CAPITAL RESOURCES

Operating Activities

For fiscal 2002, net cash provided by operating activities was $358.2 million versus $435.6 million in fiscal 2001 and $225.0 million in fiscal 2000. The decrease in fiscal 2002 was attributable to several factors, including a decrease in deferred taxes, a smaller increase in interest payable, lower distributions from unconsolidated affiliates and lower net income stemming from September 11. Deferred taxes decreased $11.9 million in fiscal 2002 due primarily to the write-down of our Jean properties, which is not deductible for tax purposes until the assets are actually disposed of. The increase in fiscal 2001 from fiscal 2000 was due to improved results at our Las Vegas Strip properties (Mandalay Bay was open for a full year versus only 11 months in fiscal 2000) and improved results at Grand Victoria in Elgin, Illinois. MotorCity Casino was also a factor, contributing a full year of operations in fiscal 2001 against less than two months in fiscal 2000.

Mandalay had cash and cash equivalents of $105.9 million at January 31, 2002, sufficient for normal daily operating requirements.

Investing Activities

Net cash used in investing activities was $159.9 million in fiscal 2002 versus $153.8 million in fiscal 2001 and $464.6 million in fiscal 2000. Capital expenditures and the related increase or decrease in construction payables accounted for most of these amounts.

Capital expenditures for fiscal 2002, which were funded primarily from cash flow, totaled $156.7 million. Of this amount, $61.6 million related to the construction of a new convention center at Mandalay Bay scheduled to open in January 2003 (see "New Projects" for additional details). Another $8.4 million related to the completion of the renovation of the pyramid rooms at Luxor. Capital expenditures also included $13.0 million related to the acquisition of land adjacent to our temporary casino facility in Detroit. For fiscal 2001, capital expenditures totaled $110.2 million. Of this amount, $24.7 million related to the Shark Reef at Mandalay Bay, a saltwater aquarium attraction which opened June 20, 2000, and $15.6 million related to the renovation of the Luxor rooms. Capital expenditures for fiscal 2000 were $352.1 million, of which $213.5 million related to the completion of Mandalay Bay and other core components of Mandalay Mile, and $23.6 million related to the Shark Reef.

With respect to fiscal 2003, we estimate that capital expenditures will be in the range of $250-$300 million. The majority of these expenditures will relate to the completion of the new convention center at Mandalay Bay. These estimated capital expenditures also include maintenance capital spending, which consists of items necessary to maintain the operating condition of our properties, such as new slot machines, carpeting, computers and similar equipment. Capital expenditures for fiscal 2003 will be funded primarily from cash flow, though we also have funds available under our bank credit facilities. Actual capital expenditures for fiscal 2003 may differ significantly from the estimated range.

Financing Activities

For fiscal 2002, financing activities used net cash of $198.4 million, which included the purchase of 5.2 million shares of our common stock at a cost of $125.9 million. See "Share Purchases" for further discussion of our share purchase activity. We also paid $45.5 million related to interim settlements and interest under our equity forward agreements with Bank of America. See the discussion under "Equity Forward Agreements" for more details. For fiscal 2001, financing activities used net cash of $292.4 million, most of which related to the purchase of 14.5 million shares of our common stock at a cost of $247.1 million. For fiscal 2000, financing activities provided net cash of $274.9 million, stemming primarily from an increase in net borrowings to fund the construction of Mandalay Bay.

Credit Facilities

In August 2001, we replaced our $1.8 billion unsecured credit facility, dated May 23, 1997, with three separate facilities that totaled $1.25 billion. These credit facilities included a $150 million capital markets term loan facility which was paid in full using a portion of the net proceeds we received from the issuance of $300 million of Senior Subordinated Notes in December 2001 (discussed more fully below). By paying off the capital markets term loan facility, we reduced our borrowing capacity to $1.1 billion under the two remaining facilities. The remaining credit facilities, which are for general corporate purposes, include a $250 million term loan facility (the entire amount of which was outstanding at January 31, 2002) and an $850 million revolving facility ($130 million of which was outstanding at January 31, 2002). Each of our credit facilities is unsecured and provides for the payment of interest, at our option, either at (1) a rate equal to or an increment above the higher of the Bank of America prime rate and the Federal Reserve Board federal funds rate plus 50 basis points, or (2) a Eurodollar-based rate. At January 31, 2002, the effective rate of interest on the indebtedness outstanding under our credit facilities was 3.6%. Each of our credit facilities includes financial covenants regarding total debt and interest coverage, plus covenants that limit our ability to dispose of assets, make distributions on our capital stock, engage in a merger, incur liens and engage in transactions with our affiliates. The entire principal amount then outstanding under our credit facilities becomes due and payable on August 21, 2006, unless the maturity date is extended with the consent of the lenders.

In December 2001, we amended the covenants under each of our credit facilities to provide for more liberal tests for total debt and interest coverage. These amendments were obtained to address the impact of the events of September 11. The amended covenants were effective with the quarter ended January 31, 2002, and will continue to provide relief through the quarter ending April 30, 2003. As of January 31, 2002, we were in compliance with all of the covenants in our credit facilities, including those related to total debt and interest coverage, and under the most restrictive covenant, we had the ability to issue additional debt of approximately $250 million. Our borrowing capacity under these covenants can fluctuate substantially from quarter to quarter depending upon our operating cash flow.

Senior Subordinated/Senior Notes

On July 24, 2000, the Company issued $500 million principal amount of 10¹/4% Senior Subordinated Notes due August 2007. And on August 16, 2000, the Company issued $200 million principal amount of 9¹/2% Senior Notes due August 2008. These notes are not subject to any sinking fund requirements. The net proceeds from these offerings were used to repay a portion of the borrowings under our then-existing credit facility.

On December 20, 2001, we issued $300 million principal amount of 9³/8% Senior Subordinated Notes due February 2010. These notes are not subject to any sinking fund requirements. The net proceeds from this offering were used to repay a portion of the borrowings under our credit facilities.

Operating Leases

In October 1998, we entered into a $200 million operating lease agreement with a group of financial institutions to lease equipment at Mandalay Bay. Pursuant to the terms of the lease agreement, the commitment under our then-existing bank credit facility was permanently reduced by $200 million.

In December 2001, we entered into a series of additional operating lease agreements totaling $130.5 million with a group of financial institutions. These leases cover equipment located at several Nevada properties. Since this equipment was originally purchased by us, the transaction constituted a sale and leaseback of this equipment. The sale of the equipment resulted in the recognition of a net deferred gain of $28.3 million. The proceeds from these leases were used to reduce borrowings outstanding under our credit facilities, thereby providing additional borrowing capacity and improving leverage under our bank covenants.

We entered into the above operating leases solely to provide greater financial flexibility; they are not considered a material source of financing. The rent expense related to these operating leases is reported separately in the consolidated statements of income as operating lease rent. The operating lease agreements contain financial covenants regarding total debt and interest coverage that are identical to those under our credit facilities. The agreements also contain covenants regarding maintenance of the equipment, insurance requirements and prohibitions on liens. As of January 31, 2002, we were in compliance with all of the covenants in these agreements.

The leases provide that, at maturity, we may elect to purchase the equipment for a stated purchase option amount which is equal to the estimated fair value of the equipment at that date, as determined by an independent appraisal. If we choose not to purchase the equipment, we may be obligated to pay additional amounts under the lease provisions. We are exposed to risks under these lease agreements as follows: (1) To the extent we are unable to make required lease payments, the equipment could be foreclosed, which could have a detrimental impact on our operating results; and (2) to the extent we are financially unable to purchase the equipment (or similar replacement equipment) at maturity, our ability to operate our properties could be impaired, which could likewise have a negative impact on our operating results. We do not consider these risks to be significant due to our historically strong

production of cash flow and our access to various other forms of capital. The following table summarizes these operating lease agreements:

Summary of Operating Lease Agreements (in thousands)

Date of agreement	10/30/98	12/21/01	12/28/01	12/28/01	Total

Initial value of leased equipment	$200,000	$112,500	$12,500	$5,500	$330,500
Purchase option at January 31, 2002(1)	$139,600	$112,500	$12,500	$5,500	$270,100
Current termination date	6/30/03	12/21/04	12/28/04	12/28/04

Purchase option at current termination(1)	$118,200	$56,300	$8,400	$3,700	$186,600
Maximum extended termination date(2)	6/30/03	12/21/05	12/28/06	12/28/06

Purchase option at maximum termination(1)	$118,200	$45,000	$6,200	$2,800	$172,200
Frequency of rent payments	Quarterly	Quarterly	Monthly	Monthly

Estimated rent expense fiscal 2003(3)	$23,000	$24,500	$2,500	$1,000	$51,000

(1): Represents estimated fair value at that date based upon independent appraisal.
(2): Assumes election of all available renewal periods.
(3): Estimated based on forward implied LIBOR.

New Projects

Mandalay Bay Convention Center

We have commenced construction of a convention and meeting complex located on land adjacent to the existing Mandalay Bay Conference Center. The complex will include more than one million square feet of exhibit space. Upon completion of the project, Mandalay Bay will offer a total of almost two million gross square feet of conference and exhibit space. Following the events of September 11, construction of the facility was temporarily suspended. We resumed construction in February and currently expect the facility to open in January 2003. The cost of the convention center, excluding land, preopening expenses and capitalized interest, is estimated to be $235 million. As of January 31, 2002, we had incurred costs of $61.6 million related to this project.

Detroit

We participate with the Detroit-based Atwater Casino Group in a joint venture that owns and operates a temporary casino in Detroit, Michigan. This joint venture is one of three groups which negotiated casino development agreements with the city. We have a 53.5% ownership interest in the joint venture.

Pending the development of a permanent hotel/casino, the joint venture constructed a temporary casino (MotorCity Casino) in downtown Detroit, which opened December 14, 1999. The cost of the temporary casino, including land and capitalized interest but excluding preopening expenses, was approximately $150 million. This cost was financed through the joint venture's $150 million credit facility, which is secured by the assets associated with the temporary casino. We have guaranteed this credit facility, which had a balance of $64 million at January 31, 2002. The joint venture's operation of the temporary casino is subject to ongoing regulatory oversight, and its ability to proceed with a permanent hotel/casino project is contingent upon the receipt of all necessary gaming approvals and satisfaction of other conditions.

We are currently negotiating with the City of Detroit concerning the location and scope of the permanent facility; however, we expect it to include hotel rooms, larger casino space, convention and meeting space, and dining and entertainment facilities. We have committed to contribute 20% of the cost of the permanent facility in the form of an investment in the joint venture. The joint venture will seek to borrow the funds necessary to complete the permanent facility. Because of the uncertainty about the location and scope of the permanent facility, its cost has yet to be determined. The current development agreement provides that we will guarantee completion of the permanent facility and will enter into a keep-well agreement with the city, pursuant to which we could be required to contribute additional funds to continue operation of the permanent facility for a period of two years. This keep-well agreement also applies to the temporary casino. There is no contractual limitation on the amount that we may be required to contribute to the joint venture in order to guarantee the completion of the permanent facility or to keep the project in operation for a period of two years. However, based on the performance of the temporary casino to date, we do not expect that these guarantees will require the outlay of additional capital. We have issued letters of credit totaling $50 million for the benefit of Bank of America in order to back letters of credit issued by Bank of America for the same total amount. The Bank of America letters of credit were issued to secure payments of principal and interest on bonds issued by the Economic Development Corporation of the City of Detroit. The proceeds of the bonds are to be used to finance costs associated with activities (including acquisition) relating to land located along the Detroit River (including the site where the joint venture's permanent facility originally was to be located). However, this restriction on the use of proceeds may be modified as a result of negotiations with the City of Detroit.

Various lawsuits have been filed in the state and federal courts challenging the constitutionality of the Casino Development Competitive Selection Process Ordinance and the Michigan Gaming Control and Revenue Act, and seeking to appeal the issuance of a certificate of suitability and casino license to MotorCity Casino. In Lac Vieux Desert Band of Lake Superior Chippewa Indians v. The Michigan Gaming Control Board et al., originally filed on February 26, 1997, the Lac Vieux Band of Lake Superior Chippewa Indians has sought to challenge the validity of the Michigan Gaming Control and Revenue Act (the "Michigan Act") and the City of Detroit's Casino Development Competitive Selection Process Ordinance (the "Ordinance"). On October 31, 1997, the United States District Court for the Western District of Michigan issued an opinion holding that the Lac Vieux Band lacked standing to challenge the Michigan Act and the Ordinance on First Amendment and Equal Protection grounds. In a decision issued on April 12, 1999, the United States Court of Appeals for the Sixth Circuit affirmed the District Court's determination that the Lac Vieux Band lacked standing to challenge the Michigan Act. However, the Sixth Circuit reversed the District Court's determination that (i) the Lac Vieux Band lacked standing to challenge the Ordinance, (ii) the First Amendment is not implicated in the Ordinance, and (iii) a rational basis review rather than a strict scrutiny review should be applied in determining the merits of the Lac Vieux equal protection claim regarding the Ordinance. The Sixth Circuit remanded the case to the District Court for further proceedings consistent with the Sixth Circuit's decision. On July 17, 2000, the District Court found in favor of the Defendants as to all matters remanded by the Sixth Circuit Court of Appeals. The Lac Vieux Band appealed the District Court's decision to the Sixth Circuit Court of Appeals which found that the Ordinance in its current form was unconstitutional and remanded the case to the District Court. The plaintiff is taking the position in the District Court that all three Detroit casino licenses, including the MotorCity Casino license, should be rebid in a new competitive selection process and, in addition, that pending completion of the rebidding process, all three casinos should be placed in conservatorship under the Michigan Act. MotorCity Casino and the other two Detroit casinos have each filed briefs with the District Court stating that, for various legal and equitable reasons, the plaintiff is not entitled to the relief it has requested. The matter is presently pending before the District Court which has declared that "the Ordinance in its current form is unconstitutional." The effect of the rulings in this case is uncertain. The plaintiff has also requested the Michigan Gaming Control Board to place the three

Detroit casinos, including MotorCity Casino, into conservatorship under the Michigan Act. The Michigan Gaming Control Board has taken the ruling of the Sixth Circuit Court of Appeals and the plaintiff's request under advisement without comment. The plaintiff filed a lawsuit on April 12, 2002, against the Michigan Gaming Control Board in the Circuit Court of Gogebic County, Michigan, seeking to compel the Board to place the three Detroit casinos into conservatorship. While Mandalay is not a party, our Detroit Joint Venture has intervened in the Lac Vieux lawsuit. Depending on the eventual outcome of this litigation, the continued operation of our Detroit joint venture's temporary facility, and/or its ability to retain its certificate of suitability and casino license for its permanent facility, could be adversely affected or even precluded.

We continue to operate MotorCity Casino. However, any future ruling by the court in either lawsuit or by the Michigan Gaming Control Board, as well as an adverse ruling in other lawsuits, could affect the joint venture's continued operation of the temporary facility, as well as its ability to retain its certificate of suitability and casino license for its permanent facility. No assurance can be given regarding the timing or outcome of any of these proceedings.

Share Purchases

In May 2000, our Board of Directors authorized the purchase of up to 15% of our then-outstanding shares of common stock, as market conditions and other factors warranted. In June 2001, the Board announced an additional authorization enabling us to purchase up to 15% of our shares of common stock which remain outstanding after we have fully utilized the May 2000 authorization. Assuming we purchase all of the shares pursuant to the equity forward agreements discussed below, the additional shares that may be purchased as of January 31, 2002, as authorized by the Board of Directors, would be approximately 7.8 million shares.

During fiscal 2002, we acquired 5.2 million shares of our common stock at a total cost of $125.9 million. During fiscal 2001, we acquired 14.5 million shares of our common stock at a total cost of $247.1 million.

Equity Forward Agreements

To facilitate our purchase of shares, we entered into equity forward agreements with Bank of America ("B of A" or "the Bank") providing for the Bank's purchase of up to an agreed amount of our outstanding common stock. (Such purchases were to be in accordance with the volume and other limitations of Rule 10b-18 under the Securities Exchange Act of 1934.) The agreements, as amended, provide that on the settlement date, we will purchase from B of A the shares that the Bank then holds. For those shares, we will pay to B of A its acquisition cost (as adjusted by any interim settlements) plus accrued fees (the "Settlement Amount"). At our option, we may acquire all or a portion of the shares at an earlier date, or we may become obligated to acquire all or a portion of the shares at an earlier date under certain circumstances specified in the agreements. The agreements provide for interim settlements whereby we may deliver or receive shares at the end of each calendar quarter so that the aggregate market value of the shares held by B of A is equal to the remaining notional amounts of the

agreements. The shares held by B of A at each interim settlement date are valued at the closing price of the stock on that date. To the extent that the value of the shares exceeds the notional amount, B of A delivers equivalent shares to us. To the extent the notional amount exceeds the value, we deliver equivalent shares to B of A.

Bank of America acquired a total of 6.9 million shares at a total cost of $138.7 million under these agreements. Pursuant to the interim settlement provisions and an amendment to the agreements, we have received a net of 3.2 million shares and reduced the notional amount of the agreements by $38.7 million. As of February 28, 2002, we were entitled to purchase the remaining 3.7 million shares from B of A for the notional amount of $100 million on the settlement date (which was extended to March 31, 2003 by amendment of the agreements), subject to any future adjustment of the notional amount and/or the number of shares under the agreements' interim settlement provisions. The table below summarizes the share purchase and interim settlement activity under these equity forward agreements through the most recent interim settlement date.

Date	Description	Shares Acquired (Delivered) by BofA		Shares Acquired (Delivered) by Mandalay		Increase (Decrease) in Notional Amount
		(in thousands)
9/8/00	Original agreement	4,856		—		$	100,000
3/21/01	Amendment (increase of notional amount)	1,246		—			24,933
6/30/01	Interim settlement	(1,543	)	1,543			—
9/15/01	Amendment (increase of notional amount)	754		—			13,741
10/31/01	Interim settlement	938		(938	)		(35,527	)
1/31/02	Interim settlement	(2,438	)	2,438			—
2/6/02	Amendment (contract extension to 3/31/03)	(116	)	116			(3,147	)

	Net amounts	3,697		3,159		$	100,000

Although our current intention is to purchase the shares held by B of A on the settlement date in accordance with the terms of the agreements, we could elect to net settle our obligation in cash or shares (i.e., pay cash or deliver additional shares or receive cash or shares). Upon final settlement of the agreements, B of A will be entitled to receive the Settlement Amount. If we elect to net settle our obligation, and if the net proceeds from the sale of the shares held by B of A total less than the Settlement Amount, we will be required to pay the difference either in cash or in the form of shares with an equivalent value (limited to the maximum number of shares under the agreement). If the net proceeds from the sale of the shares held by B of A total more than the Settlement Amount, B of A will be required to pay us the difference either in cash or in the form of shares with an equivalent value. The number of shares we ultimately acquire from B of A under these equity forward agreements will reduce, by an identical number, the shares we may purchase pursuant to our current share purchase authorizations. Our maximum exposure under the equity forward agreements is limited to the notional amount.

We incur quarterly interest charges on the notional amount at a current rate equal to LIBOR plus 1.95%. Total interest charges incurred from inception through January 31, 2002, amounted to $7.8 million, of which $6.5 million was incurred in fiscal 2002. In addition, we also incurred structuring

fees and commissions totaling $3.7 million, of which $2.0 million was incurred in fiscal 2002. These interest charges and other fees are included in the cost of treasury stock.

Liquidity

We believe we have sufficient capital resources to meet all of our obligations. These obligations include existing cash obligations, funding of capital commitments on projects under way, and any obligations that may arise pursuant to our equity forward agreements or our operating lease agreements (both discussed above). We also believe our capital resources are sufficient to provide for additional strategic purchases of our common stock or investments in new projects. This belief is based upon our historically strong and dependable operating cash flows and our revolving credit facility. We have also repeatedly demonstrated the ability to raise funds in the debt and equity markets, as most recently evidenced by our issuance in December 2001 of $300 million of Senior Subordinated Notes due 2010. Our operating cash flows are exposed to the risk of a significant downturn in our business. However, we do not believe this poses a significant liquidity risk because of the historical magnitude and stability of our cash flows. Furthermore, as of January 31, 2002, we had $670 million of borrowing capacity available under our revolving bank facility (which expires July 2006), of which we could utilize $250 million under the most restrictive of our loan covenants. Our borrowing capacity under these covenants can fluctuate substantially from quarter to quarter depending upon our operating cash flow.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of January 31, 2002:

Description	2003		2004		2005		2006		2007		Thereafter
	(in thousands)
Long-term debt	$	39,251	$	325,179	$	289	$	275,289	$	580,112	$	1,301,218
Operating leases		52,202		36,825		27,926		661		610		5,419
Other long-term obligations		—		—		—		—		—		—

Total contractual cash obligations	$	91,453	$	362,004	$	28,215	$	275,950	$	580,722	$	1,306,637

Equity forward agreements(1)	$	—	$	100,000	$	—	$	—	$	—	$	—
Guarantee of Detroit credit facility		—		—		—		—		—		—
Letters of credit supporting Detroit revenue bonds(2)		—		—		—		—		—		—
Detroit permanent casino equity contribution(3)		—		—		—		—		—		—
Detroit permanent casino completion guarantee(4)		—		—		—		—		—		—
Detroit permanent casino make-well agreement(5)		—		—		—		—		—		—

Total other commitments	$	—	$	100,000	$	—	$	—	$	—	$	—

(1): Assumes we purchase the remaining shares held by Bank of America pursuant to the equity forward agreements at the maturity date of March 31, 2003.
(2): We have issued letters of credit totaling $50 million to secure payments of principal and interest on bonds issued by the Economic Development Corporation of the City of Detroit. The proceeds of the bonds are to be used to finance costs associated with acquiring land for the joint venture's permanent facility.

(3): We are committed to contribute 20% of the cost of the permanent facility in the form of an investment in the Detroit joint venture. The scope of the permanent casino cannot be determined at this time; consequently, the timing and the amount of the required equity contribution cannot be determined.
(4): The current development agreement with the City of Detroit provides that we will guarantee completion of our joint venture's permanent facility. If we contribute additional amounts pursuant to this guarantee, there will be no proportionate increase in our ownership of the Detroit joint venture. There is no contractual limit on the amount we may be required to contribute under this guarantee.
(5): The current development agreement with the City of Detroit provides that we will enter into a keep-well agreement with the city pursuant to which we could be required to contribute additional funds, to the extent needed, to continue operation of the facility for a period of two years. If we contribute additional amounts pursuant to this guarantee, there will be no proportionate increase in our ownership of the Detroit joint venture. There is no contractual limit on the amount we may be required to contribute under this agreement.

Market Risk and Derivative Financial Instruments

Mandalay is exposed to market risk in the form of fluctuations in interest rates and their potential impact upon our variable-rate debt. We manage this market risk by utilizing derivative financial instruments in accordance with established policies and procedures. We evaluate our exposure to market risk by monitoring interest rates in the marketplace. We do not utilize derivative financial instruments for trading purposes. There were no material quantitative changes in our market risk exposure, or in how such risks were managed, during fiscal 2002.

Our derivative financial instruments consist exclusively of interest rate swap agreements. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense. Interest rate swaps related to debt are initially matched either with specific fixed-rate debt obligations or with levels of variable-rate borrowings.

To manage our exposure to counterparty credit risk in interest rate swaps, we enter into agreements with highly rated institutions that can be expected to fully perform under the terms of such agreements. Frequently, these institutions are also members of the bank group providing our credit facilities, which management believes further minimizes the risk of nonperformance.

The following table provides information about our financial instruments (both interest rate swaps and debt obligations) that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted-average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the contract. Weighted-average variable rates are based on implied forward rates in

the yield curve. Implied forward rates should not be considered a predictor of actual future interest rates.

		Year ending January 31,
		2003			2004			2005			2006			2007			Thereafter			Total
		(in millions)
Long-term debt (including current portion) Fixed-rate		$	0.3		$	300.2		$	0.3		$	275.3		$	200.1		$	1,301.1		$	2,077.3
	Average interest rate		6.7	%		6.7	%		6.6	%		9.2	%		6.5	%		9.2	%		8.6	%
	Variable-rate	$	39.0		$	25.0		$	—		$	—		$	380.0		$	—		$	444.0
	Average interest rate		2.2	%		4.3	%		—			—			6.5	%		—			6.0	%
Interest rate swaps
	Pay fixed	$	350.0		$	200.0		$	—		$	—		$	—		$	—		$	550.0
	Average payable rate		6.4	%		6.4	%		—			—			—			—			6.4	%
	Average receivable rate		2.6	%		4.7	%		—			—			—			—			3.4	%

Forward-Looking Statements

This report includes forward-looking statements which we have based on our current expectations about future events. They include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance and business, including statements relating to our business strategy, our current and future development plans, and statements that include the words "may," "could," "should," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan" or similar expressions. These forward-looking statements are subject to risks, uncertainties, and assumptions about us and our operations that are subject to change based on various important factors, some of which are beyond our control. Factors that could cause our financial performance to differ materially from the goals, plans, objectives, intentions and expectations expressed in our forward-looking statements include the following: (i) our development and construction activities and those of the joint ventures in which we participate, (ii) competition, (iii) our dependence on existing management, (iv) leverage and debt service (including sensitivity to fluctuations in interest rates and ratings which national rating agencies assign to our outstanding debt securities), (v) domestic and global economic, credit and capital market conditions, (vi) changes in federal or state tax laws or the administration of those laws, (vii) changes in gaming laws or regulations (including the legalization or expansion of gaming in certain jurisdictions), (viii) expansion of gaming on Native American lands, including such lands in California, (ix) applications for licenses and approvals under applicable laws and regulations (including gaming laws and regulations), (x) regulatory or judicial proceedings, and (xi) consequences of any future security alerts and/or terrorist attacks such as those that occurred on September 11, 2001. Additional information concerning potential factors that we think could cause our actual results to differ materially from expected and historical results is included under the caption "Factors that May Affect Our Future Results" in Item 1 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2002. If one or more of the assumptions underlying our forward-looking statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking statements. This statement is provided as permitted by the Private Securities Litigation Reform Act of 1995.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The information in Item 7 of this report under the caption "Market Risk and Derivative Financial Instruments" is incorporated herein by this reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Consolidated Balance Sheets as of January 31, 2002 and 2001		73
Consolidated Statements of Income for the three years ended January 31, 2002		74
Consolidated Statements of Cash Flows for the three years ended January 31, 2002		75
Consolidated Statements of Stockholders' Equity for the three years ended January 31, 2002		76
Notes to Consolidated Financial Statements		77-98
Report of Independent Public Accountants		99

MANDALAY RESORT GROUP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

				January 31,
				2002			2001
				(in thousands, except share data)
ASSETS
Current assets
	Cash and cash equivalents			$	105,905		$	105,941
	Accounts receivable, net of allowance				58,372			78,359
	Income tax receivable				18,089			—
	Inventories				30,555			31,180
	Prepaid expenses				40,848			40,986
	Deferred income tax				13,218			30,164

		Total current assets			266,987			286,630

Property, equipment and leasehold interests, at cost, net					3,049,812			3,236,824

Other assets
	Excess of purchase price over fair market value of net assets acquired, net				45,445			65,778
	Investments in unconsolidated affiliates				554,086			560,987
	Other investments				35,751			27,021
Deferred charges and other assets					84,953			71,026

		Total other assets			720,235			724,812

		Total assets		$	4,037,034		$	4,248,266

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Current portion of long-term debt			$	39,251		$	42,262
	Accounts and contracts payable
		Trade			33,473			37,275
		Construction			8,284			3,920
	Accrued liabilities
		Salaries, wages and vacations			52,680			51,866
		Progressive jackpots			11,556			11,334
		Advance room deposits			13,242			14,069
		Interest			58,592			53,122
		Other			92,163			82,827

			Total current liabilities		309,241			296,675

Long-term debt, net of current portion					2,482,087			2,623,597

Other liabilities
	Deferred income tax				199,478			235,763
	Deferred gain				28,339			—
	Other long-term liabilities				80,919			41,966

		Total other liabilities			308,736			277,729

		Total liabilities			3,100,064			3,198,001

Commitments and contingent liabilities
Minority interest					(3,639	)		(18,675	)

Stockholders' equity
	Common stock $.01 2/3 par value Authorized—450,000,000 shares Issued—113,634,013 shares				1,894			1,894
	Preferred stock $.01 par value Authorized—75,000,000 shares				—			—
	Additional paid-in capital				572,992			572,207
	Retained earnings				1,374,376			1,321,332
	Accumulated other comprehensive loss				(21,902	)		(6,804	)
	Treasury stock (45,278,193 and 37,357,777 shares), at cost				(986,751	)		(819,689	)

		Total stockholders' equity			940,609			1,068,940

Total liabilities and stockholders' equity				$	4,037,034		$	4,248,266

The accompanying notes are an integral part of these consolidated financial statements.

MANDALAY RESORT GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

		Year ended January 31,
		2002			2001			2000
		(in thousands, except share data)
Revenues
	Casino	$	1,201,707		$	1,221,595		$	925,499
	Rooms		581,551			611,352			534,132
	Food and beverage		410,276			418,081			346,647
	Other		332,253			299,753			251,509
	Earnings of unconsolidated affiliates		113,287			114,645			98,627

			2,639,074			2,665,426			2,156,414
	Less-complimentary allowances		(177,275	)		(169,642	)		(131,509	)

			2,461,799			2,495,784			2,024,905

Costs and expenses
	Casino		669,719			670,243			494,054
	Rooms		197,300			203,352			189,419
	Food and beverage		283,864			299,726			276,261
	Other		219,358			200,236			170,654
	General and administrative		417,149			409,603			339,455
	Corporate general and administrative		20,981			21,153			22,464
	Depreciation and amortization		216,001			217,984			178,301
	Operating lease rent		32,185			40,121			25,994
	Preopening expenses		2,155			1,832			49,134
	Impairment loss		52,027			—			—
	Abandonment loss		—			—			5,433

			2,110,739			2,064,250			1,751,169

Income from operations			351,060			431,534			273,736

Other income (expense)
	Interest, dividends and other income		(1,163	)		8,339			2,369
	Guarantee fees from unconsolidated affiliate		2,264			2,498			2,775
	Interest expense		(221,352	)		(219,940	)		(164,387	)
	Interest expense from unconsolidated affiliates		(8,451	)		(11,293	)		(11,085	)

			(228,702	)		(220,396	)		(170,328	)

Minority interest			(29,352	)		(16,746	)		(292	)

Income before provision for income taxes			93,006			194,392			103,116
Provision for income taxes			39,962			74,692			38,959

Income before cumulative effect of change in accounting principle			53,044			119,700			64,157
Cumulative effect of change in accounting for preopening expenses, net of tax benefit of $11,843			—			—			(21,994	)

Net income		$	53,044		$	119,700		$	42,163

Basic earnings per share:
	Income before cumulative effect of change in accounting principle	$	.73		$	1.53		$	.71
	Cumulative effect of change in accounting principle		—			—			(.24	)

	Net income	$	.73		$	1.53		$	.47

Diluted earnings per share:
	Income before cumulative effect of change in accounting principle	$	.71		$	1.50		$	.70
	Cumulative effect of change in accounting principle		—			—			(.24	)

	Net income	$	.71		$	1.50		$	.46

Average shares outstanding (basic)			72,798,916			78,334,735			90,607,487

Average shares outstanding (diluted)			74,459,831			79,700,614			91,896,224

The accompanying notes are an integral part of these consolidated financial statements.

MANDALAY RESORT GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

				Year ended January 31,
				2002			2001			2000
				(in thousands)
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
	Net income			$	53,044		$	119,700		$	42,163

	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation and amortization			216,001			217,984			178,301
		Provision for bad debts			20,381			21,329			13,856
		Increase (decrease) in deferred income tax			(11,864	)		25,023			(8,104	)
		Increase (decrease) in interest payable			5,470			33,727			(8,372	)
		Increase in accrued pension cost			7,536			4,363			2,888
		Loss on sale of fixed assets			1,973			290			2,903
		Impairment loss			52,027			—			—
		Increase in other current assets			(17,720	)		(33,381	)		(67,653	)
		Increase in other current liabilities			5,743			18,584			42,930
		(Increase) decrease in other noncurrent assets			13,404			(551	)		32,556
		Decrease in other noncurrent liabilities			—			—			(49	)
		Unconsolidated affiliates' (earnings in excess of distributions) distributions in excess of earnings			(2,783	)		22,077			(6,419	)
		Minority interest in earnings, net of distributions			15,036			6,421			—

			Total adjustments		305,204			315,866			182,837

		Net cash provided by operating activities			358,248			435,566			225,000

Cash flows from investing activities
	Capital expenditures				(156,742	)		(110,220	)		(352,133	)
	Increase (decrease) in construction payable				4,364			(29,495	)		(63,474	)
	Increase in other investments				(10,802	)		(16,755	)		(10,267	)
	Decrease in investments in unconsolidated affiliates				—			—			10,728
	Net cash paid for additional ownership interest in joint venture				—			—			(25,225	)
	(Increase) decrease in notes receivable				1,667			(145	)		(24,952	)
	Proceeds from sale of equipment and other assets				1,734			2,408			697
	Other				(126	)		370			—

		Net cash used in investing activities			(159,905	)		(153,837	)		(464,626	)

Cash flows from financing activities
	Proceeds from issuance of senior and senior subordinated notes				297,836			700,000			—
	Proceeds from sale-leaseback transactions				130,500			—			—
	Net effect on cash of issuances and payments of debt with initial maturities of three months or less				(380,000	)		(715,576	)		294,990
	Principal payments of debt with initial maturities in excess of three months				(62,498	)		(23,000	)		(3,425	)
	Debt issuance costs				(16,233	)		(16,325	)		(1,072	)
	Exercise of stock options				5,054			17,797			17,616
	Purchases of treasury stock				(125,910	)		(247,128	)		(29,627	)
	Interim settlements and interest under equity forward agreements				(45,517	)		(2,405	)		—
	Other				(1,611	)		(5,768	)		(3,628	)

		Net cash provided by (used in) financing activities			(198,379	)		(292,405	)		274,854

Net increase (decrease) in cash and cash equivalents					(36	)		(10,676	)		35,228
Cash and cash equivalents at beginning of year					105,941			116,617			81,389

Cash and cash equivalents at end of year				$	105,905		$	105,941		$	116,617

Supplemental cash flow disclosures
	Cash paid for interest (net of amounts capitalized)			$	209,418		$	183,638		$	170,272
	Cash paid for income taxes			$	58,132		$	38,731		$	42,551
Noncash items
	Decrease in market value of interest rate swaps			$	24,119		$	—		$	—
	Decrease in market value of pension investment			$	2,073		$	—		$	—
	Minimum pension liability adjustment			$	8,735		$	23,179		$	—
	Acquisition of additional ownership interest in joint venture
		Cash paid		$	—		$	—		$	(38,386	)
		Current assets, other than cash			—			—			(13,462	)
		Property and equipment			—			—			(152,037	)
		Other assets			—			—			(14,092	)
		Current liabilities			—			—			33,693
		Long-term debt			—			—			179,180
		Stockholders' equity			—			—			(20,121	)

		Net cash paid for acquisition		$	—		$	—		$	(25,225	)

The accompanying notes are an integral part of these consolidated financial statements.

MANDALAY RESORT GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

			Common Stock Issued							Accumulated Other Comprehensive Loss
			Common Stock Issued			Additional Paid-in Capital		Retained Earnings					Treasury Stock			Total Stockholders' Equity
			Shares	Amount		Additional Paid-in Capital		Retained Earnings					Treasury Stock			Total Stockholders' Equity
			(in thousands)
Balance, January 31, 1999			113,623	$	1,894	$	558,935	$	1,159,469	$	—		$	(562,670	)	$	1,157,628
	Net income		—		—		—		42,163		—			—			42,163
	Exercise of stock options		11		—		6,990		—		—			10,626			17,616
	Treasury stock acquired (1,672 shares), at cost		—		—		—		—		—			(29,627	)		(29,627	)

Balance, January 31, 2000			113,634		1,894		565,925		1,201,632		—			(581,671	)		1,187,780
	Net income		—		—		—		119,700		—			—			119,700
	Minimum pension liability adjustment		—		—		—		—		(6,804	)		—			(6,804	)

		Total comprehensive income															112,896
	Exercise of stock options		—		—		6,282		—		—			11,515			17,797
	Treasury stock acquired (14,534 shares), at cost		—		—		—		—		—			(247,128	)		(247,128	)
	Interest under equity forward agreements		—		—		—		—		—			(2,405	)		(2,405	)

Balance, January 31, 2001			113,634		1,894		572,207		1,321,332		(6,804	)		(819,689	)		1,068,940
	Net income		—		—		—		53,044		—			—			53,044
	Minimum pension liability adjustment		—		—		—		—		1,005			—			1,005
	Interest rate swap market adjustment		—		—		—		—		(16,103	)		—			(16,103	)

		Total comprehensive income															37,946
	Exercise of stock options		—		—		689		—		—			4,365			5,054
	Treasury stock acquired (5,186 shares), at cost		—		—		—		—		—			(125,910	)		(125,910	)
	Interim settlements and interest under equity forward agreements		—		—		—		—		—			(45,517	)		(45,517	)
	Other		—		—		96		—		—			—			96

Balance, January 31, 2002			113,634	$	1,894	$	572,992	$	1,374,376	$	(21,902	)	$	(986,751	)	$	940,609

The accompanying notes are an integral part of these consolidated financial statements.

MANDALAY RESORT GROUP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

Mandalay Resort Group (the "Company"), which changed its name from Circus Circus Enterprises, Inc. effective June 18, 1999, was incorporated February 27, 1974 in Nevada. The Company owns and operates hotel and casino facilities in Las Vegas, Reno, Laughlin, Jean and Henderson, Nevada and a hotel and dockside casino in Tunica County, Mississippi. In Detroit, Michigan, the Company is the majority investor in a temporary casino which opened December 14, 1999. It is also an investor in several unconsolidated affiliates, with operations that include a riverboat casino in Elgin, Illinois, a hotel/casino in Reno, Nevada and a hotel/casino on the Las Vegas Strip. (See Note 5—Investments in Unconsolidated Affiliates.)

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and the Detroit joint venture (53.5% owned), which is required to be consolidated. Material intercompany accounts and transactions have been eliminated. Investments in 50% or less owned affiliated companies are accounted for under the equity method.

CASH EQUIVALENTS

At January 31, 2002 and 2001, cash equivalents (consisting principally of money market funds and instruments with initial maturities of three months or less) had a cost approximately equal to market value.

INVENTORIES

Inventories (consisting primarily of food, beverage and retail inventories) are stated at the lower of cost or market. Cost is determined using the first-in, first-out and the average cost methods.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Maintenance and repairs that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Gains or losses on dispositions of property and equipment are included in the determination of income.

Depreciation and amortization of property, equipment and leasehold interests are provided using the straight-line method over the following estimated useful lives:

Buildings and improvements		15-45 years
Equipment, furniture and fixtures		3-15 years
Leasehold interests and improvements		5-16 years

CAPITALIZED INTEREST

The Company capitalizes interest costs associated with debt incurred in connection with major construction projects. When debt is not specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company's average cost of borrowed money. Capitalization of interest ceases when a project is substantially complete or construction activities are no longer underway. The amounts capitalized

during the years ended January 31, 2002, 2001 and 2000, were $1.0 million, $1.6 million and $11.0 million, respectively.

LONG-LIVED ASSETS

Long-lived assets are comprised of intangible assets and property, plant and equipment. Long-lived assets are reviewed for impairment, on a property by property basis (the lowest level for which there are identifiable cash flows), whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Pursuant to the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), an estimate of undiscounted future cash flows produced by the asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists. If an asset is determined to be impaired based on expected future cash flows, a loss, measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset, is recognized in the consolidated statements of income. Assets to be disposed of are reported at the lower of the carrying amount or its estimated net realizable value.

Pursuant to SFAS 121, the Company determined that the carrying values of its two Jean properties, Gold Strike and Nevada Landing, exceeded their fair values and, accordingly, recognized an impairment loss of $52.0 million in fiscal 2002. The properties' fair values were determined based upon several valuation approaches, including discounted future cash flows and cash flow multiples. The write-down reflects the downturn in operating results at these properties over the past few years due to the continued expansion of Native American casinos in California. Of the $52.0 million write-down, $17.9 million represented goodwill.

In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144, which is effective for the Company in fiscal 2003, supercedes SFAS 121 and portions of other accounting statements. The provisions applicable to the Company are substantially the same as those applied under SFAS 121.

TREASURY STOCK

Shares purchased and placed in treasury are valued at cost. Shares are removed from treasury using the first-in, first-out method. Interest charges and other fees related to the Company's equity forward agreements are included in treasury stock, net of the related tax benefit. (See Note 15—Equity Forward Agreements.)

CASINO REVENUES

Casino revenues are the net difference between the sums received as winnings and the sums paid as losses. Incentives, such as discounts to induce casino play, are deducted from gross revenues.

COMPLIMENTARY ALLOWANCES

Revenues include the retail value of rooms, food and beverage furnished gratuitously to customers. Such amounts are then deducted as complimentary allowances.

The estimated cost of providing such complimentary allowances, as they relate to the casino department, was included in casino expenses as follows:

	Year ended January 31,
	2002		2001		2000
	(in thousands)
Rooms	$	19,341	$	18,580	$	17,291
Food and beverage		93,405		94,440		73,495
Other		13,405		11,042		11,879

	$	126,151	$	124,062	$	102,665

PLAYER CLUB POINTS

The Company's player club allows customers to earn "points" based on the volume of their gaming activity. These points are redeemable for certain complimentary services and/or cash rebates. In February 2001, the Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board reached a consensus in EITF Issue No. 00-22, "Accounting for 'Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future." EITF Issue No. 00-22 requires that the redemption of points for cash be recognized as a reduction of revenue. The Company has complied with the requirements of EITF Issue No. 00-22 in the accompanying condensed consolidated statements of income, including reclassification of prior period amounts. The adoption of EITF Issue No. 00-22 does not affect net income.

Points are accrued based upon their historical redemption rate multiplied by the cash value or the cost of providing the applicable complimentary services. Casino revenues were reduced by the value of player club points earned of $28.3 million, $28.4 million and $26.0 million in the years ended January 31, 2002, 2001 and 2000, respectively.

PREOPENING EXPENSES

Preopening expenses consist principally of direct incremental personnel costs and advertising and marketing expenses. In accordance with the American Institute of Certified Public Accountants' Statement of Position 98-5, preopening expenses incurred through January 31, 1999 ($33.8 million), on projects opening after that date, are reflected, net of income tax benefit of $11.8 million, as a cumulative effect of a change in accounting principle for preopening expenses in the consolidated statements of income. Preopening expenses incurred after January 31, 1999 are expensed as incurred. Previously, these costs were capitalized prior to the opening of the specific project and were charged to expense at the commencement of operations.

For the year ended January 31, 2002, preopening expenses of $2.2 million related primarily to the new convention center at Mandalay Bay expected to open in January 2003. For the year ended January 31, 2001, preopening expenses of $1.8 million related to the Shark Reef at Mandalay Bay, which opened June 20, 2000. For the year ended January 31, 2000, preopening expenses of $83.0 million (including the write-off of $33.8 million of previously capitalized preopening expenses) related primarily to Mandalay Bay, which opened March 2, 1999, and the Company's joint venture in Detroit, which opened December 14, 1999.

ABANDONMENT LOSS

During fiscal 2000, the Company wrote off $5.4 million related to a proposed timeshare resort in Las Vegas which the Company decided not to pursue.

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the income tax provision and deferred tax assets and liabilities is recognized in the results of operations in the period that includes the enactment date.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period, while diluted earnings per share reflects the impact of additional dilution for all potentially dilutive securities, such as stock options.

The table below reconciles weighted average shares outstanding used to calculate basic earnings per share with the weighted average shares outstanding used to calculate diluted earnings per share. There were no reconciling items for net income.

	Year ended January 31,
	2002		2001		2000
	(in thousands, except per share data)
Net income	$	53,044	$	119,700	$	42,163

Weighted average shares outstanding (basic earnings per share)		72,799		78,335		90,607
Stock options		1,661		1,366		1,289

Weighted average shares outstanding (diluted earnings per share)		74,460		79,701		91,896

Basic earnings per share	$	.73	$	1.53	$	.47

Diluted earnings per share	$	.71	$	1.50	$	.46

COMPREHENSIVE INCOME

In fiscal 2001, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new rules for the reporting of comprehensive income and its components; however, the adoption of this statement does not impact the Company's net income. Comprehensive income is a broad concept of an enterprise's financial performance that includes all changes in equity during a period that arise from transactions and economic events from nonowner sources. Comprehensive income is net income plus "other comprehensive income," which consists of revenues, expenses, gains and losses that do not affect net income under Generally Accepted Accounting Principles. Other comprehensive income for the Company includes adjustments for minimum pension liability and adjustments to interest rate swaps,

net of tax. The accumulated other comprehensive loss reflected on the balance sheet consisted of the following:

	January 31,
	2002		2001
	(in thousands)
Minimum pension liability adjustment	$	5,799	$	6,804
Adjustment to interest rate swaps		16,103		—

Accumulated other comprehensive loss	$	21,902	$	6,804

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and affect the disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS

The financial statements for prior years reflect certain reclassifications, which have no effect on net income, to conform with classifications adopted in the current year. These include reclassifying goodwill related to the Company's acquisition of the investments in Grand Victoria and Monte Carlo. (See Note 4—Goodwill.)

Note 2. Accounts Receivable

The Company extends credit to approved casino customers. These receivables are the principal financial instruments that potentially subject the Company to concentration of credit risk. The Company maintains an allowance for doubtful accounts to reduce the receivables to their estimated collectible amount, which approximates fair value. As of January 31, 2002, management believes that there are no concentrations of credit risk for which an allowance has not been established and recorded. The collectibility of foreign and domestic receivables could be affected by future business or economic conditions or other significant events in the United States or in the countries in which foreign customers reside. Bad debt expense was $20.4 million, $21.3 million and $13.9 million for the years ended January 31, 2002, 2001 and 2000, respectively.

Accounts receivable consisted of the following:

	January 31,
	2002			2001
	(in thousands)
Casino	$	64,036		$	75,642
Hotel		20,601			30,189
Other		9,139			5,849

		93,776			111,680
Less—allowance for doubtful accounts		(35,404	)		(33,321	)

	$	58,372		$	78,359

The above allowance for doubtful accounts includes $32.8 million and $31.7 million related to casino receivables at January 31, 2002 and 2001, respectively.

Note 3. Property, Equipment and Leasehold Interests

Property, equipment and leasehold interests consisted of the following:

	January 31,
	2002			2001
	(in thousands)
Land and land leases	$	395,805		$	382,793
Buildings and improvements		3,037,800			3,088,717
Equipment, furniture and fixtures		674,830			809,616
Leasehold interests and improvements		8,664			8,664

		4,117,099			4,289,790
Less—accumulated depreciation and amortization		(1,162,203	)		(1,077,322	)
		2,954,896			3,212,468
Construction in progress		94,916			24,356

	$	3,049,812		$	3,236,824

Note 4. Goodwill

The excess of the purchase price over the fair value of net assets of businesses acquired (goodwill) is amortized using the straight-line method over 25-40 years. When events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable, the Company measures the amount of impairment, if any, by assessing current and future levels of income and cash flows as well as other factors.

On December 14, 1999, the Company purchased an additional ownership interest in a joint venture which operates MotorCity Casino, a temporary casino in Detroit, Michigan, bringing its total ownership interest in the joint venture to 53.5%. The excess of the purchase price over the fair market value of the net assets acquired amounted to $38.4 million.

On June 1, 1995, the Company completed its acquisition of a group of properties (collectively, the "Gold Strike Properties") consisting of (i) two hotel/casino facilities in Jean, Nevada (see Note 1 regarding an impairment loss at these properties); (ii) a hotel/casino in Henderson, Nevada; (iii) a 50% interest in a joint venture which owns Grand Victoria, a riverboat casino and land-based entertainment complex in Elgin, Illinois; and (iv) a 50% interest in a joint venture which owns the Monte Carlo, a major hotel/casino on the Las Vegas Strip. The excess of the purchase price over the fair market value of the net assets acquired amounted to $394.5 million.

When the Gold Strike acquisition was consumated, the Company recorded the entire excess of the purchase price over the fair market value of net assets acquired as goodwill. However, the majority of the excess related to the value of the investments in Grand Victoria and Monte Carlo. Since the amount was not assigned to the specific assets (e.g., property and equipment) of the joint ventures, it was properly treated as goodwill. With the pending adoption of a new accounting standard for goodwill (see below), goodwill related to investments in unconsolidated affiliates should be reviewed differently for impairment than other goodwill. Therefore, unamortized goodwill of $309.2 million at January 31, 2002 was reclassified to investment in unconsolidated affiliates. This reclassification had no impact on the Company's reported net income.

On February 1, 1983, the Company purchased the Edgewater Hotel and Casino in Laughlin, Nevada. The excess of the purchase price over the fair market value of the net assets acquired amounted to $9.7 million.

On November 1, 1979, the Company purchased the Slots-A-Fun Casino in Las Vegas. The excess of the purchase price over the fair market value of the net assets acquired amounted to $4.2 million.

Goodwill amortization was $11.8 million, $11.8 million and $10.5 million for the years ended January 31, 2002, 2001 and 2000, respectively, including amortization of goodwill associated with the Grand Victoria and Monte Carlo joint ventures. Accumulated goodwill amortization was $10.2 million and $11.3 million as of January 31, 2002 and 2001, respectively.

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 provides that goodwill will no longer be amortized, but will instead be reviewed for impairment at least annually. SFAS 142 is effective for the Company on February 1, 2002. The Company has begun its review of existing goodwill for impairment. After the review is complete, any impairment will be recognized as a cumulative effect of a change in accounting principle in the quarter ended April 30, 2002.

Note 5. Investments in Unconsolidated Affiliates

The Company has investments in unconsolidated affiliates that are accounted for under the equity method. Under the equity method, original investments are recorded at cost and adjusted by the Company's share of earnings, losses and distributions of these companies. The investment balance also includes interest capitalized during construction. The investment balances for Grand Victoria and Monte Carlo are greater than the carrying values of the net assets of the respective unconsolidated affiliates due primarily to goodwill recognized when the Company acquired the investments. (See Note 4—Goodwill.) Investments in unconsolidated affiliates consisted of the following:

	January 31,
	2002		2001
	(in thousands)
Circus and Eldorado Joint Venture (50%) (Silver Legacy, Reno, Nevada)	$	77,029	$	72,222
Elgin Riverboat Resort (50%) (Grand Victoria, Elgin, Illinois)		251,022		255,640
Victoria Partners (50%) (Monte Carlo, Las Vegas, Nevada)		226,035		233,125

	$	554,086	$	560,987

The Company's unconsolidated affiliates operate with fiscal years ending on December 31. Summarized balance sheet information of the unconsolidated affiliates as of December 31, 2001 and 2000 is as follows:

	2001		2000
	(in thousands)
Current assets	$	116,709	$	108,869
Property and other assets, net		655,147		673,773
Current liabilities		182,193		94,137
Long-term debt and other liabilities		135,000		244,000
Equity		454,663		444,505

Selected results of operations for each of the unconsolidated affiliates for the years ended December 31, 2001 and 2000 are as follows:

	December 31, 2001
	Silver Legacy		Grand Victoria		Monte Carlo		Total
	(in thousands)
Revenues	$	164,677	$	410,248	$	256,586	$	831,511
Expenses		130,595		284,101		189,737		604,433
Operating income		34,082		126,147		66,849		227,078
Net income		21,120		127,594		62,575		211,289

	December 31, 2000
	Silver Legacy		Grand Victoria		Monte Carlo		Total
	(in thousands)
Revenues	$	177,489	$	394,438	$	276,558	$	848,485
Expenses		140,246		278,571		198,002		616,819
Operating income		37,243		115,867		78,556		231,666
Net income		21,770		117,594		72,348		211,712

Note 6. Other Investments

The Company has adopted a Supplemental Executive Retirement Plan ("SERP"), a defined benefit plan pursuant to which the Company will pay supplemental pension benefits to certain key employees upon retirement. The SERP is an unfunded plan. However, the Company is informally funding the plan through life insurance contracts on the participants. These life insurance contracts had cash surrender values of $28.6 million and $20.6 million at January 31, 2002 and 2001, respectively.

Note 7. Deferred Charges and Other Assets

Deferred charges and other assets consisted of the following:

	January 31,
	2002		2001
	(in thousands)
Debt issuance costs, net	$	38,893	$	28,122
Intangible asset related to SERP		22,992		12,712
Other		23,068		30,192

	$	84,953	$	71,026

The Company incurs discounts, structuring fees and other costs in connection with its issuance of notes and in connection with its credit facilities. Debt issuance costs are capitalized when incurred and amortized to interest expense based on the related debt maturities using the straight-line method, which approximates the effective interest method. The amortization of debt issuance costs included in interest expense was $6.5 million, $4.9 million and $3.7 million for the years ended January 31, 2002, 2001 and 2000, respectively.

With respect to the intangible asset related to the SERP, the Company accounts for the SERP according to Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" ("SFAS 87"). SFAS 87 requires the recognition of an intangible asset in an amount equal to the additional minimum liability, provided that such intangible asset may not exceed the amount of unrecognized prior service cost and unrecognized net obligation. The amount by which the additional

minimum liability exceeds unrecognized prior service cost and unrecognized net obligation is recorded as a negative component of stockholders' equity through comprehensive income (net of related tax benefits).

Note 8. Long-term Debt

Long-term debt consisted of the following:

	January 31,
	2002			2001
	(in thousands)
Amounts due under bank credit agreements at floating interest rates, weighted average of 3.6% and 6.9%	$	380,000		$	760,000
Amounts due under majority-owned joint venture revolving credit facility at floating interest rates, weighted average of 3.3% and 7.1%		64,000			127,000
6³/4% Senior Subordinated Notes due 2003 (net of unamortized discount of $23 and $39)		149,977			149,961
9¹/4% Senior Subordinated Notes due 2005		275,000			275,000
6.45% Senior Notes due 2006 (net of unamortized discount of $176 and $220)		199,824			199,780
10¹/4% Senior Subordinated Notes due 2007		500,000			500,000
9¹/2% Senior Notes due 2008		200,000			200,000
9³/8% Senior Subordinated Notes due 2010 (net of unamortized discount of $2,142)		297,858			—
7⁵/8% Senior Subordinated Debentures due 2013		150,000			150,000
7.0% Debentures due 2036 (net of unamortized discount of $92 and $106)		149,908			149,894
6.70% Debentures due 2096 (net of unamortized discount of $88 and $135)		149,912			149,865
Other notes		4,859			4,359

		2,521,338			2,665,859
Less—current portion		(39,251	)		(42,262	)

	$	2,482,087		$	2,623,597

In August 2001, the Company replaced its $1.8 billion unsecured credit facility, dated May 23, 1997, with three separate facilities that totaled $1.25 billion. These credit facilities included a $150 million capital markets term loan facility which was paid in full using a portion of the net proceeds received from the issuance of $300 million of Senior Subordinated Notes in December 2001 (discussed more fully below), thus reducing the borrowing capacity to $1.1 billion under the two remaining facilities. The remaining credit facilities, which are for general corporate purposes, include a $250 million term loan facility, the entire amount of which was outstanding at January 31, 2002, and an $850 million revolving facility, $130 million of which was outstanding at January 31, 2002. Each of the credit facilities is unsecured and provides for the payment of interest, at the Company's option, either at a rate equal to or an increment above the higher of the Bank of America, N.A. "prime rate" and the Federal Reserve Board "Federal Funds Rate" plus 50 basis points or, alternatively, at a Eurodollar-based rate. The entire principal amount outstanding under the credit facilities becomes due and payable on August 21, 2006, unless the maturity date is extended with the consent of the lenders. While the debt instruments issued under the above credit facilities are short term in tenor, they are classified as long-term debt because it is management's intention to continue to replace such borrowings on a

rolling basis as various instruments come due and to have such borrowings outstanding for longer than one year.

Each of the credit facilities includes financial covenants regarding total debt and interest coverage and contains covenants that limit the Company's ability, among other things, to dispose of assets, make distributions on its capital stock, engage in a merger, incur liens and engage in transactions with its affiliates. In December 2001, the Company amended the covenants under each of its credit facilities to provide for more liberal tests for total debt and interest coverage. These amendments were obtained to address the impact of the terrorist attacks on September 11, 2001. The amended covenants were effective with the quarter ended January 31, 2002 and will continue to provide relief through the quarter ending April 30, 2003. At January 31, 2002, the Company was in compliance with all of the covenants in its credit facilities and, under the most restrictive loan covenant, was restricted from issuing additional debt in excess of approximately $250 million.

On December 14, 1999, the Company acquired an additional 8.5% ownership interest in the joint venture that owns and operates MotorCity Casino in Detroit, Michigan, bringing the total ownership interest to 53.5%. Therefore, long-term debt of that joint venture is reflected as an obligation of the Company. In June 1999, the joint venture entered into a $150 million reducing revolving credit facility which matures on June 30, 2003. The credit facility reduces by fixed amounts quarterly (which began on December 31, 2000) and contains financial covenants regarding total debt, capital expenditures and investments. At January 31, 2002, the joint venture was in compliance with all of these covenants. The credit facility, which is guaranteed by the Company, was used primarily to develop and construct the temporary casino facility. The fair value of the debt issued under the credit facility approximates the carrying amount of the debt.

On December 20, 2001, the Company issued $300 million principal amount of 9³/8% Senior Subordinated Notes due February 15, 2010 (the "9³/8% Notes"), with interest payable each February and August. The 9³/8% Notes are redeemable prior to maturity at the option of the Company, in whole, at 100% of the principal amount plus a make-whole premium. The 9³/8% Notes, which were discounted to $297.8 million, are not subject to any sinking fund requirements. The net proceeds from this offering were used to repay borrowings under the Company's credit facilities. As of January 31, 2002, the estimated fair value of the 9³/8% Notes was $307.5 million, based on their trading price.

On August 16, 2000, the Company issued $200 million principal amount of 9¹/2% Senior Notes due August 2008 (the "9¹/2% Notes"), with interest payable each February and August. The 9¹/2% Notes are redeemable prior to maturity at the option of the Company, in whole, at 100% of the principal amount plus a make-whole premium. The 9¹/2% Notes are not subject to any sinking fund requirements. The net proceeds from this offering were used to repay borrowings under the Company's credit facility. As of January 31, 2002, the estimated fair value of the 9¹/2% Notes was $214.3 million, based on their trading price.

On July 24, 2000, the Company issued $500 million principal amount of 10¹/4% Senior Subordinated Notes due August 2007 (the "10¹/4% Notes"), with interest payable each February and August. The 10¹/4% Notes are redeemable prior to maturity at the option of the Company, in whole, at 100% of the principal amount plus a make-whole premium. A portion of the 10¹/4% Notes are also redeemable at the option of the Company prior to August 1, 2003 with the proceeds of a public offering of equity securities. The 10¹/4% Notes are not subject to any sinking fund requirements. The net proceeds from this offering were used to repay borrowings under the Company's credit facility. As of January 31, 2002, the estimated fair value of the 10¹/4% Notes was $532.5 million, based on their trading price.

In November 1998, the Company issued $275 million principal amount of 9¹/4% Senior Subordinated Notes due December 2005 (the "9¹/4% Notes"), with interest payable each June and December. The 9¹/4% Notes are redeemable at the option of the Company, in whole, at 100% of the

principal amount plus a make-whole premium at any time prior to December 1, 2002. The 9¹/4% Notes are also redeemable at the option of the Company, in whole or in part, beginning December 1, 2002 at prices declining annually to 100% on or after December 1, 2004. The 9¹/4% Notes are not subject to any sinking fund requirements. As of January 31, 2002, the estimated fair value of the 9¹/4% Notes was $280.5 million, based on their trading price.

In November 1996, the Company issued $150 million principal amount of 7.0% Debentures due November 2036 (the "7.0% Debentures"). The 7.0% Debentures may be redeemed at the option of the holder in November 2008. Also in November 1996, the Company issued $150 million principal amount of 6.70% Debentures due November 2096 (the "6.70% Debentures"). The 6.70% Debentures may be redeemed at the option of the holder in November 2003. Both the 7.0% Debentures, which were discounted to $149.8 million, and the 6.70% Debentures, which were discounted to $149.7 million, have interest payable each May and November, are not redeemable by the Company prior to maturity and are not subject to any sinking fund requirements. As of January 31, 2002, the estimated fair value of the 7.0% Debentures was $139.5 million and the estimated fair value of the 6.70% Debentures was $148.5 million, based on their trading prices.

In February 1996, the Company issued $200 million principal amount of 6.45% Senior Notes due February 1, 2006 (the "6.45% Notes"), with interest payable each February and August. The 6.45% Notes, which were discounted to $199.6 million, are not redeemable prior to maturity and are not subject to any sinking fund requirements. As of January 31, 2002, the estimated fair value of the 6.45% Notes was $191.0 million, based on their trading price.

In July 1993, the Company issued $150 million principal amount of 6³/4% Senior Subordinated Notes (the "6³/4% Notes") due July 2003 and $150 million principal amount of 7⁵/8% Senior Subordinated Debentures (the "7⁵/8% Debentures") due July 2013, with interest payable each July and January. The 6³/4% Notes, which were discounted to $149.8 million, and the 7⁵/8% Debentures are not redeemable prior to maturity and are not subject to any sinking fund requirements. As of January 31, 2002, the estimated fair value of the 6³/4% Notes was $148.5 million and the estimated fair value of the 7⁵/8% Debentures was $129.0 million, based on their trading prices.

Required annual principal payments as of January 31, 2002 are as follows:

Year ending January 31,	(in thousands)
2003	$	39,251
2004		325,179
2005		289
2006		275,289
2007		580,112
Thereafter		1,301,218

	$	2,521,338

Note 9. Interest Rate Swaps

The Company has a policy aimed at managing interest rate risk associated with its current and anticipated future borrowings. Under this policy, the Company may use any combination of interest rate swaps, futures, options, caps and similar instruments. To the extent the Company employs such financial instruments pursuant to this policy, and the instruments qualify for hedge accounting, they are accounted for as hedging instruments. In order to qualify for hedge accounting, the underlying hedged item must expose the Company to risks associated with market fluctuations and the financial instrument used must be designated as a hedge and must reduce the Company's exposure to market fluctuation throughout the hedge period. If these criteria are not met, a change in the market value of

the financial instrument is recognized as a gain or loss in the period of change. Otherwise, gains and losses are not recognized except to the extent that the financial instrument is disposed of prior to maturity. Net interest paid or received pursuant to the financial instrument is included as interest expense in the period.

The Company has entered into various interest rate swaps, principally with its bank group, to manage interest expense, which is subject to fluctuation due to the variable-rate nature of the debt under the Company's credit facilities. The Company has interest rate swap agreements under which it pays a fixed interest rate (weighted average of approximately 6.4%) and receives a variable interest rate (weighted average of approximately 2.0% at January 31, 2002) on $550 million notional amount of "initial" swaps. The net effect of all such swaps resulted in additional interest expense of $13.7 million for the year. Three of the swaps with a combined notional amount of $350 million terminate in fiscal 2003. The remaining swap of $200 million notional amount terminates in fiscal 2004.

The Company is exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. However, the Company considers the risk of nonperformance by the counterparties to be minimal because the parties to the swaps are predominantly members of the Company's bank group. If the Company had terminated all swaps as of January 31, 2002, the Company would have had to pay a net amount of $24.1 million based on quoted market values from the various financial institutions holding the swaps.

Except as noted below, the above swaps meet the criteria for hedge accounting established by Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The fair market value of the swaps is recorded as an asset or a liability in accordance with SFAS 133. At February 1, 2001, we recorded a liability of $14.3 million ($9.3 million, net of tax), representing the fair market value of the swaps. The corresponding loss was recorded as a cumulative effect of a change in accounting principle as part of other comprehensive income. The value of the swaps decreased by an additional $9.8 million ($6.8 million, net of tax) during the year ended January 31, 2002, which increased the liability with the corresponding loss included as other comprehensive income.

The Company has $550 million notional amount in floating to fixed rate swaps, though its floating rate exposure is limited to borrowings under its credit facilities, which totaled only $380 million at January 31, 2002 (due to the issuance of $300 million Senior Subordinated Notes in December 2001, the proceeds of which were used to reduce borrowings under the credit facilities). Consequently, a portion of the Company's $200 million swap maturing September 24, 2002 is considered an "ineffective hedge" pursuant to SFAS 133, and a portion of the change in the fair value of this swap must be recognized in the income statement. This amounted to approximately $6.9 million at January 31, 2002. In accordance with SFAS 133, this amount is being amortized to interest expense over the remaining life of the $200 million swap. To the extent the fair value of this swap changes prior to maturity (due to interest rate fluctuations), the amount to be recognized in the income statement will also change.

Note 10. Leasing Arrangements

In October 1998, the Company entered into a $200 million operating lease agreement with a group of financial institutions to lease equipment at Mandalay Bay.

In December 2001, the Company entered into a series of additional operating lease agreements totaling $130.5 million with a group of financial institutions. These leases cover equipment located at several Nevada properties. Since this equipment was originally purchased by the Company, the transaction constituted a sale and leaseback of this equipment. The sale of the equipment resulted in the recognition of a net deferred gain of $28.3 million. The proceeds from these leases were used to reduce borrowings outstanding under the Company's credit facilities, thereby providing additional borrowing capacity and improving leverage under the Company's bank covenants.

The Company entered into the above operating leases solely to provide greater financial flexibility; they are not considered a material source of financing. The rent expense related to these operating leases is reported separately in the consolidated statements of income as operating lease rent. The operating lease agreements contain financial covenants regarding total debt and interest coverage that are identical to those under the Company's credit facilities. The agreements also contain covenants regarding equipment maintenance, insurance requirements and prohibitions on liens.

The leases provide that, at termination, the Company may elect to purchase the equipment for a stated purchase option amount which is equal to the estimated fair value of the equipment at that date, as determined by an independent appraisal. If the Company chooses not to purchase the equipment, it may be obligated to pay additional amounts under the lease provisions. The following table summarizes these operating lease agreements:

Summary of Operating Lease Agreements (in thousands)

Date of agreement		10/30/98		12/21/01		12/28/01		12/28/01		Total

Initial value of leased equipment	$	200,000	$	112,500	$	12,500	$	5,500	$	330,500
Purchase option at January 31, 2002(1)	$	139,600	$	112,500	$	12,500	$	5,500	$	270,100
Current termination date		6/30/03		12/21/04		12/28/04		12/28/04

Purchase option at current termination(1)	$	118,200	$	56,300	$	8,400	$	3,700	$	186,600
Maximum extended termination date(2)		6/30/03		12/21/05		12/28/06		12/28/06

Purchase option at maximum termination(1)	$	118,200	$	45,000	$	6,200	$	2,800	$	172,200
Frequency of rent payments		Quarterly		Quarterly		Monthly		Monthly

Estimated rent expense fiscal 2003(3)	$	23,000	$	24,500	$	2,500	$	1,000	$	51,000

(1): Represents estimated fair value at that date based upon independent appraisal.
(2): Assumes election of all available renewal periods.
(3): Estimated based on forward implied LIBOR.

The Company also leases various storage facilities and has various air space under operating leases expiring individually through 2032. A portion of the Circus Circus facility in Reno is built on leased land with various operating leases expiring through 2033. The following is a schedule of future minimum rental payments required as of January 31, 2002 under operating leases that have lease terms in excess of one year:

Year ending January 31,	(in thousands)
2003	$	52,202
2004		36,825
2005		27,926
2006		661
2007		610
Thereafter		5,419

	$	123,643

Note 11. Income Taxes

The Company accounts for income taxes according to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of

deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied. At January 31, 2002, the Company believes that its deferred tax assets are fully realizable because of the future reversal of existing taxable temporary differences and future projected taxable income. Accordingly, there is no valuation allowance at January 31, 2002.

The components of the provision for income taxes were as follows:

		Year ended January 31,
		2002			2001		2000
		(in thousands)
Current
	Federal	$	38,970		$	53,588	$	38,069
	State		1,615			1,545		734

			40,585			55,133		38,803

Deferred (see below)
	Federal		(623	)		19,559		(11,687	)

		$	39,962		$	74,692	$	27,116

The Company has recognized a tax benefit of $1.3 million, $2.7 million and $1.7 million related to the exercise of stock options for the fiscal years ended January 31, 2002, 2001 and 2000, respectively. Such amounts reduce current taxes payable and increase additional paid-in capital.

The components of deferred income tax expense were as follows:

	Year ended January 31,
	2002			2001			2000
	(in thousands)
Additional depreciation resulting from the use of accelerated methods for tax purposes	$	10,064		$	20,956		$	10,723
Nondeductible loss resulting from asset impairment		(11,935	)		—			—
Effect of expensing preopening costs for financial statement purposes and amortizing over five years for tax purposes		3,832			4,409			(16,932	)
Pension plan expense not deductible for tax purposes and market value adjustment		(5,594	)		(1,587	)		(978	)
Book reserve for bad debts not deductible for tax purposes until written off		6,344			(6,643	)		(2,715	)
Difference between book and tax basis of investments in unconsolidated affiliates		(2,553	)		(1,822	)		(2,294	)
Other, net		(781	)		4,246			509

	$	(623	)	$	19,559		$	(11,687	)

The reconciliation of the difference between the federal statutory tax rate and the Company's effective tax rate was as follows:

	Year ended January 31,
	2002		2001		2000
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Nondeductible goodwill impairment	6.7		—		—
Nondeductible goodwill amortization	3.8		1.8		5.3
Other, net	(2.5	)	1.6		(1.2	)

Effective tax rate	43.0	%	38.4	%	39.1	%

The income tax effects of temporary differences between financial and income tax reporting that gave rise to deferred income tax assets and liabilities at January 31, 2002 and 2001, were as follows:

			January 31,
			2002		2001
			(in thousands)
Deferred tax liabilities
	Property and equipment		$	210,715	$	218,456
	Investments in unconsolidated affiliates			10,671		12,873
	Other			312		15,376

		Gross deferred tax liabilities		221,698		246,705

Deferred tax assets
	Accrued vacation benefits			9,201		7,259
	Bad debt reserve			3,510		11,475
	Preopening expenses			9,766		13,276
	Pension plan			5,176		2,538
	Other			7,785		6,558

		Gross deferred tax assets		35,438		41,106

		Net deferred tax liabilities	$	186,260	$	205,599

Note 12. Employee Retirement Plans

Approximately 42% of the Company's employees are covered by union-sponsored, collectively bargained, multi-employer defined benefit pension plans. The Company contributed $9.2 million, $13.2 million and $12.8 million during the years ended January 31, 2002, 2001 and 2000, respectively, for such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. The Company also has a profit sharing and investment plan covering primarily nonunion employees who are at least 21 years of age and have at least one year of service. The plan is a voluntary defined contribution plan and is subject to the provisions of the Employee Retirement Income Security Act of 1974. The plan allows for investments in the Company's common stock as one of the investment alternatives. The Company's contributions to this plan include "automatic" contributions based on employees' years of service, and "matching" contributions based on employees' contributions. Employees vest in Company contributions over a period of six years. Contributions are funded with cash and were approximately $6.1 million, $5.4 million and $4.7 million in the years ended January 31, 2002, 2001 and 2000.

On June 18, 1998, the Company adopted a Supplemental Executive Retirement Plan ("SERP"). The SERP is a defined benefit plan pursuant to which the Company will pay supplemental pension

benefits to certain key employees upon retirement based upon the employees' years of service, compensation and SERP tier.

The following information summarizes activity in the SERP:

		Year ended January 31,
		2002			2001			2000
		(in thousands)
Changes in Projected Benefit Obligation
	Projected benefit obligation at beginning of year	$	31,548		$	20,763		$	12,978
	Service cost		3,089			1,783			1,395
	Interest cost		3,329			1,713			1,070
	Additional liability(1)		11,622			1,100			—
	Actuarial losses		6,630			6,436			5,330
	Benefits paid		(720	)		(247	)		(10	)

	Projected benefit obligation at end of year	$	55,498		$	31,548		$	20,763

Fair Value of Plan Assets(2)		$	—		$	—		$	—

Reconciliation of Funded Status
	Funded status	$	(55,498	)	$	(31,548	)	$	(20,763	)
	Unrecognized actuarial loss		17,719			11,585			5,330
	Unrecognized prior service cost		22,992			12,712			12,545

	Accrued net periodic pension cost	$	(14,787	)	$	(7,251	)	$	(2,888	)

Amounts Recognized in the Consolidated Balance Sheets
	Accrued net periodic pension cost	$	(14,787	)	$	(7,251	)	$	(2,888	)
	Additional minimum liability		(31,914	)		(23,179	)		—
	Intangible asset		22,992			12,712			—
	Accumulated other comprehensive loss(3)		8,922			10,467			—

	Net liability reflected in the consolidated balance sheet	$	(14,787	)	$	(7,251	)	$	(2,888	)

Components of Net Periodic Pension Cost
	Current period service cost	$	3,089		$	1,783			1,395
	Interest cost		3,329			1,713			1,070
	Amortization of prior service cost		1,342			933			433
	Recognized net actuarial loss		496			181			—

	Net expense(4)	$	8,256		$	4,610		$	2,898

Weighted Average Assumptions
	Discount rate		7.3	%		8.0	%		8.0	%
	Rate of compensation increase		3.0	%		3.0	%		3.0	%

(1): Consists of liability for prior service cost for new participants, plus certain prior year adjustments relating to years of credited service and compensation.
(2): While the SERP is an unfunded plan, the Company is informally funding the plan through life insurance contracts on the participants. The life insurance contracts had cash surrender values of $28.6 million, $20.6 million and $11.3 million at January 31, 2002, 2001 and 2000, respectively. The life insurance contracts had a face value of $174.0 million at January 31, 2002.
(3): Amount recorded in the Consolidated Statement of Stockholders' Equity is net of income tax of $3.1 million and $3.7 million in the years ended January 31, 2002 and 2001, respectively.

(4): The periodic pension expense is included in departmental expenses.

Note 13. Stock Options

The Company has various stock option plans for executive, managerial and supervisory personnel as well as the Company's outside directors and consultants. The plans permit grants of options, performance shares and restricted stock awards relating to the Company's common stock. The stock options are generally exercisable in one or more installments beginning not less than six months after the grant date.

Summarized information for stock option plans was as follows:

	Year ended January 31,
	2002				2001				2000
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding at beginning of year	5,615,940		$	13.46	6,029,959		$	13.70	3,872,674		$	14.72
Granted	4,631,500			19.33	655,500			15.99	3,377,166			14.20
Exercised	(308,269	)		12.27	(940,061	)		16.06	(878,914	)		18.08
Canceled	(41,800	)		14.92	(129,458	)		18.36	(340,967	)		19.05

Outstanding at end of year	9,897,371			16.24	5,615,940			13.46	6,029,959			13.70

Options exercisable at end of year	3,484,629			13.01	2,422,600			12.52	1,937,662			13.71
Options available for grant at end of year	6,790				4,885,990				1,912,032

The following table summarizes information about stock options outstanding and exercisable at January 31, 2002:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (yrs)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$11.25 to $13.00	4,567,371	6.19	$	12.48	3,172,198	$	12.35
14.50 to 20.20	4,737,500	9.18		18.94	136,664		15.92
20.75 to 27.61	592,500	8.12		23.67	175,767		22.77

	9,897,371	7.74		16.24	3,484,629		13.01

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") provides, among other things, that companies may elect to account for employee stock options using a fair value method or continue to apply the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25 ("APB 25").

Under SFAS 123, all employee stock option grants are considered compensatory. Compensation cost is measured at the date of grant based on the estimated fair value of the options determined using an option pricing model. The model takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the stock, expected dividends on the stock and the risk-free interest rate over the expected life of the option. Under APB 25, generally only stock options that have an intrinsic value at the date of grant are considered compensatory. Intrinsic value represents the excess, if any, of the market price of the stock at the grant date over the exercise price

of the options. Under both methods, compensation cost is charged to earnings over the period the options become exercisable.

The Company has elected to continue to account for employee stock options under APB 25. Accordingly, no compensation cost has been recognized.

The following table discloses the Company's pro forma net income and net income per share assuming compensation cost for employee stock options had been determined consistent with SFAS 123. The table also discloses the weighted average assumptions used in estimating the fair value of each option grant on the date of grant using the Black-Scholes option pricing model, and the estimated weighted average fair value of the options granted. The model assumes no expected future dividend payments on the Company's common stock.

		Year ended January 31,
		2002			2001			2000
		(in thousands, except share data)
Net income
	As reported	$	53,044		$	119,700		$	42,163
	Pro forma		42,629			114,404			30,799
Net income per share (basic)
	As reported	$	.73		$	1.53		$	.47
	Pro forma		.59			1.46			.34
Net income per share (diluted)
	As reported	$	.71		$	1.50		$	.46
	Pro forma		.57			1.44			.34
Weighted average assumptions:
	Expected stock price volatility		41.9	%		45.1	%		45.1	%
	Risk-free interest rate		4.2	%		4.6	%		6.4	%
	Expected option lives (years)		2.9			3.4			3.2
	Dividend yield		0.0	%		0.0	%		0.0	%
Estimated fair value of options granted		$	6.10		$	6.25		$	5.37

Note 14. Stock Related Matters

On July 14, 1994, the Company declared a dividend of one common stock purchase right (the "Rights") for each share of common stock outstanding at the close of business on August 15, 1994. Each Right entitles the holder to purchase from the Company one share of common stock at an exercise price of $125, subject to certain antidilution adjustments. The Rights become exercisable ten days after the earlier of an announcement that an individual or group has acquired 15% or more of the Company's outstanding common stock or the announcement of commencement of a tender offer for 15% or more of the Company's common stock.

In the event the Rights become exercisable, each Right (except the Rights beneficially owned by the acquiring individual or group, which become void) would entitle the holder to purchase, for the exercise price, a number of shares of the Company's common stock having an aggregate current market value equal to two times the exercise price. The Rights expire August 15, 2004, and may be redeemed by the Company at a price of $.01 per Right any time prior to their expiration or the acquisition of 15% or more of the Company's common stock. The Rights should not interfere with any merger or other business combination approved by the Company's Board of Directors and are intended to cause substantial dilution to a person or group that attempts to acquire control of the Company on terms not approved by the Board of Directors.

The Company is authorized to issue up to 75 million shares of $.01 par value preferred stock in one or more series having such respective terms, rights and preferences as are designated by the Board of Directors. No preferred stock has yet been issued.

In May 2000, the Company's Board of Directors authorized the purchase of up to 15% of the Company's then-outstanding shares of common stock, as market conditions and other factors warranted. In June 2001, the Board announced an additional authorization enabling the Company to purchase up to 15% of the shares of the Company's common stock which remain outstanding after the May 2000 authorization is fully utilized. Assuming the Company purchases all of the shares pursuant to the equity forward agreements (see Note 15—Equity Forward Agreements), the additional shares that may be purchased as of January 31, 2002, as authorized by the Board of Directors, would be approximately 7.8 million shares.

During the year ended January 31, 2002, the Company purchased 5.2 million shares of its common stock at a cost of $125.9 million. In the fiscal years ended 2001 and 2000, the Company purchased 14.5 million shares of its common stock at a cost of $247.1 million and 1.7 million shares of its common stock at a cost of $29.6 million, respectively. These amounts do not include interim settlements under the Company's equity forward agreements.

Note 15. Equity Forward Agreements

The Company has entered into equity forward agreements with Bank of America ("B of A" or "the Bank") providing for the Bank's purchase of up to an agreed amount of the Company's outstanding common stock. (Such purchases were to be in accordance with the volume and other limitations of Rule 10b-18 under the Securities Exchange Act of 1934.) The agreements, as amended, provide that on the settlement date, the Company will purchase from B of A the shares that the Bank then holds. For those shares, the Company will pay to B of A its acquisition cost (as adjusted by any interim settlements) plus accrued fees (the "Settlement Amount"). At the Company's option, it may acquire all or a portion of the shares at an earlier date, or it may become obligated to acquire all or a portion of the shares at an earlier date under certain circumstances specified in the agreements. The agreements provide for interim settlements whereby the Company may deliver or receive shares at the end of each calendar quarter so that the aggregate market value of the shares held by B of A is equal to the remaining notional amount of the agreements. The shares held by B of A at each interim settlement date are valued at the closing price of the stock on that date. To the extent that the value of the shares exceeds the notional amount, B of A delivers equivalent shares to the Company. To the extent the notional amount exceeds the value, the Company delivers equivalent shares to B of A.

Bank of America acquired a total of 6.9 million shares at a total cost of $138.7 million under these agreements. Pursuant to the interim settlement provisions and an amendment to the agreements, the Company has received a net of 3.2 million shares and reduced the notional amount of the agreements by $38.7 million. As of February 28, 2002, the Company was entitled to purchase the remaining 3.7 million shares from B of A for the notional amount of $100 million on the settlement date (which was extended to March 31, 2003 by amendment of the agreements) subject to any future adjustment of the notional amount and/or the number of shares under the agreements' interim settlement provisions.

The table below summarizes the share purchase and interim settlement activity under these equity forward agreements through February 28, 2002.

Date	Description	Shares Acquired (Delivered) by BofA		Shares Acquired (Delivered) by Mandalay		Increase (Decrease) in Notional Amount
		(in thousands)
9/8/00	Original agreement	4,856		—		$	100,000
3/21/01	Amendment (increase of notional amount)	1,246		—			24,933
6/30/01	Interim settlement	(1,543	)	1,543			—
9/15/01	Amendment (increase of notional amount)	754		—			13,741
10/31/01	Interim settlement	938		(938	)		(35,527	)
1/31/02	Interim settlement	(2,438	)	2,438			—
2/6/02	Amendment (contract extension to 3/31/03)	(116	)	116			(3,147	)

	Net amounts	3,697		3,159		$	100,000

Although the Company's current intention is to purchase the shares held by B of A on the settlement date in accordance with the terms of the agreements, it could elect to net settle its obligation in cash or shares (i.e., pay cash or deliver additional shares or receive cash or shares). Upon final settlement of the agreements, B of A will be entitled to receive the Settlement Amount. If the Company elects to net settle its obligation, and if the net proceeds from the sale of the shares held by B of A total less than the Settlement Amount, the Company will be required to pay the difference either in cash or in the form of shares with an equivalent value (limited to the maximum number of shares under the agreement). If the net proceeds from the sale of the shares held by B of A total more than the Settlement Amount, B of A will be required to pay the Company the difference either in cash or in the form of shares with an equivalent value. The number of shares the Company ultimately acquires from B of A under these equity forward agreements will reduce, by an identical number, the shares it may purchase pursuant to its current share purchase authorizations. The Company's maximum exposure under the equity forward agreements is limited to the notional amount.

The Company incurs quarterly interest charges on the notional amount at a current rate equal to LIBOR plus 1.95%. Total interest charges incurred from inception through January 31, 2002, amounted to $7.8 million, of which $6.5 million was incurred in fiscal 2002. In addition, the Company has also incurred structuring fees and commissions totaling $3.7 million, of which $2.0 million was incurred in fiscal 2002. These interest charges and other fees are included in the cost of treasury stock.

Note 16. Commitments and Contingent Liabilities

Mandalay Bay Convention Center

The Company has commenced construction of a convention and meeting complex located on land adjacent to the existing Mandalay Bay Conference Center. The complex will include more than one million square feet of exhibit space. Upon completion of the project, Mandalay Bay will offer a total of almost two million gross square feet of conference and exhibit space. Following the events of September 11, construction of the facility was temporarily suspended. Construction was resumed in February, and the facility is currently expected to open in January 2003. The cost of the convention

center, excluding land, preopening expenses and capitalized interest, is estimated to be $235 million. As of January 31, 2002, the Company had incurred costs of $61.6 million related to this project.

Detroit

The Company participates with the Detroit-based Atwater Casino Group in a joint venture that owns and operates a temporary casino in Detroit, Michigan. This joint venture is one of three groups which negotiated casino development agreements with the city. The Company has a 53.5% ownership interest in the joint venture.

Pending the development of a permanent hotel/casino, the joint venture constructed a temporary casino (MotorCity Casino) in downtown Detroit, which opened December 14, 1999. The cost of the temporary casino, including land and capitalized interest but excluding preopening expenses, was approximately $150 million. This cost was financed through the joint venture's $150 million credit facility, which is secured by the assets associated with the temporary casino. The Company has guaranteed this credit facility, which had a balance of $64 million at January 31, 2002. The joint venture's operation of the temporary casino is subject to ongoing regulatory oversight, and its ability to proceed with a permanent hotel/casino project is contingent upon the receipt of all necessary gaming approvals and satisfaction of other conditions.

The joint venture is currently negotiating with the City of Detroit concerning the location and scope of the permanent facility; however, the facility is expected to include hotel rooms, larger casino space, convention and meeting space, and dining and entertainment facilities. The Company has committed to contribute 20% of the cost of the permanent facility in the form of an investment in the joint venture. The joint venture will seek to borrow the funds necessary to complete the permanent facility. Because of the uncertainty about the location and scope of the permanent facility, its cost has yet to be determined. The current development agreement provides that Mandalay will guarantee completion of the permanent facility and will enter into a keep-well agreement with the city, pursuant to which it could be required to contribute additional funds to continue operation of the permanent facility for a period of two years. This keep-well agreement also applies to the temporary casino. There is no contractual limitation on the amount that the Company may be required to contribute to the joint venture in order to guarantee the completion of the permanent facility or to keep the project in operation for a period of two years. However, based on the performance of the temporary casino to date, the Company does not expect that these guarantees will require the outlay of additional capital. The Company has issued letters of credit totaling $50 million for the benefit of Bank of America in order to back letters of credit issued by Bank of America for the same total amount. The Bank of America letters of credit were issued to secure payments of principal and interest on bonds issued by the Economic Development Corporation of the City of Detroit. The proceeds of the bonds are to be used to finance costs associated with activities (including acquisition) relating to land located along the Detroit River (including the site where the joint venture's permanent facility originally was to be located). However, this restriction on the use of proceeds may be modified as a result of negotiations with the City of Detroit.

Michigan, against the Detroit joint venture and the other two casino operators in Detroit. The plaintiff purports to represent himself and a class consisting of all persons who lost money and/or incurred debts that remain unpaid at any of the three Detroit casinos. Relying on the Sixth Circuit Court of Appeals' Lac Vieux decision, the plaintiff alleges that the three casinos have been operating illegally and continue to do so. The relief sought by the plaintiff includes an injunction to restrain the three casinos from remaining open until properly licensed, compensatory damages, and disgorgement of all profits "unjustly obtained." The joint venture continues to operate MotorCity Casino. However, any future ruling by the court in either lawsuit or by the Michigan Gaming Control Board, as well as an adverse ruling in other lawsuits, could affect the joint venture's operation of the temporary facility, as well as its ability to retain its certificate of suitability and casino license for its permanent facility. No assurance can be given regarding the timing or outcome of any of these proceedings.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Mandalay Resort Group:

We have audited the accompanying consolidated balance sheets of Mandalay Resort Group (a Nevada corporation) and subsidiaries as of January 31, 2002 and 2001 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended January 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mandalay Resort Group and subsidiaries as of January 31, 2002 and 2001 and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2002, in conformity with accounting principles generally accepted in the United States.

As explained in Note 9 of the notes to consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" during the year ended January 31, 2002.

ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 27, 2002

Management's Report on Financial Statements

The Company is responsible for preparing the consolidated financial statements and related information appearing in this report. Management believes that the financial statements present fairly the Company's financial position, results of operations and cash flows in conformity with Accounting Principles Generally Accepted in the United States. In preparing its financial statements, the Company is required to include amounts based on estimates and judgments which management believes are reasonable under the circumstances.

The Company maintains accounting and other control systems designed to provide reasonable assurance that financial records are reliable for purposes of preparing financial statements and that assets are properly accounted for and safeguarded. Compliance with these systems and controls is reviewed through a program of audits by an internal audit staff.

The Board of Directors fulfills its responsibility for the Company's financial statements through its audit committee, which is composed solely of directors who are not Company officers or employees. The audit committee meets from time to time with the independent public accountants, management and the internal auditors. The independent public accountants have direct access to the audit committee, with or without the presence of management representatives.

100

SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	Fiscal year ended January 31, 2002
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter			Total
	(in thousands, except per share amounts)
Net revenues	$	669,081	$	644,194	$	609,365	$	539,159		$	2,461,799
Income from operations		138,104		111,540		100,349		1,067			351,060
Income (loss) before provision for income taxes		75,095		48,508		36,377		(66,974	)		93,006
Net income (loss)		47,362		30,527		23,311		(48,156	)		53,044
Basic earnings (loss) per share(1)	$	0.62	$	0.41	$	0.33	$	(0.68	)		0.73
Diluted earnings (loss) per share(1)	$	0.61	$	0.40	$	0.32	$	(0.66	)		0.71

	Fiscal year ended January 31, 2001
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total
	(in thousands, except per share amounts)
Net revenues	$	633,667	$	639,459	$	630,813	$	591,845	$	2,495,784
Income from operations		130,915		119,950		114,081		66,588		431,534
Income before provision for income taxes		78,245		60,801		47,231		8,115		194,392
Net income		48,858		38,052		29,371		3,419		119,700
Basic earnings per share(1)	$	0.58	$	0.49	$	0.39	$	0.04		1.53
Diluted earnings per share(1)	$	0.58	$	0.48	$	0.38	$	0.04		1.50

(1): Because earnings (loss) per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total earnings per share amounts for the year.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information beginning with the question "What is the background of this year's nominees?" under the caption "Item I—Election of Directors and Nominee Biographies" to, but not including, the caption "Compensation of Directors" in the proxy statement to be filed by Mandalay Resort Group with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended January 31, 2002 and forwarded to stockholders prior to the 2002 Annual Meeting of Stockholders (the "2002 Proxy Statement"), and the additional information in the 2002 Proxy Statement beginning immediately following the caption "Section 16(a) Beneficial Ownership Reporting Compliance" to, but not including, the caption "General" is incorporated herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information in the 2002 Proxy Statement beginning immediately following the caption "Compensation of Directors" to, but not including, the caption "Board Committees and Meeting Attendance," the additional information in the 2002 Proxy Statement beginning immediately following the caption "Executive Compensation" to, but not including, the caption "Certain Transactions," and the additional information in the 2002 Proxy Statement beginning with the caption "Compensation Committee Interlocks and Insider Participation" to, but not including, the caption "Report of the Audit Committee" is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information in the 2002 Proxy Statement beginning immediately following the caption "Stock Ownership of Certain Beneficial Owners and Management" to, but not including, the caption "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information in the 2002 Proxy Statement beginning immediately following the caption "Certain Transactions" to, but not including, the caption "Report of the Board of Directors and the Compensation Committee on Executive Compensation" is incorporated herein by this reference.

102

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) Consolidated Financial Statements:

MANDALAY RESORT GROUP AND SUBSIDIARIES

				Page
		Consolidated Balance Sheets as of January 31, 2002 and 2001		73
		Consolidated Statements of Income for the three years ended January 31, 2002		74
		Consolidated Statements of Cash Flows for the three years ended January 31, 2002		75
		Consolidated Statements of Stockholders' Equity for the three years ended January 31, 2002		76
		Notes to Consolidated Financial Statements		77-98
		Report of Independent Public Accountants		99

(a)(2) Supplemental Financial Statement Schedules:

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

	Year Ended January 31,
	Balance at Beginning of year		Charged to Costs and Expenses		Deductions		Balance at end of year
2002 Allowance for doubtful accounts	$	33,321	$	20,381	$	18,298	$	35,404
2001 Allowance for doubtful accounts		13,807		21,329		1,815		33,321
2000 Allowance for doubtful accounts		6,042		13,856		6,091		13,807

(a)(3) Exhibits:

The following exhibits are filed as a part of this report or incorporated herein by reference:

3.1.1.		Restated Articles of Incorporation of the Registrant as of July 15, 198 and Certificate of Amendment thereto, dated June 29, 1989. (Incorporated by reference to Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1991.)
3.1.2.		Certificate of Division of Shares into Smaller Denominations, dated June 20, 1991. (Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1992.)
3.1.3.		Certificate of Division of Shares into Smaller Denominations, dated June 22, 1993. (Incorporated by reference to Exhibit 3(i) to the Registrant's Current Report on Form 8-K dated July 21, 1993.)
3.1.4.		Certificate of Amendment of Restated Articles of Incorporation of the Registrant, filed with the Office of the Secretary of State of Nevada on June 18, 1999. (Incorporated by reference to Exhibit 3(i) to the Registrant's Current Report on Form 8-K dated June 18, 1999.)

103

3.2		Restated Bylaws of the Registrant dated April 30, 1999. (Incorporated by reference to Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1999.)
4.1.		Rights Agreement dated as of July 14, 1994, between the Registrant and First Chicago Trust Company of New York. (Incorporated by reference to Exhibit 4 to the Registrant's Current Report on Form 8-K dated August 15, 1994.)
4.2.		Amendment to Rights Agreement effective as of April 16, 1996, between the Registrant and First Chicago Trust Company of New York. (Incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1996.)
4.3.		Revolving Loan Agreement, dated as of August 22, 2001, by and among the Registrant, the banks named therein, Bank of America, N.A., as administration agent, and Citicorp USA, Inc, and Bankers Trust Company, as syndication agents for the Banks, and the related Subsidiary Guarantee, dated August 22, 2001, of the Registrant's subsidiaries named therein. (Incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2001.)
4.4.		Term Loan Agreement, dated as of August 22, 2001, by and among the Registrant, the banks named therein, Bank of America, N.A., as administration agent, and Citicorp USA, Inc, and Bankers Trust Company, as syndication agents for the Banks, and the related Subsidiary Guarantee, dated August 22, 2001, of the Registrant's subsidiaries named therein. (Incorporated by reference to Exhibit 4(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2001.)
4.5.		First Amendment Agreement, dated December 19, 2001, to the Revolving Loan Agreement and Term Loan Agreement, both dated August 22, 2001, by and among the Registrant, the banks named therein, Bank of America, N.A., as administration agent, and Citicorp USA, Inc, and Bankers Trust Company, as syndication agents for the Banks, and the related Subsidiary Guarantee, dated August 22, 2001, of the Registrant's subsidiaries named therein.
4.6.		Capital Markets Term Loan Agreement, dated as of August 22, 2001, by and among the Registrant, the banks named therein, Bank of America, N.A., as administration agent, and Citicorp USA, Inc, and Bankers Trust Company, as syndication agents for the Banks, and the related Subsidiary Guarantee, dated August 22, 2001, of the Registrant's subsidiaries named therein. (Incorporated by reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2001.)
4.7.		Rate Swap Master Agreement, dated as of October 24, 1986, and Rate Swap Supplements One through Four, by and between the Registrant and Bank of America, N.A. (Incorporated by reference to Exhibit 4(j) to the Registrant's Current Report on Form 8-K dated December 29, 1986.)
4.8.		Interest Rate Swap Agreement, dated as of September 27, 1999, by and between the Registrant and Bank of America, N.A. (Incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1999.)
4.9.		Interest Rate Swap Agreement, dated as of September 27, 1999, by and between the Registrant and Bank of America, N.A. (Incorporated by reference to Exhibit 4(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1999.)

104

4.10.		Interest Rate Swap Agreement, dated as of October 13, 1999, by and between the Registrant and Bank of America, N.A. (Incorporated by reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1999.)
4.11.		Interest Rate Cap Agreement, dated October 20, 1997, between the Registrant and Morgan Guaranty Trust Company of New York. (Incorporated by reference to Exhibit 4(f) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
4.12.		Interest Rate Cap Agreement, dated January 13, 1998, between the Registrant and Morgan Guaranty Trust Company of New York. (Incorporated by reference to Exhibit 4(h) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
4.13.		Interest Rate Cap Agreement dated June 14, 2000, between the Registrant and Morgan Guaranty Trust Company of New York. (Incorporated by reference to Exhibit 4(e) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000.)
4.14.		Interest Rate Cap Agreement dated June 29, 2000, between the Registrant and Morgan Guaranty Trust Company of New York. (Incorporated by reference to Exhibit 4(f) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000.)
4.15.		Grid Promissory Note, dated October 17, 1997, between the Registrant and Lyon Short Term Funding Corp. (Incorporated by reference to Exhibit 4(g) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
4.16.		Commercial Paper Dealer Agreement, dated October 9, 1997, between the Registrant and Merrill Lynch Money Markets Inc. (Incorporated by reference to Exhibit 4(b) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
4.17.		Commercial Paper Dealer Agreement, dated October 9, 1997, between the Registrant and BancAmerica Robertson Stephens. (Incorporated by reference to Exhibit 4(c) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
4.18.		Commercial Paper Dealer Agreement, dated October 9, 1997, between the Registrant and Credit Suisse First Boston Corporation. (Incorporated by reference to Exhibit 4(d) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
4.19.		Issuing and Paying Agency Agreement, dated October 9, 1997, between the Registrant and The Chase Manhattan Bank. (Incorporated by reference to Exhibit 4(e) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
4.20.		Indenture by and between the Registrant and First Interstate Bank of Nevada, N.A., as Trustee with respect to the Registrant's 6³/4% Senior Subordinated Notes due 2003 and its 7⁵/8% Senior Subordinated Debentures due 2013. (Incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated July 21, 1993.)
4.21.		Indenture, dated February 1, 1996, by and between the Registrant and First Interstate Bank of Nevada, N.A., as Trustee. (Incorporated by reference to Exhibit 4(b) to the Registrant's Current Report on Form 8-K dated January 29, 1996.)
4.22.		Supplemental Indenture, dated February 1, 1996, by and between the Registrant and First Interstate Bank of Nevada, N.A., as Trustee, with respect to the Registrant's 6.45% Senior Notes due February 1, 2006. (Incorporated by reference to Exhibit 4(c) to the Registrant's Current Report on Form 8-K dated January 29, 1996.)
4.23.		6.45% Senior Notes due February 1, 2006 in the principal amount of $200,000,000. (Incorporated by reference to Exhibit 4(d) to the Registrant's Current Report on Form 8-K dated January 29, 1996.)

105

4.24.		Supplemental Indenture, dated as of November 15, 1996, to an indenture dated February 1, 1996, by and between the Registrant and Wells Fargo Bank (Colorado), N.A., as Trustee, with respect to the Registrant's 6.70% Senior Notes due November 15, 2096. (Incorporated by reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1996.)
4.25.		6.70% Senior Notes due February 15, 2096 in the principal amount of $150,000,000. (Incorporated by reference to Exhibit 4(d) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1996.)
4.26.		Indenture, dated November 15, 1996, by and between the Registrant and Wells Fargo Bank (Colorado), N.A., as Trustee. (Incorporated by reference to Exhibit 4(e) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1996.)
4.27.		Supplemental Indenture, dated as of November 15, 1996, to an indenture dated November 15, 1996, by and between the Registrant and Wells Fargo Bank (Colorado), N.A., as Trustee, with respect to the Registrant's 7.0% Senior Notes due November 15, 2036. (Incorporated by reference to Exhibit 4(f) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1996.)
4.28.		7.0% Senior Notes due February 15, 2036, in the principal amount of $150,000,000. (Incorporated by reference to Exhibit 4(g) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1996.)
4.29.		Instrument of Joinder, dated May 31, 1998, by Mandalay Corp., pursuant to the Subsidiary Guaranty dated as of May 23, 1997, with respect to the Amended and Restated Loan Agreement, in favor of Bank of America, N.A., as administrative agent for the Banks. (Incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1998.)
4.30.		Indenture dated November 20, 1998, by and between the Registrant and The Bank of New York, as Trustee. (Incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998.)
4.31.		Supplemental Indenture, dated November 20, 1998, by and between the Registrant and The Bank of New York, as Trustee, with respect to the Registrant's 9¹/4% Senior Subordinated Notes due December 1, 2005. (Incorporated by reference to Exhibit 4(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998.)
4.32.		9¹/4% Senior Subordinated Notes due December 1, 2005 in the principal amount of $275,000,000. (Incorporated by reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998.)
4.33.		Indenture dated as of July 24, 2000 by and between the Registrant and The Bank of New York with respect to $500 million aggregate principal amount of 10¹/4% Senior Subordinated Notes due 2007. (Incorporated by reference to Exhibit 4.1 to the Registrant's Form S-4 Registration Statement No. 333-44216.)
4.34.		Indenture dated as of August 16, 2000 by and between the Registrant and The Bank of New York, with respect to $200 million aggregate principal amount of 9¹/2% Senior Notes due 2008. (Incorporated by reference to Exhibit 4.1 to the Registrant's Form S-4 Registration Statement No. 333-44838.)

106

4.35.		Indenture dated as of December 20, 2001 by and among the Registrant and The Bank of New York, with respect to $300 million aggregate principal amount of 9³/8% Senior Subordinated Notes due 2010. (Incorporated by reference to Exhibit 4.1 to the Registrant's Form S-4 Registration Statement No. 333-82936.)
4.36.		Registration Rights Agreement dated as of December 20, 2001 by and among the Registrant and Banc of America Securities LLC, Deutsche Bank Alex Brown, Inc., Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Lyonnais Securities (USA) Inc., Credit Suisse First Boston Corporation, Dresdner Kleinwort Wasserstein Grantchester Inc., Scotia Capital (USA) Inc., SG Cowen Securities Corporation, UBS Warburg LLC, and Wells Fargo Brokerage Services LLC. (Incorporated by reference to Exhibit 4.1 to the Registrant's Form S-4 Registration Statement No. 333-82936.)
10.1.*		Amended and Restated 1989 Stock Option Plan of the Registrant. (Incorporated by reference to Exhibit 10 to the Post Effective Amendment No. 4 to the Registrant's Registration Statement (No. 33-39215) on Form S-8.)
10.2.*		Amended and Restated 1991 Stock Incentive Plan of the Registrant. (Incorporated by reference to Exhibit 10 to the Post Effective Amendment No. 3 to the Registrant's Registration Statement (No. 33-56420) on Form S-8.)
10.3.*		Amended and Restated 1993 Stock Option Plan of the Registrant. (Incorporated by reference to Exhibit 10 to the Post Effective Amendment No. 2 to the Registrant's Registration Statement (No. 33-53303) on Form S-8.)
10.4.*		1998 Stock Option Plan. (Incorporated by reference to Exhibit 4(g) to the Registrant's Registration Statement (No.333-51073) on Form S-8.)
10.5.*		1999 Non-Employee Directors Stock Option Plan. (Incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1999.)
10.6.*		2000 Stock Incentive Plan. (Incorporated by reference to Appendix B to the Registrant's definitive proxy statement dated April 28, 2000 relating to the 2000 Annual Meeting of Registrant's Stockholders.)
10.7.*		Executive Compensation Insurance Plan. (Incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1992.)
10.8.		Lease, dated August 3, 1977, by and between B&D Properties, Inc., as lessor, and the Registrant, as lessee; Amendment of Lease, dated May 6, 1983. (Incorporated by reference to Exhibit 10(h) to the Registrant's Registration Statement (No. 2-85794) on Form S-1.)
10.9.		Thirteenth Amendment and Restatement of the Registrant's Employees' Profit Sharing and Investment Plan. (Incorporated by reference to Exhibit 4(d) to Post Effective Amendment No. 11 to the Registrant's Registration Statement (No. 33-18278 on Form S-8.)
10.10.		Fourteenth Amendment, dated November 21, 2000, of the Registrant's Employees' Profit Sharing and Investment Plan. (Incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.11.		Fifteenth Amendment, dated November 29, 2001, of the Registrant's Employees' Profit Sharing and Investment Plan.
10.12.		Ninth Amendment and Restatement to the Registrant's Employees' Profit Sharing and Investment Trust. (Incorporated by reference to Exhibit 4(e) to Post Effective Amendment No. 11 to the Registrant's Registration Statement (No. 33-18278) on Form S-8.)

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10.13.		Tenth Amendment and Restatement to the Registrant's Employees' Profit Sharing and Investment Trust.
10.14.		Group Annuity Contract No. GA70867 between Philadelphia Life (formerly Bankers Life Company) and Trustees of the Registrant's Employees' Profit Sharing and Investment Plan. (Incorporated by reference to Exhibit 4(c) to the Registrant's Registration Statement (No. 33-1459) on Form S-8.)
10.15.		Lease by and between Robert Lewis Uccelli, guardian, as lessor, and Nevada Greens, a limited partnership, William N. Pennington, as trustee, and William G. Bennett, as trustee, and related Assignment of Lease. (Incorporated by reference to Exhibit 10(p) to the Registrant's Registration Statement (No. 33-4475) on Form S-1.)
10.16.		Agreement of Purchase, dated March 15, 1985, by and between Denio Brothers Trucking Company, as seller, and the Registrant, as buyer, and related lease by and between Denio Brothers Trucking Co., as lessor, and Nevada Greens, a limited partnership, William N. Pennington, as trustee, and William G. Bennett, as trustee, and related Assignment of Lease. (Incorporated by reference to Exhibit 10(q) to the Registrant's Registration Statement (No. 33-4475) on Form S-1.)
10.17.		Amended and Restated Agreement of Joint Venture of Circus and Eldorado Joint Venture by and between Eldorado Limited Liability Company and Galleon, Inc. (Incorporated by reference to Exhibit 3.3 to the Form S-4 Registration Statement of Circus and Eldorado Joint Venture and Silver Legacy Capital Corp.—Commission File Nos. 333-87202 and 333-87202-01.)
10.18.		Amended and Restated Credit Agreement, dated November 24, 1997, by and among Circus and Eldorado Joint Venture, the Banks named therein and Bank of America National Trust and Savings Association as administrative agent, and the related Note, Amended and Restated Make-Well Agreement and Amended and Restated Deed of Trust. (Incorporated by reference to Exhibit 4(h) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)
10.19.		Amendment No. 1 to the Amended and Restated Credit Agreement, by and among Circus and Eldorado Joint Venture, the Banks named therein and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10(w) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2000.)
10.20.		Second and Amended and Restated Credit Agreement, dated as of March 5, 2002, among Circus and Eldorado Joint Venture, the banks referred to therein and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.2 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.21.		Guaranty, dated as of March 5, 2002, made by Silver Legacy Capital Corp., in favor of Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.3 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.22.		Second Amended and Restated Security Agreement, dated as of March 5, 2002, by and between Circus and Eldorado Joint Venture and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.4 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)

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10.23.		Guarantor Security Agreement, dated as of March 5, 2002, by and between Silver Legacy Capital Corp. and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.5 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.24.		Second Amended and Restated Deed of Trust, dated as of February 26, 2002, but effective March 5, 2002, by and among Circus and Eldorado Joint Venture and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.6 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.25.		Second Amended and Restated Assignment of Rent and Revenues entered into as of February 26, 2002, but effective March 5, 2002, by and between Circus and Eldorado Joint Venture and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.7 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.26.		Second Amended and Restated Collateral Account Agreement, dated March 5, 2002, by and between Circus and Eldorado Joint Venture and Bank of America, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.9.8 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.27.		Intercreditor Agreement, dated as of March 5, 2002, by and among Bank of America, N.A., as administrative agent, The Bank of New York, as trustee, Circus and Eldorado Joint Venture and Silver Legacy Capital Corp. (Incorporated by reference to Exhibit 10.9.9 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.28.		Indenture, dated as of March 5, 2002, among Circus and Eldorado Joint Venture, Silver Legacy Capital Corp., and The Bank of New York, as trustee. (Incorporated by reference to Exhibit 10.10.1 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.29.		Deed of Trust, dated as of February 26, 2002, by Circus and Eldorado Joint Venture, to First American Title Company of Nevada for the benefit of The Bank of New York. (Incorporated by reference to Exhibit 10.10.2 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.30.		Security Agreement, dated as of March 5, 2002, by and between Circus and Eldorado Joint Venture and Silver Legacy Corp. for the benefit of The Bank of New York, as trustee. (Incorporated by reference to Exhibit 10.10.3 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.31.		Assignment of Rent and Revenues entered into as of February 26, 2002, by and between Circus and Eldorado Joint Venture and The Bank of New York, as trustee. (Incorporated by reference to Exhibit 10.10.4 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)

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10.32.		Collateral Account Agreement, dated as of March 5, 2002, by and among Circus and Eldorado Joint Venture, Silver Legacy Capital Corp., and The Bank of New York, as trustee. (Incorporated by reference to Exhibit 10.10.5 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.33.		Environment Indemnity Agreement entered into as of March 5, 2002, by Circus and Eldorado Joint Venture and Silver Legacy Capital Corp. (Incorporated by reference to Exhibit 10.10.6 to the Annual Report on Form 10-K for the year ended December 31, 2001 of Eldorado Resorts LLC and Eldorado Capital Corp.—Commission File No. 333-11811.)
10.34.		Agreement and Plan of Merger, dated March 19, 1995, by and among the Registrant and M.S.E. Investments, Incorporated, Last Chance Investments, Incorporated, Gold Strike Investments, Incorporated, Diamond Gold, Inc., Gold Strike Aviation, Incorporated, Gold Strike Finance Company, Inc., Oasis Development Company, Inc., Michael S. Ensign, William A. Richardson, David R. Belding, Peter A. Simon II and Robert J. Verchota. (Incorporated by reference to Exhibit 10(ee) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1995.)
10.35.		First Amendment to Agreement and Plan of Merger, dated May 30, 1995, by and among the Registrant and M.S.E. Investments, Incorporated, Last Chance Investments, Incorporated, Goldstrike Investments, Incorporated, Diamond Gold, Inc., Gold Strike Aviation, Incorporated, Goldstrike Finance Company, Inc., Oasis Development Company, Inc., Michael S. Ensign, William A. Richardson, David R. Belding, Peter A. Simon II and Robert J. Verchota. (Incorporated by reference to Exhibit 99.2 of the Schedule 13D of Michael S. Ensign relating to the Registrant's Common Stock, filed on June 12, 1995.)
10.36.		Exchange Agreement, dated March 19, 1995, by and among the Registrant and New Way, Inc., a wholly owned subsidiary of the Registrant, Glenn W. Schaeffer, Gregg H. Solomon, Antonio C. Alamo, Anthony Korfman and William Ensign. (Incorporated by reference to Exhibit 10(ff) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1995.)
10.37.		First Amendment to Exchange Agreement, dated May 30, 1995, by and among the Registrant and New Way, Inc., a wholly owned subsidiary of the Registrant, Glenn W. Schaeffer, Gregg H. Solomon, Antonio C. Alamo, Anthony Korfman and William Ensign. (Incorporated by reference to Exhibit 10(d) to the Registrant's Current Report on Form 8-K dated June 1, 1995.)
10.38.		Registration Rights Agreement, dated as of June 1, 1995, by and among the Registrant and Michael S. Ensign, William A. Richardson, David R. Belding, Peter A. Simon II, Glenn W. Schaeffer, Gregg H. Solomon, Antonio C. Alamo, Anthony Korfman, William Ensign and Robert J. Verchota. (Incorporated by reference to Exhibit 99.5 of the Schedule 13D of Michael S. Ensign, relating to the Registrant's Common Stock, filed on June 12, 1995.)
10.39.		Standstill Agreement, dated as of June 1, 1995, by and among the Registrant and Michael S. Ensign, William A. Richardson, David R. Belding, Peter A. Simon II and Glenn W. Schaeffer. (Incorporated by reference to Exhibit 99.4 of the Schedule 13D of Michael S. Ensign, relating to the Registrant's Common Stock, filed on June 12, 1995.)
10.40.		Amendment No. 1 to Standstill Agreement, effective April 16, 1996, by and among the Registrant and Michael S. Ensign, William A. Richardson, David R. Belding, Peter A. Simon II and Glenn W. Schaeffer. (Incorporated by reference to Exhibit 99.7 of Amendment No. 2 to the Schedule 13D of Michael S. Ensign, relating to the Registrant's Common Stock, filed on September 5, 1996.)

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10.41.*		2000 Executive Officers' Bonus Plan. (Incorporated by reference to Appendix A to the Registrant's definitive proxy statement dated April 28, 2000 relating to its 2000 Annual Meeting of Stockholders.)
10.42.*		Amendment and Restatement of Employment Agreement dated November 1, 1997, by and between the Registrant and Michael S. Ensign. (Incorporated by reference to Exhibit 10(gg) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
10.43.*		Amendment and Restatement of Employment Agreement dated November 1, 1997, by and between the Registrant and Glenn W. Schaeffer. (Incorporated by reference to Exhibit 10(hh) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
10.44.*		Amendment and Restatement of Employment Agreement dated November 1, 1997, by and between the Registrant and William A. Richardson. (Incorporated by reference to Exhibit 10(ii) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
10.45.		Joint Venture Agreement, dated as of December 18, 1992, between Nevada Landing Partnership and RBG, L.P. (Incorporated by reference to Exhibit 10(g) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1995.)
10.46.		Amendment dated July 15, 1993 to the Joint Venture Agreement between Nevada Landing Partnership and RBG, L.P. (Incorporated by reference to Exhibit 10(h) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1995.)
10.47.		Amendment dated October 6, 1994 to the Joint Venture Agreement between Nevada Landing Partnership and RBG, L.P. (Incorporated by reference to Exhibit 10(i) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1995.)
10.48.		Amendment dated June 1, 1995 to the Joint Venture Agreement between Nevada Landing Partnership and RBG, L.P. (Incorporated by reference to Exhibit 10(j) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1995.)
10.49.		Amendment dated February 28, 1996 to the Joint Venture Agreement between Nevada Landing Partnership and RBG, L.P. (Incorporated by reference to Exhibit 10(ww) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1996.)
10.50.		Reducing Revolving Loan Agreement, dated as of December 21, 1994, among Victoria Partners, each bank party thereto, The Long-Term Credit Bank of Japan, Ltd., Los Angeles Agency, and Societe Generale, as Co-agents, and Bank of America N.A., as administrative agent (without Schedules or Exhibits) (the "Victoria Partners Loan Agreement"). (Incorporated by reference to Exhibit 99.2 to Amendment No. 1 on Form 8-K/A to the Current Report on Form 8-K dated December 9, 1994 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.51.		Amendment No. 1 to the Victoria Partners Loan Agreement, dated as of January 31, 1995. (Incorporated by reference to Exhibit 10(uu) to the Annual Report on Form 10-K for the year ended December 31, 1994 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.52.		Amendment No. 2 to the Victoria Partners Loan Agreement, dated as of June 30, 1995. (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)

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10.53.		Amendment No. 3 to the Victoria Partners Loan Agreement, dated as of July 28, 1995. (Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.54.		Amendment No. 4 to the Victoria Partners Loan Agreement, dated as of October 16, 1995. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1995.)
10.55.		Amendment No. 5 to the Victoria Partners Loan Agreement dated as of August 1, 1996. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1996.)
10.56.		Amendment No. 6 to the Victoria Partners Loan Agreement, dated as of April 12, 1997. (Incorporated by reference to Exhibit 10(ccc) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1997.)
10.57.		Amendment No. 7 to the Victoria Partners Loan Agreement, dated as of January 12, 1998. (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.58.		Amendment No. 8 to the Victoria Partners Loan Agreement, dated as of March 28, 2002.
10.59.		Joint Venture Agreement, dated as of December 9, 1994, between MRGS Corp. and Gold Strike L.V. (without Exhibit) (the "Victoria Partners Venture Agreement"). (Incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K dated December 9, 1994 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.60.		Amendment No. 1 to the Victoria Partners Venture Agreement dated as of April 17, 1995. (Incorporated by reference to Exhibit 10(c) to the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.61.		Amendment No. 2 to the Victoria Partners Venture Agreement dated as of September 25, 1995. (Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1995 of Mirage Resorts, Incorporated. Commission File No. 1-6697.)
10.62.		Amendment No. 3 to the Victoria Partners Venture Agreement dated as of February 28, 1996. (Incorporated by reference to Exhibit 10(fff) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1996.)
10.63.		Amendment No. 4 to the Victoria Partners Venture Agreement dated as of May 29, 1996. (Incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 30, 1996.)
10.64.		Consulting Agreement, dated June 1, 1995, between Circus Circus Casinos, Inc. (a subsidiary of the Registrant) and Lakeview Company. (Incorporated by reference to Exhibit 10(ggg) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1996.)
10.65.		Operating Agreement, dated October 7, 1997, by and between Circus Circus Michigan, Inc. and Atwater Casino Group, L.L.C. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report for the quarterly period ended October 31, 1997.)

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10.66.		First Amendment to Operating Agreement, dated October 7, 1997, by and between Circus Circus Michigan, Inc. and Atwater Casino Group, L.L.C. (Incorporated by reference to Exhibit 10(hhh) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2000.)
10.67.		Amended First Amendment to Operating Agreement, dated October 7, 1997, by and between Circus Circus Michigan, Inc. and Atwater Casino Group, L.L.C. (Incorporated by reference to Exhibit 10(iii) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2000.)
10.68.		Second Amendment to Operating Agreement, dated October 7, 1997, by and between Circus Circus Michigan, Inc. and Atwater Casino Group, L.L.C. (Incorporated by reference to Exhibit 10(jjj) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2000.)
10.69.		Third Amendment, dated January 21, 2001, to Operating Agreement, dated October 7, 1997, by and between Circus Circus Michigan, Inc. and Atwater Casino Group, L.L.C. (Incorporated by reference to Exhibit 10(ddd) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.70.		Amended and Restated Development Agreement, dated as of April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1998.)
10.71.		First Amendment, dated June 25, 1998, to the Amended and Restated Development Agreement, dated as of April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project. (Incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1998.)
10.72.		Second Amendment, dated December 1999, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project. (Incorporated by reference to Exhibit 10(mmm) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2000.)
10.73.		Third Amendment, dated November 30, 2000, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project. (Incorporated by reference to Exhibit 10(hhh) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.74.		Fourth Amendment, dated November 2001, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project.
10.75.		Fifth Amendment, dated March 2002, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project.

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10.76.		Sixth Amendment, dated April 2002, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project.
10.77.		Conveyance Agreement, dated April 29, 1999, by and among the City of Detroit, the Economic Development Corporation of the City of Detroit and Detroit Entertainment, L.L.C. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended April 30, 1999.)
10.78.		Loan Agreement, dated as of June 30, 1999 among Detroit Entertainment, L.L.C., the Banks named therein and Bank of America National Trust and Savings Association, as administrative agent for the Banks. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1999.)
10.79.		Amendment No. 1 to the Loan Agreement, dated June 30, 1999 among Detroit Entertainment, L.L.C., the Banks named therein and Bank of America, N.A., as administrative agent for the Banks. (Incorporated by reference to Exhibit 10(d) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000.)
10.80.		Amendment No. 2, dated January 31, 2001, to the Loan Agreement, dated June 30, 1999, among Detroit Entertainment, L.L.C., the Banks named therein and Bank of America, N.A., as administrative agent for the Banks. (Incorporated by reference to Exhibit 10(lll) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.81.		Subordination Agreement, dated January 31, 2001, by and between Circus Circus Michigan, Inc. and Detroit Entertainment, L.L.C., with respect to the Loan Agreement, dated June 30, 1999, in favor of Bank of America, N.A., as administrative agent for the lending banks. (Incorporated by reference to Exhibit 10(mmm) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.82.		Hotel Pre-opening Services Agreement, dated as of January 1, 1997, by and among the Registrant and Four Seasons Hotels Limited. (Incorporated by reference to Exhibit 10(kkk) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
10.83.		Hotel Management Agreement, dated as of March 10, 1998, by and among the Registrant, Mandalay Corp. and Four Seasons Hotel Limited. (Incorporated by reference to Exhibit 10(lll) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
10.84.		Hotel License Agreement, dated as of March 10, 1998, by and among Mandalay Corp. and Four Seasons Hotel Limited. (Incorporated by reference to Exhibit 10(mmm) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.)
10.85.		Lease Intended As Security, dated October 30, 1998, among Circus Circus Leasing, Inc., as lessee; the Registrant, as guarantor; First Security Bank, National Association, as Trustee, the Banks named therein and Bank of America, N.A., as administrative agent for the Banks. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998.)
10.86.		Amendment No. 1, dated January 28, 1999, to Lease Intended As Security, dated October 30, 1998, among Circus Circus Leasing, Inc., as lessee; the Registrant, as guarantor; First Security Bank, National Association, as Trustee, the Banks named therein and Bank of America, N.A., as administrative agent for the Banks. (Incorporated by reference to Exhibit 10(rrr) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)

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10.87.		Guaranty, dated October 30, 1998, by the Registrant in favor of First Security Bank, National Association, as Trustee, and the Banks named therein. (Incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998.)
10.88.		Master Lease, dated December 21, 2001, among the Registrant, Mandalay Corp., Ramparts, Inc., New Castle Corp., and Circus Circus Casinos, Inc. as lessees and Wells Fargo Bank Northwest, N.A., as lessor.
10.89.		Guaranty, dated December 21, 2001, by the Registrant and its subsidiaries named therein in favor of Wells Fargo Bank Northwest, N.A., and the other beneficiaries named therein.
10.90.		Aircraft Lease Agreement between the Registrant and General Electric Capital Corporation.
10.91.		Aircraft Lease Agreement, dated December 28, 2001, between the Registrant and General Electric Capital Corporation.
10.92.*		Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 1998.)
10.93.*		Amendment No. 1 to Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10(uuu) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.94.*		Amendment No. 2 to Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10—Q for the quarterly period ended July 31, 2001.)
10.95.		Stock Purchase Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A. and MBG Trust. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000.)
10.96.		First Amendment, dated as of January 2, 2001, to Stock Purchase Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., and MBG Trust. (Incorporated by reference to Exhibit 10(www) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.97.		Second Amendment, dated as of March 21, 2001, to Stock Purchase Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., and MBG Trust. (Incorporated by reference to Exhibit 10(xxx) to the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2001.)
10.98.		Amendment, dated as of September 15, 2001, to Stock Purchase Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., and MBG Trust, and to the Collateral Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., MBG Trust and Banc of America Securities LLC. (Incorporated by reference to Exhibit 10(a) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2001.)
10.99.		Amendment, dated as of February 6, 2002, to Stock Purchase Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., and MBG Trust, and to the Collateral Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., MBG Trust and Banc of America Securities LLC.

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10.100.		Collateral Agreement dated as of September 8, 2000 among the Registrant, Bank of America, N.A., MBG Trust and Banc of America Securities LLC. (Incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000.)
10.101.		Amended and Restated Trust Agreement dated as of September 8, 2000 between NMS Services (Cayman), Inc. and Wilmington Trust Company. (Incorporated by reference to Exhibit 10(c) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000.)
10.102.		Amendment, dated as of September 15, 2001, to the Amended and Restated Trust Agreement, dated as of September 8, 2000, between NMS Services (Cayman) Inc. and Wilmington Trust Company. (Incorporated by reference to Exhibit 10(b) to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended October 31, 2001.)
21.		Subsidiaries of the Registrant.
23.		Consent of Arthur Andersen LLP.
99.		Letter re: Representations of Arthur Andersen LLP.

*: This exhibit is a management contract or compensatory plan or arrangement required to be filed as an exhibit to this Report.

Certain instruments with respect to long-term debt have not been filed hereunder or incorporated by reference herein where the total amount of such debt thereunder does not exceed 10% of our consolidated total assets. Copies of such instruments will be furnished to the Securities and Exchange Commission upon request.

(b): During the fourth quarter of the fiscal year ended January 31, 2002, Mandalay filed a report on Form 8-K dated December 21, 2001. This 8-K reported information under Item 5.
(c): The exhibits required by Item 601 of Regulation S-K filed as part of this report or incorporated herein by reference are listed in Item 14(a)(3) above, and the exhibits filed herewith are listed on the Index to Exhibits which accompanies this report.
(d): See Item 14(a)(2) of this report.

116

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MANDALAY RESORT GROUP
Dated: April 29, 2002	By:	/s/ MICHAEL S. ENSIGN
		Michael S. Ensign, Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ MICHAEL S. ENSIGN Michael S. Ensign	Chairman of the Board, Chief Executive Officer and Chief Operating Officer (Principal Executive Officer)	April 29, 2002
/s/ WILLIAM A. RICHARDSON William A. Richardson	Vice Chairman of the Board	April 29, 2002
/s/ GLENN SCHAEFFER Glenn Schaeffer	President, Chief Financial Officer, Treasurer and Director (Principal Financial Officer)	April 29, 2002
/s/ LES MARTIN Les Martin	Vice President and Chief Accounting Officer (Principal Accounting Officer)	April 29, 2002
/s/ WILLIAM E. BANNEN William E. Bannen	Director	April 29, 2002
/s/ ARTHUR H. BILGER Arthur H. Bilger	Director	April 29, 2002
/s/ ROSE MCKINNEY-JAMES Rose McKinney-James	Director	April 29, 2002

117

/s/ MICHAEL D. MCKEE Michael D. McKee		Director		April 29, 2002
/s/ DONNA B. MORE Donna B. More		Director		April 29, 2002

118

INDEX TO EXHIBITS
FORM 10-K
Fiscal Year Ended
January 31, 2002

Exhibit Number
4.5.		First Amendment Agreement, dated December 19, 2001, to the Revolving Loan Agreement and Term Loan Agreement, both dated August 22, 2001, by and among the Registrant, the banks named therein, Bank of America, N.A., as administration agent, and Citicorp USA, Inc, and Bankers Trust Company, as syndication agents for the Banks, and the related Subsidiary Guarantee, dated August 22, 2001, of the Registrant's subsidiaries named therein.
10.11.		Fifteenth Amendment, dated November 29, 2001, of the Registrant's Employees' Profit Sharing and Investment Plan.
10.13.		Tenth Amendment and Restatement to the Registrant's Employees' Profit Sharing and Investment Trust.
10.58.		Amendment No. 8 to the Victoria Partners Loan Agreement, dated as of March 28, 2002.
10.74.		Fourth Amendment, dated November 2001, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project.
10.75.		Fifth Amendment, dated March 2002, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project.
10.76.		Sixth Amendment, dated April 2002, to the Amended and Restated Development Agreement, dated April 9, 1998, by and among Detroit Entertainment, L.L.C., the City of Detroit and the Economic Development Corporation of the City of Detroit for the City of Detroit Casino Development Project.
10.88.		Master Lease, dated December 21, 2001, among the Registrant, Mandalay Corp., Ramparts, Inc., New Castle Corp., and Circus Circus Casinos, Inc. as lessees and Wells Fargo Bank Northwest, N.A., as lessor.
10.89.		Guaranty, dated December 21, 2001, by the Registrant and its subsidiaries named therein in favor of Wells Fargo Bank Northwest, N.A., and the other beneficiaries named therein.
10.90.		Aircraft Lease Agreement between the Registrant and General Electric Capital Corporation.
10.91.		Aircraft Lease Agreement, dated December 28, 2001, between the Registrant and General Electric Capital Corporation.
10.99.		Amendment, dated as of February 6, 2002, to Stock Purchase Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., and MBG Trust, and to the Collateral Agreement, dated as of September 8, 2000, among the Registrant, Bank of America, N.A., MBG Trust and Banc of America Securities LLC.
21.		Subsidiaries of the Registrant.
23.		Consent of Arthur Andersen LLP.
99.		Letter re: Representations of Arthur Andersen LLP.

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PART I

ITEM 1. BUSINESS.

ITEM 2. PROPERTIES.

ITEM 3. LEGAL PROCEEDINGS.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

ITEM 6. SELECTED FINANCIAL DATA.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

MANDALAY RESORT GROUP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MANDALAY RESORT GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
MANDALAY RESORT GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
MANDALAY RESORT GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
MANDALAY RESORT GROUP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Operating Lease Agreements (in thousands)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Management's Report on Financial Statements
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS (in thousands)
SIGNATURES
INDEX TO EXHIBITS FORM 10-K Fiscal Year Ended January 31, 2002
EX-4.5 3 a2077883zex-4_5.htm EXHIBIT 4.5
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Exhibit 4.5

EXECUTION

FIRST AMENDMENT AGREEMENT

This First Amendment Agreement dated as of December 19, 2001 ("Amendment") is entered into with reference to (a) the Revolving Loan Agreement dated August 22, 2001 (the "Revolving Loan Agreement"), (b) the Term Loan Agreement dated August 22, 2001 (the "Term Loan Agreement") and (c) the Capital Markets Term Loan Agreement dated August 22, 2001 (the "Capital Markets Term Loan Agreement," and together with the Revolving Loan Agreement and the Term Loan Agreement, the "Loan Agreements"), in each case among Mandalay Resort Group, a Nevada corporation ("Borrower"), the Lenders therein named and Bank of America, N.A., as Administrative Agent. Borrower and the Administrative Agent, acting on behalf of the Requisite Lenders under each of the Loan Agreements, hereby agree to amend each of the Loan Agreements as follows:

1. Definitions. Capitalized terms used herein but not defined are used with the meanings set forth for those terms in the Loan Agreements.

2. Amendment to Section 6.11—Total Debt Ratio. Section 6.11 of each of the Loan Agreements is hereby amended to read in full as follows:

"6.11 Total Debt Ratio. Permit the Total Debt Ratio as of the last day of any Fiscal Quarter described in the matrix below to exceed the ratio set forth opposite that Fiscal Quarter:

Fiscal Quarters Ending	Maximum Ratio
January 31, 2002 through and including April 30, 2002	5.25:1.00
July 31, 2002 through and including January 31, 2003	5.50:1.00
April 30, 2003	5.00:1.00
July 31, 2003	4.75:1.00
October 31, 2003 through and including July 31, 2004	4.50:1.00
October 31, 2004 and thereafter	4.25:1.00	"

3. Amendment to Section 6.12—Interest Coverage Ratio. Section 6.12 of each of the Loan Agreements is hereby amended to read in full as follows:

"6.12 Interest Coverage Ratio. Permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter described in the matrix below to be less than the ratio set forth opposite that Fiscal Quarter:

Fiscal Quarters Ending	Minimum Ratio
January 31, 2002 through and including January 31, 2003	2.25:1.00
April 30, 2003 through and including January 31, 2004	2.50:1.00
April 30, 2004 through and including January 31, 2005	2.75:1.00
April 30, 2005 and thereafter	3.00:1.00.	"

4. Conditions Precedent. The effectiveness of this Amendment shall be conditioned upon the receipt by the Administrative Agent of each of the following:

(a) Counterparts of this Amendment executed by all parties hereto;

(b) written consents to the execution, delivery and performance hereof from each of the parties to the Subsidiary Guaranty (as defined in the Revolving Loan Agreement), the Subsidiary Guaranty (as defined in the Term Loan Agreement) and the Subsidiary Guaranty (as defined in the Capital Markets Term Loan Agreement);

(c) written consents to the execution, delivery and performance hereof from the Requisite Lenders under each of the Loan Agreements referred to above; and

(d) payment to the Administrative Agent of (i) a fee of 10 basis points times the amount of the Commitment under the Revolving Loan Agreement for the account of those Lenders party to the Revolving Loan Agreement and (ii) a fee of 10 basis points times the amount of the Commitment under the Term Loan Agreement for the account of those Lenders party to the Term Loan Agreement.

5. Representation and Warranty. Borrower represents and warrants to the Administrative Agent and the Lenders that no Default or Event of Default has occurred and remains continuing.

[Remainder of this page intentionally left blank—Signature pages to follow]

6. Confirmation. In all other respects, the terms of each Loan Agreement and the other Loan Documents are hereby confirmed.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.


		MANDALAY RESORT GROUP, a Nevada corporation
		By:		/s/ GLENN SCHAEFFER Glenn Schaeffer, President and Chief Financial Officer
		BANK OF AMERICA, N.A., as Administrative Agent
		By:		/s/ JANICE HAMMOND Janice Hammond, Vice President

EXHIBIT A

CONSENT OF GUARANTORS

This Consent of Guarantor is delivered with reference the to (a) the Revolving Loan Agreement (the "Revolving Loan Agreement") dated August 22, 2001, (b) the Term Loan Agreement dated August 22, 2001 (the "Term Loan Agreement") and (c) the Capital Markets Term Loan Agreement dated August 22, 2001 (the "Capital Markets Term Loan Agreement," and together with the Revolving Loan Agreement and the Term Loan Agreement, the "Loan Agreements"), in each case among Mandalay Resort Group, a Nevada corporation ("Borrower"), the Lenders therein named and Bank of America, N.A., as Administrative Agent. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreements.

The undersigned hereby consents to the execution, delivery and performance by Borrower of the proposed First Amendment Agreement in respect of each of the Loan Agreements.

The undersigned represents and warrants to the Administrative Agent and the Lenders that the Subsidiary Guaranty (as defined in the Revolving Loan Agreement), the Subsidiary Guaranty (as defined in the Term Loan Agreement) and the Subsidiary Guaranty (as defined in the Capital Markets Term Loan Agreement), remain in full force and effect in accordance with its terms.

CIRCUS CIRCUS CASINOS, INC., a Nevada corporation
CIRCUS CIRCUS MICHIGAN, INC., a Michigan corporation
CIRCUS CIRCUS MISSISSIPPI, INC., a Mississippi corporation
COLORADO BELLE CORP., a Nevada corporation
EDGEWATER HOTEL CORPORATION, a Nevada corporation
GALLEON, INC., a Nevada corporation
MANDALAY CORP., a Nevada corporation
NEW CASTLE CORP., a Nevada corporation
PINKLESS, INC., a Nevada corporation

RAMPARTS, INC., a Nevada corporation
SLOTS-A-FUN, INC., a Nevada corporation

By:		/s/ GLENN SCHAEFFER
		Glenn Schaeffer, authorized signatory for each of the foregoing
LAST CHANCE INVESTMENTS, INCORPORATED, a Nevada corporation MANDALAY DEVELOPMENT, a Nevada corporation
By:		/s/ WILLIAM A. RICHARDSON
		William A. Richardson, authorized signatory for each of the foregoing
DIAMOND GOLD, INC., a Nevada corporation
By:		/s/ PETER A. SIMON
		Peter A. Simon, authorized signatory for the foregoing
GOLDSTRIKE INVESTMENTS, INCORPORATED, a Nevada corporation
By:		/s/ DAVID R. BELDING David R. Belding, authorized signatory for the foregoing
GOLDSTRIKE FINANCE COMPANY, INC., a Nevada corporation M.S.E. INVESTMENTS, INCORPORATED, a Nevada corporation OASIS DEVELOPMENT COMPANY, INC., a Nevada corporation
By:		/s/ MICHAEL S. ENSIGN Michael S. Ensign, authorized signatory for each of the foregoing

GOLD STRIKE L.V., a Nevada partnership
JEAN DEVELOPMENT COMPANY, a Nevada partnership
JEAN DEVELOPMENT NORTH, a Nevada partnership
JEAN DEVELOPMENT WEST, a Nevada partnership
NEVADA LANDING PARTNERSHIP, an Illinois partnership
RAILROAD PASS INVESTMENT GROUP, a Nevada partnership

By:	M.S.E. Investments, Incorporated, general partner of each of the foregoing
		By:	/s/ MICHAEL S. ENSIGN Michael S. Ensign, authorized signatory for the foregoing
LAKEVIEW GAMING PARTNERSHIPS JOINT VENTURE, a Nevada partnership
By:	Railroad Pass Investment Group general partner of the foregoing
	By:	M.S.E. Investments, Incorporated, its general partner
		By:	/s/ MICHAEL S. ENSIGN Michael S. Ensign, authorized signatory for the foregoing

EXHIBIT B

CONSENT OF LENDER

This Consent of Lender is delivered with reference to (a) the Revolving Loan Agreement (the "Revolving Loan Agreement") dated August 22, 2001, (b) the Term Loan Agreement dated August 22, 2001 (the "Term Loan Agreement") and (c) the Capital Markets Term Loan Agreement dated August 22, 2001 (the "Capital Markets Term Loan Agreement," and together with the Revolving Loan Agreement and the Term Loan Agreement, the "Loan Agreements"), in each case among Mandalay Resort Group, a Nevada corporation ("Borrower"), the Lenders therein named and Bank of America, N.A., as Administrative Agent. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreements.

The undersigned Lender hereby consents to the execution, delivery and performance of the proposed First Amendment Agreement in respect of each of the Loan Agreements to which it is a party by the Administrative Agent on behalf of the Lenders, substantially in the form presented to the undersigned as drafts.

Bank of America, N.A. [Typed/Printed Name of Lender]
By:		/s/ MATTHEW KOENIG Matthew Koenig
Title:		Managing Director
Date:		12/12/01

EXHIBIT B

CONSENT OF LENDER

Citicorp USA, Inc. [Typed/Printed Name of Lender]
By:		/s/ JEFFREY ROTHMAN Jeffrey Rothman
Title:		Director
Date:		12/7/01

EXHIBIT B

CONSENT OF LENDER

Merrill Lynch Capital Corporation [Typed/Printed Name of Lender]
By:		/s/ CAROL J.E. FEELEY Carol J.E. Feeley
Title:		Vice President
Date:		12/18/01

EXHIBIT B

CONSENT OF LENDER

Bankers Trust Company [Typed/Printed Name of Lender]
By:		/s/ STEVEN P. LAPHAM Steven P. Lapham
Title:		Director
Date:		12/10/01

EXHIBIT B

CONSENT OF LENDER

The Bank of Nova Scotia [Typed/Printed Name of Lender]
By:		/s/ ALAN PENDERGAST Alan Pendergast
Title:		Managing Director
Date:		12/12/01

EXHIBIT B

CONSENT OF LENDER

Comerica West Incorporated [Typed/Printed Name of Lender]
By:		/s/ EOIN COLLINS Eoin Collins
Title:		Vice President
Date:		August 14, 2001

EXHIBIT B

CONSENT OF LENDER

Credit Lyonnais Los Angeles Branch [Typed/Printed Name of Lender]
By:		/s/ DIANNE M. SCOTT Dianne M. Scott
Title:		Senior Vice President and Manager
Date:		December 10, 2001

EXHIBIT B

CONSENT OF LENDER

Credit Suisse First Boston [Typed/Printed Name of Lender]
By:		/s/ BILL O'DALY Bill O'Daly
Title:		Vice President
By:		/s/ CASSANDRA DROOGAN Cassandra Droogan
Title:		Associate
Date:

EXHIBIT B

CONSENT OF LENDER

Dresdner Bank AG, New York and Grand Cayman Branches [Typed/Printed Name of Lender]
By:		/s/ J. MICHAEL LEFFLER J. Michael Leffler
Title:		Director
By:		/s/ JASMINE XINYUE GEFFNER, CFA Jasmine Xinyue Geffner
Title:		Associate
Date:		12/10/01

EXHIBIT B

CONSENT OF LENDER

Société Générale [Typed/Printed Name of Lender]
By:		/s/ CARINA T. HUYNH Carina T. Huynh
Title:		Vice President
Date:		12/13/01

EXHIBIT B

CONSENT OF LENDER

U.S. Bank National Association [Typed/Printed Name of Lender]
By:		/s/ SCOTT J. BELL Scott J. Bell
Title:		Vice President
Date:		12/17/01

EXHIBIT B

CONSENT OF LENDER

Wells Fargo Bank N.A. [Typed/Printed Name of Lender]
By:		/s/ CARLA G. AXELROD Carla G. Axelrod
Title:		Vice President
Date:		Dec. 11, 2001

EXHIBIT B

CONSENT OF LENDER

The Industrial Bank of Japan, Limited [Typed/Printed Name of Lender]
By:		/s/ CARL-ERIC BENZINGER Carl-Eric Benzinger
Title:		Senior Vice President & Senior Deputy General Manager
Date:		December 14, 2001

EXHIBIT B

CONSENT OF LENDER

The Fuji Bank, Limited [Typed/Printed Name of Lender]
By:		/s/ MR. MASAHITO FUKUDA Mr. Masahito Fukuda
Title:		Senior Vice President & Group Head
Date:		December 18, 2001

EXHIBIT B

CONSENT OF LENDER

The Dai-Ichi Kangyo Bank, Ltd. [Typed/Printed Name of Lender]
By:		/s/ CHIMIE T. PEMBA Chimie T. Pemba
Title:		Account Officer
Date:		12/14/01

EXHIBIT B

CONSENT OF LENDER

Fleet National Bank [Typed/Printed Name of Lender]
By:		/s/ JOHN T. HARRISON John T. Harrison
Title:		Senior Vice President
Date:		11/13/01

EXHIBIT B

CONSENT OF LENDER

SENIOR DEBT PORTFOLIO
By:		Boston Management and Research as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

GRAYSON & CO
By:		Boston Management and Research as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

EATON VANCE SENIOR INCOME TRUST
By:		Eaton Vance Management as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

EATON VANCE INSTITUTIONAL SENIOR LOAN FUND
By:		Eaton Vance Management as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

OXFORD STRATEGIC INCOME FUND
By:		Eaton Vance Management as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

EATON VANCE CDO III, LTD.
By:		Eaton Vance Management as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

EATON VANCE CDO IV, LTD.
By:		Eaton Vance Management as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

COSTANTINUS EATON VANCE CDO V, LTD.
By:		Eaton Vance Management as Investment Advisor [Typed/Printed Name of Lender]
By:		/s/ JOHN REDDING John Redding
Title:

Date:

EXHIBIT B

CONSENT OF LENDER

First Hawaiian Bank [Typed/Printed Name of Lender]
By:		/s/ SEYDOU DIALLO Seydou Diallo
Title:		Media Finance Officer
Date:		12/12/01

EXHIBIT B

CONSENT OF LENDER

The Bank of New York [Typed/Printed Name of Lender]
By:		/s/ MEHRASA RAYGANI Mehrasa Raygani
Title:		Vice President
Date:		December 13, 2001

EXHIBIT B

CONSENT OF LENDER

Erste Bank New York [Typed/Printed Name of Lender]
By:		/s/ ROBERT J. WAGMAN Robert J. Wagman
Title:		Vice President
By:		/s/ JOHN S. RUNNION John S. Runnion
Title:		Managing Director
Date:		12-14-01

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EXECUTION FIRST AMENDMENT AGREEMENT
EX-10.11 4 a2077883zex-10_11.htm EXHIBIT 10.11
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Exhibit 10.11

FIFTEENTH AMENDMENT
TO THE
MANDALAY RESORT GROUP
EMPLOYEES' PROFIT SHARING AND INVESTMENT PLAN

This Fifteenth Amendment to the Mandalay Resort Group Employees' Profit Sharing and Investment Plan is made and entered into this 29^th day of November, 2001, but is effective as of January 1, 2001, except as otherwise provided herein, by Mandalay Resort Group (referred to hereinafter as the "Company").

W I T N E S S E T H:

WHEREAS, the Company and the other Employers have previously adopted the Mandalay Resort Group Employees' Profit Sharing and Investment Plan, which has been amended from time to time (as amended, the "Plan"); and

WHEREAS, pursuant to the terms of the Plan, the Company is authorized and empowered to further amend the Plan; and

WHEREAS, the Company deems it advisable and in the best interests of the Participants to amend the Plan to allow Participants to make more frequent changes in designated investments, and to make certain clarifying changes and other desired changes; and

WHEREAS, the Company also deems it advisable and in the best interests of the Participants to amend the Plan to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), which is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder, such EGTRRA amendments to be effective as of January 1, 2002, except as otherwise provided.

NOW, THEREFORE, the Plan is hereby amended as follows:

Effective as of January 1, 2001, subparagraph (n)(1) of Article I of the Plan is amended to read as follows:

(n) (1) "Compensation" shall mean regular salaries and wages, overtime pay, bonuses and commissions paid (or, for Limitation Years beginning before January 1, 1992, accrued) by an Employer, tips declared by or distributed to an Employee while performing services for an Employer, Savings Contributions to this Plan, and elective contributions to any plan maintained by an Employer pursuant to Section 125 of the Code and, for years beginning after December 31, 2000, elective amounts that are not includable in the gross income of an Employee by reason of Section 132(f)(4) of the Code, but shall not include third party disability payments, tax-deferred stock options, deductible relocation expense payments, credits or benefits under this Plan (other than Savings Contributions), any amount contributed to any pension, employee welfare, life insurance or health insurance plan or arrangement, or any other tax-favored fringe benefits (except as otherwise specifically provided herein).

II.

Effective as of January 1, 2002, subparagraph (n)(3) of Article I of the Plan is amended to read as follows:

(n) (3) No Compensation in excess of $200,000 (or, for Plan Years beginning after December 31, 2001, $200,000; adjusted for cost-of living increases in accordance with Section 401(a)(17)(B) of the Code) shall be taken into account for any Employee.

III.

Effective as of January 1, 2002, the following paragraph shall be added at the end of paragraph (w) of Article I of the Plan, to read as follows:

Notwithstanding any provision herein to the contrary, for purposes of Direct Rollover Distributions made pursuant to the provisions of paragraph (b)(3) of Article IX after December 31, 2001, an "Eligible Retirement Plan" shall also mean an annuity contract described in Section 403(b) of the Code and an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of "Eligible Retirement Plan" shall also apply in the case of a distribution to a surviving Eligible Spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. This provision, however, shall not require the Trustee to accept a Rollover Contribution to this Plan from an annuity contract described in Section 403(b) of the Code or an eligible plan under Section 457(b) of the Code.

IV.

Effective as of January 1, 2002, subparagraph (3) of paragraph (x) of Article I of the Plan is amended to read as follows:

(3) any amount that is distributed on account if Hardship; and

Effective as of January 1, 2001, paragraph (aa) of Article I of the Plan is hereby amended to read as follows:

(aa) "Employer" shall mean the Company, Circus Circus Casinos, Inc., SlotsAFun, Inc., Edgewater Hotel Corporation, Colorado Belle Corp., New Castle Corp., Ramparts, Inc., Circus Circus Mississippi, Inc., Mandalay Development, Railroad Pass Investment Group, Jean Development Company, Jean Development West, Mandalay Corp., Circus Circus Michigan, Inc., and Ramparts International, as well as any other subsidiary, related corporation or other entity that adopts the Plan with the consent of the Company. Railroad Pass Investment Group, Jean Development Company and Jean Development West are, at times, collectively referred to herein as the "Gold Strike Entities." The term "Employer" shall also include, effective as of February 1, 2000, Go Vegas. The term "Employer" shall also include, effective as of May 1, 2001, Mandalay Place.

VI.

Effective as of January 1, 1997, the cross-reference in line 2 of subparagraph (3) of paragraph (ll) to paragraph (lll) of Article I, is corrected to refer to paragraph (kkk) of Article I.

VII.

Effective as of January 1, 2001, the last sentence of paragraph (nn) of Article I of the Plan is hereby amended to read as follows:

For purposes of this paragraph, "compensation" shall mean compensation as defined in Section 415(c)(3) of the Code, but including amounts contributed by an Employer on behalf of an Employee pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(e)(3), Section 402(h), or

Section 403(b) of the Code and, for years beginning after December 31, 2000, elective amounts that are not includible in the gross income of the Employee by reason of Section 132(f)(4) of the Code.

VIII.

Effective as of January 1, 2002, a new paragraph is added after the last sentence of paragraph (nn) of Article I of the Plan, to read as follows:

Notwithstanding any provision herein to the contrary, effective for Plan Years beginning after December 31, 2001, "Key Employee" shall mean any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the determination date was an officer of an Employer or an Affiliate having an aggregate annual compensation from the Employer and its Affiliates greater than $130,000 (as adjusted under Section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5% owner of an Employer or an affiliate, or a 1% owner of an Employer or an Affiliate having an aggregate annual compensation from the Employer and its Affiliates of more than $150,000. For purposes of this paragraph, "compensation" means compensation within the meaning of Section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

IX.

Effective as of January 1, 2001, paragraph (bbb) of Article I of the Plan is hereby amended to read as follows:

(bbb) "Section 415 Compensation" shall include all wages and other payments of compensation to a Participant from all Employers and all Affiliates for personal services actually rendered for which the Employers and Affiliates are required to furnish the Participant a written statement under Sections 6041(d) and 6051(a)(3) of the Code (and without regard to any provisions under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed); provided, however, that for purposes of Article VII, no Section 415 Compensation in excess of $150,000 (adjusted under such regulations as may be issued by the Secretary of the Treasury) shall be taken into account for any Employee; provided, further, that for years beginning after December 31, 1997, the term "Section 415 Compensation" shall also include any amount that is contributed by an Employer at the election of the Employee and that is not includible in the gross income of the Employee under Sections 125, 401(k), 402(h), 403(b), or 457 of the Code; and provided further that for years beginning after December 31, 2000, the term "Section 415 Compensation" shall also include elective amounts that are not includible in the gross income of the Employee by reason of Section 132(f)(4) of the Code.

Effective as of January 1, 2002, the following paragraph is added at the end of paragraph (ddd) of Article I of the Plan, to read as follows:

Notwithstanding any provision herein to the contrary, for the purposes of determining whether the Plan is Top Heavy for Plan Years beginning after December 31, 2001, the following provisions of this paragraph shall apply for purposes of determining the present values of accrued benefits and the amounts of Account balances of an Employee as of the determination date. The present values of accrued benefits and the amounts of Account

balances of an Employee as of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Section 416(g)(2) of the Code during the one-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting "five-year period" for "one-year period." The accrued benefits and Accounts of any individual who has not performed services for an Employer or an Affiliate during the one-year period ending on the determination date shall not be taken into account.

XI.

Effective as of January 1, 2002, the following paragraph is added at the end of subparagraph (a)(1) of Article VI of the Plan, to read as follows:

Notwithstanding any provision herein to the contrary, for taxable years beginning after December 31, 2001, the dollar amount set forth in section (A) of this subparagraph (1) shall be the "applicable dollar amount" set forth in Section 402(g)(1)(B) of the Code for such taxable year (adjusted for taxable years beginning after December 31, 2006 in accordance with Section 402(g) of the Code). No Participant shall be permitted to have elective deferrals made under this Plan, or any other qualified plan maintained by an Employer during any taxable year, in excess of the dollar limitation contained in Section 402(g) of the Code in effect for such taxable year, except to the extent permitted under paragraph (m) of Article VI of the Plan and Section 414(v) of the Code, if applicable.

XII.

The multiple use test described in Treasury Regulation section 1.401(m)-2 and subparagraph (f)(3) of Article VI of the Plan shall not apply for Plan Years beginning after December 31, 2001.

XIII.

Effective as of July 1, 2002, a new paragraph (m) is added to Article VI of the Plan, to read as follows:

(m) Catch-up Contributions. The Employer shall contribute to the Trust, on behalf of each Participant who has attained the age of 50 before the close of the Plan Year and with respect to whom no other elective deferrals may be made to the Plan for the Plan Year by reason of the restrictions in Section 402(g) of the Code or the dollar limitation described in paragraph (a)(1)(A) of this Article VI, a "catch-up" contribution as specified in a written salary reduction agreement (if any) between the Participant and such Employer; provided, however, that such "catch-up" contribution for a Participant for any taxable year shall not exceed the "applicable dollar amount" set forth in Section 414(v)(2)(B) of the Code (adjusted for taxable years beginning after December 31, 2006 in accordance with Section 414(v) of the Code) for such taxable year. A "catch-up" contribution hereunder may be expressed as a fixed dollar amount per payroll period, or as a fixed percentage of pay. Such "catch-up" contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such "catch-up"contributions.

XIV.

Effective as of January 1, 2002, the following paragraph is added at the end of subsection (E)(iii) of subparagraph (d)(4) of Article VII, to read as follows:

For Plan Years beginning after December 31, 2001, Matching Contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of Section 416(c)(2) of the Code and this subsection (iii). Matching contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the actual contribution percentage test and other requirements of Section 401(m) of the Code.

XV.

Effective as of January 1, 2002, subparagraph (e)(1) of Article VII of the Plan is hereby amended to read as follows:

(e) (1) Notwithstanding anything contained in this Plan to the contrary, the aggregate Annual Additions to a Participant's Accounts under this Plan and under any other defined contribution plans maintained by an Employer or an Affiliate for any Limitation Year ending prior to January 1, 2002 shall not exceed the lesser or $30,000 (adjusted under such regulations as may be issued by the Secretary of the Treasury), or 25% of the Participant's Section 415 Compensation for such Limitation Year. Except to the extent permitted under paragraph (m) of Article VI of this Plan and Section 414(v) of the Code, if applicable, the aggregate Annual Additions to a Participant's Accounts under this Plan and under any other defined contribution plans maintained by an Employer or an Affiliate for any Limitation Year beginning after December 31, 2001 shall not exceed the lesser of:

(A): $40,000, as adjusted for increases in the cost-of living under Section 415(d) of the Code, or
(B): 100% of the Participant's Section 415 Compensation for such Limitation Year.

The compensation limit referred to in section (B) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition.

XVI.

Effective for Plan Years beginning after December 31, 2001, subsection (c)(2)(A)(ii) of Article VIII of the Plan is hereby amended to read as follows:

(ii) A Participant who performs his first Hour of Service on or after July 3, 1989, and who has an Account balance in the Plan at any time after December 31, 2001 (including participants who are no longer performing service after December 31, 2001 but who have not yet forfeited their non-vested amounts under the terms of the Plan in existence immediately prior to the Effective Date of the 15^th Amendment to the Plan), shall have a vested interest in his then-existing Matching Contribution Account, Automatic Contribution Account, ESOP Matching Contribution Account, ESOP Automatic Account and Discretionary Contribution Account equal to the percentage of the balance of each such Account as of the applicable

Valuation Date, based upon such Participant's Years of Service as of the date of the termination of his employment, as follows:

TOTAL NUMBER OF YEARS OF SERVICE	VESTED INTEREST
Less than 2 Years of Service	0	%
2 years, but less than 3 years	20	%
3 years, but less than 4 years	40	%
4 years, but less than 5 years	60	%
5 years, but less than 6 years	80	%
6 years or more	100	%

XVII.

Effective as of January 1, 1995, subparagraph (b)(2) of Article IX of the Plan is hereby amended to read as follows:

(2) Any such benefits may be in cash or in kind, except that benefits attributable to a Participant's ESOP Matching Contribution Account and ESOP Automatic Contribution Account (other than any portion of such Accounts invested pursuant to a Diversification Election) shall be paid to the Participant (or, if applicable, his beneficiary or beneficiaries), at the election of the Participant (or, if applicable, his beneficiary or beneficiaries), and to the extent possible, in units of Employer Securities. Notwithstanding the foregoing, no fractional shares shall be issued and the value of any fractional shares to which a Participant (or his beneficiary or beneficiaries) would otherwise be entitled shall be paid in cash. In the event that a Participant elects to receive distribution of his benefits attributable to his ESOP Matching Contribution Account and ESOP Automatic Contribution Account (other than any portion of such Accounts invested pursuant to a Diversification Election) in units of Employer Securities, the Trustee, during the 60 day period immediately preceding the proposed distribution date of the benefit that the Participant is entitled to receive under the Plan, to the extent possible, shall apply the balance in the Participant's Other Investments Account to the purchase of the maximum number of whole units of Employer Securities that can be purchased at their then Fair Market Value, which units shall be allocated to the Participant's Employer Securities Account. Any portion of the balance of a Participant's Other Investments Account that the Trustee is unable to apply to the purchase of whole units of Employer Securities within the said 60 day period shall be paid in cash.

XVIII.

Effective as of January 1, 2002, paragraph (b) of Article X of the Plan is hereby amended to read as follows:

(b) Time and Manner of Designating Investments. The elections described in paragraph (a) shall be made in such form as may be approved by the Plan Administrator from time to time, with the Participant designating the percentage of each of his Accounts which is subject to the provisions of paragraph (a) to be allocated to any Fund specified in paragraph (a)(1). Any such designation may be revised at three month intervals, or at more frequent intervals as determined by the Plan Administrator from time to time, so long as no more than 25% of the Participant's current contributions are to be invested in the Mandalay Stock Fund, and so long as the combined percentage of the Participant's Matching Contribution Account, Automatic Contribution Account, Discretionary Contribution Account, Rollover Contribution Account and 401(k) Employer Contribution Account, together with any portion of his ESOP Matching Contribution Account and ESOP Automatic Contribution Account which is subject to a diversification election, that is

invested in the Mandalay Stock Fund, does not exceed 25% of the Participant's combined balances of such Accounts.

XIX.

Effective as of January 1, 2000, paragraph (c) of Article XI of the Plan is hereby amended to read as follows:

(c) Diversification Election. Any Participant who has attained age 55 and completed 10 years of participation in the Plan (disregarding participation before January 1, 1989), shall have the right to direct the Trustee as to the investment of a portion of his ESOP Matching Contribution Account and ESOP Automatic Contribution Account.

(1) Such a Participant may elect, within 90 days after the close of the first Plan Year in the Diversification Election Period, to diversify an amount not exceeding 25% of the combined balance of his ESOP Matching Contribution Account and ESOP Automatic Contribution Account, determined as of the last day of such Plan Year.

(2) Within 90 days after the close of the second, third, fourth and fifth Plan Years in the Diversification Election Period, such a Participant may elect to diversify an amount not exceeding the difference between 25% of the combined balance of his ESOP Matching Contribution Account and ESOP Automatic Contribution Account, determined as of the last day of such Plan Year, and the total amount with respect to which diversification was previously elected.

(3) In the last Plan Year of the Diversification Election Period, such a Participant may elect to diversify an amount not exceeding the difference between 50% of the combined balance of his ESOP Matching Contribution Account and ESOP Automatic Contribution Account, determined as of the last day of such Plan Year, and the total amount with respect to which diversification was previously elected.

(4) Any such election shall be in writing on forms provided by the Plan Administrator.

(5) If any Participant elects to diversify a portion of his Accounts in any year in the Diversification Election Period, he may direct the Trustee to sell or exchange Employer Securities attributable to the amount to be diversified. Upon receipt of such direction from the Participant, the Trustee may sell the Employer Securities to any third party purchaser (who may or may not be a "party in interest" within the meaning of Section 3(14) of ERISA), or may exchange the shares for cash or other assets (other than Employer Securities) then held in the ESOP Fund. Any sale of Employer Securities by the Trustee shall be made at Fair Market Value on the date of sale, and any such sale to a party in interest shall not be subject to any commission or similar fee. The proceeds of a sale or exchange shall be invested pursuant to Article X, no later than 90 days after the Participant's election is made.

(6) Notwithstanding any other provision of this paragraph (c), no Participant shall have the right to direct the Trustee as to the diversification of a portion of his Accounts unless the value of the Employer Securities acquired by or contributed to this Plan and allocated to the Participant's ESOP Matching Contribution Account and ESOP Automatic Contribution Account, exceeds $500 as of the Valuation Date immediately preceding the first day on which the Participant may otherwise elect to diversify such Accounts.

XX.

Effective as of September 6, 2000, a new Article XVI is added to the Plan, to read as follows:

ARTICLE XVI

Transfer of Employment from Company Joint Venture to Adopting Employer.

Any person who transfers employment from a Company joint venture that is not an Affiliate of the Company (the "predecessor employer") to become an Employee of an adopting Employer of this Plan within a transfer period of thirty (30) days, shall be credited with an Hour of Service, a Year of Credited Service and a Year of Service under this Plan for each Hour of Service, Year of Credited Service and Year of Service, respectively, with which he was credited under the qualified 401(k) plan (the "predecessor plan") sponsored by his predecessor employer, and such Employee may elect, pursuant to the provisions of the predecessor plan to have his accounts in the predecessor plan transferred from the predecessor plan to the Trustee of this Plan by a trustee-to-Trustee transfer. As provided in Code Section 414(l), each such Employee shall receive a benefit immediately after the transfer, if this Plan and Trust then terminated, that is no less than the benefit he would have received immediately before the transfer if the predecessor plan and its trust and contracts had then terminated. Each such Employee shall have the vesting schedule in effect under the predecessor plan at the time of the transfer apply with respect to him, if that vesting schedule produces a greater vested benefit for such Employee than this Plan's vesting schedule. The provisions of this Article shall apply with respect to transfers of such Employees' accounts occurring after September 5, 2000, without regard to the date of transfer of employment by any such Employee.

IN WITNESS WHEREOF, this Fifteenth Amendment has been executed as of the date first written above.


ATTEST:	MANDALAY RESORT GROUP
(CORPORATE SEAL)
YVETTE E. LANDAU	By:	GLENN SCHAEFFER
Secretary		President
		"COMPANY"

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FIFTEENTH AMENDMENT TO THE MANDALAY RESORT GROUP EMPLOYEES' PROFIT SHARING AND INVESTMENT PLAN
EX-10.13 5 a2077883zex-10_13.htm EXHIBIT 10.13
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Exhibit 10.13

TENTH AMENDMENT
TO THE
MANDALAY RESORT GROUP EMPLOYEES'
PROFIT SHARING AND INVESTMENT TRUST

This Tenth Amendment to the Mandalay Resort Group Employees' Profit Sharing and Investment Trust is made and entered into this 29 day of November, 2001, but is effective for all purposes as of May 1, 2001 (except as otherwise provided herein), by and between Mandalay Resort Group (the "Company") and Wells Fargo Bank (the "Trustee").

W I T N E S S ET H:

WHEREAS, the Company has previously adopted the Mandalay Resort Group Employees' Profit Sharing and Investment Trust which has been amended from time to time (as amended the "Trust") and

WHEREAS, pursuant to the terms of the Trust, the Company is authorized and empowered to further amend the Trust; and

WHEREAS, the Company deems it advisable and in the best interests of the Participants to amend the Trust to provide for an additional Employer.

NOW, THEREFORE, the Trust is hereby amended to read as follows:

Paragraph (i) of Article I of the Trust is hereby amended to read as follows:

(i) "Employer" shall mean the Company, Circus Circus Casinos, Inc., SlotsAFun, Inc., Edgewater Hotel Corporation, Colorado Belle Corp., New Castle Corp., Ramparts, Inc., Circus Circus Mississippi, Inc., Mandalay Development, Railroad Pass Investment Group, Jean Development Company, Jean Development West, Mandalay Corp., Circus Circus Michigan, Inc., and Ramparts International, as well as any other subsidiary, related corporation or other entity that adopts the Plan with the consent of the Company. Railroad Pass Investment Group, Jean Development Company and Jean Development West are, at times, collectively referred to herein as the "Gold Strike Entities." The term "Employer" shall also include, effective as of February 1, 2000, Go Vegas. The term "Employer" shall also include, effective as of May 1, 2001, Mandalay Place.

IN WITNESS WHEREOF, this Tenth Amendment has been executed as of the date first written above.


		MANDALAY RESORT GROUP
		By:		GLENN SCHAEFFER
				President
				"COMPANY"
		WELLS FARGO BANK
		By:		DEBRA LAGESCHULTE
		Its:		Vice President

		By:		NANCY VAN GELDER
		Its:		Vice President
				"TRUSTEE"

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TENTH AMENDMENT TO THE MANDALAY RESORT GROUP EMPLOYEES' PROFIT SHARING AND INVESTMENT TRUST
EX-10.58 6 a2077883zex-10_58.htm EXHIBIT 10.58
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Exhibit 10.58

AMENDMENT NO. 8 TO REDUCING REVOLVING LOAN AGREEMENT

This Amendment No. 8 to Reducing Revolving Loan Agreement (this "Amendment") dated as of March 28, 2002 is entered into with reference to the Reducing Revolving Loan Agreement dated as of December 21, 1994 among Victoria Partners, a Nevada general partnership ("Borrower"), the Banks referred to therein, and Bank of America, N.A., as Administrative Agent (as amended pursuant to Amendments 1 through 7 thereto, the "Loan Agreement"). Capitalized terms used but not defined herein are used with the meanings set forth for those terms in the Loan Agreement.

Borrower, the Administrative Agent and the Banks agree as follows:

1. Amendments to Section 1.1—Amended Definitions.

"Maturity Date" means July 5, 2002 or such later anniversary thereof to which the Maturity Date may be extended pursuant to Section 2.11.

2. Representation and Warranty. Borrower represents and warrants to the Administrative Agent and the Banks that no Default or Event of Default has occurred and remains continuing, and that Borrower continues to be in compliance with Section 5.10 of the Loan Agreement. (concerning Hazardous Materials Laws).

3. Conditions; Effectiveness. The effectiveness of this Amendment shall be subject to the following conditions precedent:

(a) The Administrative Agent shall have received a counterpart of this Amendment executed by the Borrower; and

(b) The Administrative Agent shall have received written consents hereto from each of the Banks substantially in the form of Exhibit A hereto.

4. Confirmation. In all other respects, the terms of the Loan Agreement and the other Loan Documents are hereby confirmed.

IN WITNESS WHEREOF, Borrower, the Administrative Agent and the Banks have executed this Amendment as of the date first written above by their duly authorized representatives.


VICTORIA PARTNERS, a Nevada general partnership
By:	Gold Strike L.V., managing general partner
	By:	/s/ GLENN SCHAEFFER
	Title:	President and Chief Financial Officer

By:	MRGS Corp., a Nevada corporation, general partner
	By:	/s/ JAMES MURREN
	Title:	Treasurer

BANK OF AMERICA, N.A., as Administrative Agent
By:	/s/ JANICE HAMMOND
	Janice Hammond, Vice President

[Exhibit A to Amendment]

CONSENT OF BANK

This Consent of Bank is delivered with reference to the Reducing Revolving Loan Agreement dated as of December 21, 1994, among Victoria Partners, a Nevada general partnership ("Borrower'), the Banks referred to therein, and Bank of America National Trust and Savings Association (now known as "Bank of America, N.A.") as Administrative Agent (as amended pursuant to Amendments 1 through 7 thereto, the "Loan Agreement"). Capitalized terms used but not defined herein are used with the meanings set forth for those terms in the Loan Agreement.

The undersigned Bank hereby consents to the execution, delivery and performance of the proposed Amendment No. 8 to Loan Agreement, substantially in the form provided to the undersigned as a draft.

		BANK OF AMERICA, N.A. [Name of Lender]
		By:		/s/ MATTHEW KOENIG
		Matthew Koenig, Managing Director
		[Printed Name and Title]
		Date:		March 22, 2002
		BANK OF SCOTLAND [Name of Lender]
		By:		/s/ JOSEPH FRATUS
		Joseph Fratus, Vice President
		[Printed Name and Title]
		Date:		March 21, 2002

		BANKERS TRUST COMPANY
		[Name of Lender]
		By:		/s/ DIANE F. ROLFE
		Diane F. Rolfe, Vice President
		[Printed Name and Title]
		Date:		March 21, 2002
		CREDIT LYONNAIS LOS ANGELES BRANCH
		[Name of Lender]
		By:		/s/ DIANNE M. SCOTT
		Dianne M. Scott, Senior Vice President and Manager
		[Printed Name and Title]
		Date:		March 22, 2002
		SOCIÉTÉ GÉNÉRALE
		[Name of Lender]
		By:		/s/ THOMAS K. DAY
		Thomas K. Day, Managing Director
		[Printed Name and Title]
		Date:		March 22, 2002
		U.S. BANK NATIONAL ASSOCIATION
		[Name of Lender]
		By:		/s/ SCOTT J. BELL
		Scott J. Bell, Vice President
		[Printed Name and Title]
		Date:		March 25, 2002

		WELLS FARGO BANK, N.A.
		[Name of Lender]
		By:		/s/ CLARK A. WOOD
		Clark A. Wood, Vice President
		[Printed Name and Title]
		Date:		March 22, 2002

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AMENDMENT NO. 8 TO REDUCING REVOLVING LOAN AGREEMENT
EX-10.74 7 a2077883zex-10_74.htm EXHIBIT 10.74
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Exhibit 10.74

FOURTH AMENDMENT TO THE
AMENDED AND RESTATED DEVELOPMENT AGREEMENT
BY AND AMONG
THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION
OF THE CITY OF DETROIT AND
DETROIT ENTERTAINMENT, L.L.C.

THIS FOURTH AMENDMENT (the "Fourth Amendment") to that certain Amended and Restated Development Agreement, dated as of April 9, 1998, as amended by the First Amendment dated June 25,1998, Second Amendment dated December, 1999, and by the Third Amendment dated November 30, 2000, by and among the City of Detroit (the "City"), The Economic Development Corporation of the City of Detroit ("EDC") and Detroit Entertainment, L.L.C., a Michigan limited liability company ("Developer") for the City of Detroit Waterfront Reclamation and Casino Development Project (the "Development Agreement") is made on this day of November, 2001 by and among the City, EDC and the Developer.

WHEREAS, the City, EDC and Developer have previously entered into the Development Agreement; and

WHEREAS, it is the desire of the parties to enter into this Fourth Amendment to amend certain provisions of the Development Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the covenants herein contained, the parties agree as follows:

1.: All capitalized terms not otherwise defined herein shall have the same, meaning as set forth in the Development Agreement.
2.: Section 2.4(d) of the Development Agreement is hereby amended by deleting the reference to "December 31, 2001 "in such section and substituting in its place "March 31, 2002."
3.: Except as amended by this Fourth Amendment, the Development Agreement is reaffirmed in all respects and shall remain in full force and effect.
4.: This Fourth Amendment shall become effective on the date (the "Amendment Effective Date") on which all of the following have been accomplished: this Fourth Amendment has been executed by all parties hereto and the City Council has duly approved the last of the following: (i) this Fourth Amendment; and (ii) a fourth amendment to the amended and restated development agreements of each of the Other Land-Based Casino Developers containing substantially the same terms and conditions as set forth in this Fourth Amendment.
5.: This Fourth Amendment may be executed in counterparts, each of which shall be deemed to be an original document and together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto have set their hands and had their seals affixed on the dates set forth after their respective signatures.

CITY OF DETROIT, a municipal corporation
By:	DENNIS ARCHER
Its:	Mayor
THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT, a Michigan public body corporate
By:	ART PAPAPANOS
Its:	Authorized Agent
By:	C. BETH DUNCOMBE
Its:	Authorized Agent
DETROIT ENTERTAINMENT, L.L.C. a Michigan limited liability company
By:	Circus Circus Michigan, Inc. a Michigan corporation, one of its members
	By:	GLENN SCHAEFFER
	Its:	President
By:	Atwater Casino Group, LLC, a Michigan limited liability company, one of its members
	By:	Atwater Management Corporation, a Delaware corporation, its manager
		By:	VIVIAN CARPENTER
		Its:	Vice President

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FOURTH AMENDMENT TO THE AMENDED AND RESTATED DEVELOPMENT AGREEMENT BY AND AMONG THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT AND DETROIT ENTERTAINMENT, L.L.C.
EX-10.75 8 a2077883zex-10_75.htm EXHIBIT 10.75
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Exhibit 10.75

FIFTH AMENDMENT TO THE
AMENDED AND RESTATED DEVELOPMENT AGREEMENT
BY AND AMONG
THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION
OF THE CITY OF DETROIT AND
DETROIT ENTERTAINMENT, L.L.C.

THIS FIFTH AMENDMENT (the "Fifth Amendment") to that certain Amended and Restated Development Agreement, dated as of April 9, 1998, as amended by the First Amendment dated June 25, 1998, Second Amendment dated December, 1999, Third Amendment dated November 30, 2000 and Fourth Amendment dated November 30,2001, by and among the City of Detroit (the "City"), The Economic Development Corporation of the City of Detroit ("EDC") and Detroit Entertainment, L.L.C., a Michigan limited liability company ("Developer") for the City of Detroit Waterfront Reclamation and Casino Development Project (the "Development Agreement") is made on this day of March, 2002 by and among the City, EDC and the Developer.

WHEREAS, the City, EDC and Developer have previously entered into the Development Agreement; and

WHEREAS, it is the desire of the parties to enter into this Fifth Amendment to amend certain provisions of the Development Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the covenants herein contained, the parties agree as follows:

1.: All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Development Agreement.
2.: Section 2.4(d) of the Development Agreement is hereby amended by deleting the reference to "March 31, 2002" in such section and substituting in its place "April 30, 2002."
3.: Except as amended by this Fifth Amendment, the Development Agreement is reaffirmed in all respects and shall remain in full force and effect.
4.: This Fifth Amendment shall become effective on the date (the "Amendment Effective Date") on which all of the following have been accomplished: (a) this Fifth Amendment has been executed by all parties hereto and (b) the City Council has duly approved the last of the following: (i) this Fifth Amendment; and (ii) a fifth amendment to the amended and restated development agreements of each or the Other Land-Based Casino Developers containing substantially the same terms and conditions as set forth in this Fifth Amendment.
5.: This Fifth Amendment maybe executed in counterparts, each of which shall be deemed to be an original document and together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto have set their hands and had their seals affixed on the dates set forth after their respective signatures.

CITY OF DETROIT, a municipal corporation
By:	KWAME M. KILPATRICK
Its:	Mayor
THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT, a Michigan public body corporate
By:	ART PAPAPANOS
Its:	Authorized Agent
By:

Its:	Treasurer
DETROIT ENTERTAINMENT, L.L.C. a Michigan limited liability company
By:	Circus Circus Michigan, Inc. a Michigan corporation, one of its members
	By:	Rhonda Cohen
	Its:	VP. & General Manager
By:	Atwater Casino Group, LLC, a Michigan limited liability company, one of its members
	By:	Atwater Management Corporation, a Delaware corporation, its manager
		By:	Thomas Celani
		Its:	President
		By:	Vivian Carpenter
		Its:	Vice President

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FIFTH AMENDMENT TO THE AMENDED AND RESTATED DEVELOPMENT AGREEMENT BY AND AMONG THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT AND DETROIT ENTERTAINMENT, L.L.C.
EX-10.76 9 a2077883zex-10_76.htm EXHIBIT 10.76
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Exhibit 10.76

SIXTH AMENDMENT TO THE
AMENDED AND RESTATED DEVELOPMENT AGREEMENT
BY AND AMONG
THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION
OF THE CITY OF DETROIT AND
DETROIT ENTERTAINMENT, L.L.C.

THIS SIXTH AMENDMENT (the "Sixth Amendment") to that certain Amended and Restated Development Agreement, dated as of April 9, 1998, as amended by the First Amendment dated June 25, 1998, Second Amendment dated December, 1999, Third Amendment dated November 30, 2000, Fourth Amendment dated November 30, 2001 and Fifth Amendment dated March 29, 2002 by and among the City of Detroit (the "City"), The Economic Development Corporation of the City of Detroit ("EDC") and Detroit Entertainment, L.L.C., a Michigan limited liability company ("Developer") for the City of Detroit Waterfront Reclamation and Casino Development Project (the "Development Agreement") is made on this day of April 2002 by and among the City, EDC and the Developer.

WHEREAS, the City, EDC and Developer have previously entered into the Development Agreement; and

WHEREAS, it is the desire of the parties to enter into this Sixth Amendment to amend certain provisions of the Development Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the covenants herein contained, the parties agree as follows:

1.: All capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Development Agreement.
2.: Section 2.4(d) of the Development Agreement is hereby amended by deleting the reference to "April 30, 2002" in such section and substituting in its place "June 15, 2002."
3.: Except as amended by this Sixth Amendment, the Development Agreement is reaffirmed in all respects and shall remain in full force and effect.
4.: This Sixth Amendment shall become effective on the date (the "Amendment Effective Date") on which all of the following have been accomplished: (a) this Sixth Amendment has been executed by all parties hereto and (b) the City Council has duly approved the last of the following: (i) this Sixth Amendment; and (ii) a sixth amendment to the amended and restated development agreements of each of the Other Land-Based Casino Developers containing substantially the same terms and conditions as set forth in this Sixth Amendment.
5.: This Sixth Amendment may be executed in counterparts, each of which shall be deemed to be an original document and together shall constitute one instrument.

IN WITNESS WHEREOF, the parties hereto have set their hands and had their seals affixed on the dates set forth after their respective signatures.

CITY OF DETROIT, a municipal corporation
By:	KWAME M. KILPATRICK
Its:	Mayor
THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT, a Michigan public body corporate
By:

Its:

By:

Its:

DETROIT ENTERTAINMENT, L.L.C. a Michigan limited liability company
By:	Circus Circus Michigan, Inc. a Michigan corporation, one of its members
	By:	RHONDA COHEN
	Its:	General Manager
By:	Atwater Casino Group, LLC, a Michigan limited liability company, one of its members
	By:	Atwater Management Corporation, a Delaware corporation, its manager
	By:	VIVIAN CARPENTER
	Its:	Vice President

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SIXTH AMENDMENT TO THE AMENDED AND RESTATED DEVELOPMENT AGREEMENT BY AND AMONG THE CITY OF DETROIT, THE ECONOMIC DEVELOPMENT CORPORATION OF THE CITY OF DETROIT AND DETROIT ENTERTAINMENT, L.L.C.
EX-10.88 10 a2077883zex-10_88.htm EXHIBIT 10.88
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Exhibit 10.88

MASTER LEASE

Dated as of December 21, 2001

among

MANDALAY RESORT GROUP,
MANDALAY CORP.,
RAMPARTS, INC.,
NEW CASTLE CORP., and
CIRCUS CIRCUS CASINOS, INC.,
as Lessees,

and

WELLS FARGO BANK NORTHWEST, N.A.,
not in its individual capacity, but solely
as Trustee under the
Trust Agreement
dated as of December 21, 2001,
as Lessor

Mandalay 2001—A Lease Financing

This Master Lease has been executed in several counterparts. To the extent, if any, that this Master Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Master Lease (or any Lease Supplement relating hereto) may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by Collateral Agent on or following the signature page hereof (or thereof).

This counterpart is not the original counterpart.

TABLE OF CONTENTS

ARTICLE I		DEFINITIONS	1
	SECTION 1.1	Definitions; Interpretation	1
ARTICLE II		LEASE OF EQUIPMENT; LEASE TERM	1
	SECTION 2.1	Acceptance and Lease of the Equipment	1
	SECTION 2.2	Acceptance Procedure	1
	SECTION 2.3	Lease Term	2
	SECTION 2.4	Title	2
	SECTION 2.5	Personal Property	2
ARTICLE III		PAYMENT OF RENT	2
	SECTION 3.1	Rent	2
	SECTION 3.2	Payment of Basic Rent	2
	SECTION 3.3	Supplemental Rent	2
	SECTION 3.4	Method of Payment	3
ARTICLE IV		QUIET ENJOYMENT; RIGHT TO INSPECT	3
	SECTION 4.1	Non-Interference	3
	SECTION 4.2	Inspection and Reports	3
ARTICLE V		NET LEASE, ETC.	4
	SECTION 5.1	Net Lease	4
	SECTION 5.2	No Termination or Abatement	5
ARTICLE VI		SUBLEASES	5
	SECTION 6.1	Subleases	5
ARTICLE VII		LESSEE ACKNOWLEDGMENTS	6
	SECTION 7.1	Condition of the Equipment	6
	SECTION 7.2	Risk of Loss	7
	SECTION 7.3	Certain Duties and Responsibilities of Lessor	7
ARTICLE VIII		POSSESSION AND USE OF THE EQUIPMENT, ETC.	7
	SECTION 8.1	Possession and Use of the Equipment	7
	SECTION 8.2	Compliance with Requirements of Law and Insurance Requirements	8
ARTICLE IX		MAINTENANCE AND REPAIR; REPORTS; PERSONNEL	8
	SECTION 9.1	Maintenance and Repair	8
	SECTION 9.2	Maintenance and Repair Reports	9
ARTICLE X		MODIFICATIONS, SUBSTITUTIONS, ETC.	9
	SECTION 10.1	Alterations and Modifications	9
	SECTION 10.2	Title to Modifications	10
	SECTION 10.3	Optional Equipment Substitutions	11
ARTICLE XI		COVENANTS WITH RESPECT TO LIENS	12
	SECTION 11.1	Covenants with Respect to Liens	12
ARTICLE XII		PERMITTED CONTESTS	13
	SECTION 12.1	Permitted Contests in Respect of Applicable Laws	13

ARTICLE XIII		INSURANCE	13
	SECTION 13.1	Required Coverages	13
	SECTION 13.2	Insurance Coverage	14
	SECTION 13.3	Delivery of Insurance Certificates	14
	SECTION 13.4	Insurance by Lessor, Collateral Agent or any Participant	14
ARTICLE XIV		CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS	15
	SECTION 14.1	Casualty	15
	SECTION 14.2	Environmental Matters	17
	SECTION 14.3	Notice of Environmental Matters	17
ARTICLE XV		TERMINATION OF LEASE	18
	SECTION 15.1	Termination upon Certain Events	18
	SECTION 15.2	Termination Procedures	18
ARTICLE XVI		EVENTS OF DEFAULT	19
	SECTION 16.1	Lease Events of Default	19
	SECTION 16.2	Remedies	21
	SECTION 16.3	Waiver of Certain Rights	23
	SECTION 16.4	Power of Attorney	23
	SECTION 16.5	Grant of Security Interest	23
ARTICLE XVII		RIGHT TO CURE	24
	SECTION 17.1	Lessor's Right to Cure Lessee's Lease Defaults	24
ARTICLE XVIII		PURCHASE PROVISIONS	24
	SECTION 18.1	Early and End of Term Purchase Options	24
	SECTION 18.2	Acceleration of Equipment Purchase	24
ARTICLE XIX		END OF LEASE TERM OPTIONS	25
	SECTION 19.1	End of Lease Term Options	25
	SECTION 19.2	Election of Options	25
	SECTION 19.3	Renewal Option	25
ARTICLE XX		SALE OPTION	26
	SECTION 20.1	Sale Option Procedures	26

	SECTION 20.2	Certain Obligations Continue	28
	SECTION 20.3	Failure to Sell Equipment	28
ARTICLE XXI		PROCEDURES RELATING TO PURCHASE OR SALE OPTION	29
	SECTION 21.1	Provisions Relating to Conveyance of the Equipment Upon Purchase by Lessees, Sales or Certain Other Events	29
ARTICLE XXII		ACCEPTANCE OF SURRENDER	30
	SECTION 22.1	Acceptance of Surrender	30
ARTICLE XXIII		NO MERGER OF TITLE	30
	SECTION 23.1	No Merger of Title	30
ARTICLE XXIV		INTENT OF THE PARTIES	30
	SECTION 24.1	Nature of Transaction	30
ARTICLE XXV		MISCELLANEOUS	32
	SECTION 25.1	Survival; Severability; Etc.	32
	SECTION 25.2	Amendments and Modifications	32
	SECTION 25.3	No Waiver	32
	SECTION 25.4	Notices	32
	SECTION 25.5	Successors and Assigns	32
	SECTION 25.6	Headings and Table of Contents	32
	SECTION 25.7	Counterparts	32
	SECTION 25.8	GOVERNING LAW	32
	SECTION 25.9	HIGHEST LAWFUL RATE	33
	SECTION 25.10	Original Lease	33
	SECTION 25.11	Limitations on Recourse	33

		EXHIBITS
EXHIBIT A	—	Description of the Facilities
EXHIBIT B	—	Form of Lease Supplement
		SCHEDULE
SCHEDULE I	—	Amortization Component of Basic Rent

iii

MASTER LEASE

This Master Lease (this "Lease"), dated as of December 21, 2001, among WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity, but solely as Trustee under the Trust Agreement dated as of December 21, 2001, having its principal office at 79 South Main Street, Salt Lake City, Utah 84111, as Lessor, and MANDALAY RESORT GROUP, a Nevada corporation, MANDALAY CORP., a Nevada corporation, RAMPARTS, INC., a Nevada corporation, NEW CASTLE CORP., a Nevada corporation, and CIRCUS CIRCUS CASINOS, INC., a Nevada corporation, as Lessees.

W I T N E S S E T H:

WHEREAS, Lessor, using amounts funded by the Participants, will acquire certain Equipment from various Sellers thereof and, pursuant to this Lease, Lessor will lease such Equipment to Lessees, and Lessees will lease the Equipment from Lessor.

NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

SECTION 1.1 Definitions; Interpretation. For all purposes hereof, the capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix 1 to that certain Participation Agreement dated as of even date herewith, among Lessees; Mandalay and its Subsidiaries listed on Schedule I thereto, as Guarantors; Lessor, not in its individual capacity, except as expressly stated therein, but solely as Trustee; the Persons named on Schedule II thereto, as Certificate Holders; the Persons named on Schedule III thereto, as Lenders; and Wells Fargo Bank Nevada, N.A., not in its individual capacity, except as expressly stated therein, but solely as Collateral Agent (as from time to time amended, restated, supplemented or otherwise modified, the "Participation Agreement"); and the rules of interpretation set forth in Appendix 1 to the Participation Agreement shall apply to this Lease. All obligations imposed on "Lessee" or "Lessees" in this Lease, and any Lease Supplement to which any Lessee is party, shall be the full recourse, joint and several liability of all Lessees in accordance with Section 10.20 of the Participation Agreement.

ARTICLE II
LEASE OF EQUIPMENT; LEASE TERM

SECTION 2.1 Acceptance and Lease of the Equipment. Lessor, subject to the satisfaction or waiver of the conditions set forth in Article II of the Participation Agreement, hereby agrees to purchase the Equipment, to accept delivery of the Equipment and to lease all of Lessor's interest in the Equipment to Lessees hereunder. Lessees hereby agree, expressly for the direct benefit of Lessor, to lease the Equipment from Lessor for the Lease Term.

SECTION 2.2 Acceptance Procedure. Lessees hereby agree that acceptance of delivery by Lessees of this Lease and one or more Lease Supplements (in the form of Exhibit B, appropriately completed) with respect to the Equipment to be accepted and leased by Lessees hereunder shall, without further act, constitute the irrevocable acceptance by Lessees of such Equipment for all purposes of this Lease and the other Operative Documents on and subject to the terms set forth herein and therein and Lessees' agreement to lease such Equipment during the Lease Term subject to the terms of this Lease and the other Operative Documents.

SECTION 2.3 Lease Term. Unless earlier terminated in accordance herewith and with the other Operative Documents, the term of this Lease shall include a base term (the "Base Term") commencing, on and including the Closing Date and ending on but not including the third (3rd) anniversary of the Closing Date, and, if exercised pursuant to each of the terms and conditions of this Lease, including Article XIX hereof, the Renewal Term (the Base Term and the Renewal Term, if any, being collectively referred to as, the "Lease Term").

SECTION 2.4 Title. The Equipment is leased to Lessees without any representation or warranty, express or implied, by Lessor and subject to the rights of parties in possession, the existing state of title with respect thereto (including all Liens other than Lessor Liens) and all Applicable Laws and Requirements of Law and any violations thereof. No Lessee shall have any recourse against Lessor for any defect in or exception to title to any of the Equipment other than any defect or exception resulting from Lessor Liens or a breach by Lessor of its obligations under Article XXI.

SECTION 2.5 Personal Property. To the maximum extent permitted by Applicable Laws, the parties hereto agree that the Equipment and any Modifications shall constitute personal property and shall not be or become fixtures or otherwise part of any real property (including any Facility) or, if any of the Equipment shall be or become fixtures, Lessees shall execute and deliver such documents and instruments (including the documentation described in Section 2.4 (c)(viii) of the Participation Agreement) and take or authorize the taking of such action to perfect and/or maintain at all relevant times a perfected first priority Lien in favor of Lessor in and to any and all such Equipment and to provide Lessor and Collateral Agent customary access rights with respect thereto. No Lessee shall enter into or be a party to any lease or mortgage of any real property on which any portion of the Equipment is or is to be located or enter into any other agreement which grants to any Person any right to any portion of the Equipment by reason of such portion being an accession to any real property owned by such Person to the extent such lease or mortgage would constitute a Lien that is not a Permitted Lien.

ARTICLE III
PAYMENT OF RENT

SECTION 3.1 Rent.

(a) During the Lease Term, Lessees, jointly and severally, shall pay (i) the interest component of Basic Rent on each Payment Date, on the date required under Section 20.1(i) in connection with Lessees' exercise of the Sale Option and on any date on which this Lease shall terminate with respect to the Equipment and (ii) the principal component of Basic Rent on each Payment Date set forth on Schedule I hereto.

(b) Basic Rent shall be due and payable in lawful money of the United States of America and shall be paid in accordance with Section 3.3 of the Participation Agreement on the due date therefor.

(c) Any Lessee's inability or failure to take possession of all or any portion of the Equipment when accepted or deemed accepted hereunder, whether or not attributable to any act or omission of any Lessee or any act or omission of Lessor or any other Person, shall not delay or otherwise affect Lessees' obligation to pay Rent in accordance with and subject to the terms of this Lease, including the provisions for early termination hereof.

SECTION 3.2 Payment of Basic Rent. Basic Rent shall be paid absolutely net to Lessor, so that this Lease shall yield to Lessor the full amount thereof, without setoff, deduction or reduction.

SECTION 3.3 Supplemental Rent. Lessees, jointly and severally, shall pay to Lessor or the Person entitled thereto any and all Supplemental Rent promptly as the same shall become due and

payable, and if Lessees fail to pay any Supplemental Rent, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent. Lessees, jointly and severally, shall pay to Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by Applicable Laws and all Requirements of Law, interest at the Applicable Default Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent payable to Lessor or any Indemnitee not paid when due or demanded pursuant to and in accordance with the terms hereof and the other Operative Documents by Lessor or any Indemnitee for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of Lessees' obligations to pay Basic Rent hereunder shall not limit or modify the obligations of Lessees with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of Lessees to pay and discharge any Supplemental Rent as and when due, Lessees shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added under any agreement with a third party for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent.

SECTION 3.4 Method of Payment. Each payment of Rent and other amounts owing pursuant to the Operative Documents shall be made by Agent Lessee to Collateral Agent prior to 10:00 a.m., Nevada time, to the account at Collateral Agent designated on Schedule IV to the Participation Agreement (or in the case of Excluded Amounts, directly to the Person entitled thereto) in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day unless the result of such extension would be to carry the date of such payment into another calendar month, in which case such payment shall be made on the immediately preceding Business Day. Payments received after 10:00 a.m., Nevada time, on the date due shall for the purpose of Section 16.1 hereof be deemed received on such day; provided, however, that for the purposes of the second sentence of Section 3.3 hereof, such payments shall be deemed received on the next succeeding Business Day and subject to interest at the Applicable Default Rate as provided in such Section 3.3.

ARTICLE IV
QUIET ENJOYMENT; RIGHT TO INSPECT

SECTION 4.1 Non-Interference. Subject to Lessor's cure rights, as provided for in Section 17.1, Lessor covenants that it will not interfere with any Lessee's use or possession of the Equipment during the Lease Term, so long as no Event of Default has occurred and is continuing, it being agreed that Lessee's remedies for breach of the foregoing covenant shall be limited to a claim for damages or the commencement of proceedings to enjoin such breach. Such right is independent of and shall not affect Lessees' obligations hereunder and under the other Operative Documents or Lessor's rights otherwise to initiate legal action to enforce the obligations of Lessees under this Lease. The foregoing covenant shall not require Lessor to take any action contrary to, or which would permit any Lessee to use any of the Equipment for a use not permitted under, the provisions of this Lease.

SECTION 4.2 Inspection and Reports.

(a) Upon two (2) Business Days prior notice to Agent Lessee, Lessor or its authorized representatives (the "Inspecting Parties") may inspect (i) any Facility and the Equipment and (ii) the books and records of Lessees relating to the Equipment and may make copies and abstracts therefrom and may discuss the affairs, finance and accounts with respect to the Equipment with any Lessee's officers. All such inspections shall be during the applicable Lessee's normal business hours (unless an Event of Default has occurred and is existing), shall be subject to such Lessee's customary safety and security provisions, shall be conducted in compliance with any

applicable Gaming Laws and shall be at the expense and risk of the Inspecting Parties, except that if an Event of Default has occurred and is continuing, Lessees shall reimburse the Inspecting Parties for the reasonable costs of such inspections and, except for the Inspecting Party's gross negligence or willful misconduct, such inspection shall be at Lessees' risk. No inspection shall unreasonably interfere with any applicable Lessee's operations. None of the Inspecting Parties shall have any duty to make any such inspection or inquiry. None of the Inspecting Parties shall incur any liability or obligation by reason of making any such inspection or inquiry unless and to the extent such Inspecting Party causes damage to the applicable Equipment or any property of any applicable Lessee or any other Person during the course of such inspection.

(b) To the extent permissible under Applicable Laws, Lessees shall prepare and file in timely fashion, or, where Lessor shall be required to file, Lessees shall prepare and make available to Lessor within a reasonable time prior to the date for filing and Lessor shall file, any reports with respect to the condition or operation of any Equipment that shall be required to be filed with any Governmental Agency.

ARTICLE V
NET LEASE, ETC.

SECTION 5.1 Net Lease. This Lease shall constitute a net lease and Lessees' obligations to pay all Rent shall be absolute and unconditional under any and all circumstances. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall any Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to any Rent, nor shall the obligations of any Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith), by reason of: (i) any defect in the condition, merchantability, design, construction, quality or fitness for use of the Equipment or any part thereof, or the failure of any of the Equipment to comply with all Applicable Laws and Requirements of Law, including any inability to use any of the Equipment by reason of such non-compliance; (ii) except as provided in Section 14.1 with respect to the adjustment of Basic Rent upon payment of any Casualty Amount, any damage to, removal, abandonment, salvage, loss, contamination of, or Release from, demolition, scrapping or destruction of or any requisition or taking of any Facility or any of the Equipment or any part thereof; (iii) any restriction, prevention, interruption or curtailment of or interference with any use, operation or possession of any Facility or any of the Equipment; (iv) any defect in title to, interests in or rights to any of the Equipment or any Lien on such title, interests or rights or on any Facility or any of the Equipment (provided, that the foregoing shall not relieve any Person from its responsibility to remove Lessor Liens attributable to it); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by Lessor, Collateral Agent or any Participant; (vi) to the fullest extent permitted by Applicable Laws, any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to any Lessee, Guarantor, Lessor, Collateral Agent, any Participant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of any Lessee, Lessor, Collateral Agent, any Participant or any other Person, or by any court, in any such proceeding; (vii) any claim that any Lessee has or might have against any Person, including any Participant, or any vendor, designer, manufacturer, or contractor of or for any of the Equipment; (viii) any failure on the part of Lessor to perform or comply with any of the terms of this Lease, of any other Operative Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by any Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof; (x) any impossibility or illegality of performance by any Lessee, Lessor or any one or more of them; (xi) any action by any court, administrative agency or other Governmental Agency; (xii) any restriction, prevention or curtailment of or interference with the use of any Facility or the Equipment or any part thereof; (xiii) any failure of

any Lessee to achieve any accounting or tax benefits or the characterization of the transaction intended by the parties as set forth at Section 24.1 hereof and Section 4.1 of the Participation Agreement; or (xiv) any other cause or circumstances whether similar or dissimilar to the foregoing and whether or not any Lessee shall have notice or knowledge of any of the foregoing. Each Lessee's agreement in the preceding sentence shall not affect any claim, action or right such Lessee may have against any Person. The parties to the Operative Documents intend that the obligations of Lessees hereunder shall be covenants and agreements that are separate and independent from any obligations of Lessor hereunder or under any other Operative Documents and the obligations of Lessees shall continue unaffected unless such obligations shall have been modified or terminated in accordance with an express provision of this Lease.

SECTION 5.2 No Termination or Abatement. Each Lessee shall remain obligated under this Lease in accordance with its terms and the terms of the other Operative Documents and shall not take any action to terminate, rescind or avoid this Lease (except as provided herein) to the fullest extent permitted by Applicable Laws, notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting Lessor, Collateral Agent or any Participant, or any action with respect to this Lease which may be taken by any trustee, receiver or liquidator of Lessor, Collateral Agent or any Participant or by any court with respect to Lessor, Collateral Agent or any Participant. Each Lessee hereby waives, to the extent permitted by Applicable Laws, all right to terminate or surrender this Lease (except as provided herein) or to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to any Rent. Each Lessee shall remain obligated under this Lease in accordance with its terms and the terms of the other Operative Documents and each Lessee hereby waives, to the extent permitted by Applicable Laws, any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Lease. Notwithstanding any such statute or otherwise, Lessees, jointly and severally, shall be bound by all of the terms and conditions contained in this Lease.

ARTICLE VI
SUBLEASES

SECTION 6.1 Subleases. Except for subleases permitted by this Article VI, no Lessee shall have the right to assign, mortgage or pledge to any Person, including an Affiliate of any Lessee or Mandalay, at any time, in whole or in part, any of its right, title or interest in, to or under this Lease, or any portion of the Equipment, in any case without the prior written consent of the Required Participants, and any such assignment, mortgage or pledge shall be void. Notwithstanding the foregoing, any Lessee may, without the consent of Lessor or the Required Participants and so long as no Event of Default exists and is continuing, enter into a sublease of all of its rights and obligations under this Lease with a wholly-owned, direct or indirect, Subsidiary of Mandalay.

With respect to any sublease permitted under this Article VI, no Lessee shall sublease any interest with respect to this Lease to, or permit any such sublease by, any Person who shall then be engaged in any proceedings for relief under any Debtor Relief Law. The sublease for any Equipment subject to a sublease permitted under this Article VI must provide (and the relevant Lessee shall assure) that such Equipment shall be used and operated only at one of the Facilities or, in the case of Slot Machines, at a casino or other gaming establishment operated by Mandalay or any of its Affiliates provided that with respect to any such sublease of Slot Machines at a location other than a Facility, Lessees shall have executed and delivered, or caused to be executed and delivered, to Lessor and Collateral Agent, any and all such documents as Trustee and/or Collateral Agent may reasonably require in order to create, perfect, preserve and protect Lessor's Lien in such Sublease and Slot Machines and ensure Lessor's and Collateral Agent's access to such Slot Machines. The Lessees shall not permit any sublessee to engage in activities in respect of the Equipment which are substantially different from Lessees' activities.

No sublease permitted hereunder will (a) discharge or diminish any Lessee's or any Guarantor's obligations under any Operative Document, including Lessees' obligations under this Lease or under any other Operative Document, and Lessees shall remain directly and primarily liable under this Lease and the other Operative Documents with respect to all of the Equipment or (b) extend beyond the last day of the Lease Term. In addition, each sublease permitted hereby (x) shall be made and shall expressly provide that it is subject and subordinate to this Lease and the rights of Lessor hereunder, (y) shall expressly provide for the surrender of the Equipment subleased by the applicable sublessee at the election of Lessor after the occurrence and continuance of an Event of Default, and (z) shall expressly prohibit any further sublease by such sublessee of the Equipment subject thereto or the granting or existence of any Liens on the Equipment subject thereto. The effectiveness of a sublease hereunder shall be conditioned upon the receipt by Lessor of a writing executed by Lessee, the applicable sublessee and Guarantors, and acceptable in form and substance to Lessor (acting at the direction of the Required Participants) (each, a "Sublease"), reaffirming that Lessees and Guarantors shall remain primarily liable hereunder and under the other Operative Documents, notwithstanding such Sublease and confirming that the applicable Lessee will serve as the representative of any such sublessee with the authority, on behalf of such sublessee, to bind such sublessee with respect to the Operative Documents or any amendment, modification or waiver thereunder and shall have the power and authority to receive and give all notifications, consents, payments and deliveries under this Lease and the other Operative Documents. No Lessee shall assign or pledge any of its rights under any Sublease to any Person other than Lessor or Collateral Agent for the benefit of the Participants.

Agent Lessee shall give Lessor prompt written notice of any Sublease permitted under this Article VI, and Agent Lessee shall, within fifteen (15) days after execution of any Sublease, deliver to Lessor the fully executed original of such Sublease and any and all other documents and instruments as Lessor (acting at the direction of the Required Participants) may reasonably require.

ARTICLE VII
LESSEE ACKNOWLEDGMENTS

SECTION 7.1 Condition of the Equipment. EACH LESSEE ACKNOWLEDGES AND AGREES THAT ALTHOUGH LESSOR WILL OWN AND HOLD LEGAL TITLE TO THE EQUIPMENT, LESSEES, JOINTLY AND SEVERALLY, ARE RESPONSIBLE (A) FOR THE SELECTION OF THE EQUIPMENT, EACH PART THEREOF AND THE MANUFACTURER THEREOF AND THE TERMS AND CONDITIONS RELATING TO THE MANUFACTURE, PURCHASE AND SHIPMENT THEREOF, (B) FOR THE DESIGN, SIZE, CAPACITY, DEVELOPMENT, BUDGETING, CONSTRUCTION, SHIPMENT, INSTALLATION, TESTING AND PLACEMENT IN SERVICE OF THE EQUIPMENT, AND (C) ANY ALTERATIONS OR MODIFICATIONS AND ALL ACTIVITIES CONDUCTED IN CONNECTION THEREWITH. EACH LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR IS NOT THE MANUFACTURER OF THE EQUIPMENT OR ANY PART THEREOF NOR IS IT A DEALER IN PROPERTY OF SUCH KIND. EACH LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE EQUIPMENT "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY LESSOR, COLLATERAL AGENT OR ANY OF THE PARTICIPANTS AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE (INCLUDING THE INTERESTS OF ANY SELLER OR ANY OTHER PERSON HAVING AN INTEREST IN THE EQUIPMENT, BUT EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF AND ANY SUCH PERSON'S SUCCESSORS, ASSIGNS, INVITEES, LICENSEES, LESSEES, SUBLESSEES OR ANY OTHER PERSONS CLAIMING BY OR THROUGH ANY SUCH PERSON, (C) ANY STATE OF FACTS WHICH AN ACCURATE PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE HEREOF OR ON THE

DELIVERY DATE FOR THE EQUIPMENT. NONE OF LESSOR, COLLATERAL AGENT OR ANY OF THE PARTICIPANTS HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), MERCHANTABILITY, VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE FOR ANY PURPOSE OF ANY OF THE EQUIPMENT (OR ANY PART THEREOF), THE ABILITY OF ANY OF THE EQUIPMENT TO PERFORM ANY FUNCTION, OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE EQUIPMENT, (OR ANY PART THEREOF) AND NONE OF LESSOR, COLLATERAL AGENT OR ANY OF THE PARTICIPANTS SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY OF THE EQUIPMENT, OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW. Each Lessee has been afforded full opportunity to inspect the Equipment to be leased by it hereunder, is satisfied with the results of its inspections, is satisfied that all such Equipment is suitable for its purposes and is entering into this Lease solely on the basis of the results of its own inspections, and all risks incident to the matters discussed in the preceding sentence, as between Lessor, the Collateral Agent and the Participants, on the one hand, and such Lessee, on the other, are to be borne by such Lessee unless herein expressly stated otherwise. The provisions of this Section 7.1 have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by any of Lessor, Collateral Agent or the Participants, express or implied, with respect to the Equipment (or any interest therein), that may arise pursuant to any law now or hereafter in effect or otherwise.

SECTION 7.2 Risk of Loss. The risk of loss of or decrease in the enjoyment and beneficial use of the Equipment as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by Lessees, and Lessor shall in no event be answerable or accountable therefor.

SECTION 7.3 Certain Duties and Responsibilities of Lessor. Lessor undertakes to perform such duties and only such duties as are specifically set forth herein and in the other Operative Documents, and no implied covenants or obligations shall be read into this Lease against Lessor, and Lessor agrees that it shall not, nor shall it have a duty to, manage, control, use, sell, maintain, insure, register, lease, operate, modify, dispose of or otherwise deal with the Equipment or any other part of the Trust Estate in any manner whatsoever, except as required by the terms of the Operative Documents and as otherwise provided herein.

ARTICLE VIII
POSSESSION AND USE OF THE EQUIPMENT, ETC.

SECTION 8.1 Possession and Use of the Equipment. Lessees may take possession of the Equipment and may use the same beginning on the Advance Date and continuing thereafter during the Lease Term. Lessees agree that, unless otherwise then subject to a Sublease permitted under Section 6.1, the Equipment will be used solely in the conduct of Lessees' business at one or more of the Facilities or, in the case of Slot Machines, at a casino or other gaming establishment located in Nevada operated by one or more Lessees, provided that where any Slot Machine is used at a location other than a Facility, the applicable Lessee(s) shall obtain and provide to the Lessor the documents of the type described in Section 2.4(c)(viii) of the Participation Agreement, any and all such documents as Trustee and/or Collateral Agent may reasonably require in order to create, perfect, preserve and protect Lessor's and Collateral Agent's respective Liens in such Sublease and Slot Machines and ensure Lessor's and Collateral Agent's access to such Slot Machines. No Lessee shall use the Equipment or

any part thereof for any purpose or in any manner that would adversely affect the Fair Market Value, utility, remaining useful life or residual value of the Equipment. No Lessee shall (a) use, operate, maintain or store at any time prior to the Expiration Date any item of Equipment or any portion thereof in violation of this Section 8.1, Section 9.1 or any Insurance Requirement; (b) abandon any item of Equipment; or (c) except in connection with the permitted return of the Equipment, permit any item of Equipment to be located in any jurisdiction other than the State of Nevada. Lessees warrant that the Equipment will at all times be used and operated under and in compliance in all material respects with any contracts or agreements, or regulations of Governmental Agencies applicable to the use, maintenance or operation of the Equipment, or any portion thereof, to which such Lessee or Lessor is a party or by which any Lessee or Lessor or the applicable Facility (or other casino or gaming establishment, as the case may be) is bound or under which any of them have rights. At all times during the Lease Term, the Equipment shall be in the possession of Lessees, wholly-owned, direct or indirect, Subsidiaries of Mandalay that are permitted sublessees or another permitted sublessee, in the ordinary course of its business. Lessees shall pay, or cause to be paid, all charges and costs required in connection with the use of the Equipment as contemplated by this Lease and the other Operative Documents. During the Lease Term, Lessees assume and agree to perform on behalf of Lessor all of Lessor's obligations as owner of the Equipment and to pay all fees, charges, costs, expenses, assessments, taxes (if any), impositions, utilities (if any) and other amounts payable by Lessor as such owner during the Lease Term and which relate to or arise in connection with the purchase, disposition, ownership, lease or use of the Equipment, governmental actions or other rights, privileges or entitlements required to be paid in connection with the Equipment. All charges for utilities, (if any) imposed with respect to the Equipment for a billing period during which this Lease expires or terminates (except when Lessees purchase the Equipment in accordance with the terms of this Lease, in which case Lessees shall be solely responsible for all such charges) shall be adjusted and prorated on a daily basis between Lessees and any purchaser or purchasers of the Equipment, and each party shall pay or reimburse the other for each party's pro rata share thereof; provided, that in no event shall Lessor have any liability therefor.

SECTION 8.2 Compliance with Requirements of Law and Insurance Requirements. Subject to the terms of Article XII relating to Permitted Contests, Lessees, at their sole cost and expense, shall comply in all material respects with all Requirements of Law (including all Environmental Laws) and Insurance Requirements and manufacturer's operating standards and guidelines relating to the Facilities or any of the Equipment, including the use, construction, operation, maintenance, repair and restoration thereof and the remarketing thereof pursuant to Article XX, whether or not compliance therewith shall require structural or extraordinary changes in the Equipment or interfere with the use and enjoyment of the Equipment, and procure, maintain and comply with (or cause to be procured, maintained and complied with) all licenses, permits, orders, approvals, consents and other authorizations required for the use, operation, maintenance, repair and restoration of the Equipment.

ARTICLE IX
MAINTENANCE AND REPAIR; REPORTS; PERSONNEL

SECTION 9.1 Maintenance and Repair. During the Lease Term, Lessees, at their own expense, shall at all times (a) maintain the Equipment in as good an operating and mechanical condition as when delivered, subject to ordinary wear and tear, and in any event in accordance with standards no lower than the highest of those applied by the Lease Obligors or any of their Affiliates to similar equipment owned or leased by them; (b) maintain the Equipment in accordance with prudent industry practice and all Applicable Laws, whether or not such maintenance requires structural modifications; (c) comply in all respects with, and maintain the Equipment in accordance with, all Insurance Requirements and the terms of all contracts (including service contracts) which are in effect at any time with respect to the Equipment or any part thereof and in accordance with standard industry

maintenance practices as required to maintain in full force and effect all warranties applicable to the Equipment; (d) use the Equipment only in accordance with Article VIII and cause the Equipment to have at all times the capacity and functional ability to be used, on a continuing basis and in commercial operation, in accordance with Article VIII except during any period for which any Casualty or Condemnation prevents such use; (e) make all necessary or appropriate repairs, replacements and renewals of the Equipment or any part thereof which may be required to keep the Equipment in the condition required by the preceding clauses (a) through (d), whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen, and including repairs, replacements and renewals that would constitute capital expenditures under GAAP if incurred by an owner of property; and (f) procure, maintain and comply in all material respects with all material licenses, permits, orders, approvals, consents and other authorizations required for the manufacture, installation, construction, use, maintenance and operation of the Equipment. In no event shall any Lessee discriminate as to the use or maintenance of the Equipment or any Part thereof (including periodicity of maintenance or record keeping in respect of the Equipment and including discrimination with respect to the installation of any Modifications required by Applicable Laws that may be phased in over a period of time or any discrimination based on the leased, rather than owned, status of the Equipment) as compared to properties of a similar nature in which any Lessee has any ownership or leasehold interest. Each Lessee waives any right that it may now have or hereafter acquire to (x) require Lessor to maintain, repair, replace, alter, remove or rebuild all or any part of the Equipment or (y) make repairs at the expense of Lessor pursuant to any Applicable Laws or other agreements.

SECTION 9.2 Maintenance and Repair Reports. During the Lease Term, Lessees shall keep or cause to be kept maintenance and repair reports, records, logs and other materials required by Applicable Law or by any Governmental Agency having jurisdiction over all or any part of the Equipment, in sufficient detail, on the same basis as records are kept for similar properties owned or leased by any Lease Obligor or any Affiliates thereof. Such reports, records, logs and other materials shall be kept on file by Agent Lessee at its offices during the Lease Term, and shall be made available at Agent Lessee's office to Lessor upon reasonable request. Agent Lessee shall give written notice to Lessor of any Condemnation or Casualty promptly after any Lessee has knowledge thereof. Agent Lessee shall prepare and deliver to Lessor and the Participants within a reasonable time prior to the required date of filing (or, to the extent permissible, file on behalf or Lessor and the Participants) any and all reports (other than income tax returns) to be filed by Lessor or any Participant with any Governmental Agency or other Person by reason of the ownership by Lessor or any Participant of the Equipment or the leasing thereof to Lessees. Lessor agrees to inform Agent Lessee of any request for such reports received by it.

ARTICLE X
MODIFICATIONS, SUBSTITUTIONS, ETC.

SECTION 10.1 Alterations and Modifications.

(a) On and after the Advance Date (i) each Lessee, at its own cost and expense, shall make or cause to be made alterations, renovations, improvements and additions to the Equipment leased by it (or any Part thereof and substitutions and replacements therefor (collectively, "Modifications")) which are (A) necessary to repair or maintain such Equipment in the condition required by Section 9.1; (B) necessary in order for such Equipment to be in compliance in all material respects with Applicable Laws or Insurance Requirements; or (C) necessary or advisable to restore such Equipment to its condition existing prior to a Casualty or Condemnation to the extent required pursuant to Article XIV; and (ii) so long as no Lease Event of Default or Lease Default has occurred and is continuing, such Lessee, at its own cost and expense, may undertake, or cause or permit to be undertaken, Modifications to such Equipment so long as such

Modifications comply with Applicable Laws and with Section 9.1 and subsection (b) of this Section 10.1.

(b) The making of any Modifications must be in compliance with the following requirements:

(i): No such Modifications in respect of any Equipment with a cost exceeding $250,000 shall be made or undertaken except upon not less than thirty (30) days' prior written notice to Lessor (except in the case of an emergency).
(ii): No Lessee shall make or cause or permit to be made any Modifications in violation of the terms of any restriction, condition, covenant or other similar matter affecting title to or interests in, or binding on, any of the Equipment or that cause any of the Equipment to be suitable for use only by one or more of the Lessees.
(iii): No Modifications shall be undertaken until the applicable Lessee shall have procured and paid for (or shall have caused to be procured and paid for), so far as the same may be required from time to time, all required permits and authorizations relating to such Modifications of all Governmental Agencies having jurisdiction over the applicable Equipment. Lessor, at Lessees' expense, shall join in the application for any such permit or authorization and execute and deliver any document in connection therewith, whenever such joinder is necessary or advisable.
(iv): The Modifications shall be completed in a good and workmanlike manner and in compliance in all material respects with all Applicable Laws then in effect and the standards imposed by any insurance policies required to be maintained hereunder or by the manufacturer in order to maintain all warranties in full force and effect.
(v): All Modifications shall, when completed, be of such a character as to not adversely affect the Fair Market Value, utility, remaining economic useful life or residual value of the affected Equipment from the Fair Market Value, utility, remaining economic useful life or residual value thereof immediately prior to the making thereof or, in the case of Modifications being made by virtue of a Casualty or Condemnation, immediately prior to the occurrence of such Casualty or Condemnation; provided, that with respect to any Modification made to meet the requirements of any Applicable Law, or any Governmental Agency having jurisdiction or any insurance policy required hereunder, the applicable Lessee may make such Modification (a "Nonconforming Modification") without regard to any decrease in the Fair Market Value, utility, remaining economic useful life or residual value of the affected Equipment, but only to the extent that such Lessee has made commercially reasonable efforts to minimize such decrease. If such Modifications in respect of any of the Equipment have a cost exceeding $5,000,000 and if requested by Collateral Agent on behalf of the Required Participants, Lessor may engage the Appraiser at Lessees' sole cost and expense, to determine (by appraisal or other methods satisfactory to Collateral Agent on behalf of the Required Participants) the projected Fair Market Value of the affected Equipment as of the completion of the Modifications relating thereto.
(vi): Each Lessee shall have made or caused to have been made adequate arrangements for payment of the cost of all Modifications when due so that the affected Equipment shall at all times be free of Liens for labor and materials supplied or claimed to have been supplied to such Equipment, other than Permitted Liens.

SECTION 10.2 Title to Modifications. Ownership in all Modifications in respect of the Equipment shall, without further act, vest in Lessor and shall be deemed to constitute a part of the Equipment and be subject to this Lease.

SECTION 10.3 Optional Equipment Substitutions. Subject to the terms and conditions set forth below, any applicable Lessee shall have the right to substitute items of Equipment or Systems (each, a "Substitution Item" or "Substitution System", as applicable) for items of Equipment or Systems which it then leases (or has theretofore proposed to lease) under this Lease. For purposes hereof, "Substitution Items" and "Substitution Systems" are different from Parts in that Substitution Items and Substitution Systems are intended to mean items of equipment or systems that are not originally contemplated to be subject to this Lease. Lessees' substitution rights pursuant to this Section 10.3 shall be subject to the following conditions:

(a) Equipment Other Than Slot Machines. With respect to Equipment other than Slot Machines:

(i): Agent Lessee shall have delivered a written notice to Lessor and Collateral Agent on behalf of the Participants specifying: (i) Lessees' desire to substitute a Substitution Item for the substituted item of Equipment or Substitution System for the substituted System, (ii) a description of the intended Substitution Item or Substitution System, as applicable, and (iii) a proposed closing date for such substitution (the "Substitution Date");
(ii): Agent Lessee shall have delivered to Lessor and Collateral Agent on behalf of the Participants not less than thirty (30) days prior to the proposed Substitution Date any and all further information regarding the intended Substitution Item or Substitution System, as applicable, as may be reasonably required by Lessor or any Participant for the purpose of evaluating the intended Substitution Item or Substitution System, as applicable, and whether it should be deemed acceptable substitution property for the substituted item of Equipment or System, as the case may be;
(iii): Any Substitution Item or Substitution System, as applicable, shall (A) have the same or greater Fair Market Value, economic useful life and utility as the substituted item of Equipment or System, as the case may be, and (B) relate to, complement or otherwise be materially associated with the business of Lessees and their Affiliates;
(iv): No Default or Event of Default shall have occurred and be continuing; and
(v): Lessor, acting at the direction of the Required Participants, shall have approved the Substitution Item or Substitution System, as applicable, as qualifying Equipment (such approval right of the Participants to be exercised reasonably from the perspective of secured creditors) and such Lessee shall have otherwise satisfied such terms and conditions regarding the inclusion of such Substitution Item or Substitution System, as applicable, as Equipment as may be reasonably required by Lessor, acting at the direction of the Required Participants, on or before the Substitution Date.

(b) Slot Machines. Lessees shall be permitted to freely substitute Slot Machines subject to the Lease from time to time provided that:

(i): Agent Lessee shall deliver to Lessor and Collateral Agent, within 60 days after the end of each Fiscal Quarter or, upon the occurrence of an Event of Default, within five (5) Business Days of such occurrence, a written report (a "Slot Machine Report"), certified by a Responsible Official, specifying in detail satisfactory to Lessor and Collateral Agent: (i) the Slot Machines then subject to this Lease; (ii) the Slot Machines, if any, substituted and replaced since the date of the immediately preceding delivered Slot Machine Report (other than with respect to the first Slot Machine Report delivered hereunder); (iii) the Slot Machines constituting Substitution Items during the quarterly period covered by such Slot Machine Report; and (iv) in each of the foregoing instances, the type, serial number (or other similar identification information), invoice cost, age and the applicable Substitution Date of each such Slot Machine;

(ii): Agent Lessee shall deliver to Lessor and Collateral Agent (on behalf of the Participants) all further information regarding the Slot Machines, or any portion thereof, described in any Slot Machine Report as may be reasonably required by Lessor, Collateral Agent or any Participant, and in any event shall deliver to Collateral Agent a bill of sale dated as of the date of the applicable Substitution Date transferring title to the relevant Substitution Slot Machine(s) to Lessor as of such date;
(iii): Any Slot Machine or group of Slot Machines constituting Substitution Items (each, a "Substitution Slot Machine") shall have the same or greater Fair Market Value, economic useful life and utility as the Slot Machine(s) for which it or they are substituted;
(iv): No Event of Default shall have occurred and be continuing; and
(v): Upon written request, Agent Lessee shall execute and deliver, or cause to be executed and delivered, all such documents as Lessor or Collateral Agent may reasonably require to perfect and/or maintain at all relevant times a perfected first priority Lien in favor of Lessor in and to any and all such Slot Machines and to provide Lessor and Collateral Agent customary access rights with respect thereto.

Upon a permitted substitution of Equipment or System, as applicable, pursuant to this Section 10.3 Lessor shall execute such documents as may be required to release the substituted item of Equipment or System, as applicable, from the terms of this Lease, at Lessees' expense. Upon such substitution pursuant to this Section 10.3, the substituted item of Equipment or Substitution System, as applicable, shall become the property of the applicable Lessee, and title thereto shall automatically vest in such Lessee upon such permitted substitution.

ARTICLE XI
COVENANTS WITH RESPECT TO LIENS

SECTION 11.1 Covenants with Respect to Liens.

(a) No Lessee shall directly or indirectly create, incur, assume or suffer to exist any Lien (other than Permitted Liens) on or with respect to any portion of the Equipment, Lessor's title to the Equipment, or any interest therein, and Lessees shall protest any such Lien and diligently pursue the defense thereof. Lessees, at their own expense, shall promptly pay, satisfy and otherwise take such actions as may be necessary to keep the Equipment free and clear of, and duly to discharge, eliminate or bond in a manner reasonably satisfactory to Lessor and Collateral Agent, any such Lien (other than Permitted Liens) not accepted above if the same shall arise at any time.

(b) Nothing contained in this Lease shall be construed as constituting the consent or request of Lessor, express or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Equipment or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF LESSOR, COLLATERAL AGENT OR ANY OF THE PARTICIPANTS IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO ANY LESSEE OR TO ANYONE HOLDING THE EQUIPMENT, OR ANY PART THEREOF OR INTEREST THEREIN THROUGH OR UNDER ANY LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR, COLLATERAL AGENT OR ANY PARTICIPANT IN AND TO THE EQUIPMENT.

ARTICLE XII
PERMITTED CONTESTS

SECTION 12.1 Permitted Contests in Respect of Applicable Laws. If, to the extent and for so long as (a) a test, challenge, appeal or proceeding for review of any Applicable Laws relating to any of the Equipment or the obligation to comply therewith shall be prosecuted diligently and in good faith in appropriate proceedings by any applicable Lessee or (b) compliance with such Applicable Laws shall have been excused or exempted by a valid nonconforming use, variance, permit, waiver, extension or forbearance, following the Closing Date, the applicable Lessee shall not be required to comply with such Applicable Laws but only if and so long as any such test, challenge, appeal, proceeding, waiver, extension, forbearance or noncompliance shall not, in the reasonable opinion of Lessor, acting at the direction of the Required Participants, involve (A) any risk of criminal liability being imposed on Lessor, Collateral Agent, any Participant, any of the Equipment or (B) any material risk of (1) the foreclosure, forfeiture or loss of any of the Equipment, or any material part thereof, or (2) the nonpayment of Rent, Lease Balance or other amount payable under the Operative Documents, (3) the interruption or cancellation of any insurance coverage, (4) the invalidity or lapse of any warranty, (5) any sale of, or the creation of any Lien (other than a Permitted Lien) on, any part of the Equipment, (6) civil liability being imposed on Lessor, Collateral Agent, any Participant or any of the Equipment for which the applicable Lessee is not obligated to indemnify such parties under the Operative Documents, or (7) enjoinment of, or interference with, the use, possession or disposition of the Equipment in any material respect (any of the foregoing being referred to as a "Permitted Contest") and provided that in any event adequate reserves in accordance with GAAP are maintained against any adverse determination of any such test, challenge, appeal or proceeding.

Lessor shall not be required to join in any proceedings pursuant to this Section 12.1 unless a provision of any Applicable Law requires that such proceedings be brought by or in the name of Lessor or it is customary in the applicable jurisdiction for an owner to join in such proceedings; and in that event Lessor shall join in the proceedings or permit them or any part thereof to be brought in its name if and so long as (i) Lessees have not elected the Sale Option and (ii) Lessees agree in writing to and pay all related expenses and agrees in writing to indemnify Lessor, Collateral Agent and the Participants in form and substance reasonably satisfactory to each of the respective Indemnitees.

ARTICLE XIII
INSURANCE

Section 13.1 (a) Required Coverages. During the Lease Term, Lessee shall provide or cause to be provided insurance with respect to the Equipment and the Facilities of a character usually insured by Persons engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons, and carry such other insurance as is usually carried by such Persons; provided, that in any event Lessees shall maintain or cause to be maintained at all times:

(a) Commercial General Liability Insurance. Third-party legal liability coverage providing coverage against claims for third-party bodily injury, including death and third-party property damage occurring on, in or about the Facilities (including environmental hazard insurance) in an amount at least equal to $100,000,000 per occurrence. Subject to Section 13.2(b), such coverage may be subject to deductibles or self-insured retentions up to an amount that is customarily carried by companies of similar size and engaged in business similar to Lessees and shall be otherwise acceptable to the Required Participants. The coverage required by this paragraph (a) may be provided in a combination of umbrella and excess liability policies.

(b) Property Insurance. Insurance against loss or damage covering the Equipment or any Facility or any portion thereof by reason of any Casualty in an amount as is carried by Persons owning and/or operating similar properties (subject to such deductibles and/or self-insurance in such minimum amounts as is carried by Persons owning and/or operating similar properties); provided, that at no time shall the amount of such coverage with respect to the Equipment be less than the Lease Balance.

(c) Workers' Compensation. Lessees shall, in the construction of any Modifications and the operation of the Equipment or any Facility, comply with the applicable workers' compensation laws and protect Lessor, Collateral Agent and the Participants against any liability under such laws.

(d) Other Insurance. Such other insurance, in each case as is generally carried by Lessees or their Affiliates for similar properties owned or leased by any of them or by other owners of similar properties, in such amounts and against such risks as are then customary for properties similar in use.

SECTION 13.2 Insurance Coverage. The insurance coverage required in Section 13.1 shall be written by reputable insurance companies that are financially sound and solvent and otherwise reasonably appropriate considering the amount and type of insurance being provided by such companies. Any insurance company selected by any Lessee shall be rated in A.M. Best's Insurance Guide or any successor thereto (or if there be none, an organization having a similar national reputation) and shall have a general policyholder rating of "A" (or comparable rating for a rating by an organization other than A.M. Best) and a financial rating of at least "VII" (or comparable rating for a rating by ISI or Standard & Poor's Corporation or another organization other than A.M. Best) or be otherwise acceptable to the Required Participants. In the case of liability insurance maintained by any Lessee, such insurance shall name Lessor (both in its individual capacity and as trustee), Collateral Agent (both individually and in its capacity as Collateral Agent) and each of the Participants, as additional insureds and, in the case of property insurance, shall name Collateral Agent as sole loss payee. Each policy referred to in Section 13.1 shall provide that: (i) it will not be canceled, materially modified or its limits reduced, or allowed to lapse without renewal, except after not less than thirty (30) days' prior written notice to Lessor and Collateral Agent; (ii) to the extent available on a commercially reasonable basis, the interests of Lessor, Collateral Agent and any Participant shall not be invalidated by any act or negligence of or breach of warranty or representation by any Lessee or any other Person having an interest in the Equipment; (iii) such insurance is primary with respect to any other insurance carried by or available to Lessor, Collateral Agent or any Participant; (iv) the insurer shall waive any right of subrogation, setoff, counterclaim, or other deduction, whether by attachment or otherwise, against Lessor, Collateral Agent or any Participant; (v) such policy shall contain a cross-liability clause providing for coverage of Lessor, Collateral Agent and each Participant, as if separate policies had been issued to each of them; and (vi) such policy shall provide that none of Lessor, Collateral Agent or any Participant shall have any obligation or liability for payment of any premiums, commissions, claims or assessments. Agent Lessee shall notify Lessor and Collateral Agent promptly of any policy cancellation, reduction in policy limits, or material modification or amendment.

SECTION 13.3 Delivery of Insurance Certificates. At the time any insurance policy of any Lessee is renewed (but in no event less frequently than once each year) or upon written request by Lessor following a Lease Event of Default, Agent Lessee shall deliver or cause to be delivered to Collateral Agent certificates of insurance evidencing that all insurance required by Sections 13.1 and 13.2 to be maintained is in effect.

SECTION 13.4 Insurance by Lessor, Collateral Agent or any Participant. Each of Lessor, Collateral Agent or any Participant may at its own expense carry insurance with respect to its interest in the Equipment provided that (i) Lessee's insurance is designated as primary and in no event excess or contributory to any insurance Lessor, Collateral Agent or any Participant may have in force which

would apply to a loss covered under such Lessee's insurance policy, (ii) each such insurance policy will not cause such Lessee's insurance required under this Article XIII to be subject to a coinsurance exception of any kind, and (iii) each such insurance policy shall contain a waiver of any right of subrogation, set-off, counterclaim, or other deduction, whether by attachment or otherwise, against such Lessee or any other Lease Obligor. Any insurance payments received from policies maintained by Lessor, Collateral Agent or any Participant shall be retained by Lessor, Collateral Agent or such Participant, as the case may be, without reducing or otherwise affecting any Lessee's obligations hereunder.

ARTICLE XIV
CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS

SECTION 14.1 Casualty. Upon the occurrence of a Casualty prior to or during the term of this Lease, Agent Lessee shall give Lessor and Collateral Agent prompt written notice thereof (a "Casualty Notice"). The Casualty Notice shall specify whether Lessees will:

(a) pay to Trustee, for the benefit of the Participants, the Casualty Amount of the Equipment suffering such Casualty (provided that if the Equipment suffering such Casualty is part of a System and, as a result of such Casualty, such System, taken as a whole, shall have suffered a Casualty, then Lessees shall pay to Trustee, for the benefit of the Participants, a Casualty Amount for such System), which payment (together with any Supplemental Rent (whether arising as a result of Section 9.7(d) of the Participation Agreement or otherwise) then due) shall be made no later than the later of (i) sixty (60) days after the occurrence of the Casualty or (ii) the next Payment Date occurring after such Casualty (the "Casualty Settlement Date"), provided that in any event the Casualty Settlement Date shall be no later than the last day of the Lease Term; or

(b) replace such Equipment with respect to which the Casualty has occurred pursuant to the following provisions of this Section 14.1;

provided, that upon the occurrence and during the continuance of a Default or Event of Default, Lessees shall be obligated, at the option of the Required Participants, to make the payments referred to in clause (a) above and shall not be entitled to exercise any right of replacement pursuant to clause (b).

If Lessees have elected, or are required, to pay the Casualty Amount pursuant to clause (a) above, Lessees shall continue to make all payments of Rent due under this Lease until and including the Casualty Settlement Date. Upon payment of the Casualty Amount in respect of any item of Equipment suffering a Casualty on such Casualty Settlement Date, the remaining scheduled payments of the principal portion of Rent shall be proportionately reduced by an amount equal to the product of the scheduled amount of such the principal portion of Rent payment (determined in each case prior to the receipt of such Casualty Amount), multiplied by the Affected Equipment Value Fraction of such item of Equipment suffering such Casualty, and the Lease Balance shall be appropriately adjusted to reflect such reduction in the remaining scheduled payments of the principal portion of Rent.

If Agent Lessee has given notice that it intends to replace the item of Equipment suffering such Casualty and such replacement is permitted under this Section 14.1, or if Lessees are required to replace the item of Equipment suffering such Casualty pursuant to the terms of this Lease, then Lessees shall make subject to this Lease, not more than sixty (60) days after the date of such Casualty Notice, a replacement for such item of Equipment meeting the suitability standards hereinafter set forth, provided, however, that such 60-day period shall be extended for a period equivalent to any period of delay caused by Force Majeure provided, further that such extension period shall not exceed thirty (30) days. To be suitable as replacement Equipment, an item must be of the same general type, year of construction (or a later year of construction), function, utility, state of repair and operating

condition (immediately preceding the Casualty assuming that such Equipment had been maintained in accordance with the terms of Section 9.1) as the Equipment suffering the Casualty, must have a value of not less than the Appraised Value (as set forth in the Appraisal of the Equipment suffering the Casualty for the date (the "Casualty Determination Date") set forth in the Appraisal closest to the date of such replacement) of the Equipment suffering the Casualty (except as otherwise provided in the immediately succeeding paragraph) and, if the Casualty pertained to a System, taken as a whole, then the value of such System, after giving effect to such replacement, shall not be less than the Appraised Value of such System (as set forth in the Appraisal of such System for the Casualty Determination Date) and be free and clear of any Liens other than Permitted Liens. Lessees shall cause a Bill of Sale and new Schedule I to the applicable Lease Supplement to be executed and delivered to Trustee and Collateral Agent (on behalf of the Participants) in order to subject such replacement item to this Lease, and upon such execution and delivery and the receipt by Trustee and Collateral Agent (on behalf of the Participants) of (i) evidence reasonably satisfactory to them of Lessees' compliance with the insurance provisions of Article XIII with respect to such replacement item, and (ii) an opinion of counsel to Lessees in form and substance reasonably satisfactory to Trustee, Collateral Agent and the Participants opining, among other things, to the effect that all appropriate filings, recordings and other acts have been taken to protect the right, title and interest of Trustee, on behalf of the Participants, in such replacement item and that no other filing, recording, deposit, or giving of notice with or to any Governmental Agency is necessary to protect such right, title and interest in such replacement item, such replacement item shall be deemed "Equipment" for all purposes hereof.

Notwithstanding the foregoing requirements for replacement of Equipment, if the replacement item has a Fair Market Value of less than the Appraised Value of the Equipment suffering the Casualty or, in the case of a Casualty pertaining to a System, of the System taken as a whole, but the conditions specified in the preceding paragraph would otherwise be satisfied, then Lessees may replace the Equipment or System, as applicable, suffering the Casualty with such item so long as the following conditions are satisfied: (i) Trustee, Collateral Agent and Lessees shall have received an appraisal of the replacement item (or System, as the case may be) from an Appraiser, which appraisal shall determine the Fair Market Value of the replacement item (or System, as applicable) as of the date of replacement, the end of the Base Term and the Renewal Term (except for such periods as have then already elapsed), (ii) Trustee shall have received, as Supplemental Rent, an amount equal to the excess of (A) the greater of (x) the Appraised Value of the replaced Equipment (or System, as applicable) as of the Casualty Determination Date as determined in the Appraisal delivered in connection with the Closing or (y) the Appraised Value of the replaced Equipment (or System, as applicable) as of the Casualty Determination Date (as determined by the appraisal delivered in connection with such replacement) over (B) the Appraised Value of the replacement item (or System, as applicable) as of the date of replacement (as determined by the appraisal delivered in connection with such replacement), (iii) all conditions set forth in the preceding paragraph shall have been satisfied (except for the requirement that the replacement item have a value of not less than the Appraised Value of the Equipment suffering the Casualty), and (iv) Lessees shall have delivered a new Schedule I to this Lease and a new Schedule I to the Lease Supplement covering the replaced Equipment (or System, as applicable) and such new Schedules shall be in form and substance reasonably satisfactory to Required Participants, such new Schedule I to the Lease Supplement shall describe the replacement Equipment (or System, as applicable) and the Fair Market Value thereof and such new Schedule I to this Lease shall reflect such adjustments to the installments of the principal portion of Rent and remaining Supplemental Rent as necessary so that (x) the Equipment (or System, as applicable) suffering the Casualty shall be treated as if the Casualty Amount with respect thereto had been paid pursuant to Section 14.1, and all reductions of the principal portion of Rent and Supplement Balance made pursuant to this Section 14.1, (y) the replacement item shall be treated as if it was purchased on such replacement date for a purchase price equal to the value set forth in the appraisal thereof with an amortization schedule (to be attached to the Lease Supplement) that reflects the decay curve as set

forth in such appraisal, and (z), if the Casualty pertained to a System, taken as a whole, such System after replacement of the applicable items of Equipment, shall have the same function and utility, taken as a whole. After giving effect to any replacement pursuant to the preceding sentence, the "Purchase Price" of the replacement Equipment shall be deemed to be the Fair Market Value thereof, as set forth for the date of such replacement in the appraisal delivered in connection with such replacement, for all purposes of this Lease and the other Operative Documents.

If Trustee has received the amount payable with respect to the Casualty and all other amounts due hereunder including amounts payable under Section 14.1(a) and no Default or Event of Default shall have occurred and be continuing, Lessee shall be entitled to receive from Trustee the proceeds of any recovery in respect of the Equipment from insurance or otherwise ("Casualty Recoveries"), and Trustee, subject to the rights of any insurer insuring the Equipment as provided herein, shall execute and deliver to Agent Lessee, or to its assignee or nominee, a quitclaim bill of sale (without representations or warranties except that the Equipment is free and clear of Lessor Liens) for the Equipment, and such other documents as may be required to release the Equipment from the terms of this Lease, in such form as may reasonably be requested by Agent Lessee. All fees, costs and expenses relating to a substitution as described herein shall be borne by Lessees. Except as otherwise provided in this Section 14.1, Lessees shall not be released from their obligations hereunder in the event of, and shall bear the risk of, any Casualty to any item of Equipment prior to or during the term of this Lease and thereafter until all of Lessees' obligations hereunder are fully performed.

Any payments (including insurance proceeds) in an amount less than $500,000 received at any time by Trustee or any Lessee from any Governmental Agency or other party with respect to any loss or damage to any item of Equipment not constituting a Casualty will be paid to or retained by Lessees to be applied directly in payment of repairs or for replacement of property in accordance with the provisions of Sections 8.1 and 9.1, if not already paid by Lessees, or if already paid by Lessees and no Default or Event of Default shall have occurred and be continuing, shall be applied to reimburse Lessees for such payment, and any balance remaining after compliance with said Sections with respect to such loss or damage shall be retained by Lessees; provided, that in the event that any Default or Event of Default so exists, Trustee shall hold such proceeds as collateral security for the obligations of Lessee under this Lease during the continuance of such Default or Event of Default.

EXCEPT FOR ANY OF THE FOLLOWING OCCURRING AS A RESULT OF THE EXISTENCE OR ENFORCEMENT OF A LESSORS LIEN, EACH LESSEE HEREBY ASSUMES ALL RISK OF LOSS, DAMAGE, THEFT, TAKING, DESTRUCTION, CONFISCATION, REQUISITION, COMMANDEERING, TAKING BY EMINENT DOMAIN OR CONDEMNATION, PARTIAL OR COMPLETE, OF OR TO EACH ITEM OF EQUIPMENT, HOWEVER CAUSED OR OCCASIONED, SUCH RISK TO BE BORNE BY LESSEES WITH RESPECT TO EACH ITEM OF EQUIPMENT FROM THE DATE OF THIS LEASE, AND CONTINUING UNTIL SUCH EQUIPMENT HAS BEEN RETURNED TO TRUSTEE IN ACCORDANCE WITH THE PROVISIONS HEREOF. EACH LESSEE AGREES THAT NO OCCURRENCE SPECIFIED IN THE PRECEDING SENTENCE SHALL IMPAIR, IN WHOLE OR IN PART, ANY OBLIGATION OF SUCH LESSEE UNDER THIS LEASE, INCLUDING THE OBLIGATION TO PAY RENT.

SECTION 14.2 Environmental Matters. At Lessees' sole cost and expense, Lessees shall promptly and diligently commence or caused to be commenced any response, clean up, remedial or other action necessary to remove, clean up or remediate any Environmental Violation with respect to the Equipment or any Facility.

SECTION 14.3 Notice of Environmental Matters. Agent Lessee shall promptly provide to Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Violation or any Release on, at, under or from any Facility or the Equipment, which violation or Release could require in excess of $500,000 in remediation costs, or which could result in the

imposition of criminal penalties upon Lessor, Collateral Agent or any Participant (any such violation, claim, action, proceeding or Release, a "Material Environmental Violation"). All such notices shall describe in reasonable detail the nature of the Material Environmental Violation, including any claims, actions or proceedings in respect thereof, and Lessees' proposed response thereto. In addition, Agent Lessee shall provide to Lessor, within ten (10) Business Days of receipt by any Lessee, copies of all written communications with any Governmental Agency relating to any such Material Environmental Violation. Agent Lessee shall also promptly provide such detailed reports of any such Material Environmental Violations as may reasonably be requested by Lessor or Collateral Agent. Upon completion of remedial action of such Material Environmental Violation by any Lessee, Agent Lessee shall cause to be prepared by an environmental consultant reasonably acceptable to Required Participants and Collateral Agent a report describing the Material Environmental Violation and the actions taken by Lessees in response to such Material Environmental Violation, and a statement by the consultant that the Material Environmental Violation has been remedied in compliance in all material respects with applicable Environmental Law. Each such Material Environmental Violation shall be remedied prior to the Expiration Date unless the Equipment has been purchased by Lessees in accordance with Article XV or Article XVIII. Nothing in this Article XIV shall reduce or limit Lessees' obligations elsewhere in this Lease or under the Participation Agreement.

ARTICLE XV
TERMINATION OF LEASE

SECTION 15.1 Termination upon Certain Events.

(a) If any of the following occurs with respect to the Equipment:

(i): a Significant Condemnation;
(ii): a Significant Casualty; or
(iii): an Environmental Violation, or the discovery of an Environmental Violation, the cost of remediation of which in the reasonable judgment of Required Participants would exceed $5,000,000;

then, in any such event, Lessor may elect to terminate the Lease by giving written notice (a "Termination Notice") to Agent Lessee that, as a consequence of such event, the Lease is to be terminated.

(b) Following Agent Lessee's receipt of the Termination Notice, Lessees shall be obligated to purchase Lessor's interest in all, but not less than all, of the Equipment on or prior to the next occurring Payment Date (but in no event any earlier than sixty (60) Business Days from the date Agent Lessee receives the applicable Termination Notice) by paying Lessor an amount equal to the Purchase Amount.

SECTION 15.2 Termination Procedures. On the date of the payment by Lessees of the Purchase Amount in accordance with Section 15.1(b) (such date, the "Termination Date"), this Lease shall terminate and, concurrent with Lessor's receipt of such payment:

(i): Lessor shall execute and deliver to Lessees (or to Lessees' designees) at Lessees' cost and expense one or more bills of sale of Lessor's interest in the Equipment and a release of Liens with respect to this Lease, in each case in recordable form to the extent applicable and otherwise in conformity with local custom and without representation and warranty except as to the absence of any Lessor Liens attributable to Lessor;
(ii): the Equipment shall be conveyed to Lessees (or to Lessees' designees) "AS IS" "WHERE IS" and in its then present physical condition; and

(iii): in the case of a termination pursuant to clause (i) or (ii) of Section 15.1(a), Lessor shall convey to Lessees any net proceeds (i.e., the gross amount received in connection with such Casualty or Condemnation less reasonable costs and expenses of claiming and collecting such amount, including all reasonable costs and expenses for which Lessor or any Participant is entitled to be reimbursed pursuant to the Operative Documents) with respect to the Casualty or Condemnation giving rise to the termination of this Lease theretofore received by Lessor or at the request of Lessees, to the extent actually received, such amounts shall be applied against sums due hereunder.

ARTICLE XVI
EVENTS OF DEFAULT

SECTION 16.1 Lease Events of Default. The occurrence of any one or more of the following events (whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall constitute a "Lease Event of Default":

(a) (i) any payment of Basic Rent shall not be paid within two (2) Business Days after the date when due; (ii) any payment of the Sale Recourse Amount or any amount due pursuant to Section 9.3 of the Participation Agreement or Section 18.2 or 20.1(i) hereof shall not be paid on the date due; or (iii) any payment of Supplemental Rent (other than Supplemental Rent described in the preceding clause (ii)) or any other payment payable by Lessees hereunder or under any other Operative Document (including any amount payable pursuant to Article VII to the extent not included in the preceding clause (ii)) shall not be paid within ten (10) Business Days after the date when due; or

(b) any representation or warranty of any Lease Obligor contained in any Operative Document to which such Person is a party or in any document furnished to any Creditor in connection therewith shall be incorrect or incomplete in any material respect when made, deemed made or reaffirmed, as the case may be; or

(c) a default shall occur in the performance or observance of any term, covenant, condition or agreement to be performed or observed on the part of any applicable Lease Obligor under Section 6.1, 13.1, 13.2, Article XVIII, XIX, XX or XXI hereof, or Section 6.1(p)(x) of the Participation Agreement in any respect that is materially adverse to the interests of the Creditors, or Section 6.1 of the Participation Agreement (other than Sections 6.1(a) through 6.1(n), 6.1(p), 6.1(w), 6.1(y), or 6.1(bb)); or

(d) a default shall occur in the performance or observance of any term, covenant, condition or agreement to be performed or observed on the part of any applicable Lease Obligor under Section 8.1, Section 9.1, Section 10.1 hereof or Section 6.1(q) of the Participation Agreement and such default shall continue unremedied for a period of ten (10) Business Days after the earlier of the date on which any Senior Officer of any Lease Obligor shall have Actual Knowledge of such default and the date on which Agent Lessee (on behalf of Lessees) and Mandalay (on behalf of Guarantors) receives written notice thereof from Trustee, Collateral Agent or any Participant; or

(e) any Lease Obligor shall default in the performance or observance of any other term, covenant, condition or agreement on its part to be performed or observed hereunder or under any Operative Document to which such Person is a party (and not constituting an Event of Default under any other clause of this Section 16.1), and such default shall continue unremedied for a period of thirty (30) days after the earlier of the date on which any Senior Officer of any Lease Obligor shall have Actual Knowledge of such default and the date on which Agent Lessee (on

behalf of Lessees) and Mandalay (on behalf of Guarantors) receives written notice thereof from any Creditor; or

(f) the insurance required by Article XIII of this Lease is not maintained and in place for any reason; or

(g) there shall occur a Change in Control; or

(h) Mandalay or any of its Significant Subsidiaries (i) fails to pay the principal, or any principal installment, of any present or future Indebtedness of $25,000,000 or more, or any guaranty of present or future Indebtedness of $25,000,000 or more, on its part to be paid, when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fails to perform or observe any other term, covenant or agreement on its part to be performed or observed, or suffers any event to occur, in connection with any present or future Indebtedness of $25,000,000 or more, or of any guaranty of present or future Indebtedness of $25,000,000 or more, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such indebtedness due before the date on which it otherwise would become due; or

(i) Any event occurs which gives the holder or holders of any Subordinated Debt (or an agent or trustee on its or their behalf) the right to declare such indebtedness due before the date on which it otherwise would become due, or the right to require the issuer thereof to redeem or purchase, or offer to redeem or purchase, all or any portion of any Subordinated Debt; or

(j) Any Operative Document, at any time after its execution and delivery and for any reason other than the agreement of the Participants or satisfaction in full of all the Obligations ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect which, in any such event in the reasonable opinion of the Requisite Participants, is materially adverse to the interests of the Participants; or any Lease Obligor denies in writing that it has any or further liability or obligation under any Operative Document, or purports in writing to revoke, terminate or rescind same; or

(k) A final judgment against any Lease Obligor or any of Mandalay's Significant Subsidiaries is entered for the payment of money in excess of $5,000,000 and, absent procurement of a stay of execution, such judgment remains unsatisfied for thirty calendar days after the date of entry of judgment, or in any event later than five days prior to the date of any proposed sale thereunder; or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within thirty calendar days after its issue or levy; or

(l) Any Lease Obligor or any of Mandalay's Significant Subsidiaries institutes or consents to the institution of any proceeding under a Debtor Relief Law relating to it or to all or any part of its property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under a Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of that Person and continues undismissed or unstayed for 60 calendar days; or

(m) Any Pension Plan maintained by Mandalay or any of its Restricted Subsidiaries is determined to have a material "accumulated funding deficiency" as that term is defined in Section 302 of ERISA and the result is a Material Adverse Effect; or

(n) The occurrence of a License Revocation with respect to a license issued by any Governmental Agency of the State of Nevada that continues for five calendar days; or

(o) Any Lessee shall have sold substantially all of its interest in any Facility without also purchasing or causing a third party to purchase the Equipment for the Purchase Amount; or

(p) Any Lessee shall violate its covenant set forth in Section 11.1(a) and Lessor shall lose title to its interest in the Equipment if any such Lien is not removed within thirty (30) days after the attachment thereof or such loss of title is not remedied within thirty (30) days after such loss occurs; or

(q) The occurrence of an Event of Default (as such term is or may hereafter be specifically defined in) any Mandalay Loan Agreement or Replacement Loan Agreement.

SECTION 16.2 Remedies. Upon the occurrence of any Lease Event of Default and at any time thereafter, Lessor may, so long as such Lease Event of Default is continuing, do one or more of the following as Lessor in its sole discretion shall determine, without limiting any other right or remedy Lessor may have on account of such Lease Event of Default, including the obligation of Lessees to purchase the Equipment as set forth in Section 18.2 and any rights and remedies set forth in any Lease Supplement:

(a) Lessor may, by notice to Agent Lessee, rescind or terminate this Lease as to any or all of the Equipment as of the date specified in such notice; provided, however, that no reletting or taking of possession of the Equipment (or any portion thereof) by Lessor shall be construed as an election on Lessor's part to terminate this Lease unless a written notice of such intention is given to Agent Lessee, and notwithstanding any reletting or taking of possession, Lessor may at any time thereafter elect to terminate this Lease for a continuing Lease Event of Default and no act or thing done by Lessor or any of its agents, representatives or employees and no agreement accepting a surrender or repossession of the Equipment shall be valid unless the same be made in writing and executed by Lessor;

(b) Lessor may demand that Lessees, and Lessees shall upon any such demand of Lessor, return the Equipment promptly to Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Article IX and Section 8.2, Section 9.1 and Section 14.2 hereof, and Lessees shall comply with the requirements of Section 21.1 hereof to the extent required by Lessor, as if the Equipment were being returned at the end of the Lease Term, and Lessor shall not be liable for the reimbursement of Lessees for any costs and expenses incurred by Lessees in connection therewith and without prejudice to any other remedy which Lessor may have for possession of the Equipment, and to the extent and in the manner permitted by Applicable Laws, Lessor may enter upon any of the Facilities (or such other applicable casino or gaming establishment) and take immediate possession (to the exclusion of Lessees, but subject to Gaming Laws) of the Equipment or any part thereof, by summary proceedings or otherwise, all without liability to Lessees for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to Lessor's other damages, Lessees shall be responsible for all reasonable costs and expenses incurred by Lessor and the Participants in connection with any reletting, including, without limitation, reasonable brokers' fees and all costs of any necessary alterations or repairs made by Lessor;

(c) Lessor may (i) subject to Applicable Laws, sell all or any part of the Equipment at public or private sale, as Lessor may determine, free and clear of any rights of Lessees (except that any Excess Sales Proceeds shall be payable to Lessees) with respect thereto, in which event Lessees' obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated; and (ii) if Lessor shall so elect, demand that Lessees pay to Lessor, and Lessees shall pay to Lessor, on the date of such sale, as damages for loss of bargain and not as a penalty (in

lieu of Basic Rent due for periods commencing on or after the Payment Date coinciding with such date of sale (or, if the sale date is not a Payment Date, the Payment Date next preceding the date of such sale)), an amount equal to (A) the excess, if any, of (1) the Lease Balance calculated as of such Payment Date (including all Rent due and unpaid to and including such Payment Date), over (2) the net proceeds of such sale (that is, after deducting all reasonable costs and expenses incurred by Lessor or any Participant(s) incident to such conveyance, including repossession costs, brokerage commissions, pro-rations, transfer taxes, fees and expenses for counsel, recording fees, if any, and any repair costs); plus (B) interest at the Applicable Default Rate on the foregoing amount from such Payment Date until the date of payment;

(d) Lessor may, at its option, elect not to terminate this Lease with respect to the Equipment and may continue to collect all Basic Rent, Supplemental Rent and all other amounts due Lessor (together with all costs of collection) and enforce Lessees' obligations under this Lease as and when the same become due, or are to be performed, and at the option of Lessor, upon any abandonment of the Equipment by Lessees or repossession of same by Lessor, Lessor may, in its sole and absolute discretion, elect not to terminate this Lease and may make the necessary repairs (and Lessees shall pay the reasonable costs of such repairs) in order to relet the Equipment, and relet the Equipment or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by Lessor from such reletting shall be applied to Lessees' obligations hereunder and the other Operative Documents in such order, proportion and priority as Lessor may elect in Lessor's sole and absolute discretion. If such rentals received from such reletting during any period are less than the Rent with respect to the Equipment to be paid during that period by Lessees hereunder, Lessees shall pay any deficiency, as calculated by Lessor, to Lessor on the next Payment Date;

(e) Unless the Equipment has been sold in its entirety, Lessor may, whether or not Lessor shall have exercised or shall thereafter at any time (subject to Lessee's prior performance in full under this clause) exercise any of its rights under clause (b), (c) or (d) with respect to the Equipment or any portion thereof, demand, by written notice to Agent Lessee specifying a date (a "Default Purchase Date") not earlier than ten (10) days after the date of such notice, that Lessees purchase, on such Default Purchase Date, the Equipment (or any remaining portions thereof) in the manner provided in Section 18.2 and in accordance with the provisions of Article XXI;

(f) Lessor may exercise any other right or remedy that may be available to it under Applicable Laws, including all rights, options and remedies of a secured party under the UCC (regardless of whether the UCC or a law similar thereto has been enacted in a jurisdiction wherein the rights or remedies are asserted), or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any period(s), and such suits shall not in any manner prejudice Lessor's right to collect any such damages for any subsequent period(s), or Lessor may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term;

(g) Lessor may retain and apply against the Lease Balance all sums which Lessor would, absent such Lease Event of Default, be required to pay to, or turn over to, Lessees pursuant to the terms of this Lease; or

(h) If a Lease Event of Default shall have occurred and be continuing, Lessor, as a matter of right and with notice to Agent Lessee, shall have the right to apply to any court and any applicable Gaming Board, in either case, having jurisdiction to appoint a receiver or receivers of the Equipment, and each Lessee hereby irrevocably consents to any such appointment. Any such

receiver(s) shall have all of the usual powers and duties of receivers in like or similar cases and all of the powers and duties of Lessor in case of entry, and shall continue as such and exercise such powers until the date of confirmation of the sale of the Equipment unless such receivership is sooner terminated.

To the maximum extent permitted by law, each Lessee hereby waives (x) the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshaling in the event of any sale of the Equipment or any interest therein and (y) any rights now or in the future conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Equipment in mitigation of the Lessor's damages or which may otherwise limit or modify any remedy of damages.

Lessor shall be entitled to enforce payment of the indebtedness and performance of the obligations secured hereby and to exercise all rights and powers under this instrument or under any of the other Operative Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the obligations secured hereby may now or hereafter be otherwise secured, whether by security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this Agreement nor its enforcement, shall prejudice or in any manner affect Lessor's right to realize upon or enforce any other security now or hereafter held by Lessor, it being agreed that Lessor shall be entitled to enforce this Agreement and any other security now or hereafter held by Lessor in such order and manner as Lessor may determine in its absolute discretion. No remedy herein conferred upon or reserved to Lessor is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Operative Documents to Lessor or to which it may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by Lessor.

SECTION 16.3 Waiver of Certain Rights. If this Lease shall be terminated pursuant to Section 16.2, each Lessee waives, to the fullest extent permitted by law, (a) any notice of the institution of legal proceedings to obtain possession; (b) any right of redemption or repossession; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting Lessor with respect to the election of remedies; and (d) any other rights which might otherwise limit or modify any of Lessor's rights or remedies under this Article XVI.

SECTION 16.4 Power of Attorney. Each Lessee unconditionally and irrevocably appoints Lessor as its true and lawful attorney-in-fact, with full power of substitution, to the extent permitted by Applicable Laws, in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery hereunder, if an Event of Default exists and is continuing, whether pursuant to foreclosure or power of sale or otherwise, and in connection therewith to execute and deliver all such bills of sale, assignments, releases (including releases of this Lease on the records of any Governmental Agency) and other proper instruments as Lessor may reasonably consider necessary or appropriate. Each Lessee ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. If requested by Lessor or any purchaser, Lessees shall ratify and confirm any such lawful sale, assignment, transfer or delivery by executing and delivering to Lessor or such purchaser, all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request.

SECTION 16.5 Grant of Security Interest. Each Lessee hereby grants a security interest to Lessor in all of the Equipment and the other Lessee Collateral and any proceeds thereof. This Lease shall constitute a security agreement within the meaning of the Uniform Commercial Code as enacted in the State of Nevada, and if a Lease Event of Default has occurred and is continuing, Lessor shall, in addition to all other rights available at law or equity, have all of the rights provided to a secured party under Article 9 of such Uniform Commercial Code.

ARTICLE XVII
RIGHT TO CURE

SECTION 17.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to), upon two (2) Business Days' prior notice to Agent Lessee, remedy any Lease Event of Default for the account and at the sole cost and expense of Lessees, including the failure by Lessee to maintain the insurance required by Article XIII, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of Lessees, enter upon any Facility and the Equipment for such purpose and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed to constitute a repossession of the Equipment. All reasonable out-of-pocket costs and expenses so incurred (including reasonable fees and expenses of counsel), together with interest thereon at the Applicable Default Rate from the date on which such sums or expenses are paid by Lessor, shall be paid by Lessees to Lessor on demand as Supplemental Rent.

ARTICLE XVIII
PURCHASE PROVISIONS

SECTION 18.1 Early and End of Term Purchase Options. Subject to the conditions contained herein and without limitation of Lessees' purchase obligation pursuant to Section 18.2, on (1) any Payment Date commencing with the fifth such Payment Date hereunder or (2) on any Business Day after the occurrence and during the continuance of a Lease Event of Default other than a Lease Event of Default arising as a result of an Insolvency Event, Lessees may, at their option, purchase all, but not less than all, of the Equipment (the "Early Termination Option") for a price equal to the Purchase Amount. Lessees' right to purchase the Equipment pursuant to this Section 18.1 shall terminate automatically and without notice upon the occurrence of a Lease Event of Default arising as a result of an Insolvency Event. In order to exercise its option to purchase the Equipment pursuant to this Section 18.1, Agent Lessee shall give to Lessor not less than fifteen (15) days' prior written notice of such election to exercise, which election shall be irrevocable when made. If Lessees exercises their option pursuant to this Section 18.1 then, upon Lessor's receipt of all amounts due in connection therewith, Lessor shall transfer to Lessees all of Lessor's right, title and interest in and to the Equipment in accordance with the procedures set forth in Section 21.1, such transfer to be effective as of the date specified in the Purchase Notice. Lessor agrees that it shall cooperate with Lessees in effecting any transfer to a designee of Lessees pursuant to this Section 18.1.

SECTION 18.2 Acceleration of Equipment Purchase.

(a) Lessees shall be obligated to purchase for an amount equal to the Purchase Amount Lessor's interest in the Equipment (notwithstanding any prior election to exercise its Early Termination Option pursuant to Section 18.1) (i) automatically and without notice upon the occurrence of a Lease Event of Default resulting from an Insolvency Event and (ii) as provided for in Section 16.2(e), upon written demand of Lessor upon the occurrence of any other Lease Event of Default. In addition, if Lessor has terminated this Lease pursuant to Section 16.2, Lessees shall, at the request of Lessor, for 180 days after delivery of the Equipment, maintain (or cause to be maintained) the Equipment in the condition required by Article 9.1, store the Equipment onsite without cost to any Creditor and keep all of the Equipment insured in accordance with Article XIII. This Section 18.2(a) shall survive termination of this Lease.

(b) Any purchase under this Section 18.2 shall be in accordance with the procedures for transfer set forth in Section 21.1.

ARTICLE XIX
END OF LEASE TERM OPTIONS

SECTION 19.1 End of Lease Term Options. At least two hundred-seventy (270) days before the scheduled expiration date of the Lease Term, Agent Lessee shall, by delivery of written notice to Lessor and Collateral Agent, exercise one of the following options:

(a) renew this Lease (the "Renewal Option") with respect to all, but not less than all, of the Equipment for one additional one-year renewal term (the "Renewal Term") on the terms and conditions set forth herein and in the other Operative Documents; provided, however, that such Renewal Option shall be available at the end of the Base Term only if the conditions set forth in Section 19.3 are satisfied; and provided, further, that the Renewal Option shall not be exercisable more than once; or

(b) purchase (or designate another to purchase) for cash for the Purchase Amount all, but not less than all, of the Equipment on the last day of the Lease Term (the "Purchase Option"); and if Lessees shall have elected to purchase the Equipment, Lessor shall, upon the payment to Lessor of the Purchase Amount then due and payable by Lessees under the Operative Documents, transfer all of Lessor's right, title and interest in and to the Equipment pursuant to Section 21.1; or

(c) sell the Equipment on behalf of Lessor for cash to a purchaser or purchasers not in any way affiliated with any Lease Obligor or any Affiliate of any Lease Obligor on the last day of the Lease Term (the "Sale Option"). Lessees' right to sell the Equipment pursuant to the Sale Option shall be conditioned upon and subject to the fulfillment by Lessees of each of the terms and conditions set forth in Article XX. In addition, all Subleases with respect to the Equipment shall have been terminated prior to Lessor's receipt of Lessees' election of the Sale Option. No Lessee shall enter into any additional Subleases or renew any Subleases with respect to the Equipment following Lessees' election of the Sale Option. Following Lessees' election of the Sale Option, Lessees shall not remove any Modifications or commence any voluntary Modifications without the consent of the Required Participants.

SECTION 19.2 Election of Options. To the extent that the Renewal Option is available, unless Lessees shall have affirmatively elected in accordance herewith the Purchase Option or the Sale Option, Lessees shall be deemed to have elected the Renewal Option. To the extent that the Renewal Option is not available for any reason, unless Lessees shall have (a) affirmatively elected the Sale Option within the time period provided for in Section 19.1 and (b) satisfied each of the requirements in Articles XX and XXI, Lessees shall be deemed to have elected the Purchase Option. In addition, the Sale Option shall automatically be revoked if there exists a Lease Default, Lease Event of Default, Significant Casualty or Significant Condemnation at any time after the Sale Option is properly elected or Lessees fail to comply with each of the terms and conditions set forth at Articles XX and XXI and Lessor shall be entitled to exercise all rights and remedies provided in Article XVI. Any election by Lessees pursuant to Section 19.1 shall be irrevocable at the time made.

SECTION 19.3 Renewal Option. The exercise of the Renewal Option by Lessees shall be subject to satisfaction of the following conditions:

(a) on the Expiration Date then in effect no Lease Event of Default or Lease Default shall have occurred and be continuing, and on the date Agent Lessee gives notice of the exercise of the Renewal Option, no Lease Event of Default or Lease Default shall have occurred and be continuing; and

(b) Lessees shall not have exercised the Sale Option or the Purchase Option.

Lessees' exercise of the Renewal Option shall be deemed to be a representation by Lessees that on both the Expiration Date then in effect and the date Lessees give notice of their exercise of the Renewal Option, no Lease Event of Default or Lease Default shall have occurred and be continuing.

ARTICLE XX
SALE OPTION

SECTION 20.1 Sale Option Procedures. Lessees' effective exercise and consummation of the Sale Option with respect to the Equipment shall be subject to the due and timely fulfillment of each of the following provisions as to the Equipment as of the dates set forth below:

(a) Agent Lessee shall have given to Lessor and the Participants written notice of Lessees' exercise of the Sale Option in accordance with Section 19.1.

(b) No Lease Event of Default or Lease Default shall be continuing on, nor shall any Lease Event of Default or Lease Default occur at any time following, the date of the exercise of the Sale Option (the period commencing on the date of Lessees' written notice to Lessor of Lessees' exercise of the Sale Option and ending on the last day of the Lease Term is referred to herein as the "Sale Option Period").

(c) On the date of Lessees' election of the Sale Option and upon surrender of the Equipment, (i) the Equipment shall be in the condition required by Section 9.1, (ii) Lessees shall have completed or caused to be completed all Modifications commenced prior to the Expiration Date, and Lessees shall have caused to be completed prior to the Expiration Date the repair and rebuilding of the affected portions of the Equipment suffering a Casualty or Condemnation, and (iii) there shall be no deferred maintenance in respect of the Equipment.

(d) Lessees shall, as nonexclusive agent for Lessor, use their best commercial efforts during the Sale Option Period to obtain the highest cash purchase price for the Equipment. Lessees shall be responsible for hiring brokers and making the Equipment available for inspection by prospective purchasers, and all marketing of the Equipment shall be at Lessees' expense. Lessees shall promptly upon request permit inspection of the Equipment and any Equipment records by Lessor, any Participant and any potential purchasers, and shall otherwise do all things necessary to sell and deliver possession of the Equipment to any purchaser.

(e) Lessees shall use their best commercial efforts to procure bids from one or more bona fide prospective purchasers to purchase the Equipment.

(f) Lessees shall submit all bids to Lessor and the Participants, and Lessor shall have the right to review the same and to submit any one or more bids. All bids shall be on an all-cash basis unless Lessor and the Required Participants shall otherwise agree in their sole discretion. In the event Lessees receive any bid, Lessees shall within five (5) Business Days after receipt thereof, and at least twenty (20) Business Days prior to the Expiration Date, certify to Lessor in writing the amount and terms of such bid, the name and address of the party (who shall not be any Lease Obligor or any Person with whom any Lease Obligor has an understanding or arrangement regarding the future use, possession or ownership of the Equipment, including any repurchase, sale/leaseback or similar arrangement), but who may be a Participant, any Affiliate thereof, or any Person contacted by any Participant (other than any Person referred to in the foregoing parenthetical clause) submitting such bid. If the Gross Proceeds to be paid to Lessor pursuant to clause (i) below from a proposed bid which Lessees desire to accept is less than the Lease Balance, Lessees' rights hereunder shall be further conditioned upon Lessor's receipt of an Appraisal described at Section 20.1(l) demonstrating that such proposed bid is for an amount at least equal to the Fair Market Value of the Equipment as established by such Appraisal.

(g) In connection with any such sale of Equipment, Lessees shall provide to the purchaser and assume all customary seller's indemnities, representations and warranties regarding title or ownership interests, absence of Liens (except Lessor Liens) and the condition of such Equipment. Lessees shall have obtained, at their cost and expense, all required governmental and regulatory consents and approvals and shall have made all filings as required by Applicable Laws in order to carry out and complete the transfer of the Equipment. As to Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by Lessor, other than the absence of Lessor Liens. Any agreement as to such sale shall be made subject to Lessor's rights hereunder and shall be in form and substance satisfactory to Lessor.

(h) Lessees shall pay or cause to be paid directly, and not from the sale proceeds, any prorations, credits, costs, impositions, taxes and expenses of or arising from the sale of the Equipment, whether incurred by Lessor, the Participants or Lessees, including the cost of all testing of the Equipment requested by Lessor or any potential purchaser, all environmental reports, appraisals, transfer taxes, Lessor's and the Participants' reasonable attorneys' fees, Lessees' attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer and document taxes and impositions.

(i) Whether or not a sale of the Equipment is completed on the Expiration Date pursuant to this Section 20.1, Lessees shall pay to Collateral Agent, on behalf of Lessor, on the Expiration Date (or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to (i) the Sale Option Recourse Amount with respect to the Equipment plus (ii) all accrued and unpaid Rent (including Supplemental Rent, if any) and all other amounts hereunder which have accrued or will accrue prior to or as of the Expiration Date for the Equipment, in the type of funds specified in Section 3.4 hereof.

(j) Lessees shall pay to Lessor on or prior to the Expiration Date the amounts, if any, required to be paid pursuant to Article IX of the Participation Agreement.

(k) If a sale of the Equipment is consummated on or prior to the Expiration Date, Lessees shall pay directly to Lessor the gross proceeds (the "Gross Proceeds") of such sale (i.e., without deduction for any marketing, closing or other costs, prorations or commissions, whether incurred by Lessees, Lessor or any of the Participants); provided, however, that if the sum of (x) the Gross Proceeds from such sale plus (y) the Sale Option Recourse Amount with respect to the Equipment received by Lessor pursuant to clause (i)(i) plus (z) amounts received by Lessor pursuant to Section 9.3 of the Participation Agreement exceeds the Lease Balance for the Equipment as of such date, then the excess shall be paid to Agent Lessee on such Expiration Date.

(l) If the bid that Lessees propose to accept and which Lessees submit pursuant to Section 20.1(f) is for an amount less than the Lease Balance, then Lessor shall promptly following the receipt of such bid, engage the Appraiser, at Lessees' expense, to determine (by appraisal methods reasonably satisfactory to the Required Participants) the Fair Market Value of the Equipment as of the Expiration Date. A copy of such appraisal shall be delivered to each of the Participants not later than five (5) Business Days prior to the Expiration Date. The Appraiser shall be instructed to assume that the Equipment is in the condition required by and have been maintained in accordance with this Lease. Any such appraisal shall be at the sole cost and expense of Lessees.

(m) Lessees shall assign, and shall cooperate with reasonable requests of the Lessor or the purchaser for obtaining, any and all licenses, permits, approvals and consents of any Governmental Agencies or other Persons that are or will be required to be obtained by the Lessor or such purchaser in connection with its use, operation, control or maintenance of the Equipment in compliance with Applicable Laws.

(n) Lessees shall deliver a report of an engineer selected by Lessor certifying that the Equipment and any Modifications are in the condition and state of repair and maintenance required by all Applicable Laws and the provisions of this Lease, together with such inspection reports, tests, and other data adequate to substantiate the conclusions reached in such report or, if the Equipment or any Modifications are not in such state of condition and repair, such engineer shall provide a list of any discrepancies in such state of condition and repair, and Lessees, at their sole cost and expense, shall cause any such discrepancies to be fully corrected prior to the Expiration Date.

(o) Notwithstanding anything contained in this Lease or any other Operative Document to the contrary, at all times during the Sales Option Period, the Equipment shall be in continuous commercial use and service by Lessees and/or one or more permitted sublessees unless any such Equipment shall have suffered a Casualty and Lessees shall then be in compliance with the requirements of Article XIV with respect to any such affected Equipment.

If one or more of the foregoing provisions shall not be fulfilled as of the date set forth above with respect to the Equipment, including Lessees' obligation at Section 20.1(f) to accept a bid for not less than the Fair Market Value of the Equipment, then Lessor shall declare by written notice to Agent Lessee the Sale Option to be null and void (whether or not it has been theretofore exercised by Lessees), in which event all of Lessees' rights under this Section 20.1 shall immediately terminate and Lessees shall be obligated to purchase the Equipment pursuant to Section 18.2 on the Expiration Date.

Except as expressly set forth herein, Lessees shall have no right, power or authority to bind Lessor in connection with any proposed sale of the Equipment.

SECTION 20.2 Certain Obligations Continue. During the Sale Option Period, the obligation of Lessees to pay Rent with respect to the Equipment (including the installment of Rent due on the Expiration Date for the Equipment) shall continue undiminished and in amounts not less than the installments of Basic Rent payable prior to Lessees' exercise of the Sale Option. Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of Lessees to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Article XX. If Lessees elect the Sale Option, Lessees shall nevertheless continue to use and operate the Equipment during the Sale Option Period in accordance with the requirements of Sections 8.1, 8.2 and 9.1.

SECTION 20.3 Failure to Sell Equipment. If Lessees shall exercise the Sale Option and shall fail to sell the Equipment and comply with its other obligations under Section 20.1 on or prior to the Expiration Date in accordance with and subject to the provisions of Section 20.1, then Lessees and Lessor hereby agree as follows:

(a) Immediately following the Expiration Date, (i) Lessees, at their sole cost and expense, shall return possession of the Equipment to Lessor at a place designated by Lessor in the continental United States of America in the condition required by this Lease (including each of the requirements and conditions set forth at Section 20.1(c) and (n)) and (ii) Lessees shall pay to Lessor all accrued and unpaid Rent due hereunder plus all other amounts then due and payable by Lessees under the Operative Documents. Thereafter, Lessees shall have no further obligation to pay Basic Rent or the remaining Lease Balance. Nothing in this Section 20.3 shall adversely affect any other rights Lessor may have to terminate this Lease pursuant to any other Section of this Lease or Lessor's right to pursue any remedy hereunder as a result of an Event of Default arising as a result of Lessees' failure to comply with the requirements set forth herein, including, pursuant to Article XVI and Article XVIII or Lessees' obligation to pay amounts arising under Article IX of the Participation Agreement. If the Expiration Date occurs on the last day of the Renewal Term, then following the Expiration Date or the effective date set forth in such notice, Lessor shall be

free to sell or lease the Equipment to any party at such reasonable times and for such amounts as Lessor deems commercially reasonable and appropriate.

(b) Lessor reserves all rights under this Lease and the other Operative Documents arising out of Lessees' breach of any provisions of this Lease (including this Article XX), whether occurring prior to, on or after the Expiration Date, including Lessees' breach of any of their obligations under this Article XX, including the right to sue Lessees for damages.

(c) To the greatest extent permitted by law, each Lessee hereby unconditionally and irrevocably waives, and releases Lessor from, any right to require Lessor to sell the Equipment in a timely manner or for any minimum purchase price or on any particular terms and conditions, each Lessee hereby agreeing that if Lessees shall elect the Sale Option, their ability to sell the Equipment on or prior to the Expiration Date and to cause any Person to submit a bid to Lessor pursuant to Section 20.1(f) shall constitute full and complete protection of Lessees' interest hereunder.

ARTICLE XXI
PROCEDURES RELATING TO PURCHASE OR SALE OPTION

SECTION 21.1 Provisions Relating to Conveyance of the Equipment Upon Purchase by Lessees, Sales or Certain Other Events. In connection with any termination of this Lease pursuant to the terms of Article XV, any purchase of the Equipment in accordance with Article XVIII, Section 19.1(b) or in connection with Lessees' obligations under Section 16.2(e) or any sale of the Equipment under Article XX, then, upon the date on which this Lease is to terminate with respect to the Equipment and upon tender by Lessees or the third party purchaser of the Equipment of the amounts set forth in Article XV, Sections 16.2(e), 18.1 or 18.2, Section 19.1(b), all amounts required under Article XX, as applicable:

(a) Lessor shall execute and deliver to Lessees (or to Lessees' designee or applicable third party purchaser) at Lessees' cost and expense bills of sale in respect of Lessor's interest in the Equipment without representation and warranty except as to the absence of any Lessor Liens attributable to Lessor.

(b) the Equipment shall be conveyed to Lessees "AS IS" and in its then present physical condition.

(c) Lessor shall execute and deliver to Lessees a statement of termination of this Lease to the extent such Operative Documents relate to the Equipment and shall use its best efforts to cause Collateral Agent to execute and deliver a release of any Liens in favor of Collateral Agent relating to the Equipment, releases of any Liens created by the Operative Documents attributable to Collateral Agent, and termination statements for any financing statements which are then of record naming Collateral Agent as the secured party.

(d) If Lessees properly exercise the Sale Option, then Lessees shall, on the Expiration Date if the Equipment is sold on such date and at its own cost, transfer possession of the Equipment to the independent purchaser(s) thereof in the case of a sale or otherwise to Lessor or its designee, in each case by surrendering the same into the possession of such purchaser or Lessor or its designee, as the case may be, free and clear of all Liens (other than Lessor Liens), in the condition required by Section 20.1(c), in compliance with Section 20.1(n) and in compliance with Applicable Laws and the provisions of this Lease, and Lessees shall execute and deliver to the purchaser, or to such Person as designated by Lessor, at Lessees' cost and expense, bills of sale in recordable form to the extent applicable and otherwise in conformity with local custom and free and clear of all Liens other than Lessor Liens; Lessees shall execute and deliver to such purchaser or Person an affidavit as to the absence of any Liens (other than Lessor Liens), together with an

instrument in recordable form to the extent required declaring this Lease to be terminated on the date of closing of the sale of the Equipment; Lessees shall, on and within a reasonable time before and up to one year after such sale or return of the Equipment, as applicable, cooperate in a reasonably commercial manner with Lessor and any purchaser of the Equipment (or any part thereof) in order to facilitate the purchase and use by such purchaser of such Equipment, which cooperation shall include the following, all of which Lessees shall do on or before such sale or return of the Equipment, as applicable, or as soon thereafter as is reasonably practicable: providing all books and records regarding the operation, maintenance and ownership of the Equipment and all know-how, data and technical information relating thereto, granting or assigning all licenses necessary for the operation and maintenance of the Equipment and cooperating reasonably in seeking and obtaining all necessary governmental approvals. The obligations of Lessees under this paragraph shall survive the expiration or termination of this Lease.

ARTICLE XXII
ACCEPTANCE OF SURRENDER

SECTION 22.1 Acceptance of Surrender. Except as otherwise specifically provided herein, no surrender to Lessor of this Lease or of the Equipment or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by Lessor and, prior to the payment or performance of all obligations under the Loan Agreement and termination of the Commitments, the Lenders, and no act by Lessor or the Lenders or any representative or agent of Lessor or the Lenders, other than a written acceptance, shall constitute an acceptance of any such surrender.

ARTICLE XXIII
NO MERGER OF TITLE

SECTION 23.1 No Merger of Title. There shall be no merger of this Lease or of the leasehold estate created hereby solely by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, (b) title to the Equipment, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate Person or (c) a beneficial interest in Lessor.

ARTICLE XXIV
INTENT OF THE PARTIES

SECTION 24.1 Nature of Transaction. It is the intention of the parties that:

(a) the Overall Transaction constitute an operating lease from Lessor to Lessees for purposes of Lessees' financial reporting, including under Financial Accounting Standards Board Statement No. 13;

(b) for purposes of federal and all state and local income, franchise, transfer and other taxes and for purposes of bankruptcy, insolvency, conservatorship and receivership law (including the substantive law upon which bankruptcy, conservatorship and insolvency and receivership proceedings are based):

(i): the Overall Transaction constitutes a financing by the Participants to Lessees and preserves beneficial ownership in the Equipment in Lessees, Lessees will be entitled to all tax benefits ordinarily available to owners of property similar to the Equipment for tax purposes and the obligations of Lessees to pay the Interest and Yield

components of Basic Rent shall be treated as payments of interest to the Participants and the obligation of Lessees to pay the principal component of Basic Rent shall be treated as payment of principal to the Participants, and the payment by Lessees of any amounts in respect of the Lease Balance shall be treated as payments of principal to the Participants;

(ii): in order to secure the obligations of Lessees now existing or hereafter arising under any of the Operative Documents, this Lease creates, and each Lessee hereby grants, conveys, assigns, mortgages and transfers a first priority (subject to Permitted Liens) security interest or a lien, as the case may be, in the Equipment and the other Lessee Collateral in favor of Lessor, and for the benefit of the Participants, and each Lessee does hereby irrevocably GRANT, BARGAIN, SELL, ALIEN, REMISE, RELEASE, CONFIRM AND CONVEY to Lessor, and for the benefit of the Participants, a Lien on all right, title and interest of such Lessee in and to the Equipment; and
(iii): the Security Documents create Liens and security interests in the Collateral in favor of Collateral Agent for the benefit of all of the Participants to secure Lessees' payment and performance of the Obligations.

Nevertheless, each Lessee acknowledges and agrees that none of Trustee, Collateral Agent, Arranger or any Participant has made any representations or warranties concerning the tax, accounting or legal characteristics of the Operative Documents or any aspect of the Overall Transaction and that such Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate.

(c) Specifically, but without limiting the generality of subsections (a) and (b) of this Section 24.1, Lessor and Lessees further intend and agree that, for the purpose of securing Lessees' obligations under the Operative Documents, (i) this Lease shall also be deemed to be a security agreement and financing statement within the meaning of Article 9 of the UCC; (ii) the conveyance provided for hereby shall be deemed to be a grant by Lessees to Lessor, for the benefit of the Participants, of a lien and security interest in all of Lessees' present and future right, title and interest in and to the Equipment, including but not limited to Lessees' leasehold estate therein and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property to secure such obligations under the Operative Documents, effective on the date hereof, to have and to hold such interests in the Equipment unto Lessor, for the benefit of the Participants; (iii) the possession by Lessor of notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be "possession by the secured party" for purposes of perfecting the security interest pursuant to the UCC; and (iv) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Lessees shall be deemed to have been given for the purpose of perfecting such security interest under Applicable Laws. Lessor and Lessees shall, to the extent consistent with this Lease, take such actions and execute, deliver, file and record such other documents, financing statements and other security agreements as may be necessary to ensure that, if this Lease were deemed to create a security interest in the Equipment in accordance with this Section, such security interest would be deemed to be a perfected security interest with priority over all Liens other than Permitted Liens, under Applicable Laws and will be maintained as such throughout the Lease Term.

ARTICLE XXV
MISCELLANEOUS

SECTION 25.1 Survival; Severability; Etc. Anything contained in this Lease to the contrary notwithstanding, all claims against and liabilities of Lessees or Lessor arising from events commencing prior to the expiration or earlier termination of this Lease shall survive such expiration or earlier termination. If any term or provision of this Lease or any application thereof shall be declared invalid or unenforceable, the remainder of this Lease and any other application of such term or provision shall not be affected thereby. If any right or option of Lessees provided in this Lease, including any right or option described in Articles XIV, XV, XVIII, XIX or XX, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the vesting of an interest in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States, Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the founder of the Standard Oil Company, known to be alive on the date of the execution, acknowledgment and delivery of this Lease.

SECTION 25.2 Amendments and Modifications. Subject to the requirements, restrictions and conditions set forth in the Participation Agreement, neither this Lease nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by Lessor and Agent Lessee.

SECTION 25.3 No Waiver. No failure by Lessor or any Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent default.

SECTION 25.4 Notices. All notices, demands, requests, consents, approvals and other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section 10.3 of the Participation Agreement.

SECTION 25.5 Successors and Assigns. All the terms and provisions of this Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

SECTION 25.6 Headings and Table of Contents. The headings and table of contents in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

SECTION 25.7 Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument.

SECTION 25.8 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEVADA. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS LEASE IS DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT ANY LIEN CREATED HEREBY AND THE

CREATION, PERFECTION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEVADA.

SECTION 25.9 HIGHEST LAWFUL RATE. All obligations of Lessees to make payments hereunder or in connection with any transaction contemplated hereby shall be subject to the provisions of Section 3.5 of the Participation Agreement.

SECTION 25.10 Original Lease. The single executed original of this Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt thereof of Collateral Agent, on or following the signature page thereof shall be the Original Executed Counterpart of this Lease (the "Original Executed Counterpart"). To the extent that this Lease constitutes chattel paper, as such term is defined in the UCC, no security interest in this Lease may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart.

SECTION 25.11 Limitations on Recourse. The parties hereto agree that, except as specifically set forth in this Lease or in any other Operative Document, Bank shall have no personal liability whatsoever to any Lessee or any Lessee's respective successors and assigns for any claim based on or in respect of this Lease or any of the other Operative Documents or arising in any way from the Overall Transaction; provided, however, that Bank shall be liable in its individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) for any Tax based on, with respect to or measured by any income, fees, commission, compensation or other amounts received by it as compensation for services (including for acting as Lessor) or otherwise under, or as contemplated by, the Operative Documents, (c) Lessor Liens on the Equipment which are attributable to it, (d) for its representations and warranties made in its individual capacity in the Participation Agreement or in any certificate or documents delivered pursuant thereto, (e) for its failure to perform any of its covenants and agreements set forth in the Participation Agreement or any other Operative Document, and (f) as otherwise expressly provided in the Operative Documents.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the parties have caused this Lease be duly executed and delivered as of the date first above written.

		MANDALAY RESORT GROUP, A NEVADA CORPORATION
		By:		/s/ GLENN W. SCHAEFFER
				Glenn W. Schaeffer President and Chief Financial Officer
		MANDALAY CORP., a Nevada corporation
		RAMPARTS, INC., a Nevada corporation
		NEW CASTLE CORP., a Nevada corporation
		CIRCUS CIRCUS CASINOS, INC., a Nevada corporation
		By		/s/ GLENN W. SCHAEFFER
				Glenn W. Schaeffer authorized signatory for each of the foregoing
		WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity, but solely as Trustee under the Trust Agreement dated as of December 21, 2001, as Lessor
		By		/s/ NANCY M. DAHL
				Nancy M. Dahl Vice President
		Payment Office:
		Bank: Wells Fargo Bank Northwest, N.A. ABA Routing #: 121000248 Account #: 051-09221-15 Account Name: Corporate Trust Services Attn: Corporate Trust/Krystal Bagshaw Reference: Mandalay Resort Group—38120

THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof.


WELLS FARGO BANK NEVADA, N.A., as Collateral Agent
By:		/s/ NANCY M. DAHL
		Nancy M. Dahl Trust Officer

EXHIBIT A
to Lease

DESCRIPTION OF THE FACILITIES

[Note: The following description is compiled from Mandalay's Public Disclosures]

MANDALAY BAY. This property, which opened March 2, 1999, is the first major resort on the Las Vegas Strip to greet visitors arriving in Las Vegas on I-15, the primary thoroughfare between Las Vegas and southern California. The 43-story South Seas themed hotel-casino resort has approximately 3,700 guest rooms (including the 424-room Four Seasons at Mandalay Bay) and a 135,000-square-foot casino which, as of October 31, 2001, featured 2,126 slot machines and 128 table games. Mandalay Bay's attractions include an 11-acre tropical lagoon featuring a sand-and-surf beach and a three-quarter-mile lazy river ride. The property features 13 restaurants, such as Charlie Palmer's Aureole, Wolfgang Puck's Trattoria Del Lupo, China Grill, rumjungle, Red Square and Border Grill, as well as a House of Blues nightclub and restaurant, including its signature Foundation Room (situated on Mandalay Bay's top floor). Additional features include a 125,000-square-foot convention facility and a 30,000-square-foot spa. Mandalay Bay offers multiple entertainment venues that include the Shark Reef at Mandalay Bay featuring sharks and rare sea predators, a 1,700-seat showroom, the rumjungle nightclub and a 12,000-seat special events arena that features additional entertainment and sporting events. Mandalay Bay was designed to attract a higher income customer than historically targeted. We have commenced construction of a three-level convention and meeting complex. The facility will be located on approximately 16.5 acres adjacent to the existing Mandalay Bay Conference Center and will include more than one million square feet of exhibit space. Upon completion of the project, Mandalay Bay will offer a total of almost two million gross square feet of conference and exhibit space. Following the events of September 11, construction on the facility was temporarily suspended. Mandalay intends to resume construction in the first quarter of its next fiscal year, with the facility currently expected to open in January 2003. The cost of the convention center, excluding land, preopening expenses and capitalized interest, is estimated to be $235 million. As of October 31, 2001, Mandalay and/or its Subsidiaries had incurred costs of $46.5 million related to this project.

LUXOR. This property is an Egyptian-themed hotel and casino complex situated on 64 acres of our Mandalay mile, between Mandalay Bay and Excalibur. The resort features a 30-story pyramid and two 22-story hotel towers. In total, the property has 4,404 guest rooms. The resort has a 120,000-square-foot casino which as of October 31, 2001, featured 2,019 slot machines and 103 table games. Luxor offers 20,000 square feet of convention space, a 20,000-square-foot spa, a 1,200-seat showroom that features the off-Broadway show "Blue Man Group," a nightclub, and food and entertainment venues on three different levels beneath a soaring hotel atrium. The pyramid's 2,454 guest rooms can be reached from the four corners of the building by state-of-the-art "inclinators" which travel at a 39-degree angle. Above the pyramid's casino, the property offers a special format motion base ride and an IMAX 2D/3D theater. Luxor's other public areas include a buffet with a seating capacity of approximately 800, seven restaurants including three gourmet restaurants, as well as a snack bar, a food court featuring national fast food franchises, several cocktail lounges and a variety of specialty shops.

EXCALIBUR. This property is a castle-themed hotel and casino complex situated on a 53-acre site immediately to the north of Luxor. Excalibur has 4,008 hotel rooms and a 110,000-square-foot casino which, as of October 31, 2001, featured 2,209 slot machines and 72 table games. Excalibur's other public areas include a Renaissance fair, a medieval village, an amphitheater with a seating capacity of nearly 1,000 where nightly mock jousting tournaments and costume drama are presented, two dynamic motion theaters, various artisans' booths and medieval games of skill. In addition, Excalibur has a

buffet restaurant with a seating capacity of approximately 1,300, seven themed restaurants, as well as several snack bars, cocktail lounges and a variety of specialty shops.

CIRCUS CIRCUS-LAS VEGAS. This property, which is our original resort, is a circus-themed hotel and casino complex situated on approximately 69 acres on the north end of the Las Vegas Strip. The property features 3,744 guest rooms and a 109,000-square-foot casino which, as of October 31, 2001, featured 2,229 slot machines and 78 table games. From a "Big Top" above the casino, Circus Circus-Las Vegas offers its guests a variety of circus acts performed daily, free of charge. A mezzanine area overlooking the casino has a circus midway with carnival-style games and an arcade that offers a variety of amusements and electronic games. Three specialty restaurants, a buffet with a seating capacity of approximately 1,200, two coffee shops, three fast food snack bars, several cocktail bars and a variety of gift shops and specialty shops are also available to the guests at Circus Circus-Las Vegas. The Adventuredome, covering approximately five acres, offers theme park entertainment that includes a high-speed, double-loop, double-corkscrew roller coaster, a coursing river flume ride on white-water rapids, an IMAX motion base ride, several rides and attractions designed for preschool age children, themed carnival-style midway games, a state-of-the-art arcade, a 65-foot waterfall, animated life-size dinosaurs, food kiosks and souvenir shops, all in a climate-controlled setting under a giant space-frame dome. Circus Circus-Las Vegas also offers accommodations for approximately 384 recreational vehicles at the property's Circusland Recreational Vehicle Park

EXHIBIT B
to Lease

LEASE SUPPLEMENT NO. ¹

⁽¹⁾Use this form if parties elect to have only one Lease Supplement rather than separate Lease Supplements for each Lessee.

LEASE SUPPLEMENT NO. dated this day of December, 2001 (this "Lease Supplement") among MANDALAY RESORT GROUP, a Nevada corporation ("Mandalay"), MANDALAY CORP., a Nevada corporation, RAMPARTS, INC., a Nevada corporation, NEW CASTLE CORP., a Nevada corporation, CIRCUS CIRCUS CASINOS, INC., a Nevada corporation, (each, a "Lessee" and collectively, "Lessees"), and WELLS FARGO BANK NORTHWEST, N.A., a national banking association ("Lessor"), not in its individual capacity, but solely in its capacity as Trustee under the Trust Agreement (Mandalay Trust No. 2001-A) dated as of December 21, 2001, among Trustee and the Certificate Holders named therein;

W I T N E S S E T H:

WHEREAS, Lessees and Trustee have heretofore entered into that certain Master Lease dated as of December 21, 2001 (as amended, restated, supplemented or otherwise modified from time to time, the "Lease"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings as specified in Appendix 1 to that certain Participation Agreement dated as of December 21, 2001, among Lessees; Mandalay and its Subsidiaries listed on Schedule I thereto, as Guarantors; Lessor, not in its individual capacity, except as expressly stated therein, but solely as Trustee; the Persons named on Schedule II thereto, as Certificate Holders; the Persons named on Schedule III thereto, as Lenders; and Wells Fargo Bank Nevada, N.A., not in its individual capacity, except as expressly stated therein, but solely as Collateral Agent (as from time to time amended, restated, supplemented or otherwise modified, the "Participation Agreement"); and the rules of interpretation set forth in Appendix 1 to the Participation Agreement shall apply to this Lease Supplement.

WHEREAS, the Lease provides for the execution and delivery of a Lease Supplement on any Advance Date substantially in the form hereof for the purpose of confirming the acceptance and lease of certain items of Equipment, and setting forth certain other matters, all as required pursuant to the Lease;

NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration, Trustee, on behalf of the Participants, and Lessees hereby agree as follows:

1. Inspection and Approval. Lessees hereby acknowledge and confirm that they have inspected and approved the Equipment set forth on Schedule I hereto for all purposes of the Lease and the other Operative Documents and, as between Trustee, on behalf of the Participants, and Lessees only (and without impairing in any manner any Lessee's rights and claims with respect to any vendor, manufacturer or supplier), such Equipment complies in all material respects with the specifications for such Equipment, is in good working order, repair, condition and appearance, and without defect therein with respect to design, manufacture, conditions, operation and fitness for use or in any other respect, whether or not discoverable by Lessees as of the date hereof. Lessees reaffirm, as to the items of Equipment set forth in Schedule I, each of the waivers, acknowledgments and agreements of Lessees set forth in the Lease.

2. Delivery and Acceptance. Trustee, on behalf of the Participants, hereby confirms delivery and lease to Lessees, and Lessees hereby confirm acceptance of delivery and lease from Trustee, on behalf

of the Participants, under the Lease as hereby supplemented, of each of the items of Equipment listed on Schedule I hereto.

3. Warranty. Each Lessee hereby represents and warrants that to its knowledge no event which would constitute a Casualty under the Lease has occurred with respect to the items of Equipment set forth on Schedule I hereto as of the date hereof. Each Lessee hereby reaffirms each of the representations and warranties set forth in the Lease as if made on the date hereof, except to the extent any such representation and warranty relates to an earlier date, which representation and warranty was true and correct in all material respects as of such earlier date. Without in any way limiting the foregoing, each Lessee represents and warrants to Trustee, on behalf of the Participants, that the Equipment set forth on Schedule I hereto which will be transferred by Lessee to Trustee, for the benefit of the Participants, is free and clear of all Liens.

4. Confirmation. Lessees hereby confirm their agreement, in accordance with the Lease, to pay Rent to Trustee, for the benefit of the Participants, for the Equipment leased hereunder. Nothing herein shall reduce any Lessee's obligation to make any payments required under the Lease, including those payments to be made on the last day of the Lease Term.

5. Incorporation into Lease. This Lease Supplement shall be construed in connection with and as part of the Lease, and all terms, conditions and covenants contained in the Lease, as supplemented by this Lease Supplement, shall be and remain in full force and effect and shall govern the Equipment described on Schedule I hereto.

6. References. Any and all notices, requests, certificates and other instruments executed and delivered concurrently with or after the execution and delivery of this Lease Supplement may refer to the "Master Lease, dated as of December 21, 2001", or may identify the Lease in any other respect without making specific reference to this Lease Supplement, but nevertheless all such references shall be deemed to include this Lease Supplement, unless the context shall otherwise require.

7. Joint and Several. Each acknowledgment, agreement, representation, warranty, covenant and obligation of each Lessee shall be joint and several as to all Lessees.

8. Counterparts. This Lease Supplement may be executed in any number of counterparts, each executed counterpart constituting an original but all together one and the same instrument.

9. Governing Law. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement to be duly executed and delivered on the day and year first above written.

		"Lessees":
		MANDALAY RESORT GROUP, as Lessee
		By:
				Name: Title:
		MANDALAY CORP., as Lessee
		By:
				Name: Title:
		RAMPARTS, INC., as Lessee
		By:
				Name: Title:
		NEW CASTLE CORP., as Lessee
		By:
				Name: Title:
		CIRCUS CIRCUS CASINOS, INC., as Lessee
		By:
				Name: Title:
		"Lessor":
		WELLS FARGO BANK NORTHWEST, N.A., not individually, but solely as Trustee under the Trust Agreement, and on behalf of the Participants
		By:
				Name: Title:

SCHEDULE I
TO LEASE SUPPLEMENT NO.

Items of Equipment/Systems transferred to Trustee, on behalf of the Participants, and leased to Lessees on December , 2001 (the "Advance Date") and subject to this Lease Supplement:

Descriptions of Item/Systems⁽²⁾		Identification Number, if any		Location		Purchase Price

⁽²⁾ In the case of any System, describe System generally and include specifics on component items of Equipment.

SCHEDULE II
TO LEASE SUPPLEMENT NO.

Advance Date:		December , 2001
Aggregate Purchase Price for all Items of Equipment/Systems described on Schedule I:		$

SCHEDULE I to Lease

AMORTIZATION COMPONENT OF BASIC RENT
[to follow]

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TABLE OF CONTENTS
ARTICLE I DEFINITIONS
ARTICLE II LEASE OF EQUIPMENT; LEASE TERM
ARTICLE III PAYMENT OF RENT
ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT
ARTICLE V NET LEASE, ETC.
ARTICLE VI SUBLEASES
ARTICLE VII LESSEE ACKNOWLEDGMENTS
ARTICLE VIII POSSESSION AND USE OF THE EQUIPMENT, ETC.
ARTICLE IX MAINTENANCE AND REPAIR; REPORTS; PERSONNEL
ARTICLE X MODIFICATIONS, SUBSTITUTIONS, ETC.
ARTICLE XI COVENANTS WITH RESPECT TO LIENS
ARTICLE XII PERMITTED CONTESTS
ARTICLE XIII INSURANCE
ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS
ARTICLE XV TERMINATION OF LEASE
ARTICLE XVI EVENTS OF DEFAULT
ARTICLE XVII RIGHT TO CURE
ARTICLE XVIII PURCHASE PROVISIONS
ARTICLE XIX END OF LEASE TERM OPTIONS
ARTICLE XX SALE OPTION
ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR SALE OPTION
ARTICLE XXII ACCEPTANCE OF SURRENDER
ARTICLE XXIII NO MERGER OF TITLE
ARTICLE XXIV INTENT OF THE PARTIES
ARTICLE XXV MISCELLANEOUS
LEASE SUPPLEMENT NO. ¹
W I T N E S S E T H
SCHEDULE I TO LEASE SUPPLEMENT NO.
SCHEDULE II TO LEASE SUPPLEMENT NO.
AMORTIZATION COMPONENT OF BASIC RENT [to follow]
EX-10.89 11 a2077883zex-10_89.htm EXHIBIT 10.89
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Exhibit 10.89

GUARANTY

dated as of December 21, 2001

MANDALAY RESORT GROUP
AND ITS SUBSIDIARIES NAMED HEREIN

in favor of

WELLS FARGO BANK NORTHWEST, N.A.

and

THE OTHER BENEFICIARIES
NAMED HEREIN

TABLE OF CONTENTS

		Page
SECTION 1.	Guaranty	1
SECTION 2.	Each Guarantor's Guaranteed Obligations Unconditional	2
SECTION 3.	Waiver and Agreement	3
SECTION 4.	Assignment	4
SECTION 5.	Waiver of Subrogation	5
SECTION 6.	Rights of the Beneficiaries	5
SECTION 7.	Term of Guaranty	5
SECTION 8.	Representations and Warranties of Guarantors	5
SECTION 9.	Notices, etc.	5
SECTION 10.	Severability of this Guaranty	6
SECTION 11.	Miscellaneous	6
SECTION 12.	Termination	6

GUARANTY

This GUARANTY ("Guaranty"), dated as of December 21, 2001, of MANDALAY RESORT GROUP, a Nevada corporation ("Mandalay"), MANDALAY CORP., a Nevada corporation, RAMPARTS, INC., a Nevada corporation, NEW CASTLE CORP., a Nevada corporation, CIRCUS CIRCUS CASINOS, INC., a Nevada corporation, COLORADO BELLE CORP., a Nevada corporation, EDGEWATER HOTEL CORPORATION, a Nevada corporation, and SLOTS-A-FUN, INC., a Nevada corporation (each, a "Guarantor" and collectively, "Guarantors"), is made in favor of WELLS FARGO BANK NORTHWEST, N.A., a national banking association, in both its individual capacity and as trustee (the "Trustee"), and the other Beneficiaries named below, pursuant to that certain Participation Agreement dated as of December 21, 2001, entered into among Trustee, as Lessor, Mandalay and the other Lessees party thereto, Guarantors, the Certificate Holders identified on Schedule II thereto, the Lenders identified on Schedule III thereto, and Wells Fargo Bank Nevada, N.A., as the Collateral Agent (as amended, modified, restated or supplemented from time to time, the "Participation Agreement"). Capitalized terms used and not otherwise defined in this Guaranty shall have the meaning assigned to such terms in Appendix 1 to the Participation Agreement.

WHEREAS, pursuant to the Master Lease and the Participation Agreement, Trustee has agreed, on behalf of the Trust and each Participant, to purchase the Equipment and lease such Equipment to Lessees pursuant to the Master Lease and one or more Lease Supplements executed and delivered in connection therewith;

WHEREAS, Trustee and the other Beneficiaries are unwilling to enter into the Participation Agreement and other Operative Documents unless Guarantors execute this Guaranty and, as an inducement to Trustee and such other Beneficiaries, Guarantors are entering into this Guaranty and the guaranty provided for herein;

AND WHEREAS, it is in the best interest of each Guarantor to execute this Guaranty inasmuch as such Guarantor will derive substantial direct and indirect benefits from the transactions contemplated by the Participation Agreement and other Operative Documents.

NOW, THEREFORE, each Guarantor covenants and agrees as follows:

SECTION 1. Guaranty. Each Guarantor jointly and severally hereby absolutely, unconditionally and irrevocably guarantees to Trustee (both individually and in its capacity as Trustee), the Collateral Agent, each Certificate Holder, each Lender and each other Indemnitee and their respective successors and permitted assigns (individually, a "Beneficiary" and, collectively, the "Beneficiaries") as their respective interests may appear: (a) the due, punctual and full payment by Lessees of all amounts (including, without limitation, amounts payable as damages in case of default and all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §362(a) and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. 502(b) and §506(b)) to be paid by Lessees in accordance with the Lease and/or any other Operative Document to which any Lessee is or is to be a party whether such obligations now exist or arise hereafter, as and when the same shall become due and payable in accordance with the terms thereof; and (b) the due, prompt and faithful performance when due of, and compliance with, all other obligations, covenants, terms, conditions and undertakings of each of the Lessees contained in the Participation Agreement, the Lease or any and all other Operative Documents to which any Lessee is or is to be a party in accordance with the terms thereof (such obligations referred to in clauses (a) and (b) above being hereinafter called the "Guaranteed Obligations"); provided, however, that such Guarantor shall be liable under this Guaranty only for the maximum amount of such liability that can be hereby incurred without rendering this Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount and, provided further that, in the case of any Guarantor that is also a Lessee, such Guarantor shall be liable under this Guaranty only for that

portion—if any—of the Guaranteed Obligations with respect to which such Guarantor is not liable as a Lessee.

Each Guarantor further agrees to pay any and all reasonable costs and expenses (including reasonable fees and disbursements of counsel) that may be paid or incurred by any Beneficiary in collecting any Guaranteed Obligations and/or in preserving or enforcing any rights under this Guaranty or under the Guaranteed Obligations.

The Guaranty is a guaranty of payment, performance and compliance and not of collectability, is in no way conditioned or contingent upon any attempt to collect from or enforce performance or compliance by any Lessee or upon any other event, contingency or circumstance whatsoever, and shall be binding upon and against each Guarantor without regard to the validity or enforceability of the Participation Agreement, the Lease or any other Operative Document.

If for any reason whatsoever any Lessee shall fail or be unable duly, punctually and fully to pay such amounts as and when the same shall become due and payable or to perform or comply with any such obligation, covenant, term, condition or undertaking when due to be performed or observed, in each case, in accordance with the Operative Documents, each applicable Guarantor will immediately pay or cause to be paid such amounts to the Person or Persons entitled to receive the same (according to their respective interests) under the terms of the Operative Documents, as appropriate, or perform or comply with any such obligation, covenant, term, condition or undertaking or cause the same to be performed or complied with, together with interest at the Applicable Default Rate on any amount due and owing from the date the same shall have become due and payable to the date of payment.

SECTION 2. Each Guarantor's Guaranteed Obligations Unconditional. The covenants and agreements of each Guarantor set forth in this Guaranty shall be primary obligations of such Guarantor, and such obligations shall be continuing, absolute and unconditional, shall not be subject to any counterclaim, setoff, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense (other than full and strict compliance by such Guarantor with its obligations hereunder or the full and strict compliance by Lessees of all of the Obligations), whether based upon any claim that any Lessee, such Guarantor, or any other Person may have against any Beneficiary or any other Person or otherwise, and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not such Guarantor or any Lessee shall have any knowledge or notice thereof) including, without limitation:

(a) Any amendment, modification, addition, deletion, supplement or renewal to or of or other change in the Guaranteed Obligations, the Lease or any other Operative Document or any of the agreements referred to in any thereof, or any other instrument or agreement applicable to any Operative Document or any of the parties to such agreements, or to the Equipment, or any assignment, mortgage or transfer thereof or of any interest therein, or any furnishing or acceptance of additional security for, guaranty of or right of offset with respect to, any of the Guaranteed Obligations; or the failure of any security or the failure of any Beneficiary to perfect or insure any interest in any collateral;

(b) Any failure, omission or delay on the part of any Lessee or any Beneficiary to conform or comply with any term of any instrument or agreement referred to in clause (a) above;

(c) Any waiver, consent, extension, indulgence, compromise, release or other action or inaction under or in respect of any instrument, agreement, guaranty, right of offset or security referred to in clause (a) above or any obligation or liability of any Lessee or any Beneficiary, or any exercise or non-exercise by any Beneficiary of any right, remedy, power or privilege under or in respect of any such instrument, agreement, guaranty, right of offset or security or any such obligation or liability;

(d) Any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding with respect to any Lessee, any Beneficiary or any other Person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding;

(e) Any limitation on the liability or obligations of any Person under the Participation Agreement, the Lease or any other Operative Document, the Guaranteed Obligations, any collateral security for the Guaranteed Obligations or any other guaranty of the Guaranteed Obligations or any discharge, termination, cancellation, frustration, irregularity, invalidity or unenforceability, in whole or in part, of any of the foregoing, or any other agreement, instrument, guaranty or security referred to in clause (a) above or any term of any thereof;

(f) Any defect in the title, compliance with specifications, condition, design, operation or fitness for use of, or any damage to or loss or destruction of, or any interruption or cessation in the use of any of the Equipment by any Lessee or any other Person for any reason whatsoever (including, without limitation, any governmental prohibition or restriction, condemnation, requisition, seizure or any other act on the part of any governmental or military authority, or any act of God or of the public enemy) regardless of the duration thereof (even though such duration would otherwise constitute a frustration of a lease), whether or not resulting from accident and whether or not without fault on the part of any Lessee or any other Person;

(g) Any merger or consolidation of any Lessee or any Guarantor into or with any other corporation or any sale, lease or transfer of any of the assets of any Lessee or any Guarantor to any other Person;

(h) Any change in the ownership of any shares of capital stock of any Lessee or any corporate change in any Lessee; or

(i) Any other occurrence or circumstance whatsoever, whether similar or dissimilar to the foregoing and any other circumstance that might otherwise constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or that might otherwise limit recourse against such Guarantor.

The obligations of each Guarantor set forth herein constitute the full recourse obligations of such Guarantor enforceable against it to the full extent of all its assets and properties, notwithstanding any provision in any agreements limiting the liability of any Beneficiary or any other Person.

SECTION 3. Waiver and Agreement. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Beneficiary upon this Guaranty or acceptance of this Guaranty, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guaranty. Each Guarantor unconditionally waives, to the extent permitted by law: (a) acceptance of this Guaranty and proof of reliance by any Beneficiary hereon; (b) notice of any of the matters referred to in Section 2 hereof, or any right to consent or assent to any thereof; (c) all notices that may be required by statute, rule of law or otherwise, now or hereafter in effect, to preserve intact any rights against such Guarantor, including without limitation, any demand, presentment, protest, proof or notice of nonpayment under the Lease or any other Operative Document, and notice of default or any failure on the part of any Lessee to perform and comply with any covenant, agreement, term or condition of the Lease or any other Operative Document; (d) except to the extent expressly provided in Section 4, any right to the enforcement, assertion or exercise against any Lessee of any right, power, privilege or remedy conferred in the Lease or any other Operative Document or otherwise; (e) any requirement of diligence on the part of any Person; (f) any requirement of any Beneficiary to take any action whatsoever, to exhaust any remedies or to mitigate the damages resulting from a default by any Person under the Lease or any other Operative Document;

(g) except as otherwise required by law, any notice of any sale, transfer or other disposition by any Person of any right under, title to or interest in the Lease, any other Operative Document or any of the Equipment; (h) any and all benefits under California Civil Code Sections 2787 through 2855 (inclusive), 2899 and 3433 and California Code of Civil Procedure Sections 580a, 580b, 580d and 726; (i) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety's or guarantor's obligation in proportion to the principal obligation; (j) any failure of any Beneficiary to file or enforce a claim in any bankruptcy or other proceeding with respect to any Person; (k) the election by any Beneficiary, in any bankruptcy proceeding of any Person, of the application or non-application of Section 1111(b)(2) of the Bankruptcy Code; (l) any extension of credit or the grant of any Lien under Section 364 of the Bankruptcy Code; (m) any use of cash collateral under Section 363 of the Bankruptcy Code; (n) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any Person; (o) the avoidance of any Lien in favor of any Beneficiary for any reason; (p) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against any Person, including any discharge of, or bar or stay against collecting, all or any of the Obligations (or any interest thereon) in or as a result of any such proceeding; (q) to the extent permitted in paragraph 40.495(4) of the Nevada Revised Statutes ("NRS"), the benefits of the one-action rule under NRS Section 40.430, or (r) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety, or that might otherwise limit recourse against any Guarantor.

Each Guarantor represents and warrants to the Beneficiaries that it has established adequate means of obtaining from Lessees and any sublessees on a continuing basis, financial and other information pertaining to the businesses, operations and condition (financial and otherwise) of each Lessee and any such sublessees and their properties, and such Guarantor now is and hereafter will be completely familiar with the businesses, operations and condition (financial and otherwise) of each Lessee and any sublessees and their properties. Each Guarantor hereby expressly waives and relinquishes any duty on the part of any Beneficiary (should any such duty exist) to disclose to such Guarantor any matter, fact or thing related to the businesses, operations or condition (financial or otherwise) of any Lessee or any sublessee or such party's properties, whether now known or hereafter known by any Beneficiary during the life of this Guaranty. With respect to any of the Guaranteed Obligations, no Beneficiary need inquire into the powers of any Lessee or any sublessee or the officers or employees acting or purporting to act on such party's behalf, and all Guaranteed Obligations made or created in good faith reliance upon the professed exercise of such power shall be guarantied hereby.

Each Guarantor agrees that this Guaranty shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Lessee is rescinded or must be otherwise restored by any of the Beneficiaries, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

Each Guarantor further agrees that, without limiting the generality of this Guaranty, if an Event of Default shall have occurred and be continuing and Trustee or its assignee is prevented by applicable law from exercising its remedies under the Lease, Trustee shall be entitled to receive hereunder from such Guarantor, upon demand therefor, the sums which would have otherwise been due from Lessees had such remedies been exercised.

SECTION 4. Assignment. Each Guarantor hereby acknowledges that it is contemplated that on the date hereof the Trustee will assign to the Collateral Agent for the benefit of the Lenders and the Certificate Holders all of the Trustee's rights, title and interest in and to this Guaranty in respect of any Guaranteed Obligations hereunder which are part of the Trust Estate and such Guarantor hereby agrees to such assignment.

SECTION 5. Waiver of Subrogation. Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against any Lessee that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under this Guaranty or any other Operative Document, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of the Beneficiaries against any Lessee or any Collateral which Trustee, on behalf of the Participants, now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from any Lessee, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights, in each case, unless and until the Guaranteed Obligations shall have been fully and finally paid in cash and, in the case of a bankruptcy or insolvency of any Lessee, one year has elapsed from the date the Guaranteed Obligations shall have been fully and finally paid in cash. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Guaranteed Obligations shall not have been fully and finally paid in cash, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for, the Beneficiaries, and shall forthwith be paid to Collateral Agent to be credited and applied pursuant to the terms of the Participation Agreement and the other Operative Documents. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Participation Agreement and the Lease and that the waiver set forth in this Section 5 is knowingly made in contemplation of such benefits. Each Guarantor hereby absolutely, unconditionally and irrevocably waives and agrees not to assert or take advantage of any defense based upon an election of remedies by Trustee and/or Collateral Agent, including an election to proceed by non-judicial rather than judicial foreclosure, which destroys or impairs any right of subrogation of such Guarantor or the right of such Guarantor to proceed against any Person for reimbursement or both.

SECTION 6. Rights of the Beneficiaries. This Guaranty is made for the benefit of, and shall be enforceable by, each Beneficiary as its interest may appear or by the Collateral Agent on behalf of the Beneficiaries.

SECTION 7. Term of Guaranty. This Guaranty and all guaranties, covenants and agreements of each Guarantor contained herein shall continue in full force and effect and shall not be discharged until such time as all the Guaranteed Obligations shall be fully and finally paid in full in cash and all the agreements of Lessees and such Guarantor hereunder and under the Participation Agreement, the Lease and the other Operative Documents shall have been duly performed. If, as a result of any bankruptcy, dissolution, reorganization, insolvency, arrangement or liquidation proceedings (or proceedings similar in purpose or effect) or if for any other reason, any payment received by any Beneficiary in respect of the Guaranteed Obligations is rescinded or must be returned by such Beneficiary, this Guaranty shall continue to be effective as if such payment had not been made and, in any event, as provided in the preceding sentence.

SECTION 8. Representations and Warranties of Guarantors. As of the date hereof and each Advance Date, each Guarantor represents and warrants to Trustee and each of the Beneficiaries that this Guaranty constitutes a legal, valid and binding agreement of such Guarantor and when executed and delivered in accordance with the terms hereof will constitute legal, valid and binding obligations of such Guarantor, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditor's rights generally and by general equitable principles.

SECTION 9. Notices, etc. All notices, demands, requests, consents, approvals and other instruments hereunder shall be in writing and shall be deemed to have been properly given if given as provided for in Section 10.5 of the Participation Agreement to Mandalay, as agent for each of the Guarantors (and each Guarantor hereby appoints Mandalay as its agent for purposes of receiving notices and other communications hereunder and under or with respect to any other Operative

Documents), at the address set forth below the signature of Guarantors on the signature page hereof, or such other address as may hereafter be furnished by any applicable Guarantor to all Beneficiaries in accordance with Section 10.5 of the Participation Agreement.

SECTION 10. Severability of this Guaranty. In case any provisions of this Guaranty or any application thereof shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions and statements and any other application thereof shall not in any way be affected or impaired thereby. To the extent permitted by law, each Guarantor hereby waives any provision of law that renders any term or provision hereof invalid or unenforceable in any respect.

SECTION 11. Miscellaneous. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Guaranty shall be binding upon each Guarantor and its successors, transferees and assigns and inure to the benefit of and be enforceable by the respective successors, permitted transferees, and permitted assigns of the Beneficiaries, provided, however, that no Guarantor may assign any of its obligations hereunder without the prior written consent of Trustee (acting at the direction of all Participants). The table of contents and headings in this Guaranty are for purposes of reference only, and shall not limit or otherwise affect the meaning hereof. This Guaranty constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

SECTION 12. Termination. Subject to the provisions of Section 7 above, this Guaranty shall remain in full force and effect until the date on which all Guaranteed Obligations of Guarantors hereunder shall have been satisfied by full and final payment in cash and performance in full.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed as of the date first above written.

MANDALAY RESORT GROUP, a Nevada corporation
By	/s/ Glenn W. Schaeffer President and Chief Financial Officer
MANDALAY CORP., a Nevada corporation
RAMPARTS, INC., a Nevada corporation
NEW CASTLE CORP., a Nevada corporation
CIRCUS CIRCUS CASINOS, INC., a Nevada corporation
COLORADO BELLE CORP., a Nevada corporation
EDGEWATER HOTEL CORPORATION, a Nevada corporation
SLOTS-A-FUN, INC., a Nevada corporation
By	/s/ Glenn W. Schaeffer, authorized signatory for each of the foregoing
Address for all Guarantors:
	c/o Mandalay Resort Group 3950 Las Vegas Boulevard South Las Vegas, Nevada 89229
	Attn:	Glenn W. Schaeffer President and Chief Financial Officer
	Phone:	(702) 632-6715
	Facsimile:	(702) 632-6708

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EX-10.90 12 a2077883zex-10_90.htm EXHIBIT 10.90
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Exhibit 10.90
Cessna

AIRCRAFT LEASE AGREEMENT
dated as of ("Agreement")

This Agreement (together with all supplements, annexes, exhibits and schedules hereto hereinafter referred to as the "Lease") is between General Electric Capital Corporation, with an office at 44 Old Ridgebury Road, Danbury, CT 06810-5105 (hereinafter called, together with its successors and assigns, if any, "Lessor") and Mandalay Resort Group, a Corporation organized and existing under the laws of the State of Nevada with its mailing address and chief place of business at 3950 Las Vegas Blvd. South, Las Vegas, NV 89119 (hereinafter called "Lessee").

1. LEASING:

(a) Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the aircraft, including the airframe, engines and all appurtenant equipment (together hereinafter the "Aircraft") described in Annex A.

(b) Lessor shall purchase the Aircraft from Lessee and lease it back to Lessee if on or before the Last Delivery Date (specified in Annex B) Lessor receives each of the following documents in form and substance satisfactory to Lessor: (i) a copy of this Lease executed by Lessee, (ii) a Bill of Sale in the form of Annex C and a Federal Aviation Administration ("FAA") Bill of Sale on AC Form 8050-2 transferring title of the Aircraft to Lessor; (iii) copies of insurance policies or, at Lessor's option, such other evidence of insurance which complies with the requirements of Section 9, (iv) evidence of an N number for the Aircraft together with an assignment of the rights thereto to Lessor; (v) evidence that the Aircraft has been duly certified as to type and airworthiness by the Federal Aviation Administration ("FAA"); (vi) evidence that Lessor's designated FAA escrow agent (which may be FAA counsel) has received in escrow the executed bill of sale and AC Form 8050-1 Aircraft Registration Form (except for the pink copy which shall be available to be placed on the Aircraft upon acceptance thereof), and an executed duplicate of this Lease all in proper form for filing with the FAA; (vii) resolution of Lessee authorizing this Lease in the form of Annex D; (viii) a completed inspection and/or survey with respect to the Aircraft in accordance with the requirements set forth in the Certificate of Acceptance; (ix) an opinion of FAA counsel, in form and substance acceptable to Lessor, concerning, among other things, the proper registration of the Aircraft and filing of documents, given the structure of the Lease; and (x) such other documents as Lessor may reasonably request. Lessor's obligation to lease the Aircraft hereunder is further conditioned upon (1) the cost to Lessor of the acquisition of the Aircraft not exceeding the Capitalized Lessor's Cost stated on Annex A; (2) upon delivery of the Aircraft, Lessee's execution and delivery to Lessor of a Certificate of Acceptance in the form of Annex E; and (3) filing of all necessary documents with, and the acceptance thereof by, the FAA.

2. TERM, RENT AND PAYMENT:

(a) The rent ("Rent") payable for the Aircraft and Lessee's right to use the Aircraft begins on the date Lessee signs the Certificate of Acceptance ("Commencement Date"). The term ("Term") of this Lease shall commence on the Commencement Date and shall continue, unless earlier terminated pursuant to the provisions of this Lease, until and including expiration date of the Basic Term and any extensions or renewal term, as applicable. If any Term is extended or renewed, the word "Term" shall be deemed to refer to all extended or renewal Terms, and all provisions of this Lease shall apply during any such extension or renewal Terms, except as may be otherwise specifically provided in writing.

(b) Lessee shall pay Rent to Lessor at its address stated above, except as otherwise directed by Lessor. Rent payments shall be in the amount, payable at such intervals and due in accordance with the provisions of Annex B. (Each payment of Rent is hereinafter referred to as a "Rent Payment".) If one or more Advance Rent is payable, such Advance Rent shall be (i) set forth on Annex B and due in accordance with the provisions of Annex B, and (ii) when received by Lessor, applied to the first Basic Term for Rent Payment as set forth on Annex B and the balance, if any, to the final Rent Payment(s), in inverse order of maturity. In no event shall any Advance Rent or any other Rent Payment be refunded to Lessee. If Rent is not paid within ten (10) days of its due date, Lessee agrees to pay a late charge of five cents ($.05) per dollar on, and in addition to, the amount of such Rent but not exceeding the lawful maximum, if any.

3. TAXES AND FEES:

(a) If permitted by law, Lessee shall report and pay promptly all taxes, fees and assessments due, imposed, assessed or levied against the Aircraft (or purchase, ownership, delivery, leasing, possession, use or operation thereof), this Agreement (or any rents or receipts hereunder), any Schedule, Lessor or Lessee, by any domestic or foreign governmental entity or taxing authority during or related to the term of this Agreement, including, without limitation, all license and registration fees, and all sales, use, personal property, excise, gross receipts, franchise, stamp, value added, custom duties, landing fees, airport charges, navigation service charges, route navigation charges or other taxes, imposts, duties and charges, together with any penalties, fines or interest thereon (collectively "Taxes"). Lessee shall promptly reimburse (on an after tax basis) Lessor for any Taxes charged to or assessed against Lessor. Lessee shall have no liability for Taxes imposed by the United States of America or any state or political subdivision thereof which are on or measured by the net income of Lessor. Lessee shall show Lessee as the owner of the Aircraft on all tax reports or returns (including but not limited to those relating to federal and state income tax, state and local sales and use tax and all personal property tax), and send Lessor a copy of each report or return and evidence of Lessees payment of Taxes upon request.

(b) Lessee's obligations, and Lessor's rights and privileges, contained in this Section 3 shall survive the expiration or other termination of this Agreement.

4. REPORTS: Lessee will provide Lessor with the following in writing within the time periods specified: (a) notice of any tax or other lien which attaches to the Aircraft and the full particulars of the tax or lien, within ten (10) days after Lessee becomes aware of the tax or lien, (b) Lessee's complete financial statements, certified by a recognized firm of certified public accountants, within one-hundred (100) days of the close of each fiscal year of Lessee, and any further financial information or reports, upon request; (c) notice to Lessor of the Aircraft's location, and the location of all information, logs, documents and records relating to the Aircraft and its use, maintenance and/or condition, immediately upon request; (d) notice to Lessor of the relocation of the Aircraft's primary hangar location, ten (10) days prior to any relocation; (e) notice of loss or damage to the Aircraft which would cost more than the lesser of (i) ten percent (10%) of the original Capitalized Lessor's Cost or (ii) two hundred fifty thousand and 00/100 dollars ($250,000.00) to repair or replace, within ten (10) days of such loss or damage; (f) notice of any accident involving the Aircraft causing personal injury or property damage, within ten (10) days of such accident; (g) copies of the insurance policies or other evidence of insurance required by the terms hereof, promptly upon request by Lessor; (h) copies of all information, logs, documents and records relating to the Aircraft and its use, maintenance and/or condition, within ten (10) days of such request; (i) on each annual anniversary of the Commencement Date of this Lease, a certificate of the authorized officer of Lessee stating that he has reviewed the activities of Lessee and that, to the best of his knowledge, there exists no Event of Default or event which with notice or lapse of time (or both) would become an Event of Default; (j) such information as may be required to enable Lessor to file any reports required by any governmental authority as a result

of Lessor's ownership of the Aircraft, promptly upon request of Lessor; (k) copies of any manufacturer's maintenance service program contract for the airframe or engines, promptly upon request by Lessor; (l) evidence of Lessee's compliance with FAA airworthiness directives and advisory circulars and of compliance with other maintenance provisions of Section 6 hereof and the return provisions of Section 10, promptly upon request of Lessor; and (m) such other reports as Lessor may reasonably request.

5. DELIVERY, REGISTRATION, USE AND OPERATION:

(a) The parties acknowledge that this is a sale/leaseback transaction, and Lessee is in possession of the Aircraft as of the Lease Commencement Date.

(b) Lessee, at its own cost and expense, shall cause the Aircraft to be duly registered under Title 49, Subtitle VII of the United States Code, as amended (the "FAA Act"), in the name of Lessee (or, if the FAA so requires, in the name of Lessor) with the security interest of Lessor as granted pursuant to Section 16 below duly indicated on such registration, and so long as any obligations remain owing to Lessor under this Lease, Lessee shall not impair such registration or cause it to be impaired, suspended or cancelled, nor register the Aircraft under the laws of any country except the United States of America.

(c) The possession, use and operation of the Aircraft shall be at the sole risk and expense of Lessee. Lessee acknowledges that it accepts full operational control of the Aircraft. Lessee agrees that the Aircraft will be used and operated in compliance with any and all statutes, laws, ordinances, regulations and standards or directives issued by any governmental agency applicable to the use or operation thereof, in compliance with any airworthiness certificate, license or registration relating to the Aircraft issued by any agency and in a manner that does not modify or impair any existing warranties on the Aircraft or any part thereof. Lessee will operate the Aircraft predominantly in the conduct of its business and will not use or operate, or permit the Aircraft to be used or operated, (i) in violation of any United States export control law, (ii) in a manner wherein the predominant use during any twelve month period is for a purpose other than transportation for Lessee, or in a manner, for any time period, such that Lessor or a third party shall be deemed to have "operational control" of the Aircraft, or (iii) for the carriage of persons or property for hire or the transport of mail or contraband. The Aircraft will, at all times be operated by duly qualified pilots holding at least a valid airline transport pilot certificate and instrument rating and any other certificate, rating, type rating or endorsement appropriate to the Aircraft, purpose of flight, condition of flight or as otherwise required by the Federal Aviation Regulations ("FAR"). The Aircraft's pilots shall be employed and/or paid and contracted for by Lessee, shall meet all recency of flight requirements and shall meet the requirements established and specified by the insurance policies required under this Lease and the FAA. The primary hangar location of the Aircraft shall be as stated in Annex B. Lessee shall not relocate the primary hangar location to a hangar location outside the United States. Lessor may examine and inspect the Aircraft, wherever located, on land and in flight, after giving Lessee reasonable prior notice.

(d) (i) AT ALL TIMES DURING THE TERM OF THE LEASE, LESSEE AGREES NOT TO OPERATE OR LOCATE THE AIRCRAFT, OR ALLOW THE AIRCRAFT TO BE OPERATED OR LOCATED, IN OR OVER ANY AREA OF GENERALLY KNOWN HOSTILITIES, ANY GEOGRAPHIC AREA WHICH IS NOT COVERED BY THE INSURANCE POLICIES REQUIRED BY THIS LEASE, OR ANY COUNTRY OR JURISDICTION FOR WHICH EXPORTS OR TRANSACTIONS ARE SUBJECT TO SPECIFIC RESTRICTIONS UNDER ANY UNITED STATES EXPORT OR OTHER LAW OR UNITED NATIONS SECURITY COUNCIL DIRECTIVE, INCLUDING WITHOUT LIMITATION, THE TRADING WITH THE ENEMY ACT, 50 U.S.C. APP. SECTIONS 1 ET SEQ., THE INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT, 50 U.S.C. APP. SECTIONS 1701 ET SEQ., AND THE EXPORT ADMINISTRATION ACT, 50 U.S.C. APP. SECTIONS 2401 ET SEQ. OR TO OTHERWISE

VIOLATE, OR PERMIT THE VIOLATION OF, SUCH LAWS OR DIRECTIVES. LESSEE ALSO AGREES TO PROHIBIT ANY NATIONAL OF SUCH RESTRICTED NATIONS FROM OPERATING THE AIRCRAFT.

(ii): Lessee represents and warrants that it does not on this date hold a contract or other obligation to operate the Aircraft in any of the following countries: Cuba, Iraq, Libya, Myanmar, North Korea, and the Federal Republic of Yugoslavia (Serbia and Montenegro).
(iii): The engines set forth on Annex A shall be used only on the airframe described in Annex A and shall only be removed for maintenance in accordance with the provisions of this Lease.

(e) Lessor shall not disturb Lessee's quiet enjoyment of the Aircraft during the Term of this Lease unless an Event of Default has occurred and is continuing under this Lease.

6. MAINTENANCE:

(a) Lessee agrees that the Aircraft will be maintained in compliance with any and all statutes, laws, ordinances, regulations and standards or directives issued by any governmental agency applicable to the maintenance thereof, in compliance with any airworthiness certificate, license or registration relating to the Aircraft issued by any agency and in a manner that does not modify or impair any existing warranties on the Aircraft or any part thereof.

(b) Lessee shall maintain, inspect, service, repair, overhaul and test the Aircraft (including each engine) in accordance with (i) all maintenance manuals initially furnished with the Aircraft, including any subsequent amendments or supplements to such manuals issued by the manufacturer from time to time, (ii) all mandatory or otherwise required "Service Bulletins" issued, supplied, or available by or through the manufacturer and/or the manufacturer of any engine or part with respect to the Aircraft, (iii) all airworthiness directives applicable to the Aircraft issued by the FAA or similar regulatory agency having jurisdictional authority, and causing compliance to such directives to be completed through corrective modification in lieu of operating manual restrictions, and (iv) all maintenance requirements set forth in Annex G hereto. Lessee shall maintain all records, logs and other materials required by the manufacturer for enforcement of any warranties or by the FAA. All maintenance procedures required hereby shall be undertaken and completed in accordance with the manufacturer's recommended procedures, and by properly trained, licensed, and certificated maintenance sources and maintenance personnel, so as to keep the Aircraft and each engine in as good operating condition as when delivered to Lessee hereunder, ordinary wear and tear excepted, and so as to keep the Aircraft in such operating condition as may be necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times under the FAA.

(c) Lessee agrees, at its own cost and expense, to (i) cause the Aircraft and each engine thereon to be kept numbered with the identification in serial number therefor as specified in Annex A; (ii) prominently display on the Aircraft that N number, and only that N number, specified in Annex A; and (iii) notify Lessor in writing thirty (30) days prior to making any change in the configuration (other than changes in configuration mandated by the FAA), appearance and coloring of the Aircraft from that in effect at the time the Aircraft is accepted by Lessee hereunder, and in the event of such change or modification of configuration, coloring or appearance, to restore, upon request of Lessor, the Aircraft to the configuration, coloring or appearance in effect on the Commencement Date or, at Lessor's option to pay to Lessor an amount equal to the reasonable cost of such restoration. Lessee will not place the Aircraft in operation or exercise any control or dominion over the same until such Aircraft marking has been placed thereon. Lessee will replace promptly any such Aircraft marking which may be removed, defaced or destroyed.

(each such accessory, device or equipment, an "Addition"), but only so long as such Addition (i) is ancillary to the Aircraft; (ii) is not required to render the Aircraft complete for its intended use by Lessee; (iii) does not alter or impair the originally intended function or use of the Aircraft; and (iv) can be readily removed without causing material damage. Title to each Addition which is not removed by Lessee prior to the return of the Aircraft to Lessor shall vest in Lessor upon such return. Lessee shall repair all damage to the Aircraft resulting from the installation or removal of any Addition so as to restore the Aircraft to its condition prior to installation, ordinary wear and tear excepted.

(e) Any alteration or modification (each an "Alteration") with respect to the Aircraft that may at any time during the Term of this Lease be required to comply with any applicable law or any governmental rule or regulation shall be made at the expense of Lessee. Any repair made by Lessee of or upon the Aircraft or replacement parts, including any replacement engine, installed thereon in the course of repairing or maintaining the Aircraft, or any Alteration required by law or any governmental rule or regulation, shall be deemed an accession, and title thereto shall be immediately vested in Lessor without cost or expense to Lessor.

(f) Except as permitted under this Section 6, Lessee will not modify the Aircraft or affix or remove any accessory to the Aircraft leased hereunder.

(g) If the Aircraft is to be operated at any time under Part 135 with the prior written consent of Lessor, then the Aircraft shall be maintained and operated in accordance with the applicable Part 135 standards.

7. LIENS, SUBLEASE AND ASSIGNMENT:

(a) LESSEE SHALL NOT SELL, TRANSFER, ASSIGN OR ENCUMBER THE AIRCRAFT, ANY ENGINE OR ANY PART THEREOF, LESSOR'S TITLE OR ITS RIGHTS UNDER THIS LEASE. LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, SUBLET, CHARTER OR PART WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE OR PART THEREOF OR ENTER INTO ANY INTERCHANGE AGREEMENT. Lessee shall not permit any engine to be used on any other Aircraft. Lessee shall keep the Aircraft each engine and any part thereof free and clear of all liens and encumbrances other than those which result from (i) the respective rights of Lessor and Lessee as herein provided; (ii) liens arising from the acts of Lessor; (iii) liens for taxes not yet due; and (iv) inchoate materialmen's, mechanics', workmen's, repairmen's, employees' or other like liens arising in the ordinary course of business of Lessee for sums not yet delinquent or being contested in good faith (and for the payment of which adequate assurances in Lessor's judgment have been provided Lessor).

(b) Lessor and any assignee of Lessor may assign this Lease, or any part hereof and/or the Aircraft. Lessee hereby waives and agrees not to assert against any such assignee, or assignee's assigns, any defense, set-off, recoupment claim or counterclaim which Lessee has or may at any time have against Lessor for any reason whatsoever.

8. LOSS, DAMAGE AND STIPULATED LOSS VALUE: Lessee hereby assumes and shall bear the entire risk of any loss, theft, confiscation, expropriation, requisition, damage to, or destruction of, the Aircraft, any engine or part thereof from any cause whatsoever, except to the extent such events directly result from the gross negligence or willful misconduct of Lessor. If for any reason the Aircraft, or any engine thereto becomes worn out, lost, stolen, confiscated, expropriated, requisitioned, destroyed, irreparably damaged, or unusable ("Casualty Occurrences") Lessee shall promptly (but in no event beyond 10 days from the date of such Casualty Occurrence) and fully notify Lessor in writing. If, in the opinion of Lessor, a Casualty Occurrence has occurred which affects only the engine(s) of the Aircraft, then Lessee, at its own cost and expense, shall replace such engine(s) with an engine(s) acceptable to Lessor and shall cause title to such engine(s) to be transferred to Lessor for lease to Lessee under this Lease. Upon transfer of title to Lessor of such engine(s), such engine(s) shall be

subject to the terms and conditions of this Lease, and Lessee shall execute whatever documents or filings Lessor deems necessary and appropriate in connection with the substitution of such replacement engine(s) for the original engine(s). If, in the opinion of Lessor, a Casualty Occurrence has occurred with respect to the Aircraft in its entirety, on the next Rent Payment Date after a Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (i) the Stipulated Loss Value as set forth in Annex F calculated as of the Rent Payment Date prior to such Casualty Occurrence; and (ii) all Rent and other amounts which are due under this Lease as of the Payment Date. Upon payment of all sums due hereunder, the Term of this Lease as to the Aircraft shall terminate.

9. INSURANCE: Lessee shall secure and maintain in effect at its own expense throughout the Term of the Lease insurance against such hazards and for such risks as Lessor may require. All such insurance shall be with companies satisfactory to Lessor. Without limiting the generality of the foregoing, Lessee shall maintain: (i) liability insurance covering public liability and property, cargo and sudden accidental pollution coverage, in amounts not less than fifty million (50,000,000) United States dollars for any single occurrence; (ii) all-risk aircraft hull and engine insurance (including, without limitation, with respect to engine or part thereof while removed from the aircraft and foreign object damage insurance) in an amount which is not less than the then Stipulated Loss Value; and (iii) confiscation, expropriation and war risk and allied perils (including, without limitation, terrorism) insurance and hijacking insurance in an amount which is (x) for physical damage, not less than the Stipulated Loss Value and (y) for liability coverage, not less than fifty million (50,000,000) United States dollars for any single occurrence. All insurance shall: (1) name Lessor as owner of the Aircraft and as loss payee and additional insured (without responsibility for premiums), (2) provide that any cancellation or substantial change in coverage shall not be effective as to the Lessor for thirty (30) days after receipt by Lessor of written notice from the insurer of such cancellation or change, (3) insure Lessor's interest regardless of any breach of warranty or other act or omission of Lessee, (4) include a severability of interest clause providing that such policy shall operate in the same manner as if there were a separate policy covering each insured, (5) waive any right of set-off against Lessee or Lessor, and any rights of subrogation against Lessor, and (6) be primary and not be subject to any offset by any other insurance carried by Lessor or Lessee. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and claim for and to receive payment of and to execute or endorse all documents, checks or drafts in connection with all policies of insurance in respect of the Aircraft. Lessor shall not act as Lessees attorney-in-fact unless Lessee is in default. Lessee shall pay any reasonable expenses of Lessor in adjusting or collecting insurance proceeds. Lessor may, at its option, apply proceeds of insurance, in whole or in part, to (A) repair the Aircraft, or repair or replace any part thereof, or (B) satisfy any obligation of Lessee to Lessor under this Lease. The foregoing notwithstanding, to the extent no Event of Default has occurred and is continuing, upon written notice from Lessee, Lessor shall follow Lessee's written direction regarding application of the proceeds of insurance, in whole or in part, to (A) repair the Aircraft, or repair or replace any part thereof, or (B) satisfy any obligation of Lessee to Lessor under this Lease; provided, however, that Lessor shall have no obligation to apply such insurance proceeds towards repair or replacement of the Aircraft or any part thereof, if Lessor determines, in its sole discretion, that any such repair or replacement is not capable of being completed before the expiration of the term of the Lease. If an Event of Default has occurred and is continuing, Lessee shall have no right to direct the application of any such insurance proceeds. Any surplus of such insurance proceeds, shall, to the extent no Event of Default has occurred and is continuing, be paid by Lessor to Lessee.

10. RETURN OF AIRCRAFT:

required to be maintained with respect to the Aircraft under this Lease or under the applicable rules and regulations of the FAA or the manufacturer's recommended maintenance program, along with a currently effective FAA airworthiness certificate. Lessee shall, upon request, assign to Lessor its rights under any manufacturer's maintenance service contract or extended warranty for the Aircraft, any engine or part thereof. The Aircraft shall be returned in the condition in which the Aircraft is required to be maintained pursuant to Section 6, but with all logos or other identifying marks of Lessee removed. Additionally, Lessee shall ensure that the Aircraft complies with all requirements and conditions set forth on Annex G hereto. Lessee shall pay for all costs to comply with this Section 10(a).

(b) Lessor shall arrange for the inspection of the Aircraft on the Return Date to determine if the Aircraft has been maintained and returned in accordance with the provisions of this Lease. Lessee shall be responsible for the cost of such inspection and shall pay Lessor such amount as additional Rent within ten (10) days of demand. If the results of such inspection indicate that the Aircraft, any engine thereto or part thereof, has not been maintained or returned in accordance with the provisions of this Lease, Lessee shall pay to Lessor within ten (10) days of demand, as liquidated damages, the estimated cost ("Estimated Cost") of servicing or repairing the Aircraft, engine or part. The Estimated Cost shall be determined by Lessor by obtaining two quotes for such service or repair work and taking their average. Lessee shall bear the cost, if any, incurred by Lessor in obtaining such quotes.

(c) If Lessee fails to return the Aircraft on the Return Date, Lessor shall be entitled to damages equal to the higher of (i) the Rent for the Aircraft, pro-rated on a per diem basis, for each day the Aircraft is retained beyond the Return Date; or (ii) the daily fair market rental for the Aircraft at the Return Date. Such damages for retention of the Aircraft after the Return Date shall not be interpreted as an extension or reinstatement of the Term.

(d) All of Lessor's rights contained in this Section shall survive the expiration or other termination of this Lease.

11. EVENTS OF DEFAULT AND REMEDIES:

(a) The term "Event of Default", wherever used herein, shall mean any of the following events under this Lease: (i) Lessee breaches its obligation to pay Rent or any other sum when due and fails to cure the breach within ten (10) days; or (ii) Lessee breaches any of its insurance obligations under Section 9; or (iii) Lessee breaches any of its other obligations and fails to cure that breach within thirty (30) days after written notice from Lessor to Lessee; or (iv) any representation or warranty made by Lessee in connection with this Lease shall be false or misleading in any material respect; or (v) Lessee or any guarantor or other obligor for any of the obligations hereunder (collectively "Guarantor") becomes insolvent or ceases to do business as a going concern; or (vi) a petition is filed by or against Lessee or any Guarantor under any bankruptcy, insolvency or similar laws and in the event of an involuntary petition, the petition is not dismissed within sixty (60) days of the filing date; or (vii) if Lessee or any Guarantor is a natural person, any death or incompetency of Lessee or such Guarantor; or (viii) there occurs an "Event of Default" under and as defined in any other agreement by and between Lessor and Lessee.

(iii) proceed by appropriate court action, either at law or in equity, to enforce the performance by Lessee of the applicable covenants of this Lease or to recover damages for breach hereof; (iv) by notice in writing terminate this Lease, whereupon all rights of Lessee to use of the Aircraft or any part thereof shall absolutely cease and terminate, and Lessee shall immediately return the Aircraft in accordance with Section 10, but Lessee shall remain liable as provided in Section 10; (v) request Lessee to return the Aircraft to a designated location in accordance with Section 10; (vi) peacefully enter the premises where the Aircraft may be and take possession of the Aircraft; (vii) sell or otherwise dispose of the Aircraft at private or public sale, in bulk or in parcels, with or without notice, and without having the Aircraft present at the place of sale; (viii) lease or keep idle all or part of the Aircraft; (ix) use Lessee's premises for storage pending lease or sale or for holding a sale without liability for rent or costs; (x) collect from Lessee all costs, charges and expenses, including reasonable legal fees and disbursements, incurred by Lessor by reason of the occurrence of any Event of Default or the exercise of Lessor's remedies with respect thereto; and/or (xi) declare any Event of Default under the terms of this Lease to be an "Event of Default" under and as defined in any other agreement between Lessor and Lessee.

(c) Lessor shall have the right to any proceeds of sale, lease or other disposition of the Aircraft, if any, and shall have the right to apply same in the following order of priorities: (i) to pay all of Lessor's costs, charges and expenses incurred in enforcing its rights under this Lease or in taking, removing, holding, repairing, selling, leasing or otherwise disposing of the Aircraft; then, (ii) to the extent not previously paid by Lessee, to pay Lessor all sums due from Lessee under this Lease; then (iii) to reimburse to Lessee any sums previously paid by Lessee as liquidated damages; and (iv) any surplus shall be paid to Lessee. Lessee shall pay any deficiency in (i) and (ii) immediately.

(d) The foregoing remedies are cumulative, and any or all thereof may be exercised instead of or in addition to each other or any remedies at law, in equity, or under statute Waiver of any Event of Default shall not be a waiver of any other or subsequent Event of Default.

12. NET LEASE:

Lessee is unconditionally obligated to pay all Rent and other amounts due for the entire Term of this Lease no matter what happens, even if the Aircraft is damaged or destroyed, if it is defective or if Lessee no longer can use it. Lessee is not entitled to reduce or set-off against Rent or other amounts due to Lessor or to anyone to whom Lessor assigns this Lease whether Lessee's claim arises out of this Lease, any statement by Lessor, Lessor's liability or any manufacturers liability, strict liability, negligence or otherwise.

13. INDEMNIFICATION:

(a) Lessee hereby agrees to indemnify Lessor, its agents, employees, successors and assigns (on an after tax basis) from and against any and all losses, damages, penalties, injuries, claims, actions and suits, including legal expenses, of whatsoever kind and nature arising out of or relating to the Aircraft or this Lease, except to the extent the losses, damages, penalties, injuries, claims, actions, suits or expenses result from Lessor's gross negligence or willful misconduct ("Claims"). This indemnity shall include, but is not limited to, Lessor's strict liability in tort and Claims arising out of (i) the selection, manufacture, purchase, acceptance or rejection of Aircraft, the ownership of the Aircraft during the term of this Lease, and the delivery, lease, possession, maintenance, uses, condition, return or operation of the Aircraft (including, without limitation, latent and other defects, whether or not discoverable by Lessor or Lessee and any claim for patent, trademark or copyright infringement or environmental damage) or (ii) the condition of the Aircraft sold or disposed of after use by Lessee, any sublessee or employees of Lessee. Lessee shall, upon request, defend any actions based on, or arising out of, any of the foregoing.

(b) All of Lessor's rights, privileges and indemnities contained in this Section 13 shall survive the expiration or other termination of this Lease, The rights, privileges and indemnities contained herein are expressly made for the benefit of, and shall be enforceable by Lessor, its successors and assigns.

14. DISCLAIMER:

LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE AIRCRAFT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES AND THAT LESSOR IS LEASING THE AIRCRAFT IN AN "AS IS" CONDITION. LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE AIRCRAFT LEASED UNDER THIS LEASE OR ANY COMPONENT THEREOF, OR ANY ENGINE INSTALLED THEREON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO CONDITION, AIRWORTHINESS, DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without limiting the foregoing, Lessor shall have no responsibility or liability to Lessee or any other person with respect to any of the following: (i) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Aircraft, any inadequacy thereof, any deficiency or defect (latent or otherwise) of the Aircraft, or any other circumstance in connection with the Aircraft; (ii) the use, operation or performance of the Aircraft or any risks relating to it; (iii) any interruption of service, loss of business or anticipated profits or consequential damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or replacement of the Aircraft. If, and so long as, no Event of Default continues under this Lease, Lessee shall be, and hereby is, authorized during the Term of this Lease to assert and enforce, at Lessee's sole cost and expense, in the name of and for the account of Lessor and/or Lessee, as their interests may appear, whatever claims and rights Lessor may have against any manufacturer or supplier of the Aircraft.

15. REPRESENTATIONS AND WARRANTIES OF LESSEE:

Lessee hereby represents, warrants and covenants to Lessor that on the date of this Lease and at all times during the Term of this Lease:

(a) Lessee has adequate power and capacity to enter into, and perform under, this Lease and all related documents (together, the "Documents") and is duly qualified to do business wherever necessary to carry on its present business and operations, including the jurisdiction(s) where the Aircraft is or is to have its primary hangar location.

(b) The Documents have been duly authorized, executed and delivered by Lessee and constitute valid, legal and binding agreements, enforceable in accordance with their terms, except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws.

(c) No approval, consent or withholding of objections is required from any governmental authority or entity with respect to the entry into or performance by Lessee of the Documents except such as have already been obtained.

(d) The entry into and performance by Lessee of the Documents will not: (i) violate any judgment, order, law or regulation applicable to Lessee or any provision of Lessee's Certificate of Incorporation or By-Laws; or (ii) result in any breach of, constitute an Event of Default under or result in the creation of any lien, charge, security interest or other encumbrance upon any Aircraft pursuant to any indenture, mortgage, deed of trust, bank loan or credit agreement or other instrument (other than this Lease) to which Lessee is a party.

(e) There are no suits or proceedings pending or, to the best knowledge of Lessee, threatened in court or before any commission, board or other administrative agency against or affecting Lessee, which will have a material adverse effect on the ability of Lessee to fulfill its obligations under this Lease.

(f) Each financial statement delivered to Lessor has been prepared in accordance with generally accepted accounting principles consistently applied, and since the date of the most recent financial statement, there has been no material adverse change.

(g) Lessee is and will be at all times validly existing and in good standing under the laws of the State of its incorporation (specified in the first sentence of this Lease) and Lessee is and will continue to be a "Citizen of the United States" within the meaning of Section 40102(15) of the FAA. Lessee shall not consolidate, reorganize or merge with any other corporation or entity (in any transaction pursuant to which Lessee is not the surviving entity),or sell, convey, transfer or lease all or substantially all of its property during the Term of this Lease.

(h) The chief executive office or chief place of business (as either of such terms is used in Article 9 of the Uniform Commercial Code) of Lessee is located at the address set forth above, and Lessee agrees to give Lessor prior written notice of any relocation of said chief executive office or chief place of business from its present location.

(i) A copy of this Lease, and a current and valid AC Form 8050-l will be kept on the Aircraft at all times during the Term of this Lease.

(j) Lessee has selected the Aircraft, manufacturer and vendor thereof, and all maintenance facilities required hereby.

(k) Lessee shall maintain all logs, books and records (including any computerized maintenance records) pertaining to the Aircraft and engines and their maintenance during the Term in accordance with FAA rules and regulations.

(l) Lessee shall not operate the Aircraft under Part 135 of the Federal Aviation Regulations without the prior written approval of Lessor.

(m) Lessee shall notify the local Flight Standards District Office of the FAA forty-eight (48) hours prior to the first flight of the Aircraft under this Lease.

(n) Throughout the Term of this Lease, Lessee will not use or operate and will not permit the Aircraft to be used or operated "predominately" outside the United States as that phrase is used in Section 168(g)(1)(A) of the Internal Revenue Code of 1986, as amended.

(o) Lessee agrees that it will at all times maintain the following:

(i): a ratio of EBITDA to Interest Expense of not less the ratio set forth below during the period corresponding thereto (to be measured as of the last day of any applicable fiscal quarter of Lessee):

Period		Ratio
At all times from the date hereof through 1/31/03		2.25 to 1.0
At all times thereafter through 1/31/04		2.50 to 1.0
At all times thereafter through 1/31/05		2.75 to 1.0
At all times thereafter		3.00 to 1.0; and

(ii): a ratio of EBITDA to Total Debt of not less the ratio set forth below during the period corresponding thereto (to be measured as of the last day of any applicable fiscal quarter of Lessee):

Period		Ratio
At all times from the date hereof through 4/30/02		5.25 to 1.0
At all times thereafter through 1/31/03		5.50 to 1.0
At all times thereafter through 4/30/03		5.00 to 1.0
At all times thereafter through 7/31/03		4.75 to 1.0
At all times thereafter through 7/31/04		4.50 to 1.0
At all times thereafter		4.25 to 1.0.

(iii): For purposes of this subsection (o), the capitalized terms used above, as well as any defined terms used therein or otherwise used to determine the above capitalized terms (herein, the "Financial Covenant Definitions"), shall have the meanings given in Lessee's Revolving Loan Agreement among Lessee, CITICORP USA, INC. and BANKERS TRUST COMPANY, as Syndication Agents, BANK OF AMERICA, N.A., as Administrative Agent and Issuing Lender, BANC OF AMERICA SECURITIES LLC and SALOMON SMITH BARNEY INC., as Lead Arrangers and Book Managers, and the Lenders, Co-Documentation Agents, Senior Managing Agents and Co-Agent named therein, dated as of August 22, 2001 (herein, the "Lessee Credit Agreement"), as such Lessee Credit Agreement is in effect on the date of this Lease. Lessee hereby agrees that no amendment to the Lessee Credit Agreement in respect of the Financial Covenant Definitions shall have any force or effect hereunder unless and until such proposed amendment is delivered in writing to Lessor and Lessor consents thereto in writing.

16. OWNERSHIP FOR TAX PURPOSES; GRANT OF SECURITY INTEREST; USURY SAVINGS:

(a) It is the intention of the parties that this Lease constitutes a financing by the Lessor to the Lessee and preserves the beneficial ownership of the Aircraft in Lessee. For income tax, sales tax and personal property tax purposes, the parties hereto agree that it is their mutual intention that Lessee shall be considered the owner of the Aircraft. Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Aircraft on its federal income tax return, (ii) not to take actions or positions inconsistent with such treatment on or with respect to its federal income tax return, and (iii) not to claim any tax benefits available to an owner of the Aircraft on or with respect o its federal income tax return. The foregoing undertakings by Lessor shall not be violated by Lessor's taking a tax position inconsistent with the forgoing sentence to the extent such a position is required by law or is taken through inadvertence so long as such inadvertent tax position is reversed by Lessor promptly upon its discovery. Lessor shall in no event be liable to Lessee if Lessee fails to secure any of the tax benefits available to the owner of the Aircraft.

(b) Lessee hereby grants Lessor a first security interest in the Aircraft and the Engines, together with all equipment, avionics, accessories, substitutes, or replacement parts, spare parts, appurtenances and appliances upon or within the Aircraft or attached thereto, whether or not furnished by the manufacturer or vendor of the Aircraft, including, without limitation, all logs, manuals, and records pertaining to the construction, modification, inspection, repair and operation of the Airframe, or any Engine or part, and all insurance and other proceeds and products of any of the foregoing, free and clear of all liens, security interests and/or encumbrances whatsoever.

(c) It is the intention of the parties hereto to comply with any applicable usury laws to the extent that this Lease is determined to be subject to such laws; accordingly, it is agreed that, notwithstanding any provision to the contrary in the Lease, in no event shall the Lease require the payment or permit the collection of interest in excess of the maximum amount permitted by applicable law. If any such excess interest is contracted for, charged or received under the Lease, or in the event that all of the principal balance shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under the Lease shall exceed the maximum amount of interest permitted by applicable law, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither Lessee nor any other person or entity now or hereafter liable for any payment required hereunder shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by applicable law, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal balance or refunded to Lessee, at the option of the Lessor, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under applicable law as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed that without limitation of the foregoing, all calculations of the rate of interest contracted for, charged or received under the Lease which are made for the purpose of determining whether such rate exceeds the maximum lawful contract rate, shall be made, to the extent permitted by applicable law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the indebtedness evidenced hereby, all interest at any time contracted for, charged or received from Lessee or otherwise by Lessor in connection with such indebtedness; provided, however, that if any applicable state law is amended or the law of the United States of America preempts any applicable state law, so that it becomes lawful for Lessor to receive a greater interest per annum rate than is presently allowed, the Lessee agrees that, on the effective date of such amendment or preemption, as the case may be, the lawful maximum hereunder shall be increased to the maximum interest per annum rate allowed by the amended state law or the law of the United States of America.

17. EARLY TERMINATION:

(a) On or after the First Termination Date (specified in Annex B), Lessee may, so long as no Event of Default exists, terminate this Lease as of a Rent Payment Date ("Termination Date"). Lessee must give Lessor at least thirty (30) days prior written notice of the termination.

(b) Lessee shall, and Lessor may, solicit cash bids for the Aircraft on an AS IS, WHERE IS basis without recourse to or warranty from Lessor, express or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall, (i) certify to Lessor any bids received by Lessee; and (ii) pay to Lessor, (a) the Termination Value (calculated as of the Termination Date) for the Aircraft; and (b) all Rent and other sums due and unpaid as of the Termination Date. Neither Lessee nor its agents shall be permitted to bid.

(c) If all amounts due hereunder have been paid on the Termination Date, Lessor shall (i) sell the Aircraft on an AS IS BASIS for cash to the highest bidder; and (ii) refund the proceeds of such sale (net of any related expenses) to Lessee. If such sale is not consummated, no termination shall occur and Lessor shall refund the Termination Value (less any expenses incurred by Lessor) to Lessee.

(d) Notwithstanding the foregoing, Lessor may elect by written notice, at any time prior to the Termination Date, not to sell the Aircraft. In that event, on the Termination Date Lessee shall: (i) return the Aircraft (in accordance with Section 10); and (ii) pay to Lessor all amounts required under Section 17(b) less the amount of the highest bid certified by Lessee to Lessor.

18. EARLY PURCHASE OPTION:

(a) On the Early Purchase Option Date (specified in Annex B), Lessee may, so long as no Event of Default exists and this Lease has not been earlier terminated, purchase the Aircraft on an AS IS BASIS for cash equal to the Early Purchase Option Price (specified on Annex B), plus all applicable sales taxes, if any. Lessee must give Lessor at least thirty (30) days, but not more than ninety (90) days, prior written notice of the purchase.

(b) If Lessee has elected to purchase the Aircraft, then on the Early Purchase Option Date Lessee shall pay to Lessor the Early Purchase Option Price (plus all applicable sales taxes) together with any rent and other sums due and unpaid on the Early Purchase Option Date.

19. END OF LEASE OPTIONS AND OBLIGATIONS:

(a) At the end of the Basic Term, so long as this Agreement has not been earlier terminated, Lessee shall exercise one of the following options:

(1) Renewal Option: Renew the Term of the Lease for an additional term of twelve (12) months (the "First Renewal Term") at the applicable Renewal Term Rent amount, to be paid in arrears on the same day of each month on which the Basic Term Rent was paid; OR

(2) Purchase or Return: Upon written notice delivered to Lessor at least 180 days but no more than 270 days prior to the Basic Term expiration date, and so long as there exists no Event of Default, Lessee shall have the option to (A) purchase the Aircraft on an AS IS BASIS, for a cash price equal to the applicable Estimated Residual Value (specified on Schedule 2 to Annex B), plus applicable taxes, or (B) subject to the terms and conditions set out in Section 19(d) below, return the Aircraft to Lessor. If Lessee elects to purchase the Aircraft, then on the Basic Term expiration date, Lessee shall pay to Lessor the applicable Estimated Residual Value (specified on Schedule 2 to Annex B) (plus applicable taxes) and all other sums due and unpaid on such date (including but not limited to the last scheduled payment of Basic Term Rent). If all of the terms and conditions of this paragraph are not fulfilled, this Lease shall continue in full force and effect as if the Renewal Option had been elected, and Lessee shall continue to be liable for all obligations thereunder, including, without limitation, the obligation to continue paying rent.

(b) At the end of the First Renewal Term, so long as this Agreement has not been earlier terminated, Lessee shall exercise one of the following options:

(1) Renewal Option: Renew the Term of the Lease for an additional term of twelve (12) months (the "Second Renewal Term") at the applicable Renewal Term Rent amount, to be paid in arrears on the same day of each month on which the Basic Term Rent was paid; OR

(2) Purchase or Return: Upon written notice delivered to Lessor at least 180 days but no more than 270 days prior to the First Renewal Term expiration date, and so long as there exists no Event of Default, Lessee shall have the option to (A) purchase the Aircraft on an AS IS BASIS, for a cash price equal to the applicable Estimated Residual Value (specified on Schedule 2 to Annex B), plus applicable taxes, or (B) subject to the terms and conditions set out in Section 19(d) below, return the Aircraft to Lessor. If Lessee elects to purchase the Aircraft, then on the First Renewal Term expiration date, Lessee shall pay to Lessor the applicable Estimated Residual Value (specified on Schedule 2 to Annex B) (plus applicable taxes) and all other sums due and unpaid on such date (including but not limited to the last scheduled payment of First

Renewal Term Rent). If all of the terms and conditions of this paragraph are not fulfilled, this Lease shall continue in full force and effect as if the Renewal Option had been elected, and Lessee shall continue to be liable for all obligations thereunder, including, without limitation, the obligation to continue paying rent.

(c) At the end of the Second Renewal Term, so long as this Agreement has not been earlier terminated, Lessee shall exercise one of the following options:

(1) Extension Option: Renew the Term of the Lease for an additional term of twelve (12) months (the "Extension Term") at a monthly rental amount to be paid in arrears on the same day of each month on which the Basic Term Rent was paid, and calculated as the product of (i) the Capitalized Lessor's Cost, times (ii) a lease rate factor calculated by Lessor, which when so multiplied times the Capitalized Lessor's Cost, will result in a product that is equal to the amount necessary to fully repay to Lessor any Unamortized Principal Balance (as specified on the Amortization Table attached as Schedule 1 to Annex B) (determined as of the Second Renewal Term expiration date) together with interest thereon at the Extension Term Interest Rate (specified on Annex B), in twelve (12) equal monthly installments. At the end of the Extension Term, Lessee shall purchase all, but not less than all, of the Aircraft for One Dollar ($1.00) cash, together with all rent and other sums then due on such date, plus all taxes and charges upon transfer and all other reasonable and documented expenses incurred by Lessor in connection with such transfer. Upon satisfaction of the foregoing conditions, Lessor will transfer, on an AS IS BASIS, all of Lessor's interest in the Aircraft; OR

(2) Purchase or Return: Upon written notice delivered to Lessor at least 180 days but no more than 270 days prior to the Second Renewal Term expiration date, and so long as there exists no Event of Default, Lessee shall have the option to (A) purchase the Aircraft on an AS IS BASIS, for a cash price equal to the applicable Estimated Residual Value (specified on Schedule 2 to Annex B), plus applicable taxes, or (B) subject to the terms and conditions set out in Section 19(d) below, return the Aircraft to Lessor. If Lessee elects to purchase the Aircraft, then on the Second Renewal Term expiration date, Lessee shall pay to Lessor the applicable Estimated Residual Value (specified on Schedule 2 to Annex B) (plus applicable taxes) and all other sums due and unpaid on such date (including but not limited to the last scheduled payment of Second Renewal Term Rent). If all of the terms and conditions of this paragraph are not fulfilled, this Lease shall continue in full force and effect as if the Extension Option had been elected, and Lessee shall continue to be liable for all obligations thereunder, including, without limitation, the obligation to continue paying rent.

(d) If at the expiration of the Basic Term, the First Renewal Term or the Second Renewal Term, as the case may be, Lessee elects to return the Aircraft to Lessor, then Lessee shall immediately return the Aircraft to Lessor in the condition and manner required by Section 10 and otherwise under this Lease and pay to Lessor in cash an amount equal to the applicable Estimated Residual Value (specified on Schedule 2 to Annex B), whereupon Lessee and Lessor shall arrange for the commercially reasonable sale, scrap or other disposition of the Aircraft on an AS IS BASIS. Upon such sale, scrap or other disposition of the Aircraft and Lessor's receipt of the Realized Value (as defined below) in available funds, and provided there exists no Event of Default, Lessor will pay to Lessee the greater of (i) the applicable Lessor's Residual Risk Amount (specified on Schedule 2 to Annex B) less remarketing costs, or (ii) the Realized Value. As used herein, "Realized Value" means the net cash proceeds realized by Lessor from sale, scrap or other disposition of the Aircraft after deduction of (x) expenses of such sale, if any, and (y) all sums due under the Lease as of the Basic Term expiration date, the First Renewal Term expiration date, or the Second Renewal Term expiration date, as the case may be, that remain unpaid as of the date of the sale.

20. EXCHANGE OPTION.

(a) SO LONG AS NO EVENT OF DEFAULT EXISTS AND THE LEASE HAS NOT BEEN EARLIER TERMINATED, AND SUBJECT TO THE CONDITIONS SET FORTH IN SUBSECTION (b) BELOW, Lessee may, as of any rental payment date during the Basic Term of the Lease, upon at least ninety (90) days prior written notice (the "Notice") to Lessor, elect to exchange the Aircraft (the "Old Aircraft") for another Aircraft (the "New Aircraft"), by terminating the Lease and entering into a new lease (the "New Lease") with respect to the New Aircraft. The Notice shall be sent to the attention of Lessor's Asset Management Organization, 44 Old Ridgebury Road, Danbury, CT 06810-5105.

(b) Lessor's obligation to purchase the New Aircraft from the manufacturer or supplier thereof (the "Supplier") or from Lessee (if Lessee has purchased the New Aircraft from the Supplier thereof) and to lease the same to Lessee under the New Lease shall be subject to each of the following conditions: (i) Lessor's receipt of current financial information relating to Lessee and any guarantor of Lessee's obligations; (ii) Lessor's approval, in its sole and absolute discretion, of the creditworthiness and business operations of Lessee and any such guarantor; (iii) Lessor's approval, in its sole and absolute discretion, of the New Aircraft (including but not limited to its make, model, condition, fair market value, and anticipated future value); (iv) Lessor's receipt of an amount (to be agreed upon by Lessor and Lessee) sufficient to terminate the Lease; (v) Lessee's execution and delivery to Lessor of the New Lease, setting forth terms and conditions agreed upon by Lessor and Lessee; and (vi) the execution and delivery to Lessor of such other documents as Lessor shall require. Without limiting the foregoing, if Lessor and Lessee are, for any reason whatsoever, unable to agree upon the termination value described in subsection (iv) above and/or the terms and conditions of the New Lease, then this Exchange Option shall be deemed cancelled and the Lease shall continue in full force and effect.

21. MISCELLANEOUS:

(a) LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR IN CONNECTION WITH THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(b) The Aircraft shall remain Lessor's property unless Lessee purchases the Aircraft from Lessor, and until such time Lessee shall only have the right to use the Aircraft as a lessee. Any cancellation or termination by Lessor of this Lease, pursuant to the provisions of this Lease, shall not release Lessee from any then outstanding obligations to Lessor hereunder.

agreement of the parties with respect to the subject matter hereof, and all Annexes referenced herein are incorporated herein by reference. NO VARIATION OR MODIFICATION OF THIS LEASE OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY TO THIS LEASE. This Agreement may be executed in counterparts which collectively will constitute one document.

(d) If Lessee does not comply with any provision of this Agreement, Lessor shall have the right, but shall not be obligated, to effect such compliance, in whole or in part. All reasonable amounts spent and obligations incurred or assumed by Lessor in effecting such compliance shall constitute additional Rent due to Lessor. Lessee shall pay the additional Rent within five day after the date Lessor sends notice to Lessee requesting payment. Lessors effecting such compliance shall not be a waiver of any Event of Default.

(e) Any Rent or other amount not paid to Lessor when due shall bear interest from the due date until paid, at the lesser of eighteen percent (18%) per annum or the maximum rate allowed by law. Any provisions in this Lease which are in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform thereto.

(f) THIS LEASE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE AIRCRAFT.

22. TRUTH-IN-LEASING:

(a) LESSEE HAS REVIEWED THE AIRCRAFT'S MAINTENANCE AND OPERATING LOGS SINCE ITS DATE OF MANUFACTURE AND HAS FOUND THAT THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS. LESSEE CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH THE APPLICABLE MAINTENANCE AND INSPECTION REQUIREMENTS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS.

(b) LESSEE CERTIFIES THAT LESSEE, AND NOT LESSOR, IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE DURING THE TERM HEREOF. LESSEE FURTHER CERTIFIES THAT LESSEE UNDERSTANDS ITS RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

(c) LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE. LESSEE UNDERSTANDS THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE, OR AIR CARRIER DISTRICT OFFICE.

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IN WITNESS WHEREOF, Lessee and Lessor have caused this Lease to be executed by their duly authorized representatives as of the date first above written.

ANNEX A
Description of Aircraft, Lessor's Cost, and Aircraft Markings

I.	Description		Cost:
	Cessna, Model 560 Aircraft which consists of the following components:	$	5,525,000.00
	(a) Airframe bearing FAA Registration Mark N117MR and Manufacturer's Serial No. 560;
	(b) Two (2) Pratt & Whitney JT 15D-5D engines bearing Manufacturer's Serial Nos. 5000034 and 5000062 respectively (each of which has 750 or more rated takeoff horsepower or the equivalent of such horsepower);
	(c) N/A propellers bearing, respectively bearing, Manufacturer's Serial Nos. and, each being rated as follows:
	(d) Standard accessories and optional equipment and such other items fitted or installed on the Aircraft and set forth hereinafter:
	(e) Those items of Lessee Furnished Equipment described in a bill of sale or bills of sale therefor (copies of which are appended hereto), delivered by Lessee to Lessor which constitute appliances and equipment which will be installed on the Aircraft;
	(f) Sales Tax	$	0.00
	(g) Other	$	0.00
	Capitalized Lessor's Cost	$	5,525,000.00
II.	Aircraft Markings (referenced in the MAINTENANCE Section of Lease)
	(a) Four-by-six inch plaque to be maintained in cockpit and affixed in conspicuous position stating:
	General Electric Capital Corporation, Lessor and Lienholder.
	, Lessee under a certain Lease dated as of , has operational control of this aircraft.
	(b) Similar markings shall be permanently affixed to each engine.

Initials:


Lessee:		GLENN SCHAEFFER		Lessor:		STEPHEN B. PETERSON

ANNEX B
DATED THIS
TO AIRCRAFT LEASE AGREEMENT
DATED AS OF

Lessor & Mailing Address:		Lessee & Mailing Address:
General Electric Capital Corporation		Mandalay Resort Group
44 Old Ridgebury Road		3950 Las Vegas Blvd. South,
Danbury, CT 06810-5105		Las Vegas, NV 89119

Capitalized terms not defined herein shall have the meanings assigned to them in the Aircraft Lease Agreement identified above.

A. Aircraft.

Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the Aircraft described on Annex A to the Lease.

B. Financial Terms.

1.	Advance Rent (if any):	(a) Amount: $0.00
		(b) Due Date: N/A.
2.	Capitalized Lessor's Cost:	$5,525,000.00
3.	Basic Term Commencement Date:	December 27, 2001.
4.	Basic Term:	Thirty Six (36) months plus one day.
5.	First Basic Term Rent Date:	February 01, 2002.
6.	Basic Term Rent Dates:	First (1^st) day of each month.
7.	First Termination Date:	One (1) month after the Basic Term Commencement Date.
8.	Last Basic Term Rent Date:	February 01, 2005.
9.	Last Delivery Date:	December 31, 2001
10.	Primary Hangar Location:	.
11.	Supplier:	Mandalay Resort Group.
12.	Lessee Federal Tax ID No.:	.
13.	Early Purchase Option:	Option Date: N/A.
		Option Price $N/A.
14.	Expiration Date:	N/A.
15.	Estimated Residual Value:	See Schedule 2 to this Annex B.
16.	Lessor's Residual Risk Amount:	See Schedule 2 to this Annex B.
17.	Daily Lease Rate Factor:	0.01526%.
18.	[INTENTIONALLY LEFT BLANK]
19.	[INTENTIONALLY LEFT BLANK].
20.	Extension Term Interest Rate:	A per annum rate equal to four hundred twenty five (425) basis points over the then current yield to maturity of U.S. Treasury Notes having a one year maturity

C. Term and Rent.

1. Interim Rent. For the period from and including the Commencement Date to the Basic Term Commencement Date ("Interim Period"), Lessee shall pay as Rent ("Interim Rent") for

each unit of Aircraft, the product of the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such unit times the number of days in the Interim Period. Interim Rent shall be due on February 01, 2002.

2. Basic Term and Renewal Term Rent. Commencing on February 01, 2002, and on the same day of each month thereafter (each, a "Rent Payment Date") during the Basic Term ("Basic Term Rent") and each of the First and Second Renewal Terms, as applicable ("Renewal Term Rent"), Lessee shall pay as Rent monthly installments of principal in arrears, each installment in the principal amount specified on the Amortization Table attached to this Annex B as Schedule 1, together with interest on the Unamortized Principal Balance as of the immediately preceding Rent Payment Date (after application of the Rent paid on such date) at the Interest Rate for the Interest Period following such immediately preceding Rent Payment Date. Interest shall be calculated on the basis of a 360 day year for the actual number of days elapsed. Said Rent consists of principal and interest components, such principal components being as provided in the Amortization Table attached to this Annex B as Schedule 1.

As used herein, the following terms shall have the following meanings:

"Interest Period" shall mean the period beginning on the Lease Commencement Date to and including the last day of the month immediately preceding the first Rent Payment Date; and thereafter from the first day of the month that includes the most recent Rent Payment Date to and including the last day of the month immediately preceding the subsequent Rent Payment Date.

"Interest Rate" shall mean that percentage per annum calculated as the sum of (a) the LIBOR Rate redetermined monthly, plus (b) three hundred twenty-five (325) basis points.

"LIBOR Rate" shall mean, with respect to any Interest Period occurring during the term of the Lease, an interest rate per annum equal at all times during such Interest Period to the quotient of (1) the rate per annum as determined by Lessor at which deposits of U.S. Dollars in immediately available and freely transferable funds are offered at 11:00 a.m. (London, England time) two (2) Business Days before the commencement of such Interest Period to major banks in the London interbank market for a period of ninety (90) days and in an amount equal or comparable to the Unamortized Principal Balance, divided by (2) a number equal to 1.00 minus the aggregate (without duplication) of the rates (expressed as a decimal fraction) of the LIBOR Reserve Requirements current on the date three (3) Business Days prior to the first day of the Interest Period.

"LIBOR Reserve Requirements" shall mean the daily average for the applicable Interest Period of the maximum rate applicable to Lessor or its participants or assignees, if any, at which reserves (including, without limitation, any supplemental, marginal and emergency reserves) are imposed during such Interest Period by the Board of Governors of the Federal Reserve System (or any successor) on "Eurocurrency liabilities", as defined in such Board's Regulation D (or in respect of any other category of liabilities that include deposits by reference to which the interest rates on Eurodollar loans is determined or any category of extensions of credit or other assets that include loans by non-United States offices of any lender to United States residents), having a term equal to such Interest Period, subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto.

If at any time Lessor (or any participant or assignee of Lessor, if any), determines that either adequate and reasonable means do not exist for ascertaining the LIBOR Rate, or it becomes impractical for Lessor or any such participant or assignee of Lessor, to obtain funds to make or maintain the financing hereunder with interest at the LIBOR Rate, or Lessor or any such participant or assignee of Lessor shall have determined that the LIBOR Rate will not adequately and fairly reflect the cost to Lessor or any such participant or assignee of Lessor,of making, maintaining, or funding the transaction hereunder at the LIBOR Rate, or Lessor or any such participant or assignee of Lessor

reasonably determines that, as a result of changes to applicable law after the date of execution of the Agreement, or the adoption or making after such date of any interpretations, directives or regulations (whether or not having the force of law) by any court, governmental authority or reserve bank charged with the interpretation or administration thereof, it shall be or become unlawful or impossible to make, maintain, or fund the transaction hereunder at the LIBOR Rate, then Lessor promptly shall give notice to Lessee of such determination, and Lessor and Lessee shall negotiate in good faith a mutually acceptable alternative method of calculating the Interest Rate and shall execute and deliver such documents as reasonably may be required to incorporate such alternative method of calculating the Interest Rate in this Schedule, within thirty (30) days after the date of Lessor's notice to Lessee. If the parties are unable mutually to agree to such alternative method of calculating the Interest Rate in a timely fashion, on the Rent Payment Date next succeeding the expiration of such thirty (30) day period Lessee shall purchase all (but not less than all) of the Aircraft and shall pay to Lessor, in cash, the purchase price for the Aircraft so purchased, determined as hereinafter provided. The purchase price of the Aircraft shall be an amount equal to the Stipulated Loss Value of such Aircraft calculated in accordance with Annex F as of the date of payment, together with all rent and other sums then due on such date, plus all taxes and charges upon sale and all other reasonable and documented expenses incurred by Lessor in connection with such sale. Upon satisfaction of the conditions specified in this paragraph, Lessor will transfer, on an AS IS BASIS, all of Lessor's interest in and to the Aircraft. Lessor shall not be required to make and may specifically disclaim any representation or warranty as to the condition of the Aircraft and other matters. Upon satisfaction of the conditions specified in this paragraph, Lessor shall execute and deliver to Lessee such Uniform Commercial Code statements of termination as reasonably may be required in order to terminate any interest of Lessor in and to the Aircraft.

3. If the Interim Rent Payment Date or any Rent Payment Date is not a Business Day, the Rent otherwise due on such date shall be payable on the immediately preceding Business Day. As used herein, "Business Day" shall mean any day other than Saturday, Sunday, and any day on which banking institutions located in the State of Connecticut are authorized by law or other governmental action to close.

D. [INTENTIONALLY LEFT BLANK]

E. Insurance.

1. Public Liability: $50,000,000.00 total liability per occurrence.

2. Casualty and Property Damage: An amount equal to the higher of the Stipulated Loss Value or the full replacement cost of the Aircraft.

F. Additional Maintenance Requirements.

G. Amendments to Lease.

Except as expressly modified hereby, all terms and provisions of the Lease shall remain in full force and effect. This Annex B is not binding or effective with respect to the Lease or Aircraft until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee, respectively.

IN WITNESS WHEREOF, Lessee and Lessor have caused this Annex B to be executed by their duly authorized representatives as of the date first above written.

LESSOR:		LESSEE:
General Electric Capital Corporation		Mandalay Resort Group
By:	STEPHEN B. PETERSON	By:	GLENN SCHAEFFER
Name:	Stephen B. Peterson	Name:	Glenn Schaeffer
Title:	Sr. Risk Analyst	Title:	President

Schedule 1
To Annex B

AMORTIZATION TABLE

RENT PAYMENT DATE

PRINCIPAL*

UNAMORTIZED PRINCIPAL BALANCE*

Payment Number	Beginning Balance	Debt Service	Interest At 5.35000%	Principal	Ending Balance
01	5,525,000.00	88,579.05	24,632.29	63,946.76	5,461,053.24
02	5,461,053.24	88,293.96	24,347.20	63,946.76	5,397,106.48
03	5,397,106.48	88,008.86	24,062.10	63,946.76	5,333,159.72
04	5,333,159.72	87,723.76	23,777.00	63,946.76	5,269,212.96
05	5,269,212.96	87,438.67	23,491.91	63,946.76	5,205,266.20
06	5,205,266.20	87,153.57	23,206.81	63,946.76	5,141,319.44
07	5,141,319.44	86,868.48	22,921.72	63,946.76	5,077,372.68
08	5,077,372.68	86,583.38	22,636.62	63,946.76	5,013,425.92
09	5,013,425.92	86,298.28	22,351.52	63,946.76	4,949,479.17
10	4,949,479.17	86,013.19	22,066.43	63,946.76	4,885,532.41
11	4,885,532.41	85,728.09	21,781.33	63,946.76	4,821,585.65
12	4,821,585.65	85,443.00	21,496.24	63,946.76	4,757,638.89
13	4,757,638.89	85,157.90	21,211.14	63,946.76	4,693,692.13
14	4,693,692.13	84,872.80	20,926.04	63,946.76	4,629,745.37
15	4,629,745.37	84,587.71	20,640.95	63,946.76	4,565,798.61
16	4,565,798.61	84,302.61	20,355.85	63,946.76	4,501,851.85
17	4,501,851.85	84,017.52	20,070.76	63,946.76	4,437,905.09
18	4,437,905.09	83,732.42	19,785.66	63,946.76	4,373,958.33
19	4,373,958.33	57,868.62	19,500.56	38,368.06	4,335,590.28
20	4,335,590.28	57,697.56	19,329.51	38,368.06	4,297,222.22
21	4,297,222.22	57,526.51	19,158.45	38,368.06	4,258,854.16
22	4,258,854.16	57,355.45	18,987.39	38,368.06	4,220,486.11
23	4,220,486.11	57,184.39	18,816.33	38,368.06	4,182,118.05
24	4,182,118.05	57,013.33	18,645.28	38,368.06	4,143,750.00
25	4,143,750.00	56,842.27	18,474.22	38,368.06	4,105,381.94
26	4,105,381.94	56,671.22	18,303.16	38,368.06	4,067,013.89
27	4,067,013.89	56,500.16	18,132.10	38,368.06	4,028,645.83
28	4,028,645.83	56,329.10	17,961.05	38,368.06	3,990,277.78
29	3,990,277.78	56,158.04	17,789.99	38,368.06	3,951,909.72
30	3,951,909.72	55,986.99	17,618.93	38,368.06	3,913,541.67
31	3,913,541.67	55,815.93	17,447.87	38,368.06	3,875,173.61
32	3,875,173.61	55,644.87	17,276.82	38,368.06	3,836,805.55
33	3,836,805.55	55,473.81	17,105.76	38,368.06	3,798,437.50
34	3,798,437.50	55,302.76	16,934.70	38,368.06	3,760,069.44
35	3,760,069.44	55,131.70	16,763.64	38,368.06	3,721,701.39
36	3,721,701.39	54,960.64	16,592.59	38,368.06	3,683,333.33
37	3,683,333.33	54,789.58	16,421.53	38,368.06	3,644,965.28
38	3,644,965.28	54,618.53	16,250.47	38,368.06	3,606,597.22
39	3,606,597.22	54,447.47	16,079.41	38,368.06	3,568,229.17
40	3,568,229.17	54,276.41	15,908.36	38,368.06	3,529,861.11

41	3,529,861.11	54,105.35	15,737.30	38,368.06	3,491,493.05
42	3,491,493.05	53,934.30	15,566.24	38,368.06	3,453,125.00
43	3,453,125.00	53,763.24	15,395.18	38,368.06	3,414,756.94
44	3,414,756.94	53,592.18	15,224.13	38,368.06	3,376,388.89
45	3,376,388.89	53,421.12	15,053.07	38,368.06	3,338,020.83
46	3,338,020.83	53,250.07	14,882.01	38,368.06	3,299,652.78
47	3,299,652.78	53,079.01	14,710.95	38,368.06	3,261,284.72
48	3,261,284.72	52,907.95	14,539.89	38,368.06	3,222,916.67
49	3,222,916.67	52,736.89	14,368.84	38,368.06	3,184,548.61
50	3,184,548.61	52,565.84	14,197.78	38,368.06	3,146,180.56
51	3,146,180.56	52,394.78	14,026.72	38,368.06	3,107,812.50
52	3,107,812.50	52,223.72	13,855.66	38,368.06	3,069,444.44
53	3,069,444.44	52,052.66	13,684.61	38,368.06	3,031,076.39
54	3,031,076.39	51,881.60	13,513.55	38,368.06	2,992,708.33
55	2,992,708.33	51,710.55	13,342.49	38,368.06	2,954,340.28
56	2,954,340.28	51,539.49	13,171.43	38,368.06	2,915,972.22
57	2,915,972.22	51,368.43	13,000.38	38,368.06	2,877,604.17
58	2,877,604.17	51,197.37	12,829.32	38,368.06	2,839,236.11
59	2,839,236.11	51,026.32	12,658.26	38,368.06	2,800,868.06
60	2,800,868.06	2,813,355.26	12,487.20	2,800,868.06	0.00

Initials:

	Lessor	Lessee

(1): *The Principal, Interest and Unamortized Principal Balance as of any Rent Payment Date shall be equal to the Capitalized Lessor's Cost of such unit multiplied by the appropriate percentage derived from the above table

SCHEDULE 2
TO ANNEX B

OPTION DATE	ESTIMATED RESIDUAL VALUE (as % of Capitalized Lessor's Cost)	LESSOR'S RESIDUAL RISK AMOUNT (as % of Capitalized Lessor's Cost)
End of Basic Term	67.33	11.73
End of First Renewal Term	58.89	7.10
End of Second Renewal Term	50.00	6.21

ANNEX C
BILL OF SALE

Mandalay Resort Group (the "Seller"), in consideration of the sum of Five Million Five Hundred Twenty Five Thousand and 00/100 Dollars ($5,525,000.00) paid by General Electric Capital Corporation (the "Buyer"), receipt of which is acknowledged, hereby grants, sells, assigns, transfers and delivers to Buyer all of Seller's right, title and interest in the Aircraft and related equipment (collectively, the "Aircraft") more particularly described on Annex A hereto, in an AS-IS, WHERE-IS condition, with no warranties, express or implied, of any kind or nature, except that Seller warrants to Buyer that (i) Seller has the right to, and does hereby, sell and convey all of its interest in the Aircraft to Buyer, and (ii) the Aircraft is free and clear of all liens, claims and encumbrances, other than the security interest granted to Buyer pursuant to that certain Aircraft Lease Agreement, dated (the "Lease Agreement").

Buyer and Seller agree and acknowledge that the sale and conveyance contemplated hereby is solely for the purpose of granting to Buyer a security interest in the Aircraft. Seller shall retain legal title to the Aircraft, and Seller shall remain in possession of the Aircraft subject to the terms and conditions of the Lease Agreement.

IN WITNESS WHEREOF, Seller has executed this Bill of Sale this day of , 2001.

SELLER:		BUYER:
Mandalay Resort Group		General Electric Capital Corporation
By: GLENN SCHAEFFER		By: STEPHEN B. PETERSON
Title: President		Title: Sr. Risk Analyst

ANNEX E
CERTIFICATE OF ACCEPTANCE

AIRCRAFT LEASE AGREEMENT dated as of (the "Lease"), between General Electric Capital Corporation, as lessor (the "Lessor"), and Mandalay Resort Group, as lessee (the "Lessee").

A.

The Aircraft: Lessee hereby certifies that the Aircraft as set forth and described in Annex A hereto has been delivered to Lessee, inspected by Lessee, found to be in good order and fully equipped to operate as required under applicable law for its intended purpose, and is, on the date set forth below, preowned and used and fully and finally accepted under the Lease.

B.

Representations by Lessee: Lessee hereby represents and warrants to Lessor that on the date hereof:

(1): The representations and warranties of Lessee set forth in the Lease and all certificates and opinions delivered in connection therewith were true and correct in all respects when made and are true and correct as of the date hereof.
(2): Lessee has satisfied or complied with all conditions precedent and requirements set forth in the Lease, which are required to be or to have been satisfied or complied with on or prior to the date hereof.
(3): No Default or Event of Default under the Lease has occurred and is continuing on the date hereof.
(4): Lessee has obtained, and there are in full force and effect, such insurance policies with respect to the Aircraft, as are required to be obtained under the terms of the Lease.
(5): Lessee has furnished no equipment for the Aircraft other than as sold to Lessor and as stated on Annex A hereto or permitted as an addition thereto pursuant to the Lease.
(6): The Lessee has undertaken, at Lessee's expense, a survey of the Aircraft completed by a consultant named by Lessor, which survey includes (i) a complete inventory of the Aircraft, including, without limitation, engines, spare parts and avionics, (ii) review of all operating and maintenance logs (including any computerized program under which the Aircraft has been maintained); (iii) physical inspection of the Aircraft (including a demonstration of flight); and (iv) an analysis of the cost of the Aircraft as compared to similarly equipped Aircraft of same model and approximately the same age, airframe, engine hours and over all condition. Such survey and its availability to Lessee shall not constitute any representation or warranty by Lessor to Lessee of any kind with respect to the Aircraft, its condition or otherwise.
(7): A report of the results of the survey required by paragraph 6 above, has been delivered to Lessor and since the date thereof, there has not occurred any material change in the configuration or condition of the Aircraft (except such modifications or repairs specified in such survey as being necessary to undertake) and neither engine has accrued more than fifty (50) operating hours since the date of such survey.
(8): The Lessee has inspected the Aircraft and all pertinent records therefor and the Aircraft has no damage history.
(9): The nameplates required to be affixed to the Aircraft and to each engine pursuant to the MAINTENANCE Section of the Lease have been duly affixed.

Date and Delivery of Acceptance:

IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be duly executed by its officers thereunto duly authorized.

		Lessee:
		Mandalay Resort Group
		By:		GLENN SCHAEFFER
		Title:		President
		Date:

Annex F
Stipulated Loss and Termination Values

The Stipulated Loss and Termination Value of the Aircraft shall be the percentage of Capitalized Lessor's Cost of the aircraft set forth opposite the applicable rent payment.

Capitalized Lessor's Cost $5,525,000.00

Basic Rent Payment No.	Termination Value	Stipulated Loss Value
1	101.843	105.744
2	100.685	104.538
3	99.528	103.331
4	98.370	102.124
5	97.213	100.918
6	96.056	99.711
7	94.898	98.505
8	93.741	97.298
9	92.583	96.092
10	91.426	94.885
11	90.269	93.678
12	89.111	92.472
13	87.954	91.265
14	86.796	90.059
15	85.639	88.852
16	84.481	87.645
17	83.324	86.439
18	82.167	85.232
19	81.472	84.489
20	80.778	83.745
21	80.083	83.001
22	79.389	82.258
23	78.694	81.514
24	78.000	80.770
25	77.306	80.027
26	76.611	79.283
27	75.917	78.540
28	75.222	77.796
29	74.528	77.052
30	73.833	76.309
31	73.139	75.565
32	72.444	74.821
33	71.750	74.078
34	71.056	73.334
35	70.361	72.591
36	69.667	71.847
37	68.972	71.103
38	68.278	70.360
39	67.583	69.616
40	66.889	68.872
41	66.194	68.129
42	65.500	67.385

43	64.806	66.642
44	64.111	65.898
45	63.417	65.154
46	62.722	64.411
47	62.028	63.667
48	61.333	62.923
49	60.639	62.180
50	59.944	61.436
51	59.250	60.693
52	58.556	59.949
53	57.861	59.205
54	57.167	58.462
55	56.472	57.718
56	55.778	56.974
57	55.083	56.231
58	54.389	55.487
59	53.694	54.744
60	53.000	54.000

Initials:	SEP	GLENN SCHAEFFER

	Lessor	Lessee

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AIRCRAFT LEASE AGREEMENT dated as of ("Agreement" )
ANNEX A Description of Aircraft, Lessor's Cost, and Aircraft Markings
ANNEX B DATED THIS TO AIRCRAFT LEASE AGREEMENT DATED AS OF
Schedule 1 To Annex B
SCHEDULE 2 TO ANNEX B
ANNEX C BILL OF SALE
ANNEX E CERTIFICATE OF ACCEPTANCE
Annex F Stipulated Loss and Termination Values
EX-10.91 13 a2077883zex-10_91.htm EXHIBIT 10.91
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Exhibit 10.91

GIII

AIRCRAFT LEASE AGREEMENT
dated as of December 28, 2001 ("Agreement")

1. LEASING:

2. TERM, RENT AND PAYMENT:

(a) The rent ("Rent") payable for the Aircraft and Lessee's right to use the Aircraft begins on the date Lessee signs the Certificate of Acceptance ("Commencement Date"). The term ("Term") of this Lease shall commence on the Commencement Date and shall continue, unless earlier terminated pursuant to the provisions of this Lease, until and including the expiration date of the Basic Term, and extension or renewal term, as applicable. If any Term is extended or renewed, the word "Term" shall be deemed to refer to all extended or renewal Terms, and all provisions of this Lease shall apply during any such extension or renewal Terms, except as may be otherwise specifically provided in writing.

3. TAXES AND FEES:

(b) Lessee's obligations, and Lessor's rights and privileges, contained in this Section 3 shall survive the expiration or other termination of this Agreement.

4. REPORTS: Lessee will provide Lessor with the following in writing within the time periods specified: (a) notice of any tax or other lien which attaches to the Aircraft and the full particulars of the tax or lien, within ten (10) days after Lessee becomes aware of the tax or lien, (b) Lessee's complete financial statements, certified by a recognized firm of certified public accountants, within one-hundred (100) days of the close of each fiscal year of Lessee, and any further financial information or reports, upon request; (c) notice to Lessor of the Aircraft's location, and the location of all information, logs, documents and records relating to the Aircraft and its use, maintenance and/or condition, immediately upon request; (d) notice to Lessor of the relocation of the Aircraft's primary hangar location, ten (10) days prior to any relocation; (e) notice of loss or damage to the Aircraft which would cost more than the lesser of (i) ten percent (10%) of the original Capitalized Lessor's Cost or (ii) two hundred fifty thousand and 00/100 dollars ($250,000.00) to repair or replace, within ten (10) days of such loss or damage; (f) notice of any accident involving the Aircraft causing personal injury or property damage, within ten (10) days of such accident; (g) copies of the insurance policies or other evidence of insurance required by the terms hereof, promptly upon request by Lessor; (h) copies of all information, logs, documents and records relating to the Aircraft and its use, maintenance and/or condition, within ten (10) days of such request; (i) on each annual anniversary of the Commencement Date of this Lease, a certificate of the authorized officer of Lessee stating that he has reviewed the activities of Lessee and that, to the best of his knowledge, there exists no Event of Default or event which with notice or lapse of time (or both) would become an Event of Default; (j) such information as may be required to enable Lessor to file any reports required by any governmental authority as a result

5. DELIVERY, REGISTRATION, USE AND OPERATION:

(a) The parties acknowledge that this is a sale/leaseback transaction, and Lessee is in possession of the Aircraft as of the Lease Commencement Date.

SECTIONS 1701 ET SEQ., AND THE EXPORT ADMINISTRATION ACT, 50 U.S.C. APP. SECTIONS 2401 ET SEQ. OR TO OTHERWISE VIOLATE, OR PERMIT THE VIOLATION OF, SUCH LAWS OR DIRECTIVES. LESSEE ALSO AGREES TO PROHIBIT ANY NATIONAL OF SUCH RESTRICTED NATIONS FROM OPERATING THE AIRCRAFT.

(ii) Lessee represents and warrants that it does not on this date hold a contract or other obligation to operate the Aircraft in any of the following countries: Cuba, Iraq, Libya, Myanmar, North Korea, and the Federal Republic of Yugoslavia (Serbia and Montenegro).

(iii) The engines set forth on Annex A shall be used only on the airframe described in Annex A and shall only be removed for maintenance in accordance with the provisions of this Lease.

(e) Lessor shall not disturb Lessee's quiet enjoyment of the Aircraft during the Term of this Lease unless an Event of Default has occurred and is continuing under this Lease.

6. MAINTENANCE:

placed thereon. Lessee will replace promptly any such Aircraft marking which may be removed, defaced or destroyed.

(d) Lessee shall be entitled from time to time during the Term of this Lease to acquire and install on the Aircraft at Lessee's expense, any additional accessory, device or equipment as Lessee may desire (each such accessory, device or equipment, an "Addition"), but only so long as such Addition (i) is ancillary to the Aircraft; (ii) is not required to render the Aircraft complete for its intended use by Lessee; (iii) does not alter or impair the originally intended function or use of the Aircraft; and (iv) can be readily removed without causing material damage. Title to each Addition which is not removed by Lessee prior to the return of the Aircraft to Lessor shall vest in Lessor upon such return. Lessee shall repair all damage to the Aircraft resulting from the installation or removal of any Addition so as to restore the Aircraft to its condition prior to installation, ordinary wear and tear excepted.

(f) Except as permitted under this Section 6, Lessee will not modify the Aircraft or affix or remove any accessory to the Aircraft leased hereunder.

7. LIENS, SUBLEASE AND ASSIGNMENT:

or any engine thereto becomes worn out, lost, stolen, confiscated, expropriated, requisitioned, destroyed, irreparably damaged, or unusable ("Casualty Occurrences") Lessee shall promptly (but in no event beyond 10 days from the date of such Casualty Occurrence) and fully notify Lessor in writing. If, in the opinion of Lessor, a Casualty Occurrence has occurred which affects only the engine(s) of the Aircraft, then Lessee, at its own cost and expense, shall replace such engine(s) with an engine(s) acceptable to Lessor and shall cause title to such engine(s) to be transferred to Lessor for lease to Lessee under this Lease. Upon transfer of title to Lessor of such engine(s), such engine(s) shall be subject to the terms and conditions of this Lease, and Lessee shall execute whatever documents or filings Lessor deems necessary and appropriate in connection with the substitution of such replacement engine(s) for the original engine(s). If, in the opinion of Lessor, a Casualty Occurrence has occurred with respect to the Aircraft in its entirety, on the next Rent Payment Date after a Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (i) the Stipulated Loss Value as set forth in Annex F calculated as of the Rent Payment Date prior to such Casualty Occurrence; and (ii) all Rent and other amounts which are due under this Lease as of the Payment Date. Upon payment of all sums due hereunder, the Term of this Lease as to the Aircraft shall terminate.

9. INSURANCE: Lessee shall secure and maintain in effect at its own expense throughout the Term of the Lease insurance against such hazards and for such risks as Lessor may require. All such insurance shall be with companies satisfactory to Lessor. Without limiting the generality of the foregoing, Lessee shall maintain: (i) liability insurance covering public liability and property, cargo and sudden accidental pollution coverage, in amounts not less than fifty million (50,000,000) United States dollars for any single occurrence; (ii) all-risk aircraft hull and engine insurance (including, without limitation, with respect to engine or part thereof while removed from the aircraft and foreign object damage insurance) in an amount which is not less than the then Stipulated Loss Value; and (iii) confiscation, expropriation and war risk and allied perils (including, without limitation, terrorism) insurance and hijacking insurance in an amount which is (x) for physical damage, not less than the Stipulated Loss Value and (y) for liability coverage, not less than fifty million (50,000,000) United States dollars for any single occurrence. All insurance shall: (1) name Lessor as owner of the Aircraft and as loss payee and additional insured (without responsibility for premiums), (2) provide that any cancellation or substantial change in coverage shall not be effective as to the Lessor for thirty (30) days after receipt by Lessor of written notice from the insurer of such cancellation or change, (3) insure Lessor's interest regardless of any breach of warranty or other act or omission of Lessee, (4) include a severability of interest clause providing that such policy shall operate in the same manner as if there were a separate policy covering each insured, (5) waive any right of set-off against Lessee or Lessor, and any rights of subrogation against Lessor, and (6) be primary and not be subject to any offset by any other insurance carried by Lessor or Lessee. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and claim for and to receive payment of and to execute or endorse all documents, checks or drafts in connection with all policies of insurance in respect of the Aircraft. Lessor shall not act as Lessees attorney-in-fact unless Lessee is in default. Lessee shall pay any reasonable expenses of Lessor in adjusting or collecting insurance proceeds. Lessor may, at its option, apply proceeds of insurance, in whole or in part, to (A) repair the Aircraft, or repair or replace any part thereof, or (B) satisfy any obligation of Lessee to Lessor under this Lease. The foregoing notwithstanding, to the extent no Event of Default has occurred and is continuing, upon written notice from Lessee, Lessor shall follow Lessee's written direction regarding application of the proceeds of insurance, in whole or in part, to (A) repair the Aircraft, or repair or replace any part thereof, or (B) satisfy any obligation of Lessee to Lessor under this Lease; provided, however, that Lessor shall have no obligation to apply such insurance proceeds towards repair or replacement of the Aircraft or any part thereof, if Lessor determines, in its sole discretion, that any such repair or replacement is not capable of being completed before the expiration of the term of the Lease. If an Event of Default has occurred and is continuing hereunder, Lessee shall have no right to direct the application of any such

insurance proceeds. Any surplus of such insurance proceeds, shall, to the extent no Event of Default has occurred and is continuing, be paid by Lessor to Lessee.

10. RETURN OF AIRCRAFT:

(a) Subject to the other Sections of this Lease, at expiration or termination of this Lease (the "Return Date"), Lessee shall return the Aircraft to Lessor, at a location within the continental United States as Lessor shall direct. Lessee shall also return all logs, loose equipment, manuals and data associated with the Aircraft, including without limitation, inspection, modification and overhaul records required to be maintained with respect to the Aircraft under this Lease or under the applicable rules and regulations of the FAA or the manufacturer's recommended maintenance program, along with a currently effective FAA airworthiness certificate. In addition, Lessee shall also return the Aircraft with the Stage III Hush Kit attached thereto. Lessee shall, upon request, assign to Lessor its rights under any manufacturer's maintenance service contract or extended warranty for the Aircraft, any engine or part thereof. The Aircraft shall be returned in the condition in which the Aircraft is required to be maintained pursuant to Section 6, but with all logos or other identifying marks of Lessee removed. Additionally, Lessee shall ensure that the Aircraft complies with all requirements and conditions set forth on Annex G hereto. Lessee shall pay for all costs to comply with this Section 10(a).

(d) All of Lessor's rights contained in this Section shall survive the expiration or other termination of this Lease.

11. EVENTS OF DEFAULT AND REMEDIES:

natural person, any death or incompetency of Lessee or such Guarantor; or (viii)) there occurs an "Event of Default" under and as defined in any other agreement by and between Lessor and Lessee.

(b) Upon the occurrence of any Event of Default and so long as the same shall be continuing, Lessor may, at its option, at any time thereafter, exercise one or more of the following remedies, as Lessor in its sole discretion shall lawfully elect: (i) demand that Lessee immediately pay as liquidated damages, for loss of a bargain and not as a penalty, an amount equal to the Stipulated Loss Value of the Aircraft, computed as of the Basic Term Rent Date prior to such demand together with all Rent and other amounts due and payable for all periods up to and including the Basic Term Rent Date following such demand; (ii) demand that Lessee pay all amounts due for failure to maintain or return the Aircraft as provided herein and cause Lessee to assign to Lessor Lessee's rights under any manufacturer's service program contract or any extended warranty contract in force for the Aircraft; (iii) proceed by appropriate court action, either at law or in equity, to enforce the performance by Lessee of the applicable covenants of this Lease or to recover damages for breach hereof; (iv) by notice in writing terminate this Lease, whereupon all rights of Lessee to use of the Aircraft or any part thereof shall absolutely cease and terminate, and Lessee shall immediately return the Aircraft in accordance with Section 10, but Lessee shall remain liable as provided in Section 10; (v) request Lessee to return the Aircraft to a designated location in accordance with Section 10; (vi) peacefully enter the premises where the Aircraft may be and take possession of the Aircraft; (vii) sell or otherwise dispose of the Aircraft at private or public sale, in bulk or in parcels, with or without notice, and without having the Aircraft present at the place of sale; (viii) lease or keep idle all or part of the Aircraft; (ix) use Lessee's premises for storage pending lease or sale or for holding a sale without liability for rent or costs; (x) collect from Lessee all costs, charges and expenses, including reasonable legal fees and disbursements, incurred by Lessor by reason of the occurrence of any Event of Default or the exercise of Lessor's remedies with respect thereto; and/or (xi) declare any Event of Default under the terms of this Lease to be an "Event of Default" under and as defined in any other agreement between Lessor and Lessee.

12. NET LEASE:

13. INDEMNIFICATION:

14. DISCLAIMER:

15. REPRESENTATIONS AND WARRANTIES OF LESSEE:

Lessee hereby represents, warrants and covenants to Lessor that on the date of this Lease and at all times during the Term of this Lease:

(g) Lessee is and will be at all times validly existing and in good standing under the laws of the State of its incorporation (specified in the first sentence of this Lease) and Lessee is and will continue to be a "Citizen of the United States" within the meaning of Section 40102(15) of the FAA. Lessee shall not consolidate, reorganize or merge with any other corporation or entity (in any transaction pursuant to which Lessee is not the surviving entity), or sell, convey, transfer or lease all or substantially all of its property during the Term of this Lease.

(i) A copy of this Lease, and a current and valid AC Form 8050-l will be kept on the Aircraft at all times during the Term of this Lease.

(j) Lessee has selected the Aircraft, manufacturer and vendor thereof, and all maintenance facilities required hereby.

(l) Lessee shall not operate the Aircraft under Part 135 of the Federal Aviation Regulations without the prior written approval of Lessor.

(m) Lessee shall notify the local Flight Standards District Office of the FAA forty-eight (48) hours prior to the first flight of the Aircraft under this Lease.

(o) Lessee agrees that it will at all times maintain the following:

(i) a ratio of EBITDA to Interest Expense of not less the ratio set forth below during the period corresponding thereto (to be measured as of the last day of any applicable fiscal quarter of Lessee):

Period		Ratio
At all times from the date hereof through 1/31/03		2.25 to 1.0
At all times thereafter through 1/31/04		2.50 to 1.0
At all times thereafter through 1/31/05		2.75 to 1.0
At all times thereafter		3.00 to 1.0; and

(ii) a ratio of EBITDA to Total Debt of not less the ratio set forth below during the period corresponding thereto (to be measured as of the last day of any applicable fiscal quarter of Lessee):

Period		Ratio
At all times from the date hereof through 4/30/02		5.25 to 1.0
At all times thereafter through 1/31/03		5.50 to 1.0
At all times thereafter through 4/30/03		5.00 to 1.0
At all times thereafter through 7/31/03		4.75 to 1.0
At all times thereafter through 7/31/04		4.50 to 1.0
At all times thereafter		4.25 to 1.0

(iii) For purposes of this subsection (o), the capitalized terms used above, as well as any defined terms used therein or otherwise used to determine the above capitalized terms (herein, the "Financial Covenant Definitions"), shall have the meanings given in Lessee's Revolving Loan Agreement among Lessee, CITICORP USA, INC. and BANKERS TRUST COMPANY, as Syndication Agents, BANK OF AMERICA, N.A., as Administrative Agent and Issuing Lender, BANC OF AMERICA SECURITIES LLC and SALOMON SMITH BARNEY INC., as Lead Arrangers and Book Managers, and the Lenders, Co-Documentation Agents, Senior Managing Agents and Co-Agent named therein, dated as of August 22, 2001 (herein, the "Lessee Credit Agreement"), as such Lessee Credit Agreement is in effect on the date of this Lease. Lessee hereby agrees that no amendment to the Lessee Credit Agreement in respect of the Financial Covenant Definitions shall have any force or effect hereunder unless and until such proposed amendment is delivered in writing to Lessor and Lessor consents thereto in writing.

16. OWNERSHIP FOR TAX PURPOSES; GRANT OF SECURITY INTEREST; USURY SAVINGS:

17. EARLY TERMINATION:

18. EARLY PURCHASE OPTION:

19. END OF LEASE OPTIONS AND OBLIGATIONS:

(a) At the end of the Basic Term, so long as this Agreement has not been earlier terminated, Lessee shall exercise one of the following options:

fulfilled, this Lease shall continue in full force and effect as if the Renewal Option had been elected, and Lessee shall continue to be liable for all obligations thereunder, including, without limitation, the obligation to continue paying rent.

(b) At the end of the First Renewal Term, so long as this Agreement has not been earlier terminated, Lessee shall exercise one of the following options:

(1) Renewal Option: Renew the Term of the Lease for an additional term of twelve (12) months (the "Second Renewal Term") at the applicable Renewal Term Rent amount, to be paid in arrears on the same day of each month on which the Basic Term Rent was paid; OR

(c) At the end of the Second Renewal Term, so long as this Agreement has not been earlier terminated, Lessee shall exercise one of the following options:

(1) Extension Option: Renew the Term of the Lease for an additional term of twelve (12) months (the "Extension Term") at a monthly rental amount to be paid in arrears on the same day of each month on which the Basic Term Rent was paid, and calculated as the product of (i) the Capitalized Lessor's Cost, times (ii) a lease rate factor calculated by Lessor, which when so multiplied times the Capitalized Lessor's Cost, will result in a product that is equal to the amount necessary to fully repay to Lessor any Unamortized Principal Balance (as specified on the Amortization Table attached as Schedule 1 to Annex B) (determined as of the Second Renewal Term expiration date) together with interest thereon at the Extension Term Interest Rate (specified on Annex B), in twelve (12) equal monthly installments. At the end of the Extension Term, Lessee shall purchase all, but not less than all, of the Aircraft for One Dollar ($1.00) cash, together with all rent and other sums then due on such date, plus all taxes and charges upon transfer and all other reasonable and documented expenses incurred by Lessor in connection with such transfer. Upon satisfaction of the foregoing conditions, Lessor will transfer, on an AS IS BASIS, all of Lessor's interest in the Aircraft; OR

paragraph are not fulfilled, this Lease shall continue in full force and effect as if the Extension Option had been elected, and Lessee shall continue to be liable for all obligations thereunder, including, without limitation, the obligation to continue paying rent.

20. EXCHANGE OPTION.

21. MISCELLANEOUS:

TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR IN CONNECTION WITH THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(c) Time is of the essence of this Lease. Lessee agrees, upon Lessor's request, to execute any instrument necessary or expedient for filing, recording or perfecting the interest of Lessor. All notices required to be given hereunder shall be deemed adequately given if delivered in hand or sent by registered or certified mail to the addressee at its address stated herein, or at such other place as such addressee may have designated in writing. This Lease and any Annexes hereto constitute the entire agreement of the parties with respect to the subject matter hereof, and all Annexes referenced herein are incorporated herein by reference. NO VARIATION OR MODIFICATION OF THIS LEASE OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY TO THIS LEASE. This Agreement may be executed in counterparts which collectively will constitute one document.

22 TRUTH-IN-LEASING:

COMPLIES WITH THE APPLICABLE MAINTENANCE AND INSPECTION REQUIREMENTS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, Lessee and Lessor have caused this Lease to be executed by their duly authorized representatives as of the date first above written.

LESSOR:		LESSEE:
General Electric Capital Corporation		MANDALAY RESORT GROUP
By:	STEPHEN B. PETERSON	By:	GLENN SCHAEFFER
Title:	Sr. Risk Analyst	Title:	President

ANNEX A
Description of Aircraft, Lessor's Cost, and Aircraft Markings

Description	Cost:
Gulfstream American Corp, Model G-1159A Aircraft which consists of the following components:	$	12,475,000.00
(a) Airframe bearing FAA Registration Mark N123MR and Manufacturer's Serial No. 455;
(b) Two (2) Rolls Royce 511-8 engines bearing Manufacturer's Serial Nos. 11332 and 11333 respectively (each of which has 750 or more rated takeoff horsepower or the equivalent of such horsepower);
(c) N/A propellers bearing, respectively bearing, Manufacturer's Serial Nos. and , each being rated as follows:
(d) Standard accessories and optional equipment and such other items fitted or installed on the Aircraft and set forth hereinafter:
(e) Those items of Lessee Furnished Equipment described in a bill of sale or bills of sale therefor (copies of which are appended hereto), delivered by Lessee to Lessor which constitute appliances and equipment which will be installed on the Aircraft;
(f) Sales Tax	$	0.00
(g) Other	$	0.00
Capitalized Lessor's Cost	$	12,475,000.00

II. Aircraft Markings (referenced in the MAINTENANCE Section of Lease)

(a) Four-by-six inch plaque to be maintained in cockpit and affixed in conspicuous position stating:

General Electric Capital Corporation, Lessor and Lienholder.

                        , Lessee under a certain
    Lease dated as of                        ,
    has operational control of this aircraft.

(b) Similar markings shall be permanently affixed to each engine.

Initials:
Lessee: GLENN SCHAEFFER		Lessor: STEPHEN B. PETERSON

ANNEX B
DATED THIS
TO AIRCRAFT LEASE AGREEMENT
DATED AS OF

Lessor & Mailing Address:		Lessee & Mailing Address:
General Electric Capital Corporation 44 Old Ridgebury Road Danbury, CT 06810-5105		Mandalay Resort Group 3950 Las Vegas Blvd. South, Las Vegas, NV 89119

Capitalized terms not defined herein shall have the meanings assigned to them in the Aircraft Lease Agreement identified above.

A. Aircraft.

Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the Aircraft described on Annex A to the Lease.

B. Financial Terms.

1.	Advance Rent (if any):	(a) Amount: $0.00
		(b) Due Date: N/A.
2.	Capitalized Lessor's Cost:	$12,475,000.00
3.	Basic Term Commencement Date:	December 28, 2001.
4.	Basic Term:	Thirty Six (36) months plus one day.
5.	First Basic Term Rent Date:	February 01, 2002.
6.	Basic Term Rent Dates:	First (1^st) day of each month.
7.	First Termination Date:	One (1) month after the Basic Term Commencement Date.
8.	Last Basic Term Rent Date:	February 01, 2005.
9.	Last Delivery Date:	December 31, 2001
10.	Primary Hangar Location:	.
11.	Supplier:	Mandalay Resort Group.
12.	Lessee Federal Tax ID No.:	.
13.	Early Purchase Option:	Option Date: N/A.
		Option Price $N/A.
14.	Expiration Date:	N/A.
15.	Estimated Residual Value:	See Schedule 2 to this Annex B.
16.	Lessor's Residual Risk Amount:	See Schedule 2 to this Annex B.
17.	Daily Lease Rate Factor:	0.014861%.
18.	[INTENTIONALLY LEFT BLANK]
19.	[INTENTIONALLY LEFT BLANK].
20.	Extension Term Interest Rate:	A per annum rate equal to four hundred twenty five (425) basis points over the then current yield to maturity of U.S. Treasury Notes having a one year maturity

C. Term and Rent.

1. Interim Rent. For the period from and including the Commencement Date to the Basic Term Commencement Date ("Interim Period"), Lessee shall pay as Rent ("Interim Rent") for each unit of

Aircraft, the product of the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such unit times the number of days in the Interim Period. Interim Rent shall be due on February 01, 2002.

As used herein, the following terms shall have the following meanings:

"Interest Period" shall mean the period beginning on the Lease Commencement Date to and including the last day of the month immediately preceding the first Rent Payment Date; and thereafter from the first day of the month that includes the most recent Rent Payment Date to and including the last day of the month immediately preceding the subsequent Rent Payment Date.

"Interest Rate" shall mean that percentage per annum calculated as the sum of (a) the LIBOR Rate redetermined monthly, plus (b) three hundred twenty-five (325) basis points.

"LIBOR Rate" shall mean, with respect to any Interest Period occurring during the term of the Lease, an interest rate per annum equal at all times during such Interest Period to the quotient of (1) the rate per annum as determined by Lessor at which deposits of U.S. Dollars in immediately available and freely transferable funds are offered at 11:00 a.m. (London, England time) two (2) Business Days before the commencement of such Interest Period to major banks in the London interbank market for a period of ninety (90) days and in an amount equal or comparable to the Unamortized Principal Balance, divided by (2) a number equal to 1.00 minus the aggregate (without duplication) of the rates (expressed as a decimal fraction) of the LIBOR Reserve Requirements current on the date three (3) Business Days prior to the first day of the Interest Period.

"LIBOR Reserve Requirements" shall mean the daily average for the applicable Interest Period of the maximum rate applicable to Lessor or its participants or assignees, if any, at which reserves (including, without limitation, any supplemental, marginal and emergency reserves) are imposed during such Interest Period by the Board of Governors of the Federal Reserve System (or any successor) on "Eurocurrency liabilities", as defined in such Board's Regulation D (or in respect of any other category of liabilities that include deposits by reference to which the interest rates on Eurodollar loans is determined or any category of extensions of credit or other assets that include loans by non-United States offices of any lender to United States residents), having a term equal to such Interest Period, subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto.

Agreement, or the adoption or making after such date of any interpretations, directives or regulations (whether or not having the force of law) by any court, governmental authority or reserve bank charged with the interpretation or administration thereof, it shall be or become unlawful or impossible to make, maintain, or fund the transaction hereunder at the LIBOR Rate, then Lessor promptly shall give notice to Lessee of such determination, and Lessor and Lessee shall negotiate in good faith a mutually acceptable alternative method of calculating the Interest Rate and shall execute and deliver such documents as reasonably may be required to incorporate such alternative method of calculating the Interest Rate in this Schedule, within thirty (30) days after the date of Lessor's notice to Lessee. If the parties are unable mutually to agree to such alternative method of calculating the Interest Rate in a timely fashion, on the Rent Payment Date next succeeding the expiration of such thirty (30) day period Lessee shall purchase all (but not less than all) of the Aircraft and shall pay to Lessor, in cash, the purchase price for the Aircraft so purchased, determined as hereinafter provided. The purchase price of the Aircraft shall be an amount equal to the Stipulated Loss Value of such Aircraft calculated in accordance with Annex F as of the date of payment, together with all rent and other sums then due on such date, plus all taxes and charges upon sale and all other reasonable and documented expenses incurred by Lessor in connection with such sale. Upon satisfaction of the conditions specified in this paragraph, Lessor will transfer, on an AS IS BASIS, all of Lessor's interest in and to the Aircraft. Lessor shall not be required to make and may specifically disclaim any representation or warranty as to the condition of the Aircraft and other matters. Upon satisfaction of the conditions specified in this paragraph, Lessor shall execute and deliver to Lessee such Uniform Commercial Code statements of termination as reasonably may be required in order to terminate any interest of Lessor in and to the Aircraft.

D. [INTENTIONALLY LEFT BLANK]

E. Insurance.

1.: Public Liability: $50,000,000.00 total liability per occurrence.
2.: Casualty and Property Damage: An amount equal to the higher of the Stipulated Loss Value or the full replacement cost of the Aircraft.

F. Additional Maintenance Requirements.

G. Amendments to Lease.

IN WITNESS WHEREOF, Lessee and Lessor have caused this Annex B to be executed by their duly authorized representatives as of the date first above written.

LESSOR:		LESSEE:
General Electric Capital Corporation		Mandalay Resort Group
By:	STEPHEN B. PETERSON	By:	GLENN SCHAEFFER
Name:	Stephen B. Peterson	Name:	Glenn Schaeffer
Title:	Sr. Risk Analyst	Title:	President

Schedule 1
To Annex B

AMORTIZATION TABLE

Payment Number	Beginning Balance	Debt Service	Interest At 5.35000%	Principal	Ending Balance
01	12,475,000.00	200,004.29	55,617.71	144,386.58	12,330,613.42
02	12,330,613.42	199,360.56	54,973.99	144,386.58	12,186,226.84
03	12,186,226.84	198,716.84	54,330.26	144,386.58	12,041,840.26
04	12,041,840.26	198,073.12	53,686.54	144,386.58	11,897,453.68
05	11,897,453.68	197,429.39	53,042.82	144,386.58	11,753,067.10
06	11,753,067.10	196,785.67	52,399.09	144,386.58	11,608,680.53
07	11,608,680.53	196,141.95	51,755.37	144,386.58	11,464,293.95
08	11,464,293.95	195,498.22	51,111.64	144,386.58	11,319,907.37
09	11,319,907.37	194,854.50	50,467.92	144,386.58	11,175,520.79
10	11,175,520.79	194,210.78	49,824.20	144,386.58	11,031,134.21
11	11,031,134.21	193,567.05	49,180.47	144,386.58	10,886,747.63
12	10,886,747.63	192,923.33	48,536.75	144,386.58	10,742,361.05
13	10,742,361.05	192,279.61	47,893.03	144,386.58	10,597,974.47
14	10,597,974.47	191,635.88	47,249.30	144,386.58	10,453,587.89
15	10,453,587.89	190,992.16	46,605.58	144,386.58	10,309,201.31
16	10,309,201.31	190,348.44	45,961.86	144,386.58	10,164,814.73
17	10,164,814.73	189,704.71	45,318.13	144,386.58	10,020,428.15
18	10,020,428.15	189,060.99	44,674.41	144,386.58	9,876,041.58
19	9,876,041.58	130,662.63	44,030.69	86,631.94	9,789,409.63
20	9,789,409.63	130,276.39	43,644.45	86,631.94	9,702,777.69
21	9,702,777.69	129,890.16	43,258.22	86,631.94	9,616,145.75
22	9,616,145.75	129,503.93	42,871.98	86,631.94	9,529,513.81
23	9,529,513.81	129,117.69	42,485.75	86,631.94	9,442,881.86
24	9,442,881.86	128,731.46	42,099.52	86,631.94	9,356,249.92
25	9,356,249.92	128,345.22	41,713.28	86,631.94	9,269,617.98
26	9,269,617.98	127,958.99	41,327.05	86,631.94	9,182,986.04
27	9,182,986.04	127,572.76	40,940.81	86,631.94	9,096,354.10
28	9,096,354.10	127,186.52	40,554.58	86,631.94	9,009,722.15
29	9,009,722.15	126,800.29	40,168.35	86,631.94	8,923,090.21
30	8,923,090.21	126,414.05	39,782.11	86,631.94	8,836,458.27
31	8,836,458.27	126,027.82	39,395.88	86,631.94	8,749,826.33
32	8,749,826.33	125,641.59	39,009.64	86,631.94	8,663,194.38
33	8,663,194.38	125,255.35	38,623.41	86,631.94	8,576,562.44
34	8,576,562.44	124,869.12	38,237.17	86,631.94	8,489,930.50
35	8,489,930.50	124,482.88	37,850.94	86,631.94	8,403,298.56
36	8,403,298.56	124,096.65	37,464.71	86,631.94	8,316,666.62
37	8,316,666.62	123,710.41	37,078.47	86,631.94	8,230,034.67
38	8,230,034.67	123,324.18	36,692.24	86,631.94	8,143,402.73
39	8,143,402.73	122,937.95	36,306.00	86,631.94	8,056,770.79
40	8,056,770.79	122,551.71	35,919.77	86,631.94	7,970,138.85
41	7,970,138.85	122,165.48	35,533.54	86,631.94	7,883,506.90
42	7,883,506.90	121,779.24	35,147.30	86,631.94	7,796,874.96
43	7,796,874.96	121,393.01	34,761.07	86,631.94	7,710,243.02
44	7,710,243.02	121,006.78	34,374.83	86,631.94	7,623,611.08

45	7,623,611.08	120,620.54	33,988.60	86,631.94	7,536,979.13
46	7,536,979.13	120,234.31	33,602.37	86,631.94	7,450,347.19
47	7,450,347.19	119,848.07	33,216.13	86,631.94	7,363,715.25
48	7,363,715.25	119,461.84	32,829.90	86,631.94	7,277,083.31
49	7,277,083.31	119,075.61	32,443.66	86,631.94	7,190,451.37
50	7,190,451.37	118,689.37	32,057.43	86,631.94	7,103,819.42
51	7,103,819.42	118,303.14	31,671.20	86,631.94	7,017,187.48
52	7,017,187.48	117,916.90	31,284.96	86,631.94	6,930,555.54
53	6,930,555.54	117,530.67	30,898.73	86,631.94	6,843,923.60
54	6,843,923.60	117,144.44	30,512.49	86,631.94	6,757,291.65
55	6,757,291.65	116,758.20	30,126.26	86,631.94	6,670,659.71
56	6,670,659.71	116,371.97	29,740.03	86,631.94	6,584,027.77
57	6,584,027.77	115,985.73	29,353.79	86,631.94	6,497,395.83
58	6,497,395.83	115,599.50	28,967.56	86,631.94	6,410,763.88
59	6,410,763.88	115,213.27	28,581.32	86,631.94	6,324,131.94
60	6,324,131.94	6,352,327.03	28,195.09	6,324,131.94	0.00

(1): *The Principal, Interest and Unamortized Principal Balance as of any Rent Payment Date shall be equal to the Capitalized Lessor's Cost of such unit multiplied by the appropriate percentage derived from the above table

SCHEDULE 2
TO ANNEX B

OPTION DATE	ESTIMATED RESIDUAL VALUE (as % of Capitalized Lessor's Cost)	LESSOR'S RESIDUAL RISK AMOUNT (as % of Capitalized Lessor's Cost)
End of Basic Term	67.33	11.73
End of First Renewal Term	58.89	7.10
End of Second Renewal Term	50.00	6.21

ANNEX C

BILL OF SALE

Mandalay Resort Group (the "Seller"), in consideration of the sum of Twelve Million Four Hundred Seventy Five Thousand and 00/100 Dollars ($12,475,000.00) paid by General Electric Capital Corporation (the "Buyer"), receipt of which is acknowledged, hereby grants, sells, assigns, transfers and delivers to Buyer all of Seller's right, title and interest in the Aircraft and related equipment (collectively, the "Aircraft") more particularly described on Annex A hereto, in an AS-IS, WHERE-IS condition, with no warranties, express or implied, of any kind or nature, except that Seller warrants to Buyer that (i) Seller has the right to, and does hereby, sell and convey all of its interest in the Aircraft to Buyer, and (ii) the Aircraft is free and clear of all liens, claims and encumbrances, other than the security interest granted to Buyer pursuant to that certain Aircraft Lease Agreement, dated (the "Lease Agreement").

IN WITNESS WHEREOF, Seller has executed this Bill of Sale this day of , 2001.

SELLER:		BUYER:
Mandalay Resort Group		General Electric Capital Corporation
By:	GLENN SCHAEFFER	By:	STEPHEN B. PETERSON
Title:	President	Title:	Sr. Rick Analyst

[for used aircraft]

ANNEX E

CERTIFICATE OF ACCEPTANCE

AIRCRAFT LEASE AGREEMENT dated as of (the "Lease"), between General Electric Capital Corporation, as lessor (the "Lessor"), and Mandalay Resort Group, as lessee (the "Lessee").

A.

B.

Representations by Lessee: Lessee hereby represents and warrants to Lessor that on the date hereof:

(1): The representations and warranties of Lessee set forth in the Lease and all certificates and opinions delivered in connection therewith were true and correct in all respects when made and are true and correct as of the date hereof.
(2): Lessee has satisfied or complied with all conditions precedent and requirements set forth in the Lease, which are required to be or to have been satisfied or complied with on or prior to the date hereof.
(3): No Default or Event of Default under the Lease has occurred and is continuing on the date hereof.
(4): Lessee has obtained, and there are in full force and effect, such insurance policies with respect to the Aircraft, as are required to be obtained under the terms of the Lease.
(5): Lessee has furnished no equipment for the Aircraft other than as sold to Lessor and as stated on Annex A hereto or permitted as an addition thereto pursuant to the Lease.
(6): The Lessee has undertaken, at Lessee's expense, a survey of the Aircraft completed by a consultant named by Lessor, which survey includes (i) a complete inventory of the Aircraft, including, without limitation, engines, spare parts and avionics, (ii) review of all operating and maintenance logs (including any computerized program under which the Aircraft has been maintained); (iii) physical inspection of the Aircraft (including a demonstration of flight); and (iv) an analysis of the cost of the Aircraft as compared to similarly equipped Aircraft of same model and approximately the same age, airframe, engine hours and over all condition. Such survey and its availability to Lessee shall not constitute any representation or warranty by Lessor to Lessee of any kind with respect to the Aircraft, its condition or otherwise.
(7): A report of the results of the survey required by paragraph 6 above, has been delivered to Lessor and since the date thereof, there has not occurred any material change in the configuration or condition of the Aircraft (except such modifications or repairs specified in such survey as being necessary to undertake) and neither engine has accrued more than fifty (50) operating hours since the date of such survey.
(8): The Lessee has inspected the Aircraft and all pertinent records therefor and the Aircraft has no damage history.
(9): The nameplates required to be affixed to the Aircraft and to each engine pursuant to the MAINTENANCE Section of the Lease have been duly affixed.

Date and Delivery of Acceptance:

IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be duly executed by its officers thereunto duly authorized.

		Lessee:
		Mandalay Resort Group
		By:		GLENN SCHAEFFER
		Title:		President
		Date:

Annex F

Stipulated Loss and Termination Values

The Stipulated Loss and Termination Value of the Aircraft shall be the percentage of Capitalized Lessor's Cost of the aircraft set forth opposite the applicable rent payment.

Capitalized Lessor's Cost $12,475,000.00

Basic Rent Payment No.	Termination Value	Stipulated Loss Value
1	101.843	105.744
2	100.685	104.538
3	99.528	103.331
4	98.370	102.124
5	97.213	100.918
6	96.056	99.711
7	94.898	98.505
8	93.741	97.298
9	92.583	96.092
10	91.426	94.885
11	90.269	93.678
12	89.111	92.472
13	87.954	91.265
14	86.796	90.059
15	85.639	88.852
16	84.481	87.645
17	83.324	86.439
18	82.167	85.232
19	81.472	84.489
20	80.778	83.745
21	80.083	83.001
22	79.389	82.258
23	78.694	81.514
24	78.000	80.770
25	77.306	80.027
26	76.611	79.283
27	75.917	78.540
28	75.222	77.796
29	74.528	77.052
30	73.833	76.309
31	73.139	75.565
32	72.444	74.821
33	71.750	74.078
34	71.056	73.334
35	70.361	72.591
36	69.667	71.847
37	68.972	71.103
38	68.278	70.360
39	67.583	69.616
40	66.889	68.872
41	66.194	68.129
42	65.500	67.385

43	64.806	66.642
44	64.111	65.898
45	63.417	65.154
46	62.722	64.411
47	62.028	63.667
48	61.333	62.923
49	60.639	62.180
50	59.944	61.436
51	59.250	60.693
52	58.556	59.949
53	57.861	59.205
54	57.167	58.462
55	56.472	57.718
56	55.778	56.974
57	55.083	56.231
58	54.389	55.487
59	53.694	54.744
60	53.000	54.000

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AIRCRAFT LEASE AGREEMENT dated as of December 28, 2001 ( "Agreement" )
ANNEX A Description of Aircraft, Lessor's Cost, and Aircraft Markings
ANNEX B DATED THIS TO AIRCRAFT LEASE AGREEMENT DATED AS OF
Schedule 1 To Annex B
AMORTIZATION TABLE
SCHEDULE 2 TO ANNEX B
ANNEX C BILL OF SALE
ANNEX E CERTIFICATE OF ACCEPTANCE
Annex F Stipulated Loss and Termination Values
EX-10.99 14 a2077883zex-10_99.htm EXHIBIT 10.99
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Exhibit 10.99

EXECUTION VERSION

AMENDMENT TO STOCK PURCHASE AGREEMENT

AMENDMENT, dated as of February 6, 2002 (this "Amendment"), to the Stock Purchase Agreement, dated as of September 8, 2000, as amended by the First Amendment thereto, dated as of January 2, 2001, by the Second Amendment thereto, dated as of March 21, 2001, and by the Amendment to Stock Purchase Agreement and Collateral Agreement (the "September 15 Amendment"), dated as of September 15, 2001 (as so amended, the "Stock Purchase Agreement"), among Bank of America, N.A., a national banking association, as Share Seller ("Share Seller"), MBG Trust, a Delaware business trust (the "Trust"), and Mandalay Resort Group, a Nevada corporation ("Share Purchaser").

W I T N E S S E T H

WHEREAS, the parties have entered into the Stock Purchase Agreement; and

WHEREAS, the parties desire to provide for the modification of the Stock Purchase Agreement as set forth herein.

NOW THEREFORE, in consideration of their mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby mutually covenant and agree as follows:

1. Defined Terms. Capitalized terms used but not defined herein have the meanings specified in the Stock Purchase Agreement.

2. Amendments to Definitions.

(a) Section 1.1 of the Stock Purchase Agreement is hereby amended as follows:

(i) in the definition of "Maturity Date", the date "March 29, 2002" shall be replaced with "March 31, 2003";

(ii) in the definition of "Maximum Deliverable Shares", the number "15,000,000" shall be replaced with "25,000,000";

(b) The definition of "Spread" in Section 1.1 of the Stock Purchase Agreement shall be amended and restated in its entirety to read as follows:

"Spread" means 195 basis points per annum (the "Initial Spread"), as such rate may be adjusted from time to time pursuant to Section 7.9; provided that if an Event of Default with respect to Share Purchaser has occurred and is continuing, the otherwise-prevailing spread (as so adjusted) shall be increased by 100 basis points per annum; provided, further, that if the spread or margin (however defined) payable by Share Purchaser with respect to Eurodollar borrowings under any of the Revolving Loan Agreement, the Term Loan Agreement or the Capital Markets Term Loan Agreement, each dated as of August 22, 2001 and as amended or supplemented from time to time, in each case among Share Purchaser, Share Seller, the lenders named therein and the other parties thereto, shall at any time during the term of this Transaction be increased above that in effect as of February 6, 2002 in accordance with the terms thereof, by agreement of the parties thereto, or otherwise, then the Initial Spread shall be proportionally increased.

(c) The definition of "Mandatory Prepayment Event" in Section 1.1 of the Stock Purchase Agreement is hereby amended (i) by replacing the number "9.0%" with "8.0%", (ii) by deleting the word "or" following clause (iv), and (iii) by including the following clauses (vi), (vii), (viii) and (ix):

"(vi) the Closing Price of the Shares is at or below $15.92 (subject to adjustment in accordance with Article VII);

(vii) the Closing Price of the Shares is at or below $13.27 (subject to adjustment in accordance with Article VII);

(viii) the Closing Price of the Shares is at or below $9.29 (subject to adjustment in accordance with Article VII); or

(ix) the aggregate notional amount (however described) at any time of all outstanding swap, forward, option, collar, repurchase or similar transactions entered into by Share Purchaser (whether with Share Seller or other counterparties) with respect to the Shares ("Other Transactions"), including the Aggregate Forward Amount hereunder, exceeds $200,000,000."

(d) Section 2.4(b)(ii) of the Stock Purchase Agreement is hereby amended and restated in its entirety to read as follows:

(A) In the case of a Mandatory Prepayment Event set forth in clauses (i), (iii), (iv), (v), (viii) or (ix) of the definition thereof, Share Seller may designate a Mandatory Prepayment Date with respect to the entire Aggregate Forward Amount;

(B) in the case of a Mandatory Prepayment Event set forth in clause (ii) of the definition thereof, Share Seller may designate a Mandatory Prepayment Date with respect to a Mandatory Prepayment Amount such that the Mandatory Prepayment Share Number following such Mandatory Prepayment Date is less than but as close as reasonably practicable to 8.0% of the total number of outstanding Shares;

(C) in the case of a Mandatory Prepayment Event set forth in clause (vi) of the definition thereof, Share Seller may designate a Mandatory Prepayment Date with respect to a Mandatory Prepayment Amount equal to 20% of the Aggregate Forward Amount as of the Mandatory Prepayment Date; and

(D) in the case of a Mandatory Prepayment Event set forth in clause (vii) of the definition thereof, Share Seller may designate a Mandatory Prepayment Date with respect to a Mandatory Prepayment Amount equal to 50% of the Aggregate Forward Amount as of the Mandatory Prepayment Date (after giving effect to any Mandatory Prepayment Date designated pursuant to clause (C) above, which may occur on the same date as a Mandatory Prepayment Date designated pursuant to this clause (D)).

The Mandatory Prepayment Date designated by any such notice described in this subparagraph (ii) shall be no less than 3 Exchange Business Days or more than 20 Exchange Business Days from the date such notice is effective. Upon receipt of such notice, Share Purchaser shall promptly (but in no event later than the second Exchange Business Day following such receipt) deliver written notice to Share Seller, the Trust and the Collateral Agent setting forth its settlement election pursuant to Article III with respect to such Mandatory Prepayment Date. Notwithstanding the foregoing, in the case of a Mandatory Prepayment Event set forth in clause (v) of the definition thereof, if designating a Mandatory Prepayment Date as set forth in this subparagraph (ii) and otherwise in accordance with the terms of this Agreement would be inconsistent with the applicable order or directive of the applicable gaming regulatory authority, the parties shall negotiate in good faith to resolve such inconsistency in a manner that preserves the fundamental economic terms of this Transaction and complies with such order or directive.

Notwithstanding anything to the contrary herein, if, at any time during the term of this Transaction, any Other Transaction entered into by Share Purchaser contains early unwind, termination or similar events (however described) that permit the termination, liquidation or unwind of such Other Transaction (in whole or in part) on terms that Share Seller deems are more favorable in any material respect than those set forth in clauses (vi)—(viii) of the definition of "Mandatory Prepayment Event"

and in clauses (A), (C) and (D) above, Share Seller shall be entitled to deem this Transaction to be amended to incorporate such more favorable terms. Share Purchaser shall promptly notify Share Seller of any such terms in any Other Transaction that may be more favorable to Share Seller than the terms of this Transaction set forth above.

3. Amendment Fee. On February 11, 2002, Share Purchaser shall pay to Share Seller an amount equal to $1,500,000.

4. Optional Prepayment. The parties acknowledge and agree that an Optional Prepayment to which physical settlement applied occurred with an Optional Prepayment Date of February 11, 2002 and an Optional Prepayment amount of $3,150,655. The amount of interest payable in respect of such Optional Prepayment pursuant to Section 2.4(c) of the Stock Purchase Agreement was $3,241 and no breakage costs were payable in respect of such Optional Prepayment pursuant to Section 2.4(d) of the Stock Purchase Agreement.

5. Mandatory Prepayment Event Notice. Share Purchaser shall promptly notify Share Seller upon the occurrence of a Mandatory Prepayment Event set forth in clause (ix) of the definition thereof at any time during the term of this Transaction.

6. Interim Settlement Adjustment. Section 4 of the September 15 Amendment is hereby amended by replacing "any calendar quarter during the term of this Stock Purchase Agreement" with "the calendar quarters ending in September 2001 and December 2001."

7. Repricing. Section 7.9 of the Stock Purchase Agreement is hereby amended by restoring such provision as it was in effect prior to the September 15 Amendment.

8. Adjustments. The Calculation Agent shall make appropriate adjustments, if any, to interest and other calculations under the Stock Purchase Agreement as a result of this Amendment, including, without limitation, to account for the amendment to the definition of Spread.

9. Effect of the Amendment. Except as amended hereby, the Stock Purchase Agreement is ratified and confirmed and continues in full force and effect. All references to the Stock Purchase Agreement in the Stock Purchase Agreement or any document related thereto shall for all purposes constitute references to the Stock Purchase Agreement as amended hereby. For the avoidance of doubt, the provisions of Section 9.10 of the Stock Purchase Agreement apply to this Amendment as if such provisions were stated in full herein.

10. Miscellaneous. This Amendment constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. No amendment, modification or waiver in respect of this Amendment will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties. This Amendment may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. The headings used in this Amendment are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Amendment.

11. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO CHOICE OF LAW PRINCIPLES).

IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first above written.

MANDALAY RESORT GROUP, as Share Purchaser
By:	/s/ GLENN SCHAEFFER
	Name: Glenn Schaeffer Title: President, Chief Financial Officer and Treasurer
MBG TRUST, as the Trust
By:	WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee
	By:	/s/ JEANNE M. OLLER Name: Jeanne M. Oller Title: Financial Services Officer
BANK OF AMERICA, N.A., as Share Seller
By:	/s/ WILLIAM C. CACCAMISE
	Name: William C. Caccamise Title: Authorized Signatory

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AMENDMENT TO STOCK PURCHASE AGREEMENT
W I T N E S S E T H
EX-21 15 a2077883zex-21.htm EXHIBIT 21
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Exhibit 21

Subsidiaries of the Company

Set forth below is information concerning the Company's (MRG) subsidiaries and their respective ownership.

Name	Jurisdiction and Form	Percentage of Ownership
Circus Circus Casinos, Inc.(1)	Nevada corporation	100% MRG
Slots-A-Fun, Inc.(2)	Nevada corporation	100% MRG
Edgewater Hotel Corporation(3)	Nevada corporation	100% MRG
Colorado Belle Corp.(4)	Nevada corporation	100% MRG
New Castle Corp.(5)	Nevada corporation	100% MRG
Ramparts, Inc.(6)	Nevada corporation	100% MRG
Circus Circus Mississippi, Inc.(7)	Mississippi corporation	100% MRG
Mandalay Corp.(8)	Nevada corporation	100% MRG
Mandalay Development	Nevada corporation	100% MRG
Ramparts International ("RI")	Nevada corporation	100% MRG
Galleon, Inc. ("GI")	Nevada corporation	100% MRG
M.S.E. Investments, Incorporated ("MSE")	Nevada corporation	100% MRG
Last Chance Investments, Incorporated ("LCI")	Nevada corporation	100% MRG
Goldstrike Investments, Incorporated ("GSI")	Nevada corporation	100% MRG
Diamond Gold, Inc. ("DGI")	Nevada corporation	100% MRG
Oasis Development Company, Inc. ("ODC")	Nevada corporation	100% MRG
Circus Circus Leasing, Inc.	Nevada corporation	78.7% MRG
Circus Circus Michigan, Inc. ("CCM")	Michigan corporation	100% MRG
Go Vegas	Nevada corporation	100% MRG
MRG Vegas Portal, Inc. ("MRGV")	Nevada corporation	100% MRG
Mandalay Marketing and Events	Nevada corporation	100% MRG
Mandalay Place	Nevada corporation	100% MRG
Railroad Pass Investment Group ("RPIG")(9)	Nevada partnership	70% MSE 20% LCI 10% GSI
Jean Development Company ("JDC")(10)	Nevada partnership	40% MSE 40% LCI 20% GSI
Jean Development West ("JDW")(11)	Nevada partnership	40% MSE 40% LCI 12% GSI 8% DGI
Gold Strike Fuel Company	Nevada partnership	16²/3% MSE 16²/3% LCI 16²/3% GSI 50% ODC
Jean Fuel Company West	Nevada partnership	40% MSE 40% LCI 12% GSI 8% ODC
Nevada Landing Partnership ("NLP")	Illinois partnership	40% MSE 40% LSI 5% GSI 15% DGI

Gold Strike L.V. ("GSLV")	Nevada partnership	52% MSE 39% LCI 6.5% GSI 2.5% DGI
Jean Development North ("JDN")	Nevada partnership	47.5% MSE 38.5% LCI 5% GSI 9% DGI
Other Interests:
Circus and Eldorado Joint Venture	Nevada partnership	50% GI
Detroit Entertainment, L.L.C.	Michigan limited liability company	53.5% CCM
Elgin Riverboat Resort	Illinois partnership	50% NLP
LasVegas.Com, LLC	Nevada limited liability company	50% MRGV
Victoria Partners	Nevada partnership	50% GSLV

(1): Doing business as Circus Circus Hotel and Casino-Las Vegas and Circus Circus Hotel and Casino-Reno.
(2): Doing business as Slots-A-Fun Casino.
(3): Doing business as Edgewater Hotel and Casino.
(4): Doing business as Colorado Belle Hotel and Casino.
(5): Doing business as Excalibur Hotel and Casino.
(6): Doing business as Luxor Hotel and Casino.
(7): Doing business as Gold Strike Casino Resort.
(8): Doing business as Mandalay Bay Resort and Casino
(9): Doing business as Railroad Pass Hotel and Casino.
(10): Doing business as Gold Strike Hotel and Gambling Hall.
(11): Doing business as Nevada Landing Hotel and Casino.

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Subsidiaries of the Company
EX-23 16 a2077883zex-23.htm EXHIBIT 23
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Exhibit 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our report dated February 27, 2002 included in Mandalay Resort Group's Annual Report on Form 10-K for the year ended January 31, 2002 into Mandalay's previously filed Form S-8 Registration Statements File Nos. 2-91950, 2-93578, 33-18278, 33-29014, 33-39215, 33-56420, 33-53303, 333-51073, 333-93803, 333-93805 and 333-47268, Mandalay's previously filed Form S-3 Registration Statement File No. 333-60975 and Mandalay's previously filed Form S-4 Registration Statement File No. 333-82936.

ARTHUR ANDERSEN LLP

Las Vegas, Nevada
April 26, 2002

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Exhibit 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
EX-99 17 a2077883zex-99.htm EXHIBIT 99

Exhibit 99

April 29, 2002

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0408

Re:: LETTER TO SECURITIES AND EXCHANGE COMMISSION PURSUANT TO TEMPORARY NOTE 3T

Ladies and Gentlemen:

Pursuant to Temporary Note 3T to Article 3 of Regulation S-X, Mandalay Resort Group has obtained a letter of representation from Arthur Andersen LLP ("Andersen"), its independent public accountants, stating that the January 31, 2002 audit was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Andersen personnel working on the audit and availability of national office consultation. Availability of personnel at foreign affiliates of Andersen is not relevant to this audit.

Sincerely,

Mandalay Resort Group

GLENN SCHAEFFER

Glenn Schaeffer
President, Chief Financial Officer and Treasurer

-----END PRIVACY-ENHANCED MESSAGE-----

General Electric Capital Corporation

MANDALAY RESORT GROUP

STEPHEN B. PETERSON

Sr. Risk Analyst