Collateral Agreement - MBG Trust, Mandalay Resort Group, Bank of America NA and Banc of America Securities LLC
COLLATERAL AGREEMENT
COLLATERAL AGREEMENT (this "AGREEMENT"), dated as of September 8, 2000,
among MBG Trust, a Delaware business trust ("PLEDGOR"), Mandalay Resort Group, a
Nevada corporation ("SHARE PURCHASER"), Bank of America, N.A., a national
banking association ("SHARE SELLER," and together with Share Purchaser, the
"SECURED PARTIES"), and Banc of America Securities LLC, a Delaware limited
liability company, as "securities intermediary" (as defined in Section 8-102(a)
of the UCC) and collateral agent for the Secured Parties (the "COLLATERAL
AGENT").
W I T N E S S E T H:
WHEREAS, Share Purchaser, Share Seller and Pledgor have entered into that
certain Stock Purchase Agreement, dated as of the date hereof (the "STOCK
PURCHASE AGREEMENT"), pursuant to which Share Purchaser has agreed to purchase,
and Share Seller has agreed to sell, a certain number of shares of the common
stock of Share Purchaser (the "SHARES");
WHEREAS, Shares will be purchased pursuant to the Stock Purchase Agreement
and delivered to the Collateral Agent; and
WHEREAS, in order to secure the obligations of Share Purchaser and Share
Seller under the Stock Purchase Agreement, Pledgor has agreed to enter into this
Agreement pursuant to which the Initial Shares, any Purchaser Interim Settlement
Shares and any Substitute Collateral (each as defined herein) shall be pledged
to the Collateral Agent for the benefit of the Secured Parties.
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. DEFINITIONS.
1.1 CERTAIN DEFINITIONS. Capitalized terms not defined in this
Section 1.1 or used and not otherwise defined herein shall have the meanings set
forth in the Stock Purchase Agreement.
"CASH COLLATERAL" means funds denominated in United States dollars and
pledged hereunder to the Collateral Agent.
"CLEARANCE SYSTEM" means The Depository Trust Company, or any
successor to or transferee of such clearance system.
"COLLATERAL" has the meaning set forth in Section 4(a) of this
Agreement.
"COLLATERAL ACCOUNT" means the account established pursuant to Section
2.1(a) of this Agreement.
<PAGE>
"COLLATERAL AGENT" has the meaning set forth in the initial paragraph
of this Agreement.
"COLLATERAL SHARES" means all Shares Delivered to the Collateral Agent
and credited to the Collateral Account from time to time, including the Initial
Shares, Purchaser Interim Settlement Shares, Make-Whole Shares, Interest
Settlement Shares and Interest Make-Whole Shares.
"DELIVERY" means (a) in the case of certificated securities (other
than those described in clause (c)), delivery to the Collateral Agent of
certificates representing such securities, registered in the name of the
Collateral Agent or its nominee, free and clear of all liens, security interests
or other encumbrances of any kind (other than the Security Interests),
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent, and the crediting of such securities to
the Collateral Account, (b) in the case of uncertificated securities,
registration by the issuer of such securities in the name of the Collateral
Agent or its nominee, accompanied by any required transfer tax stamps, and the
crediting of such securities to the Collateral Account, (c) in the case of
Initial Shares or any securities in respect of which security entitlements are
held through a securities intermediary, the crediting of such securities, free
and clear of all liens, security interests or other encumbrances of any kind
(other than the Security Interests), to a securities account of the Collateral
Agent at such securities intermediary or at another securities intermediary
satisfactory to the Collateral Agent, and (d) in the case of cash (including all
or any portion of the Cash Collateral), (i) with respect to cash delivered to
the Collateral Agent, in accordance with such delivery instructions as the
Collateral Agent may give to the relevant transferor from time to time by
written notice hereunder, (ii) with respect to cash delivered by the Collateral
Agent, in accordance with such delivery instructions as the transferee may give
to the Collateral Agent from time to time by written notice hereunder or (iii)
otherwise in accordance with the terms hereof. The terms "Deliver," "Delivered"
and "Delivering" have corresponding meanings.
"DELIVERY AMOUNT" has the meaning set forth in Section 2.7(b) of this
Agreement.
"DESIGNATED BROKER" means Banc of America Securities LLC.
"ELIGIBLE SUBSTITUTE COLLATERAL" means funds denominated in U.S.
dollars and U.S. Government Obligations.
"EXCESS AMOUNT" means, for any date on which the Collateral Agent
receives proceeds of the sale of Shares pursuant to Section 2.5(b)(i), the
excess, if any, of such proceeds over the amounts payable in respect thereof on
such date to Share Purchaser or Share Seller pursuant to Section 3.3 of the
Stock Purchase Agreement, as appropriate.
"FINANCING STATEMENT" means the financing statement(s) on form UCC-1
substantially in the form of Exhibit I hereto to be filed with the Secretary of
State of the State of Delaware.
"INDEMNIFIED PARTY" has the meaning set forth in Section 13(g) of this
Agreement.
2
<PAGE>
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended.
"LOCATION" means, with respect to any party, the place such party is
"deemed located" within the meaning of Section 9-103(3)(d) of the UCC.
"MERGER EVENT NOTICE" means a notice of any Merger Event or potential
Merger Event.
"OTHER LIENS" has the meaning set forth in Section 3(b)(iv) of this
Agreement.
"PLEDGOR" has the meaning set forth in the initial paragraph of this
Agreement.
"PROCEEDS" means all proceeds, including cash, instruments, securities
and other property, from time to time received, receivable or otherwise
distributed in respect of, in exchange for or upon the exercise or disposition
of any or all of the Collateral hereunder.
"RETURN AMOUNT" has the meaning set forth in Section 2.7(c) of this
Agreement.
"SECURED OBLIGATIONS" means the obligations secured under this
Agreement including (a) all obligations of Pledgor under this Agreement or the
Stock Purchase Agreement, (b) all obligations of Share Seller under the Stock
Purchase Agreement and (c) all obligations of Share Purchaser under the Stock
Purchase Agreement. The Secured Obligations shall include any interest, costs,
fees, expenses and indemnities which accrue on or with respect to any of the
foregoing, whether before or after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of
Pledgor.
"SECURED PARTIES" has the meaning set forth in the initial paragraph
of this Agreement.
"SECURITY" or "SECURITIES" has the meaning set forth in Section
8-102(a)(15) of the UCC.
"SECURITY INTERESTS" means the security interests in the Collateral
granted under this Agreement securing the Secured Obligations.
"SHARE PURCHASER" has the meaning set forth in the initial paragraph
of this Agreement.
"SHARE SELLER" has the meaning set forth in the initial paragraph of
this Agreement.
"SHARES" has the meaning set forth in the first Whereas clause on page
1.
"STOCK PURCHASE AGREEMENT" has the meaning set forth in the first
Whereas clause on page 1.
3
<PAGE>
"SUBSTITUTE COLLATERAL" means all Eligible Substitute Collateral,
distributions thereon and any Proceeds thereof transferred or Delivered to or in
the possession of or received by the Collateral Agent pursuant to this Agreement
and not transferred to Pledgor or released by the Collateral Agent hereunder.
"SUBSTITUTED SHARES" means, as of any date of determination, a number
of Shares equal to the Number of Shares as of such date MINUS the number of
Collateral Shares as of such date (excluding Make-Whole Shares, Interest
Settlement Shares and Interest Make-Whole Shares).
"TRUSTEE" means Wilmington Trust Company, not in its individual
capacity but solely in its capacity as trustee under the Trust Agreement.
"TEMPORARY CASH INVESTMENT" means any investment in (i) direct
obligations of the United States or any agency thereof, or obligations fully
guaranteed by the United States or any agency thereof; or (ii) repurchase
agreements with respect to securities described in clause (i) entered into with
an office in the United States of a bank or trust company the senior unsecured
long-term debt of which is rated at least "A+" or better by S&P, and "A1" or
better by Moody's; provided that in each case such investment matures within
three months from the date of acquisition thereof.
"TRUST AGREEMENT" means that certain Amended and Restated Trust
Agreement, dated as of the Closing Date, by and between Wilmington Trust
Company, as Trustee, and NMS Services (Cayman) Inc., in the form attached as
Exhibit II hereto.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"U.S. GOVERNMENT OBLIGATION" means any negotiable debt obligation
issued by the United States Treasury Department with a remaining maturity of not
more than one year.
"VALUATION DATE" means the last Business Day in each and every week
following any substitution of Collateral pursuant to Section 2.7(a)(i); PROVIDED
that Substitute Collateral remains in the Collateral Account on such date.
"VALUE" means, for any date of determination, (i) with respect to any
Shares, the Closing Price of such Shares on the immediately preceding Exchange
Business Day and (ii) with respect to any Eligible Substitute Collateral or
Substitute Collateral that is (A) cash, the amount thereof, or (B) a U.S.
Government Obligation, the bid price thereof on the immediately preceding
Exchange Business Day.
1.2 RULES OF CONSTRUCTION.
Definitions contained herein apply equally to both the singular and
plural forms of the defined terms. The words "include" and "including" shall be
deemed to be followed by the phrase "without limitation." The terms "herein,"
"hereof" and "hereunder" and other words of similar import appearing in this
Agreement refer to this Agreement as a whole and not to any particular Section,
paragraph or subdivision. The Section titles in this Agreement appear as a
4
<PAGE>
matter of convenience only and shall not affect the interpretation of this
Agreement. Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and permitted assigns of such party.
2. MATTERS RELATING TO THE COLLATERAL.
2.1 ESTABLISHMENT OF COLLATERAL ACCOUNT; INITIAL SHARES; DELIVERY AND
RETENTION OF COLLATERAL; EXCESS AMOUNTS; DELIVERY OF SHARES.
(a) ESTABLISHMENT OF COLLATERAL ACCOUNT. The Collateral Agent is
hereby authorized to establish in the name of the Collateral Agent on behalf of
the Secured Parties an account (the "COLLATERAL ACCOUNT") in or to which the
Collateral is to be deposited or credited, all pursuant to and in accordance
with this Agreement.
(b) DELIVERY OF INITIAL SHARES. At the request of Share Seller on any
Initial Period Date, Pledgor agrees on behalf of Share Seller to purchase
Initial Shares in accordance with Section 2.2 of the Stock Purchase Agreement
and to immediately Deliver such Initial Shares to the Collateral Agent for
credit to the Collateral Account. If any Delivery of Initial Shares is required
to be made on a day on which the Clearance System is not open for business, such
Delivery shall be made on the first succeeding day on which the Clearance System
is open for business.
(c) HOLDING OF COLLATERAL. The Collateral Agent shall hold all
Collateral in trust only and shall not release such Collateral or any Proceeds
thereof from the Collateral Account unless such release is expressly authorized
by the terms of this Agreement. The parties hereto hereby acknowledge and agree
that neither Pledgor nor the Secured Parties shall have any right to substitute,
sell, transfer, hypothecate, encumber or otherwise dispose of the Collateral or
any Proceeds thereof except as expressly authorized by the provisions of this
Agreement.
(d) INVESTMENT OF EXCESS AMOUNTS. The Collateral Agent shall invest
all Excess Amounts held by it on any date in Temporary Cash Investments maturing
not later than the next Exchange Business Day.
(e) DELIVERY OF SHARES. Except as otherwise determined by the
Collateral Agent in its sole discretion, deliveries of Collateral Shares to
Share Purchaser hereunder or releases of Collateral Shares for sale pursuant to
Section 2.6 shall be made first from Purchaser Interim Settlement Shares,
Make-Whole Shares, Interest Settlement Shares or Interest Make-Whole Shares, as
appropriate, and, if such Shares are insufficient, from other Collateral Shares.
2.2 INTEREST PAYMENTS AND COMMISSIONS.
(a) DIRECTION OF INTEREST PAYMENTS AND COMMISSIONS. Share Seller
agrees that Share Purchaser's Delivery to the Collateral Agent of any payments
in cash pursuant to Sections 2.3(a), (b) or (c), Sections 2.4(c) or (d) or
Section 3.7 of the Stock Purchase Agreement shall discharge Share Purchaser's
obligations under the Stock Purchase Agreement with respect to such payments.
Immediately upon receipt of any such payments, the Collateral Agent shall
Deliver such amounts to Pledgor.
5
<PAGE>
(b) DELIVERY OF SHARES IN LIEU OF INTEREST OR COMMISSIONS. Share
Seller agrees that Share Purchaser's Delivery to the Collateral Agent of any
Shares required to be delivered by Share Purchaser pursuant to Section 2.3(c),
Sections 2.4(c) or (d) or Section 3.7 of the Stock Purchase Agreement shall
discharge Share Purchaser's obligations under the Stock Purchase Agreement with
respect to such deliveries. The parties hereby direct the Collateral Agent, and
the Collateral Agent agrees, to release such Shares for sale pursuant to Section
2.6 in accordance with Sections 2.3(c), 3.5 and 3.6 of the Stock Purchase
Agreement, against payment to the Collateral Agent of the proceeds from such
sales. Immediately upon receipt of any such proceeds, such proceeds shall be
Delivered to Pledgor except to the extent Share Purchaser is entitled to receive
such proceeds under the Stock Purchase Agreement, in which case such proceeds
shall be Delivered to Share Purchaser. In addition, to the extent Share Seller
is required to deliver any remaining Shares to Share Purchaser pursuant to such
sections, the Collateral Agent shall deliver Collateral Shares to Share
Purchaser.
2.3 VOTING RIGHTS AND DIVIDENDS. (a) The Collateral Agent shall have
the right to receive in respect of the Collateral hereunder all dividends or
other distributions on the Collateral and Pledgor shall take all such action as
the Collateral Agent shall deem necessary or appropriate to give effect to such
right. All dividends or other distributions received with respect to the
Collateral shall be deposited in the Collateral Account. If notwithstanding the
provisions of this Agreement dividends or other payments and distributions on
the Collateral are received by Pledgor, Pledgor shall hold such assets in trust
for the benefit of the Secured Parties, segregate such assets from other assets
of Pledgor and forthwith Deliver such assets to the Collateral Agent as
Collateral in the same form as received (with any necessary endorsement).
(b) The parties hereby direct the Collateral Agent, and the
Collateral Agent agrees, to Deliver to Share Purchaser any cash dividend or
distribution with respect to the Shares to which Share Purchaser is entitled
under Section 7.8(a) of the Stock Purchase Agreement from any cash dividend or
distribution received by the Collateral Agent with respect to the Collateral
immediately upon receipt.
(c) The parties hereby direct the Collateral Agent, and the
Collateral Agent agrees, to deliver to Share Purchaser against the applicable
payment any Extraordinary Dividend to which Share Purchaser is entitled under
Section 7.8(b) of the Stock Purchase Agreement from any Extraordinary Dividend
received by the Collateral Agent with respect to the Collateral (subject to
netting as provided in such section). Share Seller agrees that Share Purchaser's
Delivery to the Collateral Agent of any payments in cash required pursuant to
Section 7.8(b) of the Stock Purchase Agreement (after taking into account any
netting provided for in such section) shall discharge Share Purchaser's
obligations under the Stock Purchase Agreement with respect to such payments.
Immediately upon receipt of any such payments (including by way of netting), the
Collateral Agent shall Deliver such amounts to Pledgor.
(d) The Collateral Agent shall have the right, to the extent
permitted by law, and Pledgor shall take all such action as may be necessary or
appropriate to give effect to such right, to vote and to give consents,
ratifications and waivers, and to take any other action with respect to any or
all of the Collateral Shares (or security entitlements in respect thereof),
including the receipt of any Merger Event Notice with the same force and effect
as if the Collateral Agent were the absolute and sole owner thereof. Except as
provided in Section 2.4,
6
<PAGE>
with respect to any matter on which holders of Shares are entitled to vote, give
consents, ratifications and waivers or take any such other action, the
Collateral Agent shall cause the Collateral Shares to be voted, such consents,
ratifications and waivers to be given and such other actions to be taken, in the
same proportion as the votes cast, consents ratifications and waivers given and
actions taken by holders of all other Shares.
2.4 MERGER EVENTS.
(a) If a Merger Event occurs during the term of the Transaction, the
Collateral Agent shall promptly forward any Merger Event Notice received by the
Collateral Agent to Share Seller and Share Purchaser. The parties hereby
instruct the Collateral Agent to tender the Collateral Shares at the address
specified in such Merger Event Notice on a date and at a time that is no later
than the latest date and time on which tenders may be made pursuant to such
Merger Event, as set forth in the Merger Event Notice. To the extent the
Collateral Agent as registered holder of Collateral Shares shall be entitled to
make any election with respect to the consideration for tendering its Shares in
connection with such Merger Event, the parties hereby instruct the Collateral
Agent to follow Share Seller's direction (after consultation by Share Seller
with Share Purchaser pursuant to the Stock Purchase Agreement) in connection
therewith.
(b) (i) If upon tender of such Shares, the Collateral Agent receives
any New Shares, the Collateral Agent shall credit such New Shares to the
Collateral Account, and for all purposes hereunder, such New Shares will be
deemed to be the Shares. If upon tender of such Shares, the Collateral Agent
receives cash, to the extent the Collateral Agent is not required to distribute
such amounts on the date of receipt, the Collateral Agent shall invest such cash
in Temporary Cash Investments maturing not later than the expected date of
distribution of such amounts. If upon tender of such Shares, the Collateral
Agent receives Other Consideration, the Collateral Agent shall credit such Other
Consideration to the Collateral Account.
(ii) In connection with a Merger Event subject to Section 7.3 of the
Stock Purchase Agreement, the parties agree that the Other Consideration
received by the Collateral Agent upon tender of the Collateral Shares shall be
deemed to be Shares for purposes of this Agreement.
(iii) In connection with a Merger Event subject to Section 7.4 of the
Stock Purchase Agreement, the parties hereby direct the Collateral Agent, and
the Collateral Agent agrees, to treat such Other Consideration as an
Extraordinary Dividend subject to the provisions of Section 2.3(c) hereof.
2.5 PRINCIPAL PAYMENTS.
(a) If with respect to any Principal Payment Date Share Purchaser
elects or is deemed to have elected physical settlement pursuant to the
provisions of Sections 3.1 and 3.2 of the Stock Purchase Agreement, the parties
hereby direct the Collateral Agent, and the Collateral Agent agrees, to deliver
to Share Purchaser from the Collateral Shares on the applicable Settlement Date
the number of Shares to which Share Purchaser is entitled under Section 3.2 of
the Stock Purchase Agreement against the applicable payment. In addition, Share
Seller agrees that Share Purchaser's Delivery to the Collateral Agent of its
payment with respect to such
7
<PAGE>
settlement shall discharge Share Purchaser's obligation under the Stock Purchase
Agreement with respect to such payment. Immediately upon receipt of such
payment, the Collateral Agent shall Deliver such amount to Pledgor.
(b) If with respect to any Principal Payment Date Share Purchaser is
entitled to elect and has elected net cash settlement pursuant to Sections 3.1
and 3.3 of the Stock Purchase Agreement:
(i) the parties hereby direct the Collateral Agent, and the
Collateral Agent agrees, to release a number of Collateral Shares equal to the
number of Settlement Shares for sale pursuant to Section 2.6 in accordance with
Sections 3.3, 3.5 and 3.6 of the Stock Purchase Agreement, as appropriate,
against payment to the Collateral Agent of the proceeds from such sales.
Immediately upon receipt of any such proceeds, (A) to the extent Net Sale
Amounts are payable to Share Seller pursuant to Section 3.3 of the Stock
Purchase Agreement, Share Seller directs the Collateral Agent to Deliver such
amounts to Pledgor from such proceeds, and (B) to the extent Net Sale Amounts
are payable to Share Purchaser pursuant to Section 3.3 of the Stock Purchase
Agreement, the Collateral Agent shall Deliver such amounts to Share Purchaser
from such proceeds; PROVIDED that if on any date such proceeds are insufficient
to pay such amounts, the Collateral Agent shall pay such amounts from Excess
Amounts, if any, previously received in respect of such Principal Payment Date;
PROVIDED, FURTHER, that promptly following the payment of all amounts owing
pursuant to such section in respect of such Principal Payment Date, the
Collateral Agent shall Deliver any remaining Excess Amounts with respect to such
Principal Payment Date to Pledgor.
(ii) Share Seller agrees that Share Purchaser's Delivery to the
Collateral Agent of any payments in cash required pursuant to Section 3.3 of the
Stock Purchase Agreement shall discharge Share Purchaser's obligations under the
Stock Purchase Agreement with respect to such payments. Immediately upon receipt
of any such payments, the Collateral Agent shall Deliver such amounts to
Pledgor.
(c) If with respect to any Principal Payment Date Share Purchaser is
entitled to elect and has elected net share settlement pursuant to Sections 3.1
and 3.4 of the Stock Purchase Agreement:
(i) The parties hereby direct the Collateral Agent, and the
Collateral Agent agrees, to release a number of Collateral Shares equal to the
number of Settlement Shares for sale pursuant to Section 2.6 in accordance with
Sections 3.4, 3.5 and 3.6 of the Stock Purchase Agreement, as appropriate,
against payment to the Collateral Agent of the proceeds from such sales.
Immediately upon receipt of any such proceeds, such proceeds shall be Delivered
to Pledgor except to the extent Share Purchaser is entitled to receive such
proceeds under the Stock Purchase Agreement, in which case such proceeds shall
be Delivered to Share Purchaser. In addition, to the extent Share Seller is
required to deliver any remaining Settlement Shares to Share Purchaser pursuant
to Section 3.4 of the Stock Purchase Agreement, the Collateral Agent shall
deliver Collateral Shares to Share Purchaser.
(ii) Share Seller agrees that Delivery by Share Purchaser to the
Collateral Agent for credit to the Collateral Account of any Make-Whole Shares
required to be delivered by
8
<PAGE>
Share Purchaser under the Stock Purchase Agreement shall discharge Share
Purchaser's obligations under the Stock Purchase Agreement with respect to such
delivery.
(iii) Share Seller agrees that Share Purchaser's Delivery to the
Collateral Agent of any payments in cash pursuant to Section 3.4 of the Stock
Purchase Agreement shall discharge Share Purchaser's obligations under the Stock
Purchase Agreement with respect to such payments. Immediately upon receipt of
any such payments, the Collateral Agent shall Deliver such amounts to Pledgor.
(d) Share Seller agrees that Share Purchaser's Delivery to the
Collateral Agent of any payments in cash required pursuant to Section 3.6 of the
Stock Purchase Agreement shall discharge Share Purchaser's obligations under the
Stock Purchase Agreement with respect to such payments. Immediately upon receipt
of any such payments, the Collateral Agent shall Deliver such amounts to
Pledgor. In addition, to the extent Share Seller is required to deliver any
remaining Interest Settlement Shares, Interest Make-Whole Shares or Settlement
Shares to Share Purchaser pursuant to Section 3.6 of the Stock Purchase
Agreement, the Collateral Agent shall deliver Collateral Shares to Share
Purchaser against the applicable payment.
2.6 DESIGNATED BROKER COMMISSION.
The parties agree that the Designated Broker shall be the exclusive
broker with respect to sales of Collateral Shares pursuant to the Stock Purchase
Agreement and this Agreement. Share Purchaser and Share Seller agree that any
additional underwriting fees or commission agreed to by Share Purchaser and
Share Seller pursuant to Section 3.6 of the Stock Purchase Agreement shall be
paid to the Designated Broker. The Designated Broker shall be entitled to
receive a commission equal to the applicable Sale Commission for the sale of any
Shares through the Designated Broker hereunder. The Collateral Agent shall
instruct the Designated Broker to deduct such amount from the sales proceeds
received in connection with any sale of Shares hereunder.
2.7 SUBSTITUTION OF COLLATERAL. (a) (i) Pledgor shall be entitled
from time to time, upon notice to the Collateral Agent and the Secured Parties,
so long as no Event of Default or Mandatory Prepayment Event shall have occurred
and be continuing, to Deliver to the Collateral Agent Eligible Substitute
Collateral solely pursuant to the provisions of this Section 2.7. Upon receipt
thereof, the Collateral Agent shall deliver to or as directed by Pledgor
Collateral Shares or other Collateral designated by Pledgor in such notice with
a Value equal to the Value of such Substitute Collateral, determined as of the
date of transfer.
(ii) From and after any such substitution, Pledgor shall be entitled
and, as provided in subsections (iii) and (iv) below, shall be obligated to
Deliver Shares to the Collateral Agent to be held as Collateral Shares in
substitution for Substitute Collateral, and upon receipt of such Shares, the
Collateral Agent shall deliver to Pledgor Substitute Collateral with a Value
equal to the Value of such Shares, determined as of the date of transfer.
(iii) Pledgor shall Deliver Shares pursuant to subsection (ii) above
no later than the Exchange Business Day immediately preceding any Settlement
Date in a number such that, following such Delivery, the number of Collateral
Shares shall be at least equal to the number of
9
<PAGE>
Prepayment Shares for such Settlement Date (or, in the case of the Settlement
Date related to the Maturity Date, the Number of Shares). Upon the occurrence of
a Merger Event or the declaration of a dividend or distribution described in
Section 7.8 of the Stock Purchase Agreement, Pledgor shall Deliver Shares
pursuant to subsection (ii) above in a number equal to the number of Substituted
Shares no later than the Exchange Business Day prior to (A) in the case of a
Merger Event, the latest date and time on which tenders of Shares may be made
pursuant to such Merger Event and (B) in the case of such a dividend or
distribution, the applicable record date. Pledgor shall Deliver Shares pursuant
to subsection (ii) above no later than the Exchange Business Day immediately
preceding any date on which Share Seller is required to deliver Seller Interim
Settlement Shares pursuant to the Stock Purchase Agreement in a number such
that, following such Delivery, the number of Collateral Shares shall be at least
equal to such number of Seller Interim Settlement Shares.
(iv) In addition to the delivery requirements under subsection (iii)
above, Share Purchaser shall be entitled to require Pledgor, upon five Business
Days' written notice, to Deliver Shares pursuant to subsection (ii) above in a
number determined by Share Purchaser, up to and including the number of
Substituted Shares.
(b) If on any Valuation Date the Value of the Substituted Shares
exceeds the Value of all Substitute Collateral, Pledgor shall Deliver to the
Collateral Agent, by the close of business on such Valuation Date, additional
Eligible Substitute Collateral having a Value as of the date of transfer at
least equal to such excess (each such amount, a "DELIVERY AMOUNT").
(c) If on any Valuation Date the Value of all Substitute Collateral
exceeds the Value of the Substituted Shares, upon a demand made by Pledgor, the
Collateral Agent shall deliver to or as directed by Pledgor (in a manner to be
agreed by Pledgor and the Collateral Agent) Substitute Collateral having a Value
as of the date of transfer as close as practicable to such excess (each such
amount, a "RETURN AMOUNT"); PROVIDED that no delivery of a Return Amount shall
be made if an Event of Default or a Mandatory Prepayment Event has occurred and
is continuing. If a demand for a Return Amount is made by 1 p.m. on a Business
Day, such amount shall be delivered by the close of business on such Business
Day. If a demand for a Return Amount is made after 1 p.m. on a Business Day,
such amount shall be delivered by the close of business on the first Business
Day following the date of such demand.
(d) All calculations of Value and determinations of whether the
Collateral Agent or Pledgor is entitled to receive a Delivery Amount or Return
Amount, as the case may be, in respect of a Valuation Date shall be made by the
Calculation Agent in accordance with the terms of the Stock Purchase Agreement.
The Calculation Agent shall notify the relevant parties of such calculations and
determinations by 11:00 a.m. on each Valuation Date.
2.8 INTERIM SETTLEMENTS. The parties hereby direct the Collateral
Agent, and the Collateral Agent agrees, to deliver to Share Purchaser from the
Collateral Shares on the applicable delivery date any Seller Interim Settlement
Shares to which Share Purchaser is entitled under Section 2.5(a) of the Stock
Purchase Agreement. Share Seller agrees that delivery by Share Purchaser to the
Collateral Agent for credit to the Collateral Account of any Purchaser Interim
Settlement Shares required to be delivered by Share Purchaser pursuant to
Section 2.5(b)
10
<PAGE>
of the Stock Purchase Agreement shall discharge Share Purchaser's obligations
under the Stock Purchase Agreement with respect to such delivery.
3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Pledgor represents and warrants to, and agrees with, the
Collateral Agent and each Secured Party, as of each date Collateral is Delivered
to the Collateral Agent hereunder, that:
(i) Pledgor is a statutory business trust duly constituted,
validly existing and in good standing under the laws of the State of
Delaware, and has full power, authority and legal right to enter into,
deliver, and perform its obligations under, this Agreement and the Stock
Purchase Agreement;
(ii) the execution, delivery and performance by Pledgor of this
Agreement and the Stock Purchase Agreement have been duly authorized by all
necessary action on the part of Pledgor and do not contravene, or
constitute a default under, any provision of applicable law or regulation
or of the constituent documents of Pledgor or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon
Pledgor;
(iii) this Agreement and the Stock Purchase Agreement each
constitute a valid and binding agreement of Pledgor, enforceable against
Pledgor in accordance with its terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
equitable principles of general applicability;
(iv) Pledgor (A) owns and, at all times prior to the release of
the Collateral pursuant to the terms of this Agreement, will own the
Collateral free and clear of any liens, security interests or other
encumbrances of any kind or type and (B) is not, and will not become, a
party to or otherwise be bound by any agreement, other than this Agreement
and the Stock Purchase Agreement, that restricts in any manner the rights
of any present or future owner of the Collateral with respect thereto;
(v) Pledgor has not performed and will not perform any act or
acts which might prevent any Secured Party from enforcing any of the terms
of this Agreement or which might limit the rights of any Secured Party,
including the rights in any such enforcement;
(vi) other than this Agreement and any financing statements filed
for the benefit of the Collateral Agent, no financing statement, security
agreement or similar or equivalent document, agreement or instrument
covering all or any part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be effective to create
or perfect a lien, security interest or other encumbrance of any kind on
such Collateral;
(vii) other than the Financing Statements, no registration,
recordation or filing with or consent of any governmental body, agency or
official or any other Person is required in connection with the execution
and delivery of this Agreement or the Stock
11
<PAGE>
Purchase Agreement (except as have been obtained on or prior to the date
hereof and except for informational filings with the Securities and
Exchange Commission and applicable gaming regulatory authorities) or
necessary for the due execution, validity or enforceability hereof or
thereof or for the perfection or enforcement of the Security Interests;
(viii) the Location of Pledgor is the address set forth for it in
Section 16(b) (or such other address notified in writing to the Collateral
Agent pursuant to Section 9(b));
(ix) Pledgor is not and will not become an "investment company,"
as such term is defined in the Investment Company Act;
(x) upon the execution and delivery of this Agreement by the
parties hereto, the Delivery of the Collateral to the Collateral Agent and
the filing of the Financing Statements in the appropriate jurisdiction, the
Collateral Agent will have a valid and first priority perfected security
interest in the Collateral for the benefit of the Secured Parties subject
to no prior lien, security interest or other encumbrance of any kind; and
(xi) Pledgor is solvent and able to pay its debt as they come
due, with assets having a fair value greater than the amount of its
liabilities and with capital sufficient to carry on the businesses in which
it engages, and has received fair consideration for its pledge of the
Collateral hereunder.
(b) The Collateral Agent represents and warrants to, and agrees with,
each of the parties hereto that:
(i) the Collateral Agent is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and has full power, authority and legal right to enter
into, deliver, and perform its obligations under, this Agreement;
(ii) the execution, delivery and performance by the Collateral
Agent of this Agreement have been duly authorized by all necessary action
on the part of the Collateral Agent and do not and will not contravene, or
constitute a default under, any provision of applicable law or regulation
or constituent documents of the Collateral Agent or of any material
agreement, judgment, injunction, order, decree or other instrument binding
upon the Collateral Agent;
(iii) this Agreement constitutes a valid and binding agreement of
the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, subject to applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally and equitable principles
of general applicability;
(iv) the Collateral Agent hereby agrees that (A) all liens,
pledges and other security interests of any kind or nature held by it in
any of the Collateral securing any obligation to the Collateral Agent
(whether in such capacity, its capacity as securities
12
<PAGE>
intermediary or in any other capacity) (collectively, "OTHER LIENS")
shall be subordinate and junior to the liens, pledges and security
interest in the Collateral arising hereunder and that the Collateral
Agent will take no action to enforce any Other Lien so long as any
obligation under this Agreement or the Stock Purchase Agreement (whether
or not then due) should remain unsatisfied and (B) its obligation to
Pledgor in respect of any Collateral will not be subject to deduction,
set-off, recoupment, banker's lien or any other right in respect of
obligations owed by Pledgor or any other Person to the Collateral Agent;
(v) The Collateral Agent is not and will not become a party to
or otherwise bound by any agreement that provides any Person with control
(as defined in Section 8-106 or Section 9-115(1)(e) of the UCC) with
respect to any of the Collateral; and
(vi) the Collateral Agent is a "securities intermediary" as
defined in Section 8-102(a) of the UCC.
4. THE SECURITY INTERESTS; COLLATERAL ACCOUNT.
(a) In order to secure the full and punctual payment and performance
of the Secured Obligations in accordance with their terms and the performance of
all the obligations of Pledgor hereunder, Pledgor hereby assigns, pledges and
grants to the Collateral Agent, as agent of and for the benefit of the Secured
Parties, security interests in and to, and a lien upon and right of set-off
against, and transfers to the Collateral Agent, for the benefit of the Secured
Parties, as and by way of a security interest having priority over all other
security interests, with power of sale, all of its right, title and interest in
and to, whether now owned or hereafter acquired, (i) the Collateral Shares; (ii)
the Substitute Collateral; (iii) the Collateral Account and all cash,
securities, investments, and other financial assets (as defined in Section 8-102
of the UCC), funds, property and other assets from time to time held therein or
credited thereto; (iv) all additions to and substitutions for the foregoing; (v)
all powers, rights and privileges of Pledgor with respect to the Stock Purchase
Agreement; (vi) all powers, rights and privileges of Pledgor with respect to the
Collateral Account and the contents thereof (including all securities
entitlements in respect thereof); (vii) all income, Proceeds and other proceeds
and collections received or to be received, or derived or to be derived, now or
any time hereafter (whether before or after the commencement of any proceeding
under applicable bankruptcy, insolvency or similar law, by or against Pledgor,
with respect to Pledgor) from or in connection with any of the items mentioned
in (i) through (vi) (including any shares of capital stock issued in respect of
any Securities (or security entitlements in respect thereof) constituting
Collateral or any cash, Securities or other property distributed in respect of
or exchanged for any Securities (or security entitlement in respect thereof)
constituting Collateral, or into which any such Securities (or security
entitlements in respect thereof) are converted, and any security entitlements in
respect of any of the foregoing); and (viii) all powers, rights and privileges
of Pledgor, now or hereafter acquired, including rights of enforcement, with
respect to the foregoing (collectively, the "COLLATERAL").
(b) The Collateral Account is hereby established with the Collateral
Agent in its capacity as securities intermediary as a collateral account in the
name of "Banc of America
13
<PAGE>
Securities LLC, as collateral agent on behalf of Mandalay Resort Group and Bank
of America, N.A." into which there shall be deposited from time to time or to
which there shall be credited the Collateral required to be delivered to the
Collateral Agent pursuant to this Agreement. Subject to the provisions of
Section 2.3, any income received by the Collateral Agent with respect to the
property from time to time credited to the Collateral Account shall remain, or
be deposited, in the Collateral Account. All right, title and interest in and to
the Collateral on deposit or credited from time to time in the Collateral
Account shall vest in the Collateral Agent, shall constitute part of the
Collateral hereunder and shall not constitute payment of the Secured Obligations
until applied thereto as hereinafter provided.
(c) If the Issuer of Collateral Shares at any time or from time to
time issues to Pledgor in respect of any Collateral Shares or security
entitlements in respect thereof, or Pledgor receives or becomes entitled to
receive in respect of any Collateral Shares or security entitlements in respect
thereof, or Pledgor receives any Proceeds in respect of any Collateral Shares or
security entitlements in respect of Collateral Shares consisting of, any
additional or substitute Securities of any kind (or security entitlements in
respect thereof), Pledgor shall immediately Deliver to the Collateral Agent all
such Securities (and security entitlements) as additional security for the
Secured Obligations. All such Securities (and security entitlements) and any of
the foregoing issued to the Collateral Agent (as registered holder of the
Collateral Shares) shall constitute Collateral (or security entitlements in
respect thereof) and are subject to all provisions of this Agreement.
(d) The Security Interests are granted as security only and shall not
subject either Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of (i) Pledgor with respect to any of the Collateral or
any transaction in connection therewith or (ii) the other Secured Party under
any Transaction Document.
(e) The Collateral Agent and the other parties hereto expressly agree
that all rights, assets and property (other than cash) held at any time in the
Collateral Account shall be treated as a financial asset as described in Section
8-102(a)(9) of the UCC.
5. ENTITLEMENT ORDERS.
(a) The Collateral Agent agrees that it will not comply with
entitlement orders originated by either Secured Party without the consent of the
other Secured Party in respect of any Collateral, except as provided in Section
10 below.
(b) Pledgor agrees that it shall not (i) create or permit to exist
any lien, security interest or other encumbrance of any kind upon or with
respect to the Collateral, except for those created hereunder, (ii) sell or
otherwise dispose of, or grant any option with respect to, any of the Collateral
or (iii) enter into or consent to any agreement pursuant to which any Person has
or will have control (within the meaning of Section 8-106 of the UCC) in respect
of any Collateral, including the Collateral Account and the financial assets and
other property held in the Collateral Account.
6. GENERAL AUTHORITY. Each party hereto irrevocably designates and
appoints Banc of America Securities LLC as the Collateral Agent and its true and
lawful attorney-in-fact, with full
14
<PAGE>
power of substitution in the name of Pledgor, any Secured Party or otherwise,
for the sole use and benefit of the Secured Parties, but at the expense of
Pledgor, to the extent permitted by law, to exercise (i) at any time and from
time to time all powers with respect to the Collateral as may be required to
permit the Collateral Agent to carry out its obligations under this Agreement
and (ii) at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(a) to demand, sue for, collect, receive, appropriate and give
acquittance for any and all monies due or to become due upon or by virtue
thereof,
(b) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(c) subject to the requirements of Section 10, to sell (either by
public or private sale), transfer, assign, exercise rights of election
pertaining thereto or otherwise deal in or with the same or the proceeds or
avails thereof, as fully and effectually as if the Collateral Agent were the
absolute owner thereof (including the giving of instructions and entitlement
orders in respect thereof), and
(d) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
PROVIDED, HOWEVER, that the Collateral Agent shall give the parties hereto not
less than two (2) Business Days' prior written notice of the time and place of
any sale or other intended disposition of any of the Collateral, except any
Collateral that threatens to decline speedily in value, or is of a type
customarily sold on a recognized market. The Collateral Agent and Pledgor hereby
expressly agree that such notice constitutes "reasonable notification" within
the meaning of Section 9-504(3) of the UCC.
7. INCONSISTENCY WITH STOCK PURCHASE AGREEMENT. In the event of any
inconsistency between the provisions of Article 2 hereof and the Stock Purchase
Agreement, the parties agree that the provisions of the Stock Purchase Agreement
will govern.
8. DEFENSE OF TITLE.
(a) Pledgor shall warrant and defend its title to the Collateral,
subject to the rights of the Secured Parties, against the claims and demands of
all Persons.
(b) The Collateral Agent may elect (but has no obligation to do so)
to discharge any lien, security interest or other encumbrance of any kind or
type of any third party on any of the Collateral.
9. FURTHER ASSURANCES; COVENANTS.
(a) Pledgor agrees that it shall at its expense and in such manner
and form as the Collateral Agent may reasonably require, execute, deliver, file
and record any financing statement, continuation statement, specific assignment
or other document or instrument and take any other action that may be necessary
or desirable, or that the Collateral Agent may reasonably
15
<PAGE>
request, in order to create, preserve, perfect, confirm or validate any Security
Interest or to enable the Collateral Agent to exercise and enforce its rights on
behalf of the Secured Parties hereunder with respect to any of the Collateral.
To the extent permitted by applicable law, Pledgor hereby authorizes the
Collateral Agent to execute and file, in the name of Pledgor or otherwise,
financing statements or continuation statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or of a
financing statement or continuation statement relating to this Agreement) that
the Collateral Agent, upon the advice of counsel or at the direction of the
Secured Parties, may deem reasonably necessary or appropriate to perfect or
further perfect any of the Security Interests; and further, to execute and file
in the name of Pledgor or otherwise any other document that the Collateral
Agent, in its sole discretion, may deem reasonably necessary or appropriate in
connection with the Collateral Agent's authority conferred by this Agreement.
(b) Pledgor agrees that it shall not change (i) its name, identity,
or organizational structure or (ii) its Location, unless in either case (A) it
shall have given the Collateral Agent not less than thirty (30) days' prior
written notice thereof and (B) such change shall not cause any of the Security
Interests to become unperfected or subject to any other lien, security interest
or other encumbrance of any kind.
(c) If at any time any of the Collateral Shares or Substitute
Collateral (or security entitlements in respect thereof) are not registered, or
held through a securities intermediary, in the name of the Collateral Agent or
its nominee, the Collateral Agent and Pledgor agree that Pledgor shall take all
action as is reasonably requested by the Collateral Agent to cause such
Collateral to be transferred of record into, or held through a securities
intermediary in, the name of the Collateral Agent or its nominee. The Collateral
Agent shall promptly give to Pledgor and the Secured Parties copies of any
notices and communications received by it with respect to Collateral Shares or
Substitute Collateral (or security entitlements in respect thereof) registered,
or held through a securities intermediary, in the name of the Collateral Agent
or its nominee.
10. REMEDIES UPON EVENT OF DEFAULT; OTHER CONSEQUENCES.
(a) If an Event of Default shall have occurred and be continuing and
the Defaulting Party shall have failed to perform its obligations with respect
to any Principal Payment Date theretofore designated, the Collateral Agent
shall, following receipt from the Non-Defaulting Party of a certification to the
Collateral Agent to that effect, at the direction of the Non-Defaulting Party,
(i) exercise all the rights of a secured party under the Uniform Commercial Code
(whether or not in effect in the jurisdiction where such rights are exercised),
(ii) solely where Share Seller is the Defaulting Party, deliver to Share
Purchaser all Collateral (or the applicable portion thereof owed to Share
Purchaser, in the event of a net share settlement) in satisfaction of Share
Seller's obligations to Share Purchaser under the Stock Purchase Agreement,
against payment by Share Purchaser to the Collateral Agent of all amounts owed
by Share Purchaser under the Stock Purchase Agreement, and (iii) without being
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law:
(A) apply the cash, if any, then held by it as Collateral as
specified in Section 11 hereof, and
16
<PAGE>
(B) if there shall be no such cash or if such cash shall be
insufficient to pay in full all the Secured Obligations, sell the Collateral or
any part thereof at public or private sale or at any broker's board or
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Collateral Agent may, in its sole discretion deem
satisfactory.
Any Secured Party or Pledgor may be the purchaser of any or all of
the Collateral so sold at any public sale (or, if the Collateral is of a type
customarily sold in a recognized market or is of a type that is the subject of
widely distributed standard price quotations, at any private sale). The
Collateral Agent is authorized, in connection with any such sale:
(X) to restrict the prospective bidders on or purchasers of any
of the Collateral constituting "securities" within the meaning of the
Securities Act in such a manner so as to comply with any available
exemption from the registration requirements of the Securities Act;
(Y) to cause to be placed on certificates for any or all of the
Collateral Shares or on any other securities pledged hereunder a
legend to the effect that such security has not been registered under
the Securities Act and may not be disposed of in violation of the
provisions of said Act; and
(Z) to impose such other limitations or conditions in connection
with any such sale as the Collateral Agent or the Non-Defaulting Party
deems necessary or advisable in order to comply with the Securities
Act or any other law or regulation.
(b) Following receipt from the Non-Defaulting Party of the
certification provided for in Section 10(a), the Collateral Agent shall comply
with any order given by the Non-Defaulting Party without the consent of the
other Secured Party. Pledgor covenants and agrees that it shall execute and
deliver such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sale may be made in compliance
with the Securities Act and any other law or regulation. Upon any such sale, the
Collateral Agent shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Subject to the provisions of this
Section 10 hereof, each purchaser at any such sale shall hold the Collateral so
sold absolutely and free and from any claim or right of whatsoever kind,
including any equity or right of redemption of Pledgor that may be waived, and
Pledgor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal that Pledgor has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale shall (1) in
case of a public sale, state the time and place fixed for such sale, (2) in case
of a sale at a broker's board or on a securities exchange, state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or the portion thereof so being sold, will first be offered for sale at such
board or exchange, and (3) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The
17
<PAGE>
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold shall be retained by the Collateral Agent until the selling price is paid
by the purchaser thereof, however, the Collateral Agent shall not incur any
liability in case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may again
be sold upon like notice. The Collateral Agent, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
11. APPLICATION OF PROCEEDS.
The proceeds of any sale of, or other realization upon, all or any
part of the Collateral and any cash received and held by the Collateral Agent as
or in respect of Collateral pursuant to Section 10 shall be applied by the
Collateral Agent in the following order of priorities:
FIRST, to the payment of any expenses of such sale or other
realization, including reasonable compensation to the Collateral
Agent, counsel and agents for the Non-Defaulting Party, and all
expenses, liabilities and advances incurred or made by the
Non-Defaulting Party in connection therewith, and any other
unreimbursed expenses, if any, for which the Non-Defaulting Party is
to be reimbursed pursuant to the Stock Purchase Agreement;
SECOND, to the payment of all Secured Obligations owed to the
Non-Defaulting Party, until all such Secured Obligations have been
paid in full;
THIRD, to the payment of (or if a future or contingent
obligation, to cash collateralize) any other Secured Obligations; and
FOURTH, to the payment to the Trust or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus
then remaining.
12. PROVISION OF NOTICE. Each party hereto agrees that, until all
outstanding Secured Obligations have been repaid in full, each such party shall
notify the other parties hereto immediately upon having actual or constructive
knowledge of the occurrence of any of the following events:
(a) any party hereto fails to fulfill or discharge any of its
obligations, agreements or covenants under or relating to any Transaction
Document to which it is a party;
(b) any representation made or repeated or deemed to have been made
or repeated by any party hereto under any Transaction Document is or becomes
incorrect or misleading in any material respect;
18
<PAGE>
(c) the Security Interests fail at any time to constitute valid,
continuing first priority perfected security interests in all of the Collateral
securing all obligations purported to be secured thereby, subject to no prior or
equal lien, security interest or other encumbrance of any kind; or
(d) any Event of Default or Mandatory Prepayment Event occurs under
the Stock Purchase Agreement.
13. APPOINTMENT OF COLLATERAL AGENT.
(a) Each party hereto hereby irrevocably designates, appoints and
authorizes the Collateral Agent to take such action on their behalf and to
exercise such powers under this Agreement as are delegated to the Collateral
Agent by the terms hereof, together with all such powers as are reasonably
incidental thereto.
(b) The Collateral Agent may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(c) Neither the Collateral Agent nor any of its directors, officers,
trust officers, agents or employees shall be liable for any action taken or not
taken by it in connection with this Agreement with the consent or at the request
of the Secured Parties or in the absence of its own gross negligence or willful
misconduct. The Collateral Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex or similar writing) reasonably believed by it
to be genuine or to be signed by the proper party or parties.
(d) Any corporation or association into which the Collateral Agent
may be converted or merged, or with which it may be consolidated, or to which it
may sell or transfer its agency business and assets as a whole or substantially
as a whole, or any corporation or association resulting from any such
conversion, sale, merger, consolidation or transfer to which it is a party,
shall, subject to the prior written consent of the Secured Parties, be and
become a successor Collateral Agent hereunder and vested with all of the title
to the Collateral and all of the powers, discretions, immunities, privileges and
other matters as was its predecessor without, except as provided above, the
execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
(e) Beyond the exercise of reasonable care in the custody thereof,
the Collateral Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent, bailee, clearing
corporation or securities intermediary or in respect of any income on such
Collateral or as to the preservation of rights against prior parties or any
other rights pertaining thereto. The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
the Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
19
<PAGE>
diminution in the value thereof, by reason of the act or omission of any agent,
bailee, clearing corporation or securities intermediary selected by the
Collateral Agent in good faith (or selected, in good faith, by an agent, bailee,
clearing corporation or securities intermediary so selected by the Collateral
Agent).
(f) The Collateral Agent may resign as Collateral Agent upon thirty
(30) days' written notice thereof to Pledgor, each of the Secured Parties and
each other party hereto; PROVIDED that no such resignation shall be effective
until a successor Collateral Agent reasonably satisfactory to Pledgor and the
Secured Parties has accepted such appointment in writing.
(g) Share Purchaser agrees to indemnify the Collateral Agent and its
Affiliates and their respective directors, officers, employees, agents and
controlling persons (the Collateral Agent and each such person being an
"INDEMNIFIED PARTY") from and against any and all losses, claims, damages and
liabilities, joint and several, to which such Indemnified Party may become
subject under any applicable federal or state law or otherwise, that arise out
of or relate to this Agreement, the transactions contemplated hereby or any
action taken or not taken pursuant hereto, and will reimburse any Indemnified
Party for all expenses (including reasonable counsel fees and expenses) as they
are incurred in connection with the investigation of, preparation for or defense
or settlement of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a party and whether
or not such claim, action or proceeding is initiated or brought by or on behalf
of Share Purchaser. Share Purchaser shall not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage, liability
or expense is found in a nonappealable judgment by a court of competent
jurisdiction to have resulted from the Collateral Agent's willful misconduct or
gross negligence. The provisions of this Section 13(g) shall survive any
termination of this Agreement or of the Security Interests created hereunder.
14. TERMINATION AND RELEASE OF COLLATERAL.
(a) Upon the satisfaction in full of all Secured Obligations and all
obligations under the Stock Purchase Agreement and this Agreement, the Security
Interests shall terminate and all rights to the Collateral shall revert to
Pledgor.
(b) Upon the transfer by the Collateral Agent of any Collateral to
the Share Purchaser or Pledgor pursuant to the terms hereof, the Security
Interests in such Collateral shall be released immediately and, to the extent
possible, without further action by any party.
(c) Upon any such termination of the Security Interests or release of
Collateral, the Secured Parties shall execute and deliver to Pledgor such
documents as Pledgor or Share Seller shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
15. TRANSFERABILITY.
Share Seller shall have the right to transfer its rights and
obligations under this Agreement to the extent, but only to the extent, of its
assignment of its rights and obligations under the Stock Purchase Agreement.
Upon any such transfer, the parties hereto agree to
20
<PAGE>
execute an amendment to this Agreement to add any such transferees as additional
Secured Parties hereunder.
16. NOTICES.
(a) Except as otherwise expressly set forth in this Agreement, all
notices and other communications to any party hereunder shall be dated and in
writing and shall be given to such party: (i) at its address or facsimile number
set forth in Section 16(b), below, and (ii) in the case of any party, at such
other address or facsimile number as such party may hereafter specify for the
purpose by written notice to the other parties hereto.
(b) Each such notice or other communication shall be effective (i) if
given by facsimile, when transmitted to the facsimile number referred to below
and confirmation of receipt is received, or (ii) if given by any other means,
when delivered at the address referred to below.
Notices to Pledgor shall be directed to:
MBG Trust
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Facsimile: (302) 651-8882
Notices to Share Purchaser shall be directed to
Mandalay Resort Group
3950 Las Vegas Boulevard South
Las Vegas, Nevada 89119
Attention: Glenn W. Schaeffer, President
Facsimile: (702) 632-6715
Notices to Share Seller shall be directed to:
Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street
New York, New York 10019
Attention: Chris Innes
Facsimile: (212) 583-8457
with a copy to:
Bank of America, N.A.
c/o Banc of America Securities LLC
9 West 57th Street
40th Floor
21
<PAGE>
New York, New York 10019
Attention: Equity Financial Products, Middle Office
Facsimile: (212) 583-8369
Notices to the Collateral Agent shall be directed to:
Banc of America Securities LLC
9 West 57th Street
New York, New York 10019
Attention: Equity Financial Products, Middle Office
Facsimile: (212) 583-8369
17. WAIVERS, NON-EXCLUSIVE REMEDIES.
No failure on the part of any Secured Party to exercise, and no
delay in exercising and no course of dealing with respect to, any right under
any of the Transaction Documents shall operate as a waiver thereof; nor shall
any single or partial exercise by any Secured Party of any right under any of
the Transaction Documents preclude any other or further exercise thereof or the
exercise of any other right. The rights in the Transaction Documents are
cumulative and are not exclusive of any other remedies provided by law.
18. OBLIGATIONS UNCONDITIONAL; DISCHARGE OF OBLIGATIONS, ETC.
(a) The obligations of Pledgor hereunder are unconditional and
absolute and may only be waived, amended, restated, or otherwise modified in
accordance with Section 23(a) hereof. Without limiting the generality of the
foregoing, the obligations of Pledgor hereunder, in the absence of a
modification effected in accordance with Section 23(a) hereof, shall not be
released, discharged or otherwise affected by:
(i) any modification or amendment of, supplement to or
assignment or transfer of rights and obligations under the Stock Purchase
Agreement;
(ii) the existence of any claim, set-off or other rights that
Pledgor may have at any time against any Secured Party or any other Person,
whether in connection herewith or with any related or unrelated
transactions, PROVIDED, HOWEVER, that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim; or
(iii) any other act or omission to act or delay of any kind by
any Secured Party or any other Person or any other circumstance whatsoever
that might, but for the provisions of this Section 18, constitute a legal
or equitable discharge of Pledgor's obligations hereunder.
(b) Pledgor's obligations hereunder shall remain in full force and
effect until the Stock Purchase Agreement shall have terminated and all Secured
Obligations shall have been paid in full. If at any time any payment or delivery
by Share Seller or Share Purchaser under the Stock Purchase Agreement is
rescinded or must be otherwise restored or returned upon the insolvency or
bankruptcy of Share Seller or Share Purchaser or otherwise, Pledgor's
obligations
22
<PAGE>
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
(c) Pledgor irrevocably waives acceptance hereof, presentment,
demand, protest and any notice whatsoever, not provided for herein.
(d) Pledgor shall have no greater rights against Share Purchaser in
respect of amounts paid to Share Seller from proceeds of Collateral, whether by
way of subrogation or otherwise, than Share Seller would have against Share
Purchaser under the Stock Purchase Agreement (including as provided in Section
6.6(b) thereof).
19. SPECIFIED TIMES ARE NEW YORK CITY TIMES. Any reference herein to a
specified time of day shall refer to such time of day in New York City.
20. SEVERABILITY. The provisions of this Agreement are severable. If any
clause or provision is held to be invalid and unenforceable in whole or in part
by a court of competent jurisdiction, then that invalidity or unenforceability
will affect only that clause or provision, or part thereof, in such
jurisdiction, and will not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision in any jurisdiction.
21. LIMITATION OF LIABILITY OF THE TRUSTEE. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally, but solely as
trustee of Pledgor, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of Pledgor is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but
made and intended for the purpose of binding only Pledgor, (c) nothing herein
contained shall be construed as creating any liability on Wilmington Trust
Company, individually or personally, to perform any covenant, either expressed
or implied, contained herein, all liability, if any, being expressly waived by
the parties hereto and by any person claiming by, through or under the parties
hereto and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of Pledgor or
be liable for the breach of any obligation, representation, warranty or covenant
made or undertaken by Pledgor under this Agreement or any other related
documents.
22. CONFLICTING INSTRUCTIONS. If the Collateral Agent receives conflicting
or disputed instructions pursuant to Section 10, the Collateral Agent shall
attempt to resolve such conflict or dispute with the Secured Parties; PROVIDED
that if such conflict or dispute cannot be so resolved, the Collateral Agent
shall take such actions with respect to the Collateral are as instructed by a
court of competent jurisdiction.
23. MISCELLANEOUS. This Agreement:
(a) cannot be altered, amended, restated, modified or supplemented in
any way, except by a writing signed by all of the parties hereto;
(b) will be binding upon Pledgor and its successors and assigns, and
will inure to the benefit of the Secured Parties and their nominees, successors
and assigns, and in the event
23
<PAGE>
of an assignment of all or any of the Secured Obligations, the rights hereunder,
to the extent applicable to the obligations so assigned, shall be transferred
with such obligations; and
(c) may be executed in one or more counterparts, each of which when
executed will be deemed to be an original, but all of which taken together will
constitute one and the same document.
24. GOVERNING LAW. THIS AGREEMENT, AND THE ESTABLISHMENT AND MAINTENANCE
OF THE COLLATERAL ACCOUNT, 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).
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MBG TRUST, as Pledgor
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Trustee
By: /s/ JAMES P. LAWLER
--------------------------------
Name: James P. Lawler
Title: Vice President
MANDALAY RESORT GROUP, as Share
Purchaser
By: /s/ GLENN W. SCHAEFFER
--------------------------------
Name: Glenn W. Schaeffer
Title: President
BANK OF AMERICA, N.A., as Share Seller
By: /s/ WILLIAM C. CACCAMISE
--------------------------------
Name: William C. Caccamise
Title: Authorized Signatory
BANC OF AMERICA SECURITIES LLC, as
Collateral Agent
By: /s/ WILLIAM C. CACCAMISE
--------------------------------
Name: William C. Caccamise
Title: Managing Director
<PAGE>
EXHIBIT I
FORM OF FINANCING STATEMENT
DEBTOR: SECURED PARTY:
MBG Trust Banc of America Securities LLC,
c/o Wilmington Trust Company, as Trustee as Collateral Agent on behalf of
Rodney Square North Mandalay Resort Group and Bank of
1100 North Market Street America, N.A.
Wilmington, Delaware 19890-0001 9 West 57th Street
New York, New York 10019
EXHIBIT A TO FINANCING STATEMENT
This financing statement covers all of Debtor's right, title and
interest in and to the following, whether now owned or hereafter acquired (all
of which hereinafter collectively referred to as the "COLLATERAL"):
(i) the Collateral Shares;
(ii) the Substitute Collateral;
(iii) the Collateral Account and all cash, securities, investments,
and other financial assets (as defined in Section 8-102 of the UCC), funds,
property and other assets from time to time held therein or credited thereto;
(iv) all additions to and substitutions for the foregoing;
(v) all powers, rights and privileges of Debtor with respect to the
Stock Purchase Agreement;
(vi) all powers, rights and privileges of Debtor with respect to the
Collateral Account and the contents thereof (including, but not limited to, all
securities entitlements in respect thereof);
(vii) all income, Proceeds and other proceeds and collections received
or to be received, or derived or to be derived, now or any time hereafter
(whether before or after the commencement of any proceeding under applicable
bankruptcy, insolvency or similar law, by or against Debtor, with respect to
Debtor) from or in connection with any of the items mentioned in (i) through
(vi) above (including, without limitation, any shares of capital stock issued in
respect of any Securities (or security entitlements in respect thereof)
constituting Collateral or any cash,
I-1
<PAGE>
Securities or other property distributed in respect of or exchanged for any
Securities (or security entitlements in respect thereof) constituting
Collateral, or into which any such Securities (or security entitlements in
respect thereof) are converted, and any security entitlements in respect of any
of the foregoing); and
(viii) all powers, rights and privileges of Debtor, now or hereafter
acquired, including, but not limited to, rights of enforcement, with respect to
the foregoing.
As used in this Exhibit A, the following capitalized terms have the
meanings specified below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"CASH COLLATERAL" means funds denominated in United States dollars and
pledged under the Collateral Agreement to the Collateral Agent.
"COLLATERAL ACCOUNT" means Account No. 207/208-00294, entitled "Banc
of America Securities LLC, as collateral agent on behalf of Mandalay Resort
Group and Bank of America, N.A.," at the Collateral Agent, a securities account
(as defined in Section 8-501(a) of the UCC) established in the name of the
Collateral Agent in or to which the Collateral is to be deposited or credited,
all pursuant to and in accordance with the Collateral Agreement.
"COLLATERAL AGENT" means Banc of America Securities LLC, in its
capacity as the collateral agent for Share Seller and Share Purchaser under the
Collateral Agreement.
"COLLATERAL AGREEMENT" means the Collateral Agreement, dated as of
September 8, 2000, among Share Seller, Share Purchaser, Debtor and the
Collateral Agent, as the same may be amended, restated or otherwise modified
from time to time.
"COLLATERAL SHARES" means all Shares Delivered to the Collateral Agent
and credited to the Collateral Account from time to time, including, without
limitation, the Initial Shares, Purchaser Interim Settlement Shares, Make-Whole
Shares, Interest Settlement Shares and Interest Make-Whole Shares (each as
defined in the Stock Purchase Agreement).
"DEBTOR" means MBG Trust, a Delaware business trust.
"DELIVERY" means (a) in the case of certificated securities (other
than those described in clause (c)), delivery to the Collateral Agent of
certificates representing such securities, registered in the name of the
Collateral Agent or its nominee, free and clear of all liens, security interests
or other encumbrances of any kind (other than the Security Interests),
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Collateral Agent, and the crediting of such securities to
the Collateral Account, (b) in the case of uncertificated securities,
registration by the issuer of such securities in the name of the Collateral
Agent or its nominee, accompanied by any required transfer tax stamps, and the
crediting of such securities to the Collateral Account, (c) in the case of
Initial Shares or any securities in respect of which security entitlements are
held through a securities intermediary, the crediting of such securities, free
and clear of all liens, security interests or other encumbrances of any kind
(other than the Security Interests), to a securities account of the Collateral
Agent at such securities intermediary or at another securities intermediary
satisfactory to the Collateral Agent, and (d) in
I-2
<PAGE>
the case of cash (including all or any portion of the Cash Collateral), (i) with
respect to cash delivered to the Collateral Agent, in accordance with such
delivery instructions as the Collateral Agent may give to the relevant
transferor from time to time by written notice hereunder, (ii) with respect to
cash delivered by the Collateral Agent, in accordance with such delivery
instructions as the transferee may give to the Collateral Agent from time to
time by written notice hereunder or (iii) otherwise in accordance with the terms
hereof. The terms "Deliver," "Delivered" and "Delivering" have corresponding
meanings.
"ELIGIBLE SUBSTITUTE COLLATERAL" means funds denominated in U.S.
dollars and U.S. Government Obligations.
"PROCEEDS" means all proceeds, including cash, instruments, securities
and other property, from time to time received, receivable or otherwise
distributed in respect of, in exchange for or upon the exercise or disposition
of any or all of the Collateral under the Collateral Agreement.
"SECURED OBLIGATIONS" means the obligations secured under the
Collateral Agreement including (a) all obligations of Debtor under the
Collateral Agreement or the Stock Purchase Agreement, (b) all obligations of
Share Seller under the Stock Purchase Agreement and (c) all obligations of Share
Purchaser under the Stock Purchase Agreement. The Secured Obligations shall
include any interest, costs, fees, expenses and indemnities which accrue on or
with respect to any of the foregoing, whether before or after the commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of Debtor.
"SECURITY" or "SECURITIES" has the meaning set forth in Section
8-102(a)(15) of the UCC.
"SECURITY INTERESTS" means the security interests in the Collateral
granted under the Collateral Agreement securing the Secured Obligations.
"SHARE PURCHASER" means Mandalay Resort Group or its successors or
permitted assigns under the Stock Purchase Agreement.
"SHARE SELLER" means Bank of America, N.A., or its successors or
permitted assigns under the Stock Purchase Agreement.
"SHARES" means shares of the common stock of Share Purchaser.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement, dated
as of September 8, 2000, among Share Purchaser, Share Seller and Debtor, as the
same may be amended, restated or otherwise modified from time to time.
"SUBSTITUTE COLLATERAL" means all Eligible Substitute Collateral,
distributions thereon and any Proceeds thereof transferred or Delivered to or in
the possession of or received by the Collateral Agent pursuant to the Collateral
Agreement and not transferred to Debtor or released by the Collateral Agent
thereunder.
I-3
<PAGE>
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"U.S. GOVERNMENT OBLIGATION" means any negotiable debt obligation
issued by the United States Treasury Department with a remaining maturity of not
more than one year.
I-4