<PAGE>

                                                                     EXHIBIT 4.1

                        IRREVOCABLE SECURITY AGREEMENT
                               OF MGM GRAND, INC.
                      REGARDING DEFEASANCE AND REDEMPTION

          $220,000,000 PRINCIPAL AMOUNT MGM GRAND HOTEL FINANCE CORP.
                   11-3/4% FIRST MORTGAGE NOTES DUE 1999 AND

          $253,000,000 PRINCIPAL AMOUNT MGM GRAND HOTEL FINANCE CORP.
                       12% FIRST MORTGAGE NOTES DUE 2002


     IRREVOCABLE SECURITY AGREEMENT OF MGM GRAND, INC. REGARDING DEFEASANCE AND
REDEMPTION dated as of July 1, 1996 among (i) MGM GRAND, INC., a Delaware
corporation (the "Grantor"), (ii) MGM GRAND HOTEL FINANCE CORP., a Nevada
                  -------
corporation ("MGM Finance"), (iii) BANK OF AMERICA NATIONAL TRUST AND SAVINGS
              -----------
ASSOCIATION, as Administrative Agent under the Loan Agreement (defined below)
for the Banks (defined below) and as Agent (in such capacity, the "Credit
                                                                   ------
Agent") under the Credit Agreement (defined below), (iv) FIRST TRUST OF
-----
ILLINOIS, NATIONAL ASSOCIATION, a national banking association ("First Trust"),
                                                                 -----------
as agent for the Trustee, Administrative Agent and the Credit Agent hereunder
(the "Secured Lenders' Agent") and (v) U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
      ----------------------
as Trustee under the Indenture (defined below).

                             PRELIMINARY STATEMENTS

     (1) Pursuant to that certain Indenture dated as of May 1, 1992 (as
supplemented, amended or otherwise modified from time to time, the "Indenture",
                                                                    ---------
the terms defined therein and not otherwise defined herein being used herein as
therein defined) by and among (i) MGM Finance, as issuer, (ii) the Grantor, as
guarantor, (iii) MGM Grand Hotel, Inc., a Nevada corporation (the "Company") as
                                                                   -------
obligor under certain covenants therein, and (iv) U.S. Trust Company of
California, N.A., a national banking association, as trustee (the "Trustee"),
                                                                   -------
MGM Finance has issued $220,000,000 principal amount of its 11-3/4% First
Mortgage Notes due 1999 and $253,000,000 principal amount of its 12% First
Mortgage Notes due 2002 (collectively, the "First Mortgage Notes").
                                            --------------------

     (2) Pursuant to the Loan Agreement, dated as of July 1, 1996 (as
supplemented, amended or otherwise modified from time to time, the "Loan
                                                                    ----
Agreement"), by and among the Grantor, the lenders from time to time party
---------
thereto (collectively, the "Banks", and individually, a "Bank"), Bank of
                            -----                        ----
Scotland, Societe Generale, the Long-Term Credit Bank of Japan, Ltd., Wells
Fargo Bank, N.A., and CIBC, Inc., as Co-Agents, and Bank of America National
Trust and Savings Association, as Administrative Agent, the Banks have agreed to
extend the credit facilities described therein to the Grantor.

     (3) Pursuant to the Credit Agreement, dated as of May 13, 1992 (as
supplemented, amended or otherwise modified from time to time, the "Credit
                                                                    ------
Agreement"), by and among MGM Finance, the Company, the financial institutions
---------
from time to time

<PAGE>

party thereto and Bank of America National Trust and Savings Association, as
Agent thereunder, such financial institutions have agreed to extend the credit
facilities in an amount not to exceed $60,000,000 described therein to MGM
Finance and the Company.

     (4) The Grantor has established two securities accounts with First Trust at
its office at 410 North Michigan Avenue, Suite 370, Chicago, Illinois  60611,
each in the name of Grantor and each subject to the terms of this Agreement.
The first such securities account has been designated "Defeasance Account
pledged to U.S. Trust Company of California, N.A., as Trustee" (the "Defeasance
                                                                     ----------
Account").  The second such securities account has been designated "Securities
-------
Account pledged to Bank of America National Trust & Savings Association, as
Administrative Agent as senior pledgee, and to U.S. Trust Company of California,
N.A., as Trustee as subordinated pledgee" (the "Dual Interest Account", and,
                                                ---------------------
together with the Defeasance Account, the "Securities Accounts").
                                           -------------------

     (5) The Grantor has entered into this Agreement to assign, pledge and
encumber all of the Grantor's right, title and interest in and to each of the
Securities Accounts and the securities deposited in each thereof in favor of the
Trustee, in order to secure the payment and performance of the obligations of
MGM Finance under the Indenture and the First Mortgage Notes; provided that
                                                              --------
until such time as is specified herein, such assignment, pledge and security
interest in the Dual Interest Account and the U.S. Government Obligations
therein shall be junior and subject as to priority to the assignment, pledge and
security interest created hereby in favor of the Administrative Agent and the
Banks, as set forth in Section 17 hereof.

     (6) MGM Finance has entered into the Irrevocable Security Agreement of MGM
Grand Hotel Finance Corp. Regarding Defeasance and Redemption (as supplemented,
amended or otherwise modified from time to time, the "MGM Finance Defeasance
                                                      ----------------------
Agreement"), of even date herewith, with the Administrative Agent, the Credit
---------
Agent, the Trustee, the Secured Lenders' Agent and the Grantor, to assign,
pledge and encumber all of MGM Finance's right, title and interest in and to the
Defeasance Account (as defined in the MGM Finance Defeasance Agreement) and the
U.S. Government Obligations deposited therein in favor of the Trustee, in order
to secure the payment and performance of the obligations of MGM Finance under
the Indenture and the First Mortgage Notes.

     (7) MGM Finance, the Company and the Grantor (collectively, the "MGM Grand
                                                                      ---------
Parties") may terminate all of their obligations under the Indenture (except MGM
-------
Finance's obligations under Section 7.07 thereof), pursuant to and on the terms
and conditions set forth in Article 8 of the Indenture, which Article provides
for the defeasance of the First Mortgage Notes.  In furtherance of such
defeasance, MGM Finance (pursuant to the MGM Finance Defeasance Agreement) and
the Grantor (pursuant hereto) intend to deposit with the Secured Lenders' Agent
for the benefit of the Trustee U.S.Government Obligations in amounts sufficient
under Article 8 to defease the First Mortgage Notes.

                                       2
<PAGE>

          NOW, THEREFORE, in consideration of the premises the parties hereto
hereby agree as follows:

     SECTION 1.  Grant for the Benefit of the Creditors.  The Grantor hereby
                 --------------------------------------
assigns and pledges to the Administrative Agent for its benefit and the ratable
benefit of the Banks, and hereby grants to the Administrative Agent for its
benefit and the ratable benefit of the Banks a security interest in, the
following (collectively, the "Bank Collateral"):
                              ---------------

     (a)  the Dual Interest Account and all U.S. Government Obligations
contained or deposited in the Dual Interest Account from time to time, and any
certificates representing any thereof, and all cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and

     (b)  all proceeds of any and all of the foregoing Bank Collateral
(including, without limitation, proceeds that constitute property of the types
described above in Section 1(a)).

     SECTION 2.  Grant for the Benefit of the Trustee.  The Grantor hereby
                 ------------------------------------
assigns and pledges to the Trustee for its benefit and the benefit of the
Holders, and hereby grants to the Trustee for its benefit and the benefit of the
Holders a security interest in, the following (collectively, and including,
without limitation, all property constituting Bank Collateral, the

"Collateral"):
 ----------

     (a)  the Securities Accounts and all U.S. Government Obligations contained
or deposited in either Securities Account from time to time, and any
certificates representing any thereof, and all cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and

     (b)  all proceeds of any and all of the foregoing Collateral (including,
without limitation, proceeds that constitute property of the types described
above in Section 2(a)).

     SECTION 3.  Agreement to Defease and Redeem First Mortgage Notes.
                 ----------------------------------------------------

     (a)  On or before July 3, 1996 (the "Delivery Date") Grantor shall deliver
                                          -------------
to the Secured Lenders' Agent as Collateral in the manner provided in Section 4
below, U.S Government Obligations maturing as to principal and interest in such
amounts and at such times as is, together with the MGM Finance Defeasance
Deposit (as defined in the MGM Finance Defeasance Agreement) sufficient, without
consideration of the reinvestment of interest and after payment of all federal,
state and local taxes or other charges or assessments in respect thereof payable
by the Trustee, to pay principal of and interest on the First Mortgage Notes to
May 1, 1997 (the "Redemption Date"), and to pay all other sums payable by it
                  ---------------
under the Indenture (such amount of such U.S. Government Obligations so
delivered being referred to herein as the "Grantor Defeasance Deposit", and,
                                           --------------------------
together with the MGM Finance Defeasance Deposit, the "Defeasance Deposit").  On
                                                       ------------------
or before the

                                       3
<PAGE>

Delivery Date MGM Finance shall deliver to the Trustee an Officer's Certificate
certifying that the Defeasance Deposit is and will be sufficient to pay all such
principal, interest and other amounts, as required by Section 8.01(a) of the
Indenture.

     (b)  MGM Finance shall cause all of the First Mortgage Notes to be redeemed
on May 1, 1997 pursuant hereto and to the optional redemption provisions of
paragraph 5 of each First Mortgage Notes and Section 3.07 of the Indenture.

     (c)  The Trustee hereby agrees:

          (i)    That delivery of a Defeasance Deposit by the Grantor and MGM
     Finance to the Secured Lenders' Agent pursuant to and complying with the
     terms hereof and the MGM Finance Defeasance Agreement will satisfy MGM
     Finance's obligation to deposit U.S. Government Obligations with the
     Trustee under Section 8.01(a) of the Indenture;

          (ii)   That possession by the Secured Lenders' Agent on the ninety-
     first day following the Delivery Date or such later date on which the
     conditions of Section 8.01 of the Indenture shall be satisfied (the
     "Defeasance Date") of a Defeasance Deposit complying with the requirements
      ---------------
     of Section 8.01(a) of the Indenture, of the MGM Finance Defeasance
     Agreement and hereof shall be deemed to satisfy the obligation of MGM
     Finance to deposit the redemption price of all First Mortgage Notes under
     Section 3.05 of the Indenture as of the Defeasance Date provided the
                                                             --------
     assignment, pledge and security interest created hereunder in favor of the
     Trustee and Holders in all of the U.S. Government Obligations included in
     the Collateral shall then be valid, perfected and first priority;

          (iii)  To provide, in MGM Finance's name and at MGM Finance's expense,
     notice of the redemption of the First Mortgage Notes to each Holder before
     the Redemption Date as provided in Section 3.03 of the Indenture;

          (iv)   To use the proceeds of the Collateral to redeem all of the then
     outstanding First Mortgage Notes on the Redemption Date in accordance with
     the Indenture;

          (v)    After redemption of the First Mortgage Notes and payment of all
     other amounts required to be paid in connection with such redemption under
     the Indenture, to remit any Collateral or proceeds thereof then remaining
     to the Grantor provided, that with respect to the Bank Collateral, the
                    --------
     assignment, pledge and security interest granted under Section 1 hereof in
     the Bank Collateral shall then have terminated;

          (vi)   Delivery to the Trustee of an opinion of Christensen, White,
     Miller, Fink, Jacobs, Glaser & Shapiro substantially in the form of Exhibit
     A hereto

                                       4
<PAGE>

     shall satisfy the requirement for the delivery of the Opinion of Counsel
     required by Sections 8.01(d), (e), (f) and (g) of the Indenture;

          (vii)  Delivery to the Trustee of an Officer's Certificate
     substantially in the form of Exhibit B hereto shall satisfy the requirement
     for the delivery of the Officer's Certificate required by Section 8.01(g)
     of the Indenture; and

          (viii) On each of the Defeasance Date and the Redemption Date the
     Trustee shall acknowledge to the Grantor and MGM Finance in writing the
     discharge of their respective obligations under the Indenture, except for
     those then surviving obligations as specified in Section 8.01 of the
     Indenture.

     SECTION 4.  Delivery of Collateral.
                 ----------------------

     (a)  All certificates or instruments representing or evidencing Collateral
(if any) shall be delivered to and held by the Secured Lenders' Agent pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Secured Lenders' Agent.

     (b)  With respect to any Collateral the ownership of which is recorded in
book-entry form by a Federal Reserve Bank, the Grantor shall cause such
Collateral to be irrevocably transferred to and maintained in a custody account
with such Federal Reserve Bank in the book entry records of such Federal Reserve
Bank in the name of First Bank National Association, as agent for First Trust as
Secured Lenders' Agent.  Grantor shall also deliver to the Secured Lenders'
Agent and the Administrative Agent a listing of such Collateral by title (or
series), unpaid principal amount and maturity.  Each such listing of Collateral
shall be accompanied by written instructions of the Grantor to the Secured
Lenders' Agent directing that each item of listed Collateral be deposited and
maintained in the Securities Account specified therein.  The Secured Lenders'
Agent shall cause each item of listed Collateral delivered to it to be deposited
and maintained in the Securities Account specified therefor, subject to the
Liens, terms and conditions hereof.  The Secured Lenders' Agent shall cooperate
with Grantor in effecting each such delivery of Collateral, and upon the date of
the completion of each transfer to its custodial account with the appropriate
Federal Reserve Bank, the Secured Lenders' Agent shall notify each of the
Grantor, Trustee and Administrative Agent that it has received and holds such
Collateral for the account of Grantor in the appropriate Securities Account, and
subject to the Liens, terms and conditions hereof.  The Secured Lenders' Agent
shall cause all relevant records respecting such U.S. Government Obligations
delivered to it to be maintained in the name of First Trust as Secured Lenders'
Agent in order to reflect and perfect the respective interests of the Grantor,
the Administrative Agent and the Trustee therein, in each case in a manner
required by and consistent with applicable law (including United States
regulations applicable to perfection of security interests in such U.S.
Government Obligations).  If U.S. Government Obligations so delivered under this
Section 4(b) are

                                       5
<PAGE>

securities of the United States Treasury, such delivery shall be made by wire
transfer to ABA #091000022, FIRST MPLS/TRUST, Account #03, or to such other
account as the Secured Lenders' Agent may specify in writing. The Secured
Lenders' Agent shall, promptly upon its receipt of any U.S. Government
Obligations hereunder place them in the appropriate Securities Account. The
execution and delivery of this Agreement shall constitute acknowledgement by,
and notification of, the Secured Lenders' Agent as if it were bailee of the
Collateral with notice of the assignment, pledge and security interests created
hereby to the full extent contemplated by 31 C.F.R. section 306.118 and Article
8 of the Uniform Commercial Code of any jurisdiction.

     (c)  All deliveries of Collateral hereunder shall be irrevocable and, for
the purposes of the Indenture, shall be deemed to constitute irrevocable deposit
of such Collateral by MGM Finance with the Trustee.

     (d)  On the Closing Date (as defined in the Loan Agreement) and at all
times on or before the date on which the Administrative Agent shall have
provided a Collateral Notice to the Secured Lenders' Agent as contemplated by
Sections 13(a) or (b), Grantor shall maintain in the Dual Interest Account U.S.
Government Obligations in an amount equal to $157,500,000 (105% of the maximum
principal amount permitted to be outstanding under the Loan Agreement at any
time prior to the Second Closing Date (as defined in the Loan Agreement)), which
U.S. Government Obligations shall be delivered as provided in this Section 4 and
maintained in the Dual Interest Account as Bank Collateral until released in
accordance with Section 13 of this Agreement. Except as provided in this Section
4(d), Grantor shall not be required to maintain in the Dual Interest Account any
U.S. Government Obligations or other property.

     SECTION 5.  Security for Obligations.
                 ------------------------

     (a)  The assignment, pledge and security interest in the Bank Collateral
granted under Section 1 hereof secure the prompt payment, in full in cash, and
the full performance of, all Obligations (as defined in the Loan Agreement) of
the Grantor (collectively, the "Grantor's Obligations"), whether for principal,
                                ---------------------
interest, fees, expenses or otherwise, including, without limitation, all
Obligations of the Grantor now or hereafter existing under this Agreement and
the Loan Documents, and all interest that accrues on all or any part of any of
the Obligations of Grantor after the filing of any petition or pleading against
Grantor or any other Person for a proceeding under any Debtor Relief Laws (as
defined in the Loan Agreement).

     (b)  The assignment, pledge and security interest in the Collateral granted
under Section 2 hereof secure the prompt payment, in full in cash, and the full
performance of, all obligations of MGM Finance to the Trustee and the Holders
under the Indenture and the First Mortgage Notes, whether for principal,
interest, fees, expenses or otherwise, including, without limitation, all
interest that accrues on all or any part of any of such obligations of MGM
Finance after the filing of any petition or pleading against MGM

                                       6
<PAGE>

Finance or any other Person for a proceeding under any Debtor Relief Laws
(collectively, the "MGM Finance Obligations", and, together with the Grantor
                    -----------------------
Obligations, the "Secured Obligations").
                  -------------------

     SECTION 6.  Representations and Warranties.
                 ------------------------------

     (a)  The Grantor represents and warrants to and for the benefit of the
Administrative Agent and the Banks as follows:

          (i)    The Grantor is the legal and beneficial owner of the Bank
     Collateral free and clear of any Lien, except for the assignment, pledge
     and security interest created by this Agreement.

          (ii)   This Agreement and the pledge of the Bank Collateral pursuant
     hereto create a valid and perfected first priority security interest in the
     Bank Collateral, securing the payment of the Grantor Obligations.

          (iii)  No consent of any other Person and no authorization, approval
     or other action by, and no notice to or filing with, any governmental
     authority or regulatory body or other third party is required either (x)
     for the grant by the Grantor of the assignment and security interest
     granted hereby, for the pledge by the Grantor of the Bank Collateral
     pursuant hereto or for the execution, delivery or performance of this
     Agreement by the Grantor, or (y) for the perfection or maintenance of the
     pledge, assignment and security interest created hereby over the Bank
     Collateral (including the first priority nature of such pledge, assignment
     or security interest), except as may be required in connection with the
     disposition thereof by laws affecting the offering and sale of securities
     generally. This Agreement has been duly authorized, executed and delivered
     by, and is the legal, valid and binding obligation of, each the Grantor and
     MGM Finance, enforceable against each such MGM Party in accordance with its
     terms.

          (iv)   There are no conditions precedent to the effectiveness of this
     Agreement that have not been satisfied or waived.

          (v)    There is no action, suit, investigation, litigation or
     proceeding affecting either the Grantor or MGM Finance pending or
     threatened before any court, governmental agency or arbitrator that
     purports to affect the legality, validity or enforceability of this
     Agreement or the consummation of the transactions contemplated hereby or
     whose resolution could have a material adverse affect on the ability of
     either such party to perform its obligations hereunder.

          (vi)   No Event of Default has occurred and is continuing, and neither
     this Agreement nor the consummation of the transactions contemplated hereby
     shall cause or result in a Default under the Indenture or a breach or
     violation of, or constitute a default

                                       7
<PAGE>

     under, any other agreement instrument to which MGM Finance is a party or by
     which it or its property is bound.

     (b)  The Grantor represents and warrants to and for the benefit of the
Secured Lenders' Agent, the Trustee and the Holders as follows:

          (i)    The Grantor is the legal and beneficial owner of the Collateral
     free and clear of any Lien, except for the assignments, pledges and
     security interests created by this Agreement.

          (ii)   This Agreement and the pledge of the Collateral pursuant hereto
     create a valid and perfected security interest in the Collateral securing
     the payment of the MGM Finance Obligations. Such security interest is first
     priority with respect to all Collateral other than Bank Collateral. With
     respect to Bank Collateral, such security interest is subject as to
     priority only to the Lien created by Section 1 hereof.

          (iii)  No consent of any other Person and no authorization, approval
     or other action by, and no notice to or filing with, any governmental
     authority or regulatory body or other third party is required either (x)
     for the grant by the Grantor of the assignment and security interest
     granted hereby, for the pledge by the Grantor of the Collateral pursuant
     hereto or for the execution, delivery or performance of this Agreement by
     the Grantor, or (y) for the perfection or maintenance of the pledge,
     assignment and security interest created hereby over the Collateral
     (including the priority nature of such pledge, assignment or security
     interest as described in clause (ii) above), except as may be required in
     connection with the disposition thereof by laws affecting the offering and
     sale of securities generally.

          (iv)   There are no conditions precedent to the effectiveness of this
     Agreement that have not been satisfied or waived.

          (v)    There is no action, suit, investigation, litigation or
     proceeding affecting either the Grantor or MGM Finance pending or
     threatened before any court, governmental agency or arbitrator that
     purports to affect the legality, validity or enforceability of this
     Agreement or the consummation of the transactions contemplated hereby or
     whose resolution could have a material adverse affect on the ability of
     either such party to perform its obligations hereunder.

          (vi)   No Event of Default has occurred and is continuing, and neither
     this Agreement nor the consummation of the transactions contemplated hereby
     shall cause or result in a Default under the Indenture or a breach or
     violation of, or constitute a default under, any other agreement instrument
     to which MGM Finance is a party or by which it or its property is bound.

                                       8
<PAGE>

     SECTION 7.  Further Assurances.  The Grantor agrees that from time to time,
                 ------------------
at the expense of the Grantor, the Grantor will promptly execute and deliver all
further instruments and documents (including the filing and recording of any
necessary financing statements), and take all further action, that may be
necessary or desirable, or that the Administrative Agent, Trustee or Secured
Lenders' Agent may request, in order to perfect and protect any pledge,
assignment or security interest granted or purported to be granted hereby or to
enable the Administrative Agent, Trustee and Secured Lenders' Agent to exercise
and enforce their respective rights hereunder.  The Grantor shall pay all taxes,
assessments and other charges with respect to the Collateral, and will defend
the Collateral against any suit, action or proceeding which could adversely
affect the assignment, pledge and security interest created hereby.

     SECTION 8.  Interest and Distributions; Reinvestment of Securities
                 ------------------------------------------------------
Accounts.  (a)  The Secured Lenders' Agent shall be entitled to receive and
--------
retain any and all interest and other distributions paid in respect of Bank
Collateral and Collateral as additional Bank Collateral and Collateral,
respectively, subject to the Lien and terms hereof.  All interest and
distribution payments that are received by the Grantor contrary to the
provisions of this Section 8 shall be received in trust for the benefit of the
Secured Lenders' Agent, shall be segregated from other funds of the Grantor and
shall be forthwith paid over to the Secured Lenders' Agent as Collateral.

     (b)  All amounts maintained in either of the Securities Accounts, including
all amounts paid in respect of interest and other distributions on Bank
Collateral and Collateral which are retained by the Secured Lenders' Agent,
shall be invested in U.S. Government Obligations with respect to which the
requirements of Sections 4(a) or (b), and Section 7, have been satisfied.

     SECTION 9.  Transfers and Other Liens.  The Grantor shall not (i) sell,
                 -------------------------
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except that the Grantor may
assign its interests in the Collateral to the Company at any time after the
Defeasance Date provided that the Collateral remains subject to the assignments,
pledges and security interests created hereby, or (ii) create or suffer to exist
any Lien upon or with respect to any of the Collateral except for the pledge,
assignment and security interest created by this Agreement.

     SECTION 10. Secured Lenders' Agent Appointed Attorney-in-Fact.  The Grantor
                 -------------------------------------------------
hereby irrevocably appoints the Secured Lenders' Agent the Grantor's attorney-
in-fact, with full authority in the place and stead of the Grantor and in the
name of the Grantor or otherwise, from time to time in the Secured Lenders'
Agent's discretion, to take any action and to execute any instrument necessary
to accomplish the purposes of this Agreement.

     SECTION 11. Secured Lenders' Agent May Perform.  If the Grantor fails to
                 ----------------------------------
perform any agreement contained herein, the Secured Lenders' Agent may itself
perform, or cause

                                       9
<PAGE>

performance of, such agreement, and the expenses of the Secured Lenders' Agent
incurred in connection therewith shall be payable by the Grantor.

     SECTION 12. The Secured Lenders' Agent's Duties.  The Trustee (on its own
                 -----------------------------------
behalf and on behalf of the Holders) hereby appoints Secured Lenders' Agent as
their agent to act for and on its behalf, but only upon its direction, in
connection with the exercise and enforcement of their rights and remedies
hereunder in accordance with the terms hereof, including, without limitation,
for the purposes of perfection of the assignment, pledge and security interest
created hereby in favor of the Trustee and the Holders.  The Administrative
Agent (on its own behalf and on behalf of the Banks) hereby appoints Secured
Lenders' Agent as their agent to act for and on its behalf, but only upon its
direction, in connection with the exercise and enforcement of their rights and
remedies hereunder in accordance with the terms hereof, including, without
limitation, for the purposes of perfection of the assignment, pledge and
security interest created hereby in favor of the Administrative Agent and the
Banks.  The powers conferred on the Secured Lenders' Agent hereunder are solely
to protect the assignments, pledges and security interests in the Collateral,
including the Bank Collateral, and shall not impose any duty upon it to exercise
any such powers.  Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Secured Lenders' Agent shall have no duty as to any Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Security Collateral,
whether or not the Secured Lenders' Agent has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral.  The
Secured Lenders' Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which First Trust accords its
own property.

     SECTION 13. Release and Termination.
                 -----------------------

     (a)  On the Defeasance Date, and subject to the fulfillment or waiver of
the conditions precedent set forth in Article 8 (including Sections 8.2 and 8.3
thereof) of the Loan Agreement on that date, the Administrative Agent shall
notify the Secured Lenders' Agent that, concurrently with the release and
termination of all collateral and guarantees held by the Secured Lenders' Agent
for the First Mortgage Notes and credit Agreement (other than the liens in the
Securities Accounts created hereunder), the assignment, pledge and security
interest created hereunder or pursuant hereto for the benefit of the Banks or
the Administrative Agent, all rights of any Bank or the Administrative Agent
with in or respect of any Bank Collateral, and all other rights of any Creditor
or the Administrative Agent hereunder, have been terminated.  Such notice and
the notice of the Administrative Agent to the Secured Lenders' Agent
contemplated by Section 13(b) below are each referred to herein as a "Collateral
                                                                      ----------
Notice".  Upon such termination, the Administrative Agent shall, at the
------
Grantor's expense, execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence the release of any Bank Collateral
from

                                       10
<PAGE>

the assignment, pledge and security interest granted to the Administrative Agent
and the Banks hereby, regardless of whether at the time of such request or such
release any Event of Default or Loan Agreement Event of Default shall have
occurred and be continuing.

     (b)  Without limitation to the foregoing Section 13(a), upon the later of
payment in cash and in full of the Grantor Obligations and the termination in
full of the Commitment (as defined in the Loan Agreement), the pledge,
assignment and security interest granted hereby in the Bank Collateral shall
terminate.  Upon any such termination, the Administrative Agent will, at the
Grantor's expense, execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination and shall promptly
notify the Secured Lenders' Agent that the assignment, pledge and security
interest created by Section 1 hereof have terminated.

     (c)  The term of this Agreement shall commence upon its execution and
delivery and shall terminate when the First Mortgage Notes have been paid and
discharged in accordance with the Indenture and the assignment, pledge and
security interest granted to the Administrative Agent and the Banks under
Section 1 hereof shall have terminated pursuant to Sections 13(a) or (b) above.
Upon termination of this Agreement each assignment, pledge and security interest
created hereunder shall terminate and be released.

     SECTION 14. Certification of Defeasance and Reconveyance of Deeds of Trust
                 --------------------------------------------------------------
and Release of Collateral Related to the Defeased First Mortgage Notes.  On the
----------------------------------------------------------------------
Defeasance Date the Trustee shall execute and deliver to the addressees thereof
the Certificate of Defeasance in the form attached hereto as Exhibit C.  In
addition, the Credit Agent and Trustee shall, and shall cause the Secured
Lender's Agent to, reconvey and release all Collaterally Assigned Documents and
all other guaranties, mortgages, deed of trust, security agreement, pledge,
assignments and any other document and instrument securing or supporting the
Indenture, the First Mortgage Notes, the MGM Finance Obligations, the Credit
Agreement and the "Loan Documents" (as such term is defined in the Credit
Agreement) or any of the foregoing, in each case by execution, delivery and
recordation by the Trustee of such instruments and agreements of reconveyance
and release as may be reasonably requested by the Grantor, MGM Finance, the
Trustee or the Credit Agent.

     SECTION 15. Remedies for the Benefit of the Banks and Administrative Agent.
                 --------------------------------------------------------------
Upon the occurrence and continuation of an "Event of Default" under and as such
term is defined in the Loan Agreement (a "Loan Agreement Event of Default"):
                                          -------------------------------

     (a)  The Administrative Agent may exercise, or cause the Secured Lenders'
Agent to exercise, in respect of the Bank Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party upon default under the Uniform Commercial
Code in effect in the State of Nevada at such time (the "Uniform Commercial
                                                         ------------------
Code") (whether or not the Uniform Commercial Code applies to the affected Bank
Collateral) and also may without notice except as specified below, sell the Bank
Collateral or any part thereof in one or more parcels at

                                       11
<PAGE>

public or private sale, at any of the Secured Lenders' Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Secured Lenders' Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to the Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Neither the Administrative Agent nor the Secured Lenders' Agent
shall be obligated to make any sale of Bank Collateral regardless of notice of
sale having been given. Any public or private sale may be adjourned from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.

     (b)  All cash proceeds received in respect of any sale of, collection from,
or other realization upon all or any part of the Bank Collateral may, in the
discretion of the Secured Lenders' Agent, be held by the Secured Lenders' Agent
as collateral for, and/or then or at any time thereafter applied in whole or in
part by the Administrative Agent for the ratable benefit of the Banks against,
all or any part of the Grantor Obligations in such order as the Administrative
Agent shall elect.  Any surplus of such cash or cash proceeds held by the
Secured Lenders' Agent or the Administrative Agent and remaining after payment
in full of all the Grantor Obligations shall be held by the Secured Lenders'
Agent as Collateral pursuant to the terms hereof.

     SECTION 16. Remedies for the Benefit of the Trustee.  Subject in each case
                 ---------------------------------------
to the provisions of Section 17 hereof, upon the occurrence and continuation of
an Event of Default under the Indenture:

     (a)  The Trustee may cause the Secured Lenders' Agent to exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party upon default under the Uniform Commercial Code (whether or not the Uniform
Commercial Code applies to the affected Collateral) and also may without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Secured Lenders' Agent's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Secured Lenders' Agent may deem commercially reasonable. The
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Grantor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Secured Lenders' Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The
Secured Lenders' Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.

     (b)  All cash proceeds received by the Secured Lenders' Agent in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Trustee, be held by the Secured
Lenders' Agent as collateral for,

                                       12
<PAGE>

and/or then or at any time thereafter applied in whole or in part by the Trustee
against, all or any part of the MGM Finance Obligations in accordance with the
Indenture. Any surplus of such cash or cash proceeds held by the Secured
Lenders' Agent and remaining after payment in full of all the MGM Finance
Obligations shall be paid over to the Grantor or to whomsoever may be lawfully
entitled to receive such surplus.

     SECTION 17. Subordination of Trustee's Lien on Bank Collateral.
                 --------------------------------------------------

     (a)  Notwithstanding the date, manner or order of attachment or perfection
or the description of any Bank Collateral or security interests, liens, claims
or encumbrances covered or granted hereby with respect to the Bank Collateral,
the assignment, pledge and security interest granted in the Bank Collateral
under Section 2 hereof shall be in all respects subordinate to and rank after
the assignment, pledge and security interest granted in the Bank Collateral
under Section 1 hereof.  The Administrative Agent and the other Creditors (as
defined in the Loan Agreement) shall have at all times an interest prior and
superior to that of the Secured Lenders' Agent and Trustee in the Bank
Collateral except as specified in Section 13 hereof.  Without prejudice to the
generality of the foregoing, the Administrative Agent and the Banks may
exercise, or cause the Secured Lenders' Agent to exercise, any right of sale
(whether by private contract, court sale or otherwise) of the Bank Collateral,
the method, manner, time, place and terms of which sale shall be commercially
reasonable, without any further responsibility or duty on the part of the
Secured Lenders' Agent, Banks or the Administrative Agent to protect any rights
and entitlement of the Trustee or Holders hereunder.  For this purpose, the
Secured Lenders' Agent and the Trustee hereby irrevocably agree to take all
steps as may be necessary or desirable to consent to and ratify and confirm such
sale and, whether or not the proceeds of such sale shall be sufficient after
application thereof by the Banks and the Administrative Agent in payment of the
Grantor Obligations to discharge the MGM Finance Obligations, the Trustee shall
cooperate with the  Banks and the Agent in the completion of such sale and, in
particular, but without limitation, shall forthwith upon the request of the
Banks or the Administrative Agent execute such discharges, releases and/or
reassignments as may be necessary or desirable to effect the sale of the Bank
Collateral free of any lien, charge, assignment, encumbrance or other security
created for the benefit of the Trustee hereby or pursuant hereto in such Bank
Collateral.

     (b)  Neither the Trustee nor any Holder shall ask, exercise, demand or sue
for any right, power or remedy in respect of the Bank Collateral, or permit,
cause or attempt to cause the Secured Lenders' Agent to do any of the foregoing
on its behalf or on behalf of any Holders, whether pursuant to any enforcement,
collection, execution, levy or foreclosure proceeding or otherwise, in each case
unless one of the conditions set forth in clauses (i) or (ii) below shall have
been satisfied.  The Trustee further agree that, until one of the conditions set
forth in clauses (i) or (ii) below shall have been satisfied, the only right of
the Trustee and Holders under this Agreement with respect to the Bank Collateral
is for the Grantor Obligations to be secured by the Bank Collateral and to
receive a share of the

                                       13
<PAGE>

proceeds of such Bank Collateral, if any, to the extent and at the time provided
in this Agreement:

          (i)    the Administrative Agent has given its written consent thereto
     on behalf of the Banks; or

          (ii)   the assignment, pledge and security interest created in the
     Bank Collateral in favor of the Administrative Agent and the Banks under
     Section 1 hereof shall have terminated as provided in Section 13 hereof;

provided, however, that nothing in this Agreement shall be taken to restrict the
--------  -------
right of the Trustee or any Holders to appear in any proceeding brought against
any Bank Collateral for the purpose of putting appropriate parties on notice of
their interests and rights under this Agreement.

     (c)  The Administrative Agent shall be under no duty to marshall assets in
favor of the Trustee or any other person, or to pursue any other claim or remedy
which may exist in favor of the Administrative Agent, but may proceed against
any Bank Collateral in any order or manner which it may in its discretion elect,
subject to the terms of the Loan Agreement.  The Credit Agent shall be under no
duty to marshall assets in favor of the Trustee or any other person, or to
pursue any other claim or remedy which may exist in favor of the Credit Agent,
but may proceed against any collateral of which it is beneficiary in any order
or manner which it may in its discretion elect, subject to the agreements
governing the provision of such collateral.

     SECTION 18. Responsibilities of Trustee and Secured Lenders' Agent.
                 ------------------------------------------------------

     (a)  Each of the Trustee and the Secured Lenders' Agent undertakes to
perform only such duties as are expressly and specifically set forth in the
Indenture (in the case of the Trustee only) and this Agreement and no implied
duties or obligations shall be read into this Agreement against the Trustee or
the Secured Lenders' Agent.

     (b)  Neither the Trustee nor the Secured Lenders' Agent shall have any
liability hereunder except to the extent of its own gross negligence or willful
misconduct.  In no event shall the Trustee or the Secured Lenders' Agent be
liable for any special, indirect or consequential damages.  Neither the Trustee
nor the Secured Lenders' Agent shall have any duty or responsibility under this
Agreement in the case of any default in the performance of the covenants or
agreements contained in the Indenture.  Neither the Trustee nor the Secured
Lenders' Agent shall be required to resolve conflicting demands to money or
property in its possession under this Agreement.

     (c)  The Trustee and the Secured Lenders' Agent may consult with counsel of
its own choice and the opinion of such counsel shall be full and complete
authorization to take or suffer in good faith any action hereunder in accordance
with such opinion of counsel.

                                       14
<PAGE>

     (d)  Neither the Trustee nor the Secured Lenders' Agent shall be
responsible for any of the recitals or representations contained herein.

     (e)  Either the Trustee or the Secured Lenders' Agent may become the owner
of, or acquire an interest in, any of the First Mortgage Notes with the same
rights that it would have if it were not the Trustee or Secured Lenders' Agent,
respectively.

     (f)  Neither the Trustee nor the Secured Lenders' Agent shall be liable for
the accuracy of any calculations provided as to the sufficiency of the U.S.
Government Obligations deposited hereunder to pay any obligations secured
hereby.

     (g)  Neither the Trustee nor the Secured Lenders' Agent shall be liable for
any action or omission of any each other, any MGM Party, the Administrative
Agent or the Credit Agent under this Agreement or the Indenture.

     (h)  Whenever in the administration of this Agreement the Trustee or
Secured Lenders' Agent shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action thereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of gross negligence or willful misconduct on the
part of the Trustee or Secured Lenders' Agent, respectively, be deemed to be
conclusively proved and established by a certificate of an authorized
representative of the Grantor and such certificate shall, in the absence of
gross negligence or willful misconduct on the part of the Trustee or the Secured
Lenders' Agent, respectively, be full warrant to the Trustee or Secured Lenders'
Agent, respectively, of any action taken or suffered by it under the provisions
of this Agreement upon the faith thereof.

     (i)  The Trustee and the Secured Lenders' Agent may conclusively rely, as
to the truth and accuracy of the statements and correctness of the opinions and
the calculations, if any, provided to it in connection with this Agreement, and
shall be protected in acting, or refraining from acting, upon any written
notice, instruction, request, certificate, document or opinion furnished to the
Trustee or Secured Lenders' Agent in connection with this Agreement and
reasonably believed by the Trustee or Secured Lenders' Agent, respectively, to
have been signed or presented by the proper party, and it need not investigate
any fact or matter stated in such notice, instruction, request, certificate,
document or opinion.

     (j)  The Grantor agrees to indemnify the Trustee, its agents and its
officers or employees, and hold the Trustee, its agents, officers or employees
harmless, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable fees and disbursements of counsel for the Trustee) which may be
imposed on, incurred by, or asserted against the Trustee at any time by reason
of the performance of its duties as Trustee in any transaction arising out of
this Agreement, or any of the transactions contemplated herein or in the
Indenture, unless due to the Trustee's or its officers' or employees' or agents'
negligence or willful misconduct.

                                       15
<PAGE>

     (k)  The Secured Lenders' Agent shall distribute funds from the Securities
Accounts to the Trustee, to the extent such funds are available for application
to payments of principal and interest  under the Indenture and the First
Mortgage Notes in accordance with the Schedule attached to the Officer's
Certificate delivered in the form of Exhibit D.

     SECTION 19. Resignation and Merger.
                 ----------------------

     (a)  The Trustee may resign and be discharged of its duties hereunder in
accordance with the procedures in the Indenture, if and at such time as the
Trustee shall resign or be discharged as the Trustee under the Indenture. Any
successor Trustee under the Indenture shall succeed as the Trustee under this
Agreement.

     (b)  Any company into which the Trustee may be merged or converted or with
which it may be consolidated or any company resulting from any merger,
conversion or consolidation to which it shall be a party or any company to which
the Trustee may sell or transfer all or substantially all of its corporate trust
business, provided such company shall be eligible under this Agreement, shall be
the successor to such Trustee without the execution or filing of any paper or
any further act, notwithstanding anything to the contrary herein.

     (c)  First Trust reserves the right to resign as Secured Lenders' Agent
under this Agreement at any time by giving written notice of its resignation,
specifying the effective date thereof, to the other parties hereto.  Within 30
days after receiving the aforesaid notice, MGM Finance agrees to appoint a
successor Secured Lenders' Agent, reasonably acceptable to the Administrative
Agent, the Credit Agent and the Trustee, to which First Trust may distribute the
property then held by it hereunder, less its fees, costs and expenses.  If a
successor Secured Lenders' Agent has not been appointed hereunder and has not
accepted such appointment by the end of such 30 day period, First Trust may
apply to a court of competent jurisdiction for appointment of a successor
Secured Lenders' Agent hereunder, and the costs, expenses and reasonable
attorney's fees which it incurs in connection with such a proceeding shall be
paid by MGM Finance.

     SECTION 20. Successors.
                 ----------

     (a)  If at any time hereafter the Trustee shall resign, be removed, be
dissolved or otherwise become incapable of acting, or shall be taken over by any
governmental official, agency, department or board, the position of Trustee
shall thereupon become vacant.  MGM Finance shall mail notice of any such
vacancy to the Holders.

     (b)  If no appointment of a successor Trustee shall be made pursuant to the
foregoing provisions of this section any Holder, or any retiring Trustee or
Secured Lenders' Agent, respectively, may apply to any court of competent
jurisdiction to appoint a successor Trustee.  Such court may thereupon, after
such notice, if any, as such court may deem proper and prescribe, appoint a
successor Trustee.

                                       16
<PAGE>

     SECTION 21. Limitation of Liability.  The Trustee shall not be liable or
                 -----------------------
responsible because of the failure of any of the other parties of this Agreement
to perform any act required of each of them hereunder or because of the loss of
any moneys arising through the insolvency or the act or default or omission of
any depository, other than itself, in which such moneys shall have been
deposited.  The liability of the Trustee hereunder to make payments due and
payable with respect to the First Mortgage Notes as provided herein is limited
to the availability of amounts on deposit under the Indenture and as Collateral
hereunder.

     SECTION 22. Indemnity and Expenses.
                 ----------------------

     (a)  The Grantor agrees to indemnify the Secured Lenders' Agent from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting from the Secured
Lenders' Agent's, own gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction.

     (b)  The Grantor will upon demand pay to the Secured Lenders' Agent the
amount of any and all reasonable fees and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that the Secured
Lenders' Agent may incur in connection with (i) the custody, preservation, use
or operation of, or the sale of, collection from or other realization upon, any
of the Collateral, or (ii) the failure by the Grantor to perform or observe any
of the provisions hereof.

     SECTION 23. Security Interests Absolute.  The obligations of the Grantor
                 ---------------------------
under this Agreement are independent of the Secured Obligations, and a separate
action or actions may be brought and prosecuted against the Grantor to enforce
this Agreement, irrespective of whether any action is brought against MGM
Finance or whether MGM Finance is joined in any such action or actions.  All
rights of the beneficiaries hereof and the pledge, assignment and security
interest hereunder, and all obligations of the Grantor hereunder, shall be
absolute and unconditional, irrespective of:

     (a)  any lack of validity or enforceability of the Indenture, any First
Mortgage Note or any Loan Document (as defined in the Loan Agreement) or any
other agreement or instrument relating thereto;

     (b)  any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations or any other amendment or waiver
of or any consent to any departure from the terms of the Indenture, the First
Mortgage Notes or any Loan Document;

     (c)  any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;

                                       17
<PAGE>

     (d)  any manner of application of collateral, or proceeds thereof, to all
or any of the Secured Obligations, or any manner of sale or other disposition of
any collateral for all or any of the Secured Obligations or any other assets of
the Grantor;

     (e)  any change, restructuring or termination of the corporate structure or
existence of the Grantor; or

     (f)  any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Grantor or a third party grantor of a
security interest.

     SECTION 24. Redemption or Acceleration of Maturity.  MGM Finance will not
                 --------------------------------------
accelerate the maturity or due date of the First Mortgage Notes to a date
earlier than May 1, 1997.

     SECTION 25. Amendments; Waivers; Etc.   No amendment or waiver of any
                 ------------------------
provision of this Agreement, and no consent to any departure by any party
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the each of the parties hereto, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.  No failure on the part of any party hereto to exercise, and no
delay in exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.

     SECTION 26. Addresses for Notices.  All notices and other communications
                 ---------------------
provided for hereunder shall be in writing (including electronic facsimile) and
(a) if to the Trustee, the Grantor or MGM Finance, to the address provided
therefor under Section 12.10 of the Indenture,  (b) if to the Administrative
Agent, to the address provided therefor under Section 11.6 of the Loan
Agreement, (c) if to the Credit Agent, to the address provided therefor under
Section 11.02 of the Credit Agreement, and (d) if to the Secured Lenders' Agent,
to 410 North Michigan Avenue, Suite 370, Chicago, Illinois  60611, Attention:
Gwendolyn Carroll, Vice President, facsimile number 312-836-6757, or, as to each
party, to such other address as such party shall designated in a notice to each
of the other parties hereto.

     SECTION 27. Continuing Security Interest; Assignments under the Loan
                 --------------------------------------------------------
Agreement.  This Agreement shall create a continuing security interest in the
---------
Collateral and shall (a) remain in full force and effect except as provided by
Section 13 hereof, (b) be binding upon the parties hereto and their respective
successors, transferees and assigns and (c) inure, together with the rights and
remedies hereunder, to the benefit of the parties hereto and their respective
successors, transferees and assigns.  Without limiting the generality of the
foregoing clause (c), any Bank may assign or otherwise transfer all or any
portion of its rights and obligations under the Loan Agreement (including,
without limitation, all or any portion of its Commitment) to any other Person
permitted by the Loan Agreement, and

                                       18
<PAGE>

such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Bank herein or otherwise, in each case as provided in
the Loan Agreement.

     SECTION 28. Severability.  If any one or more of the covenants or
                 ------------
agreements provided in this Agreement should be determined by a court of
competent jurisdiction to be contrary to law, such covenants or agreements
herein contained shall be null and void and shall be severed from the remaining
covenants and agreements and shall, in so far as is reasonably possible, not
affect the validity of the remaining provisions of this Agreement.

     SECTION 29. Counterparts.  This Agreement may be executed in several
                 ------------
counterparts, all or any of which shall be regarded for all purposes as
duplicate originals and shall constitute and be but one and the same instrument.

     SECTION 30. Governing Law; Terms.  This Agreement shall be governed by and
                 --------------------
construed in accordance with the laws of the State of Nevada, except to the
extent that the validity or perfection of the security interest hereunder, or
remedies hereunder, in respect of any particular Collateral are governed by the
laws of a jurisdiction other than the State of Nevada.  Unless otherwise defined
herein or in the Indenture, terms used in Article 9 of the Uniform Commercial
Code are used herein as therein defined.

     SECTION 31. Waiver of Jury Trial.  Each party hereto hereby irrevocably
                 --------------------
waives any right to a trial by jury in any action or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby.

                                       19
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.

MGM GRAND, INC.

By: /s/ Scott Langsner
    ----------------------------
        Scott Langsner


MGM GRAND HOTEL FINANCE CORP.

By: /s/ Daniel H. Scott
    ----------------------------
        Daniel H. Scott

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent
and Credit Agent

By: /s/ L. Chenevert, Jr.
    ----------------------------
        L. Chenevert, Jr.
        Vice President


FIRST TRUST OF ILLINOIS, NATIONAL ASSOCIATION

By: /s/ G.M. Carroll
    ----------------------------
        G.M. Carroll

U.S. TRUST COMPANY OF CALIFORNIA, N.A., as
Trustee

By: /s/ D. Young
    ----------------------------
        D. Young
        Assistant Vice President

                                       20