EXHIBIT  10.2


 





 


	
   

  	
  Date: 

  	
   

  	
  December 3, 2003

  	
   

  



 


	
   

  	
  To: 

  	
   

  	
  Mandalay Resort Group

  	
   

  
	
   

  	
  Attention: 

  	
   

  	
  Swaps Documentation
  Department

  	
   

  
	
   

  	
  Facsimile no.: 

  	
   

  	
  1 702 632 6822

  	
   

  



 


	
   

  	
  Our Reference:

  	
   

  	
  Global No. N270170N

  	
   

  



 


	
   

  	
  Re:

  	
   

  	
  Interest Rate Swap
  Transaction

  	
   

  



 


	
   

  	
  Ladies and Gentlemen: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  The purpose of this letter
  agreement is to set forth the terms and conditions of the Transaction entered
  into between Deutsche Bank AG (“DBAG”) and Mandalay Resort Group
  (“Counterparty”) on the Trade Date specified below (the “Transaction”). This
  letter agreement constitutes a “Confirmation” as referred to in the Agreement
  specified below.

  	
   

  
	
   

  	
   

  	
   

  



 


	
   

  	
  The definitions and
  provisions contained in the 2000 ISDA Definitions (the “Definitions”) as
  published by the International Swaps and Derivatives Association, Inc. are
  incorporated by reference herein. In the event of any inconsistency between
  the Definitions and this Confirmation, this Confirmation will govern.

  	
   

  



 


	
   

  	
  For the purpose of this
  Confirmation, all references in the Definitions or the Agreement to a “Swap
  Transaction” shall be deemed to be references to this Transaction.

  	
   

  
	
   

  	
   

  	
   

  



 


	
   

  	
  1. This Confirmation
  evidences a complete and binding agreement between DBAG (“Party A”) and
  Counterparty (“Party B”) as to the terms of the Transaction to which this
  Confirmation relates. In addition, Party A and Party B agree to use all
  reasonable efforts to negotiate, execute and deliver an agreement in the form
  of the ISDA Master Agreement (Multicurrency-Cross Border) (the “ISDA Form”)
  (as may be amended, modified or supplemented from time to time, the
  “Agreement”) with such modifications as Party A and Party B will in good
  faith agree. Upon execution by the parties of such Agreement, this
  Confirmation will supplement, form a part of and be subject to the Agreement.
  All provisions contained or incorporated by reference in such Agreement upon
  its execution shall govern this Confirmation except as expressly modified
  below. Until Party A and Party B execute and deliver the Agreement, this
  Confirmation, together with all other documents referring to the ISDA Form
  (each a “Confirmation”) confirming Transactions (each a “Transaction”)
  entered into between us (notwithstanding anything to the contrary in a
  Confirmation) shall supplement, form a part of, and be subject to an agreement
  in the form of the ISDA Form as if Party A and Party B had executed an
  agreement on the Trade Date of the first such Transaction between us in such
  form, with the Schedule thereto (i) specifying only that (a) the governing
  law is the laws of the State of New York, without reference to choice of law
  doctrine, provided, that such choice of law shall be superseded by any choice
  of law provision specified in the Agreement upon its execution, and (b) the
  Termination Currency is U.S. Dollars and (ii) incorporating the addition to
  the definition of “Indemnifiable Tax” 

  	
   

  



 

















 


	
   

  	
   

  	
  contained in (page 48 of)
  the ISDA “User’s Guide to the 1992 ISDA Master Agreements”. In the event of
  any inconsistency between the terms of this Confirmation, and the terms of
  the Agreement, this Confirmation will prevail for the purpose of this
  Transaction. 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2. The terms of the
  particular Transaction to which this Confirmation relates are as follows:

  	
   

  



 


	
   

  	
  Notional Amount:

  	
   

  	
  USD 125,000,000.00

  	
   

  



 


	
   

  	
  Trade Date:

  	
   

  	
  November 26, 2003

  	
   

  



 


	
   

  	
  Effective Date:

  	
   

  	
  December 1, 2003

  	
   

  



 


	
   

  	
  Termination Date:

  	
   

  	
  December 15, 2011

  	
   

  



 


	
   

  	
  Fixed Amounts:

  	
   

  



 


	
   

  	
  Fixed Rate Payer:

  	
   

  	
  DBAG

  	
   

  



 


	
   

  	
  Fixed Rate Payer Period
  End Dates:

  	
   

  	
  The 15th day of June and
  December of each year, commencing June 15, 2004, through and including the
  Termination Date with No Adjustment

  	
   

  



 


	
   

  	
  Fixed Rate Payer Payment
  Dates:

  	
   

  	
  The 15th day of June and
  December of each year, commencing June 15, 2004, through and including the
  Termination Date

  	
   

  



 


	
   

  	
  Fixed Rate:

  	
   

  	
  6.375%

  	
   

  



 


	
   

  	
  Fixed Rate Day Count Fraction:

  	
   

  	
  30/360

  	
   

  



 


	
   

  	
  Fixed Rate Payer Business
  Days:

  	
   

  	
  London and New York

  	
   

  



 


	
   

  	
  Fixed Rate Payer Business
  Day Convention:

  	
   

  	
  Following

  	
   

  



 


	
   

  	
  Floating Amounts:

  	
   

  



 


	
   

  	
  Floating Rate Payer:

  	
   

  	
  Counterparty

  	
   

  



 


	
   

  	
  Floating Rate Payer Period
  End Dates:

  	
   

  	
  The 15th day of June and
  December of each year, commencing June 15, 2004, through and including the
  Termination Date

  	
   

  



 


	
   

  	
  Floating Rate Payer
  Payment Dates:

  	
   

  	
  The 15th day of June and
  December of each year, commencing June 15, 2004, through and including the
  Termination Date

  	
   

  



 


	
   

  	
  Floating Rate for initial
  Calculation Period:

  	
   

  	
  To be determined

  	
   

  



 


 


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  Floating Rate Option:

  	
   

  	
  USD-LIBOR-BBA

  	
   

  



 


	
   

  	
  Designated Maturity:

  	
   

  	
  Six months, except with
  respect to the initial Calculation Period for which the Designated Maturity
  shall be the Linear Interpolation of the six month and seven month

  	
   

  



 


	
   

  	
  Spread:

  	
   

  	
  Plus 1.74%

  	
   

  



 


	
   

  	
  Floating Rate Day Count
  Fraction:

  	
   

  	
  Actual/360

  	
   

  



 


	
   

  	
  Reset Dates:

  	
   

  	
  The last Floating Rate
  Payer Business Day of each Calculation Period or Compounding Period, if
  Compounding is applicable.

  	
   

  



 


	
   

  	
  Compounding:

  	
   

  	
  Inapplicable

  	
   

  



 


	
   

  	
  Floating Rate Payer
  Business Days:

  	
   

  	
  London and New York

  	
   

  



 


	
   

  	
  Floating Rate Payer
  Business Day Convention:

  	
   

  	
   

  Modified Following

  	
   

  



 


	
   

  	
   

  	
  3. Account Details:

  	
   

  



 


	
   

  	
  USD DBAG Payment
  Instructions:

  	
   

  



 


	
   

  	
  Account With:

  	
   

  	
  Deutsche Bank AG, New York

  	
   

  



 


	
   

  	
  SWIFT Code:

  	
   

  	
  DEUTUS33

  	
   

  



 


	
   

  	
  Favor Of:

  	
   

  	
  Deutsche Bank AG, New York

  	
   

  



 


	
   

  	
  Account Number:

  	
   

  	
  100440170004

  	
   

  



 


	
   

  	
  USD Counterparty Payment
  Instructions:

  	
   

  



 


	
   

  	
  PLEASE PROVIDE AT YOUR
  EARLIEST CONVENIENCE

  	
   

  



 


	
   

  	
  4. Offices:

  	
   

  



 


	
   

  	
  The Office of DBAG for
  this Transaction is New York.

  	
   

  



 


	
   

  	
  The Office of Counterparty
  for this Transaction is NV.

  	
   

  



 


	
   

  	
  5. Calculation Agent:

  	
   

  	
  The party specified as
  such in the Agreement, or if not specified therein, DBAG.

  	
   

  



 


6.       General Definitions:


 


“Credit Agreement” shall
mean, individually and collectively (i) the Revolving Loan Agreement dated as
of August 20, 2001, between Party B and the Lenders and Co- Documentation
Agents named therein (as “Lenders” and “Co-Documentation Agents”), Citicorp
USA, Inc. and Bankers Trust Company (as “Syndication Agents”), Bank of America,
N.A. (as “Administrative Agent” and “Issuing Lender”), and Bank of America
Securities LLC and Salomon Smith Barney Inc. (as “Lead Arrangers” and “Book
Managers”) and (ii) the Term Loan Agreement dated as of August 20, 2001, 


 


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between Party B and the
Lenders and Co-Documentation Agents named therein (as “Lenders” and
“Co-Documentation Agents”), Citicorp USA, Inc. and Bankers Trust Company (as
“Syndication Agents”), Bank of America, N.A. (as “Administrative Agent” and
“Issuing Lender’’), and Bank of America Securities LLC and Salomon Smith Barney
Inc. (as “Lead Arrangers” and “Book Managers”), as each such agreement may be
amended or restated from time to time.


 


     7.  Modifications to the ISDA Form:


 


(a)         Specified
Entity”
means for the purpose of:


 


Section 5(a)(v) of this Agreement, (i) in relation to
Party A, none, and (ii) in relation to


Party B, any significant subsidiary of Party B (as
defined below);


 


Section 5(a)(vi) of this Agreement, (i) in relation to
Party A, none, and (ii) in relation to Party B, any significant subsidiary of
Party B;


 


Section 5(a)(vii) of this Agreement, (i) in relation
to Party A, none, and (ii) in relation to Party B, any significant subsidiary
of Party B; and


 


Section 5(b)(iv) of this Agreement, (i) in relation to
Party A, none, and (ii) in relation to Party B, any significant subsidiary of
Party B.


 


For purposes of
this Agreement, “Significant Subsidiary of Party B” shall mean as of any date
of determination, with respect to Party B, any entity of which at least 80% of
the capital stock or other ownership interests are owned directly or indirectly
by Party B on such date, and with assets determined in accordance with GAAP of
$15,000,000.


 


 


(b)                       “Specified
Transaction” will have the meaning specified in Section 14 of this
Agreement. For purposes of clause (c) of such definition, Specified Transaction
includes any securities lending agreement, securities options, margin loans,
short sales, repurchase agreement, reverse repurchase agreement and forward
securities contract, and any other similar  transaction
now existing or hereafter catered into between Party A (or any Section 5(a)(v)
Affiliate) and Party B (or any Affiliate of Party B).


 


(c)                          The “Cross
Default” provisions of Section 5(a)(vi) will apply to Party A and
will apply to Party B.


 


For purposes of Section
5(a)(vi), the following provisions apply:


 


“Specified
Indebtedness” means, instead of the definition thereof in Section 14
of this Agreement, any obligation (whether present or future, contingent or
otherwise, as principal or surety or otherwise) in respect of (i) borrowed
money, or (ii) any transaction with any party of the type referred to in
subparagraphs (a), (b) or (c) of the definition of Specified Transaction;
provided, however, that Specified Indebtedness shall not include deposits
received in the course of a party’s ordinary banking business.


 


For the purpose of Section 5(a)(vi)(1):


 


(a) Any reference to Specified Indebtedness becoming,
or becoming capable of being declared, due and payable shall in the case of
Specified Indebtedness which is a Transaction with any party of the type
referred to in subparagraphs (a), (b) or (c) of the definition of Specified
Transaction, be deemed to be a reference to Specified Indebtedness being, or 


 


4

















 


becoming capable of being, terminated, liquidated,
accelerated or cancelled by reason of a default by a party to such Transaction;
and


 


(b) in determining
the amount to be included in “Threshold Amount” with respect to Specified
Indebtedness which is a Transaction with any party of the type referred to in
subparagraphs (a), (b) or (c) of the definition of Specified Transaction, the
termination or settlement value of such transaction shall be used or, if it is
not available, the Non-defaulting Party shall determine the settlement amount
of such transaction in good faith on the basis of the information available to
it.


 


“Threshold Amount” means


 


(A)  with respect to Specified Indebtedness in
respect of borrowed money:


 


        (i)    with respect to
Party A, 2% of the stockholders’ equity of Party A; and


 


        (ii)   with respect to
Party B, $25,000,000; and


 


                                  (B)   with respect to Specified Indebtedness which
is a transaction referred to in subparagraphs (a), (b) or (c) of the definition
of Specified Transaction:


 


        (i)    with respect to
Party A, $50,000,000; and


 


        (ii)   with respect to Party B, $25,000,000


 


Including, in the case of (A) and (B) above, the U.S.
Dollar equivalent on the date of any event of default of arty obligation stated
in any other currency.


 


Fox purposes of
the above, stockholders’ equity shall be  determined
by reference to the relevant party’s most recent consolidated (quarterly, in
the case of a U.S. incorporated party) balance sheet and shall include, in the
case of a U.S. incorporated party, legal capital, paid-in capital, retained
earnings and cumulative translation adjustments. Such balance sheet shall be
prepared in accordance with accounting principles that are generally accepted
in such party’s country of organization.


 


 


                        (d)           Credit Event Upon Merger. If “Credit Event
Upon Merger” is specified in to Schedule as applying to the party, such party
(“X”), any Credit Support Provider of X or any applicable Specified Entity of
X:


 


(A) consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another entity
and such action does not constitute an event described in Section 5(a)(viii)
and the creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider of X or such
Specified Entity, or


 


(B) (I) any person or entity acquires directly or
indirectly the beneficial ownership of equity securities having the power to
elect a majority of the Board of Directors or other managing body of X, any
Credit Support Provider of X or any applicable Specified Entity of X, or (II)
X, any Credit Support Provider of X or any applicable Specified Entity of X
effects any substantial change in its capital structure by means of the
issuance, incurrence or guarantee of debt or the issuance of preferred-stock or
other securities convertible into, or exchangeable for, debt or preferred
stock, or (III) X, any Credit Support Provider of X of any applicable Specified
Entity of X enters into any agreement providing for any of the forgoing, but in
the 


 


5

















 


case of clauses (I), (II) or (III) the
creditworthiness of the resulting, surviving, transferee, reorganized, burdened
or recapitalized entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be, immediately
prior to such action (and, in such event, X or its successor or  transferee, as appropriate, will be the
Affected Party);


 


provided, however,
with  respect
to a Specified Entity of Party B only, with respect to subsection (B)  above, the
resulting, surviving, transferee, reorganized, burdened or recapitalized entity
will be deemed to be materially weaker only if Party B is materially weaker.”


 


     (e)           “Additional Termination Event”.


 


The following provisions shall constitute an
Additional Termination Events under Section 5(b)(v) of the Agreement:


 


Ratings
Termination: If
at any time the senior unsecured long-term corporate rating of Party B shall be
rated at or below BB- by Standard & Poor’s Rating Group, a division of
McGraw Hill, Inc., (“S&P”), or at or below B1 by Moody’s Investor Services,
Inc. (“Moody’s”) or Party B shall fail or cease to be rated by either S&P
or Moody’s, it shall constitute an Additional Termination Event with respect to
Party B (who shall be the Affected Party), with Party A as the party entitled
to designate an Early Termination Date and determine the Settlement Amount.


 


(f)                                  Additional Events of
Default. The
following shall constitute Events of Default as though specified in Section
5(a) of this Agreement, with Party B as the Defaulting Party.


 


Credit Agreement Defaults. Each of the Events of Default (together
with the relevant provisions of any other Section or Sections to which they
refer, including definitions)  contained in the Credit Agreement is hereby
incorporated herein by this reference and made a part of this Agreement to the
same extent as if each such Event of Default were set forth in full herein.


 


(g)           Set-off.


 


                   Section
6 of the Agreement is amended by adding the following new subsection 6(f):


 


(f) In addition to any rights of set-off a party may
have as a matter of law or otherwise, upon the occurrence of an Event of
Default with respect to a party (“X”) the other party (“Y”) will have the right
(but will not be obliged): without prior notice to X or any other person to
set-off any obligation of X owing to Y (whether or not arising under this
Agreement, whether or  not
contingent and regardless of the currency, place of payment or booking office
of the obligation) against any obligation of Y owing to X (whether or not
arising under this Agreement, whether or not contingent and regardless of the
currency, place of payment or booking office of the obligation).


 


For the purpose of cross-currency set-off, Y may
convert any obligation to another currency at a market rate determined by Y.


 


If an obligation is unascertained, Y may in good faith  estimate that obligation and set-off in
respect of the estimate, subject to the relevant party accounting to the other
when the obligation is ascertained.


 


Nothing in this provision will be deemed to create a
charge or other security interest.


 


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(h)                                 Escrow Payments.


 


If by reason of the time difference between the cities
in which payments are to be made, it is not possible for simultaneous payments
to be made on any date on which both parties are required to make payments
hereunder, either party may at its option and in its sole discretion notify the
other party that payments on that date are to be made in escrow. In this case
the deposit of the payment due earlier on that date shall be made by 2:00 p.m.
(local time at the place for the earlier payment) on that date with an escrow
agent selected  by the party giving
the notice, accompanied by irrevocable payment instructions (i) to release the
deposited payment to the intended recipient upon receipt by the escrow agent of
the required deposit of the corresponding payment from the other party on the
same date accompanied by the irrevocable payment instructions to the same
effect or (ii) if the required deposit of the corresponding payment is not made
on that same date, to return the payment deposited to the party that paid it
into escrow. The party that elects to have payments made in escrow shall pay
the costs of the escrow arrangements and shall cause those arrangements to
provide that the intended recipient of the payment due to be deposited first
shall be entitled to interest on that deposited payment for each day in the
period of its deposit at the rate offered by the escrow agent for that day for
overnight deposits in the relevant currency in the office where it holds that
deposited payment (at 11:00 am. local time on that day) if that payment is not
released by 5:00 p.m. on the date it is deposited for any reason other than the
intended recipients’ failure to make the escrow deposit it is required to make
hereunder in a timely fashion.


 


	
   

  	
   

  	
  8. Representations

  	
   

  



 


	
   

  	
  Counterparty, if it is a
  nonresident alien individual, foreign corporation, foreign partnership,
  foreign trust, or foreign estate, represents that it is a foreign person for
  purposes of US Treasury regulations relating to information reporting and
  backup withholding.

  



 


	
   

  	
  Each party will be deemed
  to represent to the other party on the date on which it enters into this
  Transaction that (absent a written agreement between the parties that expressly
  imposes affirmative obligations to the contrary for this Transaction):

  	
   

  	
   

  



 


	
   

  	
   

  	
  (i) Non-Reliance. It is acting
  for its own account, and it has made its own independent decisions to enter
  into this Transaction and as to whether this Transaction is appropriate or
  proper for it based upon its own judgement and upon advice from such advisers
  as it has deemed necessary. It is not relying on any communication (written
  or oral) of the other party as investment advice or as a recommendation to
  enter into this Transaction; it being understood that information and
  explanations related to the terms and conditions of this Transaction shall
  not be considered investment advice or a recommendation to enter into this
  Transaction. No communication (written or oral) received from the other party
  shall be deemed to be an assurance or guarantee as to the expected results of
  this Transaction.

  	
   

  	
   

  



 


	
   

  	
   

  	
  (ii) Assessment and Understanding.
  It is capable of assessing the merits of and understanding (on its own behalf
  or through independent professional advice), and understands and accepts, the
  terms, conditions and risks of this Transaction. It is also capable of
  assuming, and assumes, the risks of this Transaction.

  	
   

  	
   

  



 


	
   

  	
   

  	
  (iii) Status of Parties. The other
  party is not acting as a fiduciary for, or an adviser to it in respect of
  this Transaction.

  	
   

  	
   

  



 


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  9. Please confirm that the
  foregoing correctly sets forth the terms of our agreement by having an
  authorized officer sign this Confirmation and return it via facsimile or
  e-mail to:

  	
   

  



 


	
   

  	
  Attention: Derivative
  Documentation

  	
   

  
	
   

  	
  Telephone: 44 20 7547 4755

  	
   

  
	
   

  	
  Facsimile: 44 20 7545 9761

  	
   

  
	
   

  	
  E-mail:
  Derivative.Documentation@db.com

  	
   

  



 


	
   

  	
  This message will be the
  only form of Confirmation dispatched by us. If you wish to exchange hard copy
  forms of this Confirmation, please contact us.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Yours sincerely,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Deutsche Bank AG

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:       /s/ BIANCA MUELLER  

  	
   

  
	
   

  	
  Name:   Bianca Mueller

  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:       /s/ JAMIE HUNT  

  	
   

  
	
   

  	
  Name:   Jaime Hunt

  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mandalay Resort Group

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:       /s/ LES MARTIN  

  	
   

  
	
   

  	
  Name:   Les Martin

  Title:     Vice President, Chief Accounting
  Officer and Treasurer

  	
   

  



 


 


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