================================================================================

                       LETTER OF CREDIT AND REIMBURSEMENT
                                   AGREEMENT



                         DATED AS OF NOVEMBER 17, 1993



                                    BETWEEN



                                MGM GRAND, INC.,
                                AS ACCOUNT PARTY



                                      AND



                         BANK OF AMERICA NATIONAL TRUST
                            AND SAVINGS ASSOCIATION

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                                EXHIBIT 10(22)
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------



                                                                                      Page
                                                                                      ----
                                                                                    
ARTICLE 1
DEFINITIONS........................................................................     1
   SECTION 1.1             Certain Defined Terms...................................     1
   SECTION 1.2             Computation of Time Periods.............................     7

ARTICLE 2
AMOUNT AND TERMS OF THE LETTER OF CREDIT...........................................     7
   SECTION 2.1             The Letter of Credit....................................     7
   SECTION 2.2             Issuing the Letter of Credit............................     7
   SECTION 2.3             Reimbursement of Draws..................................     7
   SECTION 2.4             Letter of Credit Fee and Draw Fee.......................     7
   SECTION 2.5             Increased Costs and Reduced Return......................     8
   SECTION 2.6             Payments and Computations...............................     9
   SECTION 2.7             Non-Business Days.......................................     9
   SECTION 2.8             Obligations Absolute....................................     9
   SECTION 2.9             Security................................................    10

ARTICLE 3
CONDITIONS OF ISSUANCE.............................................................    10
   SECTION 3.1             Condition Precedent to Issuance of the Letter of 
                           Credit..................................................    10
   SECTION 3.2             Additional Conditions Precedent to Issuance of the 
                           Letter of Credit........................................    11

ARTICLE 4
REPRESENTATIONS AND WARRANTIES.....................................................    12
   SECTION 4.1             Corporate Existence and Power...........................    12
   SECTION 4.2             Corporate Authorization; No Contravention...............    12
   SECTION 4.3             Governmental Authorization..............................    12
   SECTION 4.4             Binding Effect..........................................    13
   SECTION 4.5             Litigation..............................................    13
   SECTION 4.6             No Default..............................................    13
   SECTION 4.7             Management Agreement....................................    13
   SECTION 4.8             No Liens................................................    13
   SECTION 4.9             Taxes...................................................    14
   SECTION 4.10            Financial Condition.....................................    14
   SECTION 4.11            Collateral Documents....................................    14
   SECTION 4.12            Regulated Entities......................................    14
   SECTION 4.13            No Burdensome Restrictions..............................    15
   SECTION 4.14            Full Disclosure.........................................    15

ARTICLE 5
COVENANTS..........................................................................    15
   SECTION 5.1             Financial Statements....................................    15
   SECTION 5.2             Certificates; Other Information.........................    16
   SECTION 5.3             Notices.................................................    16
   SECTION 5.4             Preservation of Corporate Existence, Etc................    17
   SECTION 5.5             Maintenance of Property.................................    17
   SECTION 5.6             Insurance...............................................    17
   SECTION 5.7             Payment of Obligations..................................    18
   SECTION 5.8             Compliance with Laws....................................    18


<PAGE>


                                                                                   
   SECTION 5.9       Inspection of Property and Books..............................    18
   SECTION 5.10      Environmental Laws............................................    19
   SECTION 5.11      Maintenance of Tangible Consolidated Net Worth................
   SECTION 5.12      Maintenance of Consolidated Coverage Ratio....................    19
   SECTION 5.13      Further Assurances............................................    19
   SECTION 5.14      Amendments to Related Documents...............................    20

ARTICLE 6
EVENTS OF DEFAULT..................................................................    20
   SECTION 6.1       Event of Default..............................................    20
   SECTION 6.2       Upon an Event of Default......................................    22
   SECTION 6.3       Rights Not Exclusive..........................................    23

ARTICLE 7
MISCELLANEOUS......................................................................    23
   SECTION 7.1       Amendments, Etc...............................................    23
   SECTION 7.2       Notices, Etc..................................................    23
   SECTION 7.3       No Waiver; Remedies...........................................    24
   SECTION 7.4       Right of Set-off..............................................    25
   SECTION 7.5       Indemnity.....................................................    25
   SECTION 7.6       Liability of the Account Party................................    26
   SECTION 7.7       Costs.........................................................    26
   SECTION 7.8       Binding Effect; Successors and Assigns........................    27
   SECTION 7.9       Severability..................................................    27
   SECTION 7.10      Governing Law.................................................    27
   SECTION 7.11      Headings......................................................    28


<PAGE>
 
                              LETTER OF CREDIT AND
                              --------------------
                            REIMBURSEMENT AGREEMENT
                            -----------------------


     LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of November 17,
1993, between MGM GRAND, INC., a Delaware corporation, (the "Account Party") and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association (the "Bank").

                                 R E C I T A L:
                                 ------------- 


     WHEREAS, in order to secure the payment when due of certain rent and other
payments to Norwest Bank Minnesota National Association, not individually, but
solely as trustee under the Trust Agreement, as Lessor ("Lessor") under a Master
Lease dated ag of November 17, 1993, between MGM Grand Equipment Inc., a
Delaware corporation ("Lessee") and Lessor (as amended, supplemented or modified
from time to time being herein referred to as the "Master Lease"), the Account
Party, as guarantor of Lessee's obligations under the Master Lease, has
requested the Bank to issue the Letter of Credit.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to issue the Letter of Credit, the parties hereto agree as follows:


                                   ARTICLE 1
                                  DEFINITIONS


     SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following
                 ---------------------                                          
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):

     "Agreement" means this Letter of Credit and Reimbursement Agreement, as
      ---------                                                             
amended and supplemented from time to time hereafter.

     "Amortization" means, for any period, as applied to any Person, the amount
      ------------                                                             
of the amortization (other than amortization of debt discount and amortization
of capitalized financing fees) that is reflected on the financial statements of
such Person and its consolidated Subsidiaries for such period in accordance with
GAAP.

     "Bank Loan Agreement" means that certain Credit Agreement, entered into as
      -------------------                                                      
of May 13, 1992, among MGM Finance, MGM Hotel, the several financial
institutions parties thereto, and Bank of America National Trust and Savings
Association, as agent for such banks, and any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and
extensions thereof.

     "Base Rate" means for any day, a rate per annum equal to the higher of (i)
      ---------                                                                
the Reference Rate for such day and (ii) the Federal Funds Rate applicable to
the Bank for such day plus onehalf of one percent (0.50%).

     "Business Day" means a day of the year on which banks are not required or
      ------------                                                            
authorized to close in San Francisco, California, Los Angeles, California or New
York, New York.

                                       1
<PAGE>
 
     "Certificate Holders" has the meaning assigned to that term under the
      -------------------                                                 
Participation Agreement.

     "Collateral Documents" means, collectively, (i) the Security Agreement,
      --------------------                                                  
(ii) the Intercreditor Agreement, (iii) other security agreements and documents,
and all financing statements (or comparable documents) now or hereafter filed in
accordance with the UCC (or comparable law) in connection therewith in favor of
the Bank and (iv) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of the
foregoing.

     "Commitment" means, as of any date, an amount equal to the lesser of (a)
      ----------                                                             
$7,000,000 and (b) 20% of the balance of the Master Lease on such date, as such
amount shall be permanently reduced by the amount of any Drawing under the
Letter of Credit in accordance with Section 2.1.

     "Consolidated Adjusted Net Worth" has the meaning assigned to that term in
      -------------------------------                                          
the Indenture.

     "Consolidated Coverage Ratio" has the meaning assigned to that term in the
      ---------------------------                                              
Indenture.

     "Consolidated Fixed Charges" has the meaning assigned to that term in the
      --------------------------                                              
Indenture.

     "Consolidated Income Tax Expense" has the meaning assigned to that term in
      -------------------------------                                          
the Indenture.

     "Consolidated Net Income" has the meaning assigned to that term in the
      -----------------------                                              
Indenture.

     "Contractual Obligations" means, as to any Person, any provision of any
      -----------------------                                               
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.

     "Credit Obligations" means all unreimbursed Draws, interest, fees,
      ------------------                                               
expenses, and other indebtedness, advances, liabilities, obligations, covenants
and duties owing by the Account Party to the Bank, of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising under this Agreement or under any other Related Document,
whether or not for the payment of money, whether arising by reason of an
extension of credit, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired.

     "Default Rate" means the Base Rate from time to time in effect plus 3%.
      ------------                                                          

     "Depreciation Expense" has the meaning assigned to that term in the
      --------------------                                              
Indenture.

     "Draw" or "Drawing" means the payment by the Bank under the Letter of
      ----      -------                                                   
Credit of an amount as demanded pursuant to the presentation of a sight draft by
the Lessor.

     "Event of Default" has the meaning assigned to that term in Section 6.1.
      ----------------                                                       

     "Federal Funds Rate" means, for any day, the rate per annum (rounded
      ------------------                                                 
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged

                                       2
<PAGE>
 
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of San Francisco on the Business Day next succeeding such day, provided in each
case that (a) if such day is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day, and (b) if no such rate is
so published on such next succeeding Business Pay, the Federal Funds Rate with
respect to the Bank for such day shall be the average rate quoted to the Bank on
such day on such transactions as determined by the Bank.

     "Fiscal Year" has the meaning assigned to that term in the Indenture.
      -----------                                                         

     "GAAP" means generally accepted accounting principles set forth in the
      ----                                                                 
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such other entity as may be in general use by significant
segments of the U.S. accounting profession, which are applicable to the
circumstances as of the date of determination.

     "Governmental Authority" means any nation or government, any state or other
      ----------------------                                                    
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

     "Indebtedness" has the meaning assigned to that term in the Indenture.
      ------------                                                         

     "Indemnified Person" has the meaning assigned to that term in Section 7.5.
      ------------------                                                       

     "Indemnified Liabilities" has the meaning assigned to that term in Section
      -----------------------                                                  
7.5.

     "Indenture" means that certain Indenture dated as of May 1, 1992 among MGM
      ---------                                                                
Finance, as issuer, the Account Party, as guarantor, MGM Hotel, as obligor, and
U.S. Trust Company of California, N.A., as trustee, relating to the $220,000,000
113/4% First Mortgage Notes due May 1, 1999 and $253,000,000 12% First Mortgage
Notes due May 1, 2002. All references to the Indenture in this Agreement shall
mean the Indenture as in effect on the date hereof and, to the extent consented
to by the Bank in writing, any amendments thereto.

     "Insolvency Proceeding" means (a) any case, action or proceeding before any
      ---------------------                                                     
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors or other, similar arrangement;
in each case (a) and (b) under U.S. Federal, State or foreign law.

     "Intercreditor Agreement" means the Intercreditor Agreement, substantially
      -----------------------                                                  
in the form of Exhibit A hereto and any amendments, supplements, modifications,
               ---------                                                       
renewals, replacements, consolidations, substitutions and extensions thereof.

     "Letter of Credit" means the irrevocable transferable letter of credit,
      ----------------                                                      
substantially in the form of Exhibit A.
                             --------- 

     "Lien" means any mortgage, deed of trust, pledge, hypothecation,
      ----                                                           
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or

                                       3
<PAGE>
 
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement), the
interest of a lessor under a capital lease obligation, any financing lease
having substantially the same economic effect as any of the foregoing, or the
filing of any financing statement naming the owner of the asset to which such
lien relates as debtor, (under the UCC or any comparable law) and any contingent
or other agreement to provide any of the foregoing.

     "Management Agreement" has the meaning assigned to that term in the
      --------------------                                              
Indenture.

     "Master Lease Commencement Date" means the date of opening of the MGM Grand
      ------------------------------                                            
Hotel and Theme Park, but in no event later than March 31, 1994.

     "Material Adverse Effect" means a material adverse change in, or a material
      -----------------------                                                   
adverse effect upon, any of (a) the operations, business, properties, condition
(financial or otherwise) or prospects of the Account Party; (b) the ability of
the Account Party to perform under any Related Document; (c) the legality,
validity, binding effect or enforceability of any Related Document; or (d) the
perfection or priority of any Lien granted to the Bank under any of the
Collateral Documents.

     "MGM Finance" means MGM Grand Hotel Finance Corp., a Nevada corporation.
      -----------                                                            

     "MGM Grand Hotel and Theme Park" has the meaning assigned to that term in
      ------------------------------                                          
the Indenture.

     "MGM Hotel" means MGM Grand Hotel, Inc., a Nevada corporation.
      ---------                                                    

     "Minimum Equity" has the meaning assigned to that term in the Indenture.
      --------------                                                         

     "Operative Documents" has the meaning assigned to that term in the
      -------------------                                              
Participation Agreement.

     "Participant" has the meaning assigned to that term in Section 7.8(b).
      -----------                                                          

     "Participation Agreement" means the Participation Agreement dated as of the
      -----------------------                                                   
date hereof, among MGM Hotel, as Sublessee, Lessee, Account Party, the
Certificate Holders and the Lessor, as amended or supplemented from time to
time.

     "Person" means an individual, a corporation, a partnership, an association,
      ------                                                                    
a joint venture, a trust, an unincorporated organization or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

     "Reference Rate" means the rate of interest publicly announced from time to
      --------------                                                            
time by the Bank in San Francisco, California, as its reference rate. It is a
rate set by the Bank based upon various factors including the Bank's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the reference rate announced by the Bank
shall take effect at the opening of business on the day specified in the public
announcement of such change.

     "Related Documents" means this Agreement, the Letter of Credit, the
      -----------------                                                 
Collateral Documents, the Operative Documents and all documents and certificates
delivered in connection with the execution and delivery hereof and thereof.

                                       4
<PAGE>
 
     "Requirement of Law" means, as to any Person, any law (statutory or
      ------------------                                                
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

     "Responsible Officer" means the Chief Executive Officer or the President of
      -------------------                                                       
the Account Party or, with respect to financial matters, the Chief Financial
Officer or the Treasurer of the Account Party.

     "Security Agreement" means the Security Agreement substantially in the form
      ------------------                                                        
of Exhibit B hereto and any amendments, supplements, modifications, renewals,
   ---------                                                                 
replacements, consolidations, substitutions and extensions thereof.

     "Scheduled Termination Date" means the earlier of (a) March 31, 1999 and
      --------------------------                                             
(b) [the one hundred and twenty-first day next following the date on which the
Lessee, MGM Hotel and the Account Party have performed all of their Obligations
to the Lessee and the Certificate Holders pursuant to the Operative Agreements
(as such terms "Obligations", "Certificate Holders" and "Operative Agreements"
are defined in or by reference to the Participation Agreement)] [five years from
the Master Lease Commencement Date].

     "Stated Amount" means the amount of the Letter of Credit, as adjusted from
      -------------                                                            
time to time pursuant to the terms of this Agreement and the Letter of Credit.

     "Subsidiary" of any specified Person means (i) a corporation a majority of
      ----------                                                               
whose Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such Person or by
such Person and a Subsidiary or Subsidiaries of such Person or by a Subsidiary
or Subsidiaries of such Person or (ii) any other Person (other than a
corporation) in which such Person or such Person and a Subsidiary or
Subsidiaries of such Person or a Subsidiary or Subsidiaries of such Person
directly or indirectly, at the date of determination thereof has at least
majority ownership interest.

     "Tangible Consolidated Net Worth" has the meaning assigned to that term in
      -------------------------------                                          
the Indenture.

     SECTION 1.2 Computation of Time Periods.  In this Agreement, in the
                 ---------------------------                            
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".


                                   ARTICLE 2
                    AMOUNT AND TERMS OF THE LETTER OF CREDIT


     SECTION 2.1 The Letter of Credit.
                 -------------------- 

          (a)    The Bank hereby agrees, on the terms and conditions hereinafter
set forth, to issue the Letter of Credit upon the request of the Account Party;
provided, however, that in no event shall the sum of (i) the Stated Amount and
(ii) the aggregate principal amount of all unreimbursed Draws exceed the
Commitment. Each Drawing under the Letter of Credit shall permanently reduce the
Stated Amount of the Letter of Credit.

          (b)    The Account Party hereby applies to the Bank, and instructs the

                                       5
<PAGE>
 
Bank to issue, and the Bank agrees, on the terms and conditions hereinafter set
forth, to issue the Letter of Credit to the Lessor on the date as set forth in
Section 2.2 and in a Stated Amount equal to the amount requested by the Account
Party pursuant to Section 2.2. The Commitment to issue the Letter of Credit
hereunder shall terminate if the Account Party has not requested the issuance
thereof, and said terms and conditions set forth herein have not been complied
with, on or before November 30, 1993.

          (c)    The Letter of Credit and the Commitment shall expire on the
Scheduled Termination Date.

     SECTION 2.2 Issuing the Letter of Credit. The Letter of Credit shall be
                 ----------------------------                               
issued concurrently herewith.

     SECTION 2.3 Reimbursement of Draws. The Account Party shall cause the Bank
                 ----------------------                                        
to be reimbursed for any Draws, together with any accrued interest on
unreimbursed Draws, no later than 1:00 P.M. (San Francisco time) immediately on
demand upon each date on which the Bank shall pay any Draw. Each unreimbursed
Draw shall accrue interest from the date on which the Bank pays such Draw until
payment in full, at the Default Rate in effect from time to time.

     SECTION 2.4 Letter of Credit Fee and Draw Fee.
                 --------------------------------- 

          (a)    The Account Party hereby agrees to pay to the Bank a letter of
credit commission on the Stated Amount of the Letter of Credit in effect from
time to time from the date of issuance of the Letter of Credit until the
Scheduled Termination Date, at the rate of 2% per annum, payable quarterly in
arrears on the first Business Day of each January, April, July and October until
the Scheduled Termination Date and on the Scheduled Termination Date.

          (b)    The Account Party hereby agrees to pay to the Bank a one time
draw fee equal to $75.00, payable on each Business Day on which the Bank shall
pay any amount under the Letter of Credit pursuant to a demand for payment.

     SECTION 2.5 Increased Costs and Reduced Return.
                 ---------------------------------- 

          (a)    If the Bank shall have reasonably determined that the
introduction of any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein or any change in the interpretation or
administration thereof by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or compliance by the
Bank or any corporation controlling the Bank, with any request, guideline or
directive regarding capital adequacy (whether or not having the force of law) of
any such central bank or other authority, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration the Bank's or such
corporation's policies with respect to capital adequacy and the Bank's desired
return on capital) determines that the amount of such capital is increased as a
consequence of its obligations under this Agreement, then, upon demand of the
Bank, the Account Party shall immediately pay to the Bank, from time to time as
specified by the Bank, additional amounts sufficient to compensate the Bank for
such increase; provided, however, that the Account Party shall not be required
               --------  -------                                              
to compensate the Bank in respect of any period prior to 30 days after the Bank
makes its initial demand (or delivers its initial notice that it intends to make
a demand) for any compensation under this Section.

          (b)    If, after the date hereof, the adoption of any applicable law,
rule or

                                       6
<PAGE>
 
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof or compliance
by the Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency:

               (i)  shall subject the Bank to any tax, duty or other charge with
     respect to the Credit Obligations, or shall change the basis of taxation of
     payments to the Bank with respect to the Credit Obligations (except for
     changes in the rate of tax on the overall net income of the Bank imposed by
     the jurisdiction in which the Bank's principal executive office is
     located); or

               (ii)  shall impose, modify or deem applicable any reserve,
     special deposit or similar requirement (including, without limitation, any
     imposed by the Board of Governors of the Federal Reserve System), against
     assets of, deposits with or for the account of, or credit extended by, the
     Bank;

and the result of any of the foregoing is to increase the cost to the Bank of
issuing or maintaining the Commitment or the Letter of Credit or paying any
Draw, or to reduce the amount of any sum received or receivable by the Bank
under this Agreement, by an amount deemed by the Bank to be material, then,
within 30 days after demand by the Bank, the Account Party agrees to pay or
cause to be paid to the Bank such additional amount or amounts as will
compensate the Bank for such increased cost or reduction.

          (c)    A certificate of the Bank claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder (accompanied by a statement specifying the reasons therefor) shall be
conclusive in the absence of manifest error. In determining such amount, the
Bank may use any reasonable averaging and attribution methods, provided that
adjustments pursuant to subsection (a) and (b) shall not be duplicative.

     SECTION 2.6 Payments and Computations. The Account Party shall make each
                 -------------------------                                   
payment hereunder not later than 1:00 p.m. (San Francisco time) on the day when
due in lawful money of the United States of America to the Bank in immediately
available funds. Computations of the Base Rate, the Default Rate and the fees
hereunder shall be made on the basis of a year of 365 or 366 days, as the case
may be, for the actual number of days (including the first day but excluding the
last day) elapsed. Any payment received by the Bank after 1:00 P.M. (San
Francisco time) will be deemed to have been received on the following Business
Day.

     SECTION 2.7 Non-Business Days. Whenever any payment to be made hereunder
                 -----------------                                           
shall be stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest or
fees, as the case may be.

     SECTION 2.8 Obligations Absolute. The obligation of the Account Party to
                 --------------------                                        
reimburse the Bank for payments made by the Bank under the Letter of Credit
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:

               (i)  any lack of validity or enforceability of the Letter of
     Credit or any other Related Document;

                                       7
<PAGE>
 
               (ii) any amendment or waiver of or any consent to departure from
     the Letter of Credit or any of the other Related Documents;

               (iii)  the existence of any claim, set-off, defense or other
     right which the Account Party may have at any time against the Lessor or
     any other beneficiary, or any transferee, of the Letter of Credit (or any
     persons or entities for whom the Lessor, any such beneficiary or any such
     transferee may be acting), the Bank or any other person or entity, whether
     in connection with this Agreement, the transactions contemplated herein or
     in the Related Documents, or any unrelated transaction;

               (iv)  any breach of contract or dispute between the Account
     Party, the Lessor, the Bank or any other person or entity;

               (v)  any statement or any other document presented under the
     Letter of Credit proving to be forged, fraudulent, invalid or insufficient
     in any respect or any statement therein being untrue or inaccurate in any
     respect whatsoever;

               (vi)  payment by the Bank under the Letter of Credit against
     presentation of a demand for payment which does not comply with the terms
     of the Letter of Credit;

               (vii)  any delay, extension of time, renewal, compromise or other
     indulgence or modification granted or agreed to by the Bank, with or
     without notice to or approval by the Account Party, with respect to the
     Account Party's Credit Obligations; or

               (viii)  any other circumstance or happening whatsoever, whether
     or not similar to any of the foregoing.

     SECTION 2.9 Security. All Credit Obligations shall be secured in accordance
                 --------                                                       
with the Collateral Documents.


                                   ARTICLE 3
                             CONDITIONS OF ISSUANCE


     SECTION 3.1 Condition Precedent to Issuance of the Letter of Credit.  The
                 -------------------------------------------------------      
obligation of the Bank to issue the Letter of Credit is subject to the
conditions precedent that the Bank shall have received on or before the date of
the issuance of the Letter of Credit the following, each dated such date, in
form and substance satisfactory to the Bank:

          (a)    Certified copies of the resolutions of the Board of Directors
of the Account Party approving the Related Documents to which it is a party, the
form and content of the Letter of Credit and the other matters contemplated
hereby, and of all other documents evidencing any other necessary action of the
Account Party.

          (b)    Certified copies of the Related Documents, which shall have
been (or concurrently herewith are being) duly executed and delivered by the
parties thereto, and all governmental and regulatory approvals or determinations
necessary or appropriate for the Account Party with respect to this Agreement
and the Related Documents and the transactions contemplated hereby and thereby.

          (c)    Certified copy of the Management Agreement.

                                       8
<PAGE>
 
          (d)    A certificate of the Secretary or an Assistant Secretary of the
Account Party certifying the names and true signatures of the officers of the
Account Party authorized to sign this Agreement and the other documents to be
delivered by it hereunder.

          (e)    An opinion of counsel for the Account Party, in form and
substance satisfactory to the Bank in the exercise of reasonable judgment.

          (f)    An opinion of counsel for Lessor, in form and substance
satisfactory to the Bank in the exercise of reasonable judgment.

          (g)    This Agreement and the Collateral Documents in form and
substance satisfactory to the Bank duly executed and delivered by the parties
thereto, together with any UCC financing statements deemed necessary or
desirable by Bank in the exercise of reasonable judgment.

     SECTION 3.2 Additional Conditions Precedent to Issuance of the Letter of
                 ------------------------------------------------------------
Credit. The obligation of the Bank to issue the Letter of Credit shall be
------                                                                   
subject to the further conditions precedent that on the date of the issuance of
the Letter of Credit the following statements shall be true and the Bank shall
have received a certificate signed by a duly authorized officer of the Account
Party, dated the date of such issuance, stating that:

          (a)    the representations and warranties contained in Section 4.1 of
this Agreement are correct on and as of the date of issuance of the Letter of
Credit as though made on and as of such date; and

          (b)    no event has occurred and is continuing, or would result from
the issuance of the Letter of Credit, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both;

and the Bank shall have received such other approvals, opinions or documents as
the Bank may reasonably request, including, without limitation, a receipt from
the Lessor acknowledging receipt of the Letter of Credit.


                                   ARTICLE 4
                         REPRESENTATIONS AND WARRANTIES


     SECTION 4.1 Corporate Existence and Power. The Account Party (a) is a
                 -----------------------------                            
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation; (b) has the power and authority and
all governmental licenses, authorizations, consents and approvals to own its
assets, carry on its business and to execute, deliver and perform its
obligations under the Related Documents; (c) is duly qualified as a foreign
corporation, licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except where the failure to so qualify, to
be authorized or to be in good standing would not result in a Material Adverse
Effect; and (d) is in compliance with all Requirements of Law, except where the
failure to be in compliance would not result in a Material Adverse Effect.

     SECTION 4.2 Corporate Authorization; No Contravention. The execution,
                 -----------------------------------------                
delivery and performance by the Account Party of this Agreement and each other
Related Document to which the Account Party is a party, have been duly
authorized by all necessary corporate

                                       9
<PAGE>
 
action and do not and will not: (a) contravene the terms of the Account Party's
certificate of incorporation, bylaws or other organization document; or (b)
conflict with or result in any breach or contravention of, or the creation of
any lien under, any indenture, agreement, lease, instrument, Contractual
Obligation, injunction, order, decree or undertaking to which such the Account
Party is a party; or (c) violate any Requirement of Law.

     SECTION 4.3 Governmental Authorization. No approval, consent, exemption,
                 --------------------------                                  
authorization, or other action by, or notice to, or filing with, any
Governmental Authority (except for recordings or filings in connection with the
Liens granted to the Bank under the Collateral Documents) is necessary or
required in connection with the execution, delivery, performance or enforcement
against the Account Party of this Agreement or any other Related Document or any
other instrument or agreement required hereunder to be made by the Account
Party.

     SECTION 4.4 Binding Effect. This Agreement and each other Related Document
                 --------------                                                
to which the Account Party is a party constitute the legal, valid and binding
obligations of the Account Party, enforceable against such the Account Party in
accordance with their respective terms.

     SECTION 4.5 Litigation. There are no actions, suits, proceedings (other
                 ----------                                                 
than ordinary and customary proceedings involving issuance, renewal or extension
of permits, licenses and other evidences of authority to operate aspects of the
business of the Account Party in which no material dispute has arisen and in
which no third party is contesting issuance of such license, permit or evidence
of authority), claims or disputes pending, or to the best knowledge of the
Account Party, threatened or contemplated at law, in equity, in arbitration or
before any Governmental Authority, against the Account Party or any of its
properties which:

          (a)    purport to affect or pertain to this Agreement, or any Related
Document, or any of the transactions contemplated hereby or thereby; or

          (b)    if determined adversely to the Account Party, might have a
Material Adverse Effect. No injunction, writ, temporary restraining order or any
order of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery and performance of this
Agreement or any other Related Document or directing that the transactions
provided for herein or therein not be consummated as herein or therein provided.

     SECTION 4.6 No Default. No Default or Event of Default exists or would
                 ----------                                                
result from the incurring of obligations by the Account Party under this
Agreement or any other Related Document. The Account Party is not in default
under or with respect to any Contractual Obligation, which such default would
have a Material Adverse Effect.

     SECTION 4.7 Management Agreement. The Management Agreement is in full force
                 --------------------                                           
and effect, and the parties thereto are in full compliance with the provision
thereof. There are no events or conditions known to the Account Party which
causes it to believe that the Management Agreement will not be performed in
accordance with its terms.

     SECTION 4.8 No Liens. The right of the Account Party to receive proceeds
                 --------                                                    
pursuant to the Management Agreement is free and clear of all Liens or rights of
others, except Liens contemplated by this Agreement and the Security Agreement
and restrictions and limitations contemplated by the Indenture and/or the Bank
Loan Agreement.

     SECTION 4.9 Taxes. The Account Party has filed all Federal and other
                 -----                                                   
material

                                       10
<PAGE>
 
tax returns and reports required to be filed and have paid prior to delinquency
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP and no Notice of Lien has been filed or recorded. There is
no material proposed tax assessment against the Account Party except those which
are or will be contested in good faith by appropriate proceedings and for which
adequate reserves have been, or upon notice of such assessment, will be,
provided in accordance with GAAP.

     SECTION 4.10  Financial Condition.
                   ------------------- 

          (a)    The audited consolidated financial statements of the Account
Party dated December 31, 1992, the related combined statements of operations,
stockholders' equity and cash flows for the fiscal year ended on that date and
the audited consolidated and consolidating financial statements of the Account
Party and its Subsidiaries dated December 31, 1992, the related consolidated and
consolidating statements of operations, stockholders' equity and cash flows for
the fiscal year ended on that date: (i) were prepared in accordance with GAAP,
except as otherwise expressly noted therein; (ii) are complete, accurate and
fairly present the financial condition of the Account Party and its Subsidiaries
as of the date thereof and results of operations for the period covered thereby;
and (iii) show all material indebtedness and other liabilities, direct or
contingent of the Account Party and its Subsidiaries as of the date thereof
(including liabilities for taxes and material commitments).

     SECTION 4.11  Collateral Documents. The Account Party has the full power
                   --------------------                                      
and authority to pledge the Collateral pursuant to the Collateral Documents. The
provisions of each of the Collateral Documents are effective to create in favor
of the Bank a legal, valid and enforceable first priority security interest in
all right, title and interest of the Account Party in the collateral described
therein; and financing statements have been filed in the offices in all of the
jurisdictions listed in the schedule to the Security Agreement.

     SECTION 4.12  Regulated Entities. Neither the Account Party, nor any Person
                   ------------------                                           
controlling the Account Party, or any Subsidiaries of thereof, is (a) an
"Investment Company" within the meaning of the Investment Company Act of 1940;
or (b) subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, the Interstate Commerce Act, any state public
utilities code or any other Federal or state statute or regulation limiting its
ability to incur Indebtedness.

     SECTION 4.13  No Burdensome Restrictions. The Account Party is not a party
                   --------------------------                                  
to or bound by any Contractual Obligation or subject to any charter or corporate
restriction or any Requirement of Law (other than the Related Documents, the
Indenture, the Bank Loan Agreement and documents executed or delivered in
connection therewith) which could reasonably be expected to materially and
adversely affect or insofar as the Account Party may reasonably foresee may so
affect, the ability of the Account Party to perform or observe its obligations
under this Agreement.

     SECTION 4.14  Full Disclosure. None of the representations or warranties
                   ---------------                                           
made by the Account Party in the Related documents, none of the statements
contained in each exhibit, report, statement or certificate furnished by or on
behalf of the Account Party in connection with the Related Documents, and none
of the Account Parties filings with the Securities Exchange Commission (the
"SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "1934
Act") as of the date of such representation, warranty statement or filing, as
the case may be, taken as a whole, contain any untrue statement of a material
fact or omits any material fact required to be stated therein or necessary to
make the

                                       11
<PAGE>
 
statements made therein, in light of the circumstances under which they are
made, not misleading.


                                   ARTICLE 5
                                   COVENANTS


     The Account Party covenants and agrees that, so long as the Bank shall have
any Commitment hereunder, or any Credit Obligation shall remain unpaid, unless
the Bank waives compliance in writing:

     SECTION 5.1 Financial Statements. The Account Party shall deliver to the
                 --------------------                                        
Bank in form and detail reasonably satisfactory to the Bank:

          (a)    as soon as available, but not later than ninety (90) days after
the end of each fiscal year of the Account Party, as the case may be, a copy of
the audited combined balance sheet of the Account Party as at the end of such
year and the related combined statements of income, stockholders' equity and
cash flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous year, and accompanied, in each case, by the opinion
of Arthur Andersen & Co. or another nationally-recognized independent public
accounting firm which opinion shall state that such combined financial
statements present fairly the financial position for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years; and

          (b)    as soon as available, but not later than forty-five (45) days
after the end of each of the first three (3) fiscal quarters of each year a copy
of the unaudited combined balance sheet of the Account Party as of the end of
such quarter and the related combined statements of income, stockholders' equity
and cash flows for the period commencing on the first day and ending on the last
day of such quarter, and certified by Responsible Officers of the Account Party
as being complete and correct and fairly presenting, in accordance with GAAP,
the financial position and the results of operations of the Account Party;

     SECTION 5.2 Certificates; Other Information. The Account Party shall
                 -------------------------------                         
furnish to the Bank:

          (a)    concurrently with the delivery of the financial statements
referred to in subsection 5.1(a) above, and so long as not contrary to the then-
current recommendations of the American Institute of Certified Public
Accountants or to a written policy adopted by the Account Party's independent
certified public accountants, a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;

          (b)    concurrently with the delivery of the financial statements
referred to in subsections 5.1(a) and (b) above, a certificate of a Responsible
Officer (i) stating that, to the best of such officer's knowledge, the Account
Party, as the case may be, during such period, has observed or performed in all
material aspects all of its covenants and other agreements, and satisfied in all
material aspects every condition contained in this Agreement to be observed,
performed or satisfied by it, and that such officer has obtained no knowledge of
any Default or Event of Default except as specified in such certificate, and
(ii) showing in detail the calculations supporting such statement in respect of
Sections 5.11 and 5.12;

                                       12
<PAGE>
 
          (c)    promptly after the same are sent, copies of all financial
statements and reports which the Account Party sends to its stockholders, and
promptly after the same are filed, copies of all financial statements and
regular, periodical or special reports which the Account Party may make to, or
file with, the SEC, the Nevada Gaming Commission or any successor or similar
Governmental Authority to either of them; and

          (d)    promptly, such additional financial and other information as
the Bank may from time to time reasonably request.

     SECTION 5.3 Notices. The Account Party shall promptly notify the Bank:
                 -------                                                   

          (a)    of the occurrence of any Default or Event of Default and of the
occurrence or existence of any event or circumstance that a Responsible Officer
of such Person believes, in such Person's reasonable business judgement, will
become a Default or Event of Default;

          (b)    promptly upon becoming aware of any Material Adverse Effect
subsequent to the date of the most recent audited financial statements of the
Account Party delivered to the Bank pursuant to subsection 5.1(a), notice
thereof; and

          (c)    promptly following any material change in accounting policies
or financial reporting practices, notice thereof.

     Each notice pursuant to this Section 5.3 shall be accompanied by a written
statement by a Responsible Officer of the Account Party setting forth details of
the occurrence referred to therein and stating what action the Account Party
proposes to take with respect thereto.

     SECTION 5.4 Preservation of Corporate Existence, Etc. The Account Party
                 ----------------------------------------                   
shall and shall cause MGM Hotel to:

          (a)    preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;

          (b)    preserve and maintain in full force and effect all rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business to the extent required by the
Indenture and the Bank Credit Agreement; and

          (c)    use its reasonable efforts, in the ordinary course and
consistent with past practice, to preserve its business organization and
preserve the general goodwill and business of the customers, suppliers and
others having business relations with it, the non-preservation of which could
have a Material Adverse Effect.

     SECTION 5.5 Maintenance of Property. The Account Party shall maintain, and
                 -----------------------                                       
shall cause MGM Hotel to maintain, and preserve all their respective property
which is used or useful in their respective business in good working order and
condition, ordinary wear and tear excepted and make all necessary repairs
thereto and renewals and replacements thereof, except as permitted by the
Indenture or the Bank Credit Agreement. The Account Party shall use the standard
of care typical in the industry in the operation of its facilities.

     SECTION 5.6 Insurance. The Account Party shall maintain, and shall cause
                 ---------                                                   
MGM Hotel to maintain, with financially sound and reputable insurers, insurance
with respect to their respective properties and business against loss or damage
of the kinds customarily insured against by Persons engaged in the same or
similar business, of such types and in

                                       13
<PAGE>
 
such amounts as are customarily carried under similar circumstances by such
other Persons, including workers' compensation insurance, business interruption,
public liability and property and casualty insurance.

     SECTION 5.7 Payment of Obligations. The Account Party shall, and shall
                 ----------------------                                    
cause MGM Hotel and MGM Finance to, pay and discharge as the same shall become
due and payable, all their respective obligations and liabilities unless the
same are being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Account Party or
such Subsidiary, including:

          (a)    prior to delinquency, all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets;

          (b)    all lawful claims which, if unpaid or otherwise provided for,
might by law become a Lien upon its property; and

          (c)    all Indebtedness as and when due and payable but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.

     SECTION 5.8 Compliance with Laws. The Account Party shall comply, and shall
                 --------------------                                           
cause MGM Hotel and MGM Finance to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it or
its business (including the Federal Fair Labor Standards Act), except such as
may be contested in good faith or as to which a bona fide dispute may exist.

     SECTION 5.9 Inspection of Property and Books. The Account Party shall
                 --------------------------------                         
maintain, and shall cause MGM Hotel and MGM Finance to maintain, proper books of
record and accounts in which full, true and correct entries in conformity with
GAAP shall be made of all financial transactions and matters involving the
assets and business of the Account Party and such Subsidiaries. The Account
Party will permit, and will cause MGM Hotel and MGM Finance to permit,
representatives or employees of the ______, to visit and inspect any of their
respective properties, to examine their respective corporate, financial and
operating records and make copies thereof or abstracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective directors,
officers employees and independent public accountants, and at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Account Party.

     SECTION 5.10  Environmental Laws. The Account Party shall, and shall cause
                   ------------------                                          
MGM Hotel to, conduct its operations and keep and maintain its property in
material compliance with all Environmental Laws and to promptly upon discovery
by any Responsible Officer of the Account Party, as the case may be, make such
reports to Governmental Authorities as are required by applicable law and
repair, eliminate or otherwise institute remedial action in respect of any
violation of any Environment Law.

     SECTION 5.11  Maintenance of Tangible Consolidated Net Worth. Following the
                   ----------------------------------------------               
Termination of Construction Period, the Account Party shall cause MGM Hotel and
MGM Finance, on a combined basis, to maintain a Tangible Consolidated Net Worth
at the end of each of fiscal quarter of at least equal to the lesser of (a) 70%
of the Tangible Consolidated Net Worth as of the last day of the first fiscal
quarter immediately following the Termination of Construction Period and (b)
$255,000,000.

     SECTION 5.12  Maintenance of Consolidated Coverage Ratio. Subsequent to
                   ------------------------------------------               
four

                                       14
<PAGE>
 
fiscal quarters following the Termination of Construction Period, the Account
Party shall cause MGM Hotel and MGM Finance, on a combined basis, to maintain a
Consolidated Coverage Ratio, as of the last day of any quarter during any Fiscal
Year as follows:

 
 
          Fiscal Year                         Coverage Ratio
                                            
          2nd year after Termination of
          Construction Period                    1. 50 to 1

          3rd year after Termination of
          Construction Period
          and thereafter                         1. 75 to 1
 

     SECTION 5.13  Further Assurances.
                   ------------------ 

          (a)    The Account Party shall ensure that all written information,
exhibits and reports furnished to the Bank pursuant to this Agreement do not and
will not contain, as of the time the same is furnished, any untrue statement of
a material fact and do not and will not omit to state, as of the time the same
is furnished, any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made,
and will promptly disclose to the Bank and correct any material defect or error
that may be discovered therein or in any Related Document or in the execution,
acknowledgement or recordation thereof.

          (b)    Promptly upon request by the Bank, the Account Party shall (and
shall cause MGM Hotel to) do, execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments, estoppel certificates,
financing statements and continuations thereof, termination statements, notices
of assignment, transfers, certificates, assurances and other instruments as the
Bank may reasonably require from time to time in order (i) to carry out more
effectively the purposes of this Agreement or any other Related Document, (ii)
to subject to the Liens created by any of the Collateral Documents any of the
properties, rights or interests covered by any of the Collateral Documents,
(iii) to perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents and the Liens intended to be created thereby, and (iv)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Bank the rights granted or now or hereafter intended to be granted to the
Bank under any Related Document or under any other instrument executed in
connection therewith.

     SECTION 5.14  Amendments to Related Documents. The Account Party will not
                   -------------------------------                            
amend, waive or modify, or take or refrain from taking any action which has the
effect of amending, waiving or modifying, any provision of any Related Document
or the Management Agreement without the prior written consent of the Bank if
such amendment, waiver or modification would have an adverse effect on the
rights of the Bank.


                                   ARTICLE 6
                               EVENTS OF DEFAULT


     SECTION 6.1 Event of Default. Any of the following events while outstanding
                 ----------------                                               
or continuing shall constitute an "Event of Default":

          (a)    Non-Payment of Principal or Interest. The Account Party fails
                 ------------------------------------                         
to

                                       15
<PAGE>
 
pay when due any amount of principal or any interest hereunder or within any
grace period pursuant to any other Related Document; or

          (b)    Other Non-Payment. The Account Party fails to pay any fees or
                 -----------------                                            
any other amount payable hereunder or pursuant to any other Related Document and
such amount remains unpaid for four (4) days following the expiration of such
grace period; or

          (c)    Representation or Warranty. Any representation or warranty by
                 --------------------------                                   
the Account Party in this Agreement or any Related Document or which is
contained in any certificate, document or financial or other statement furnished
at any time under this Agreement or in or under any Related Document, shall
prove to have been incorrect in any material respect on or as of the date made
or deemed made; or

          (d)    Specific Defaults. The Account Party fails to perform or
                 -----------------                                       
observe any term, covenant or agreement contained in Section 5.4, 5.11, 5.12 or
5.14; or

          (e)    Other Defaults. The Account Party fails to perform or observe
                 --------------                                               
any other term or covenant contained in this Agreement or any Related Document,
and such default shall continue unremedied for a period of thirty (30) days
after notice;

          (f)    Cross-Default. (i) An event of default shall exist and be
                 -------------                                            
continuing under any Related Document, the Indenture, the Management Agreement
or the Bank Loan Agreement, or (ii) the Account Party, MGM Hotel MGM Finance
fails to make any payment in respect of any Indebtedness or Contingent
Obligation, having an aggregate principal amount of more than $25,000,000 when
due, (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) unless such obligation is being contested in good faith in
appropriate proceedings and adequate reserves have been set aside in accordance
with GAAP, or (iii) the Account Party, MGM Hotel or MGM Finance fails to perform
or observe any other condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation and such failure continues after the
applicable grace or notice period, if any, specified in the document relating
thereto, if the effect of such event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity or such Contingent Obligation to
become payable; or

          (g)    Bankruptcy or Insolvency. The Account Party, MGM Hotel or MGM
                 ------------------------                                     
Finance (i) becomes insolvent or generally fail to pay, or admit in writing its
inability to pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii) voluntarily
ceases to conduct its business in the ordinary course substantially as it is
conducted on the date hereof; (iii) commences any Insolvency Proceeding or files
any petition or answer in any Insolvency Proceeding; (iv) acquiesces in the
appointment of a receiver, trustee, custodian or liquidator for itself or a
substantial portion of its property, assets or business or effects a plan or
other arrangement with its creditors; (v) admits the material allegations of a
petition filed against it in any Insolvency Proceeding, or (vi) takes any action
to effectuate any of the foregoing; or

          (h)    Involuntary Proceedings. Any involuntary Insolvency Proceeding
                 -----------------------                                       
is commenced or filed against the Account Party, MGM Hotel or MGM Finance, or
any writ, judgment, warrant of attachment, execution or similar process, is
issued or levied against a substantial part of the Account Party's, MGM Hotel's
or MGM Finances's assets and any such proceedings or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded

                                       16
<PAGE>
 
within ninety (90) days after commencement, filing or levy; or

          (i)    Monetary Judgments. One or more final judgments, orders or
                 ------------------                                        
decrees shall be entered against the Account Party, MGM Hotel or MGM Finance
involving in the aggregate a liability (not fully covered by insurance) of
$25,000,000 or more and the same shall remain unvacated, undischarged, unstayed
or unbonded pending appeal for a period of thirty (30) days after the entry
thereof; or

          (j)    Non-Monetary Judgments. Any non-monetary judgment, order or
                 ----------------------                                     
decree shall be rendered against the Account Party, MGM Hotel or MGM Finance
which does or could be expected to have a Material Adverse Effect, and either
(i) enforcement proceedings shall have been commenced by any Person upon such
judgment or order and (ii) there shall be any period of sixty (60) consecutive
days during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or

          (k)    Collateral.
                 ---------- 

               (i)  any provision of any Collateral Document shall for any
     reason cease to be valid and binding on or enforceable against any party
     thereto, or any party thereto shall so state in writing or bring an action
     to limit its obligations or liabilities thereunder; or

               (ii)  the Collateral Documents shall for any reason (other than
     pursuant to the terms thereof) cease to create a valid security interest in
     the Collateral purported to be covered thereby or such security interest
     shall for any reason cease to be a perfected and first (except to the
     extent prior or pari passu security interests are otherwise permitted in
     the Related Documents) priority security interest; or

          (l)    Adverse Change. There shall occur a Material Adverse Effect.
                 --------------                                              

     SECTION 6.2 Upon an Event of Default. If any Event of Default shall have
                 ------------------------                                    
occurred and be continuing, the Bank may do any one or all of the following:

          (a)    instruct the Account Party to direct the Lessor to make one or
more Draws in the aggregate amount required to pay in full all amounts, if any,
entitled to be drawn under the Letter of Credit and, require the Account Party
immediately to reimburse the Bank for the amount of such Draw(s);

          (b)    declare the Credit Obligations hereunder, all interest thereon
and all other amounts owed by the Account Party hereunder to be immediately due
and payable, whereupon all Credit Obligations, all such interest and all such
amounts shall become and be immediately due and payable without presentment,
demand or notice of any kind, all of which are hereby expressly waived by the
Account Party; and

          (c)    direct the Account Party to pay to the Bank an amount in cash
equal to the undrawn face amount of the Letter of Credit, to be deposited into a
deposit account established or maintained with Bank as cash collateral for the
Account Party's obligations to reimburse Bank for any Drawings under the Letter
of Credit as and when such Drawings are made;

provided, however, that upon the occurrence of any event specified in Section
--------  -------                                                            
6.1(g) or (h) above, all Credit Obligations, all interest thereon and all other
amounts due hereunder shall be immediately due and payable; the Account Party
shall immediately reimburse the Bank

                                       17
<PAGE>
 
for any Draw made as provided in Section 6.2(a) above; and the Account Party
shall forthwith pay to the Bank an amount in cash equal to the undrawn face
amount of the Letter of Credit, to be deposited into a deposit account
established or maintained with Bank as cash collateral for the Account Party's
obligations to reimburse Bank for any Drawings under the Letter of Credit as and
when such Drawings are made without any instruction, declaration or notice of
any kind, all of which notices and demands are hereby expressly waived by the
Account Party.

     SECTION 6.3 Rights Not Exclusive. The rights provided for in this Agreement
                 --------------------                                           
and the other Related Documents are cumulative and are not exclusive of any
other rights, powers, privileges or remedies provided by law or in equity, or
under any other instrument, document or agreement.


                                   ARTICLE 7
                                 MISCELLANEOUS


     SECTION 7.1 Amendments, Etc. No amendment of this Agreement shall be
                 ---------------                                         
effective unless the same shall be in writing and signed by each of the parties
hereto. No waiver of any provision of this Agreement, nor consent to any
departure by the Account Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by the and then such waivers or consents
shall be effective only in the specific instance and for the specific purpose
for which given.

     SECTION 7.2 Notices, Etc. All notices and other communications provided for
                 ------------                                                   
hereunder shall be in writing (including telecommunication, facsimile or telex)
and mailed, delivered or facsimilied to the addresses set forth below:

          If to the Account Party:

               MGM Grand, Inc.
               3155 W. Harmon Avenue
               Las Vegas, Nevada  89103
               Attention:  K. Eugene Shutler, Esq.
               Telecopy: (702) 891-1114

          If to the Bank:

               Bank of America National Trust and Savings Association
               Payment Services #5693
               1850 Gateway Boulevard
               Concord, California 94520
               Attention: ABA No.
               Telecopy No. (510)

          with a copy to:

               Bank of America National Trust and Savings Association
               Trade Finance Services #5655
               333 South Beaudry Street
               Los Angeles, California 90017
               Attention: International Trade Banking Division     
               Telecopy No. (213) 345-6694

                                       18
<PAGE>
 
               Telephone No. (213) 345-6631

          and to:

               Credit Products Group #3283
               555 South Flower Street
               Los Angeles, California  90071
               Attention:  Jon Varnell
               Telecopy No. (213) 228-6181
               Telephone No. (213) 228-2641

or as to each such person, at such other address as shall be designated by such
person in written notice to the other persons. All such notices and
communications shall, when delivered, mailed or facsimilied, be effective when
delivered, deposited in the mails or facsimilied, respectively, addressed as
aforesaid, except that notices to the Bank pursuant to the provisions of Article
II shall not be effective until actually received by the Bank.

     SECTION 7.3 No Waiver; Remedies. No failure on the part of the Bank or the
                 -------------------                                           
Account Party 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
right hereunder preclude any other or further exercise thereof or the exercise
of any other right.

     SECTION 7.4 Right of Set-off.
                 ---------------- 

          (a)    Upon the occurrence and during the continuance of an Event of
Default, the Bank is hereby authorized at any time and from time to time, to the
fullest extent permitted by applicable law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Account Party against any and all of the obligations of
the Account Party now or hereafter existing under this Agreement, irrespective
of whether or not the Bank shall have made any demand hereunder and although
such obligations may be contingent or unmatured.

          (b)    The Bank agrees promptly to notify the Account Party after any
such set-off and application referred to in subsection (a) above, provided that
the failure to give such notice shall not affect the validity of such setoff and
application. The rights of the Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Bank may have.

     SECTION 7.5 Indemnity. The Account Party shall pay, indemnify, and hold the
                 ---------                                                      
Bank and each of its officers, directors, employees, counsel, agents and
attorneys-in-fact (each, an "Indemnified Person") harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses or disbursements (including
reasonable fees and expenses of counsel and allocated costs of internal counsel)
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement and performance of this Agreement and any other Related Documents or
the transactions contemplated herein, including by reason of or in connection
with the execution and delivery or transfer of, or payment or failure to make
payment under after a properly presented demand therefor, the Letter of Credit,
and with respect to any investigation, litigation or proceeding related to this
Agreement or the use of the proceeds thereof (whether or not any Indemnified
Person is a party thereto) (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, however, that the Account Party shall not be required
to indemnify the Bank pursuant to this Section 7.5 for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by (i) the Bank's
wilful misconduct or

                                       19
<PAGE>
 
gross negligence in determining whether documents presented under the Letter of
Credit comply with the terms of the Letter of Credit or (ii) the 's wilful or
grossly negligent failure to make lawful payment under the Letter of Credit of a
demand for payment strictly complying with the terms and conditions of the
Letter of Credit. Nothing in this Section 7.5 is intended to limit the Account
Party's obligations contained in Article 2.

     SECTION 7.6 Liability of the Account Party. As between the Bank and the
                 ------------------------------                             
Account Party, the Account Party assumes all risks of the acts or omissions of
the Lessor and any other beneficiary or transferee of the Letter of Credit with
respect to its officers use of the Letter of Credit. Neither the Bank nor any of
their officers or directors shall be liable or responsible for: (a) any use
which may be made of the Letter of Credit or any acts or omissions of the Lessor
and any other beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Bank against
presentation of documents which do not comply with the terms of the Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under the Letter of Credit, except that the
Account Party shall have a claim against the Bank, and the Bank shall be liable
to the Account Party, to the extent of any direct, as opposed to consequential,
damages suffered by the Account Party which the Account Party proves were caused
by (i) the Bank's wilful misconduct or gross negligence in determining whether
documents presented under the Letter of Credit comply with the terms of the
Letter of Credit or (ii) the Bank's wilful or grossly negligent failure to make
lawful payment under the Letter of Credit after the presentation to it by the
Lessor or a successor trustee under the Trust Agreement of a demand for payment
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, the Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.

     SECTION 7.7 Costs. Expenses and Taxes. The Account Party agrees to
                 -----                                                 
reimburse the Bank for all reasonable attorneys fees, costs and expenses
(including without limitation the allocated cost of inhouse counsel) incurred by
Bank in connection with the preparation, execution, delivery, filing and
recording of this Agreement and any other documents which may be delivered in
connection with this Agreement. The Account Party agrees to pay on demand to the
Bank all reasonable attorneys fees, costs and expenses (including without
limitation the allocated cost of inhouse counsel) incurred by Bank in connection
with (i) the enforcement of this Agreement and such other documents which may be
delivered in connection with this Agreement, including, without limitation, any
costs or expenses incurred in connection with a "work out" or with any
bankruptcy or similar proceedings, or (ii) any action or proceeding relating to
a court order, injunction, or other process or decree restraining or seeking to
invalidate or enjoin payments under the Letter of Credit. In addition, the
Account Party agrees, to the extent permitted by law, to save the Bank harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such expenses and fees.

     SECTION 7.8 Binding Effect; Successors and Assigns.
                 -------------------------------------- 

          (a)    This Agreement shall become effective when it thereafter shall
have been executed by the Account Party and the Bank and shall be binding upon
and inure to the benefit of the Account Party and the Bank and their respective
successors and assigns; provided, however, that neither the Account Party nor
the Bank shall have the right to assign its rights hereunder or any interest
herein (except that the Bank may grant participating interests in the Letter of
Credit and this Agreement as set forth in subparagraph

                                       20
<PAGE>
 
(b) below) without the prior written consent of the other party hereto.

          (b)    The _____ may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in the Letter of
Credit and this Agreement. In the event of any such grant by the of a
participating interest to a Participant, whether or not upon notice to the
Account Party, the shall remain responsible for the performance of its
obligations hereunder, and the Account Party shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and obligations to
the Account Party hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement.

          (c)    No Participant or other transferee of the Bank's rights shall
be entitled to receive any greater payment hereunder, or at any different time,
than the Bank would have been entitled to receive with respect to the rights
transferred unless such transfer is made with the Account Party's prior written
consent.

          (d)    Upon the written request of the Account Party the will identify
each Participant to which it has participated any of its rights hereunder.

     SECTION 7.9 Severability. Any provision of this Agreement which is
                 ------------                                          
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.

     SECTION 7.10  Governing Law. This Agreement shall be governed by, and
                   -------------                                          
construed in accordance with, the laws of the State of California.

     SECTION 7.11  Headings. Section headings in this Agreement are included
                   --------                                                 
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.

     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:________________________________

                              Title:_____________________________



                              BANK OF AMERICA NATIONAL TRUST
                              AND SAVINGS ASSOCIATION


                              By:________________________________
                                    Vice President

                                       21
<PAGE>
 
                                                                       EXHIBIT B
                                                                       ---------


                               SECURITY AGREEMENT
                               ------------------


          THIS SECURITY AGREEMENT ("Agreement") entered into as of November 17,
1993 between MGM GRAND, INC. ("MGM"), a Delaware corporation ("MGM,") and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank").

                                    RECITAL
                                    -------

          MGM and Bank are entering into a Letter of Credit and Reimbursement
Agreement dated as of even date herewith (as amended, modified or supplemented
from time to time, the "Reimbursement Agreement"), and it is a condition
precedent in such Reimbursement Agreement that the parties hereto execute and
deliver this Agreement.

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

          1.  THE SECURITY.  MGM hereby assignees and grants to a security
interest to Bank in the following described personal property, all such property
hereinafter collectively called "Collateral":

          A.  All rights to the payment of money now owned or hereafter acquired
     by MGM, whether due or to become due and whether or not earned by
     performance, including, but not limited to, accounts, contract rights,
     chattel paper, instruments and general intangibles, arising under that
     certain Management and License Agreement dated as of May 13, 1992 between
     MGM and MGM Grand Hotel, Inc. a Nevada corporation ("MGM Hotel"), (as
     amended, supplemented or modified from time to time, "Management
     Agreement").

          B.   All proceeds of the foregoing.

          C.  All rights to insurance and the proceeds thereof covering any of
     the above property.

     2.   OBLIGATIONS SECURED.  The Collateral secures and will secure all
Obligations of MGM to Bank under this Agreement and under the Reimbursement
Agreement. For the purposes of this Agreement, "Obligations" shall mean all
reimbursement obligations of MGM to Bank under the Reimbursement Agreement, all
extensions of credit made by Bank to MGM and all other obligations and
liabilities of MGM to Bank under the Reimbursement Agreement and this Agreement,
whether now existing or hereafter incurred or created, whether voluntary or
involuntary, whether due or not due, whether absolute or contingent, or whether
incurred directly or acquired by Bank by assignment or otherwise.

     3.   MGM'S COVENANTS. MGM covenants and warrants that:

          A.  MGM will properly maintain and care for Collateral.

          B.  MGM will notify Bank in writing prior to any change in MGM's place
     of business, or, if MGM has or acquires more than one place of business,
     prior to any change in MGM's chief executive office or the offices where
     MGM's books and records concerning the Collateral are kept.

                                       1
<PAGE>
 
          C.  MGM will immediately notify Bank of any proposed or actual change
     of MGM's name, identity or corporate structure.

          D.  MGM has not executed and will not execute any security agreement
     or financing statement covering any Collateral except to Bank.

          E.  MGM will not dispose of or create a security interest in the
     Collateral except as provided hereunder.

          F.  Until Bank exercises its rights to make collections, MGM will
     diligently collect all amounts owing under the Management Agreement and
     keep accurate books and records thereof.

          G.  MGM will promptly notify Bank of any legal process levied against
     the Collateral or any other event which materially affects the value of the
     Collateral or the rights and remedies of Bank in relation thereto.

          H.  Except as may be required pursuant to the Bank Loan Agreement or
     the Indenture (as such terms are defined in the Reimbursement Agreement) or
     any of the documents executed in connection therewith, MGM will not agree
     to subordinate or otherwise restrict its right to receive payments under
     the Management Agreement.

     4.   BANK'S REMEDIES AFTER DEFAULT.  Upon the occurrence and continuance of
any Event of Default, Bank may do any one or more of the following:

          A.  Require MGM to segregate all collections and proceeds of the
     Collateral so that they are capable of identification and deliver daily
     such collections and proceeds to Bank in kind.

          B.  Require MGM to periodically deliver to Bank records and schedules,
     which show amounts owing under the Management Agreement or other matters
     which affect the Collateral.

          C.  Verify amounts owing under the Management Agreement and inspect
     the books and records of MGM and make copies thereof or extracts therefrom.

          D.  Require MGM to deliver to Bank any instruments or chattel paper
     evidencing amounts owing under the Management Agreement.

          E.  Notify MGM Hotel or any other persons of Bank's interest in the
     Collateral and the proceeds thereof.

          F.  Require MGM to direct MGM Hotel to forward all remittances,
     payments and proceeds of the Collateral to a post office box under Bank's
     exclusive control.

          G.  Demand and collect any amounts owing under the Management
     Agreement and any proceeds of the Collateral. In connection therewith MGM
     irrevocably authorizes Bank to endorse or sign MGM's name on all
     collections, receipts or other documents, take possession of an open the
     mail addressed to MGM and remove therefrom proceeds and payments of
     Collateral.

          H.  Enforce the security interest given hereunder pursuant to the
     Uniform

                                       2
<PAGE>
 
     Commercial Code of California or any other law.

          I.  Require MGM to assemble the records pertaining to Collateral and
     make them available to Bank at a place designated by Bank.

          J.  Enter the premises of MGM and take possession of the records
     pertaining to the Collateral.

          K.  Grant extensions of, compromise claims in respect of, and settle
     amounts owing under, the Management Agreement for less than face value, all
     without prior notice to MGM.

     5.   MISCELLANEOUS.

          A.  Any waiver, expressed or implied, of any provision hereunder and
     any delay or failure by Bank to enforce any provision shall not preclude
     Bank from enforcing any such provision thereafter.

          B.  MGM shall, at the request of Bank, execute such other agreements,
     documents or instruments in connection with this Agreement as Bank may
     reasonable deem necessary.

          C.  This Agreement shall be governed by and construed according to the
     laws of the State of California, to the jurisdiction of which the parties
     hereto submit.

          D.  All rights and remedies herein provided are cumulative and not
     exclusive of any rights or remedies otherwise provided by law. Any single
     or partial exercise of any right or remedy shall not preclude the further
     exercise thereof or the exercise of any other right or remedy.

          E.  All terms not defined herein are used as set forth in the
     Reimbursement Agreement or in the Uniform Commercial Code of California.

          F.  In the event of any action by Bank to enforce this Agreement or to
     protect the security interest of Bank in the Collateral, MGM agrees to pay
     the costs thereof, reasonable attorney's fees, including the allocated cost
     of inhouse counsel, and other expenses.

     IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first written above.


                                           MGM GRAND, INC.                    
                                                                              
                                           By:________________________________
                                                                              
                                           Name:______________________________
                                                                              
                                           Title:_____________________________
                                                                              
                                                                              
                                           BANK OF AMERICA NATIONAL TRUST     
                                           SAVINGS ASSOCIATION                
                                                                              
                                       3
<PAGE>
 
                                      By:________________________________
                                               Jon Varnell
                                               Vice President

                                       4
<PAGE>
 
                             CONSENT TO ASSIGNMENT


          The undersigned, MGM Grand Hotel, Inc. ("MGM Hotel") acknowledges and
consents to the foregoing Security Agreement dated as of November 17, 1993 and
agrees with Bank of America National Trust and Savings Association ("Bank") as
follows:

          1. Upon and after MGM Hotel's receipt of a notice from the Bank (a)
stating that an Event of Default has occurred and is continuing under the
Reimbursement Agreement and (b) directing MGM Hotel to do so, MGM Hotel agrees
to forward all remittances, payments and proceeds under the Management Agreement
to a post office box designated by the Bank.

          2. The Bank may enforce MGM Grand, Inc.'s rights under the Management
Agreement directly against MGM Hotel.

          3. If requested by the Bank, MGM Hotel will cooperate with the Bank by
assembling its records in order to verify amounts owing under the Management
Agreement and permit the Bank to inspect MGM Hotel's books and records and make
copies thereof or extracts therefrom in connection therewith.

          4. Except at may be required pursuant to the Bank Loan Agreement or
the Indenture (as such terms are defined in the Reimbursement Agreement) or any
of the documents executed in connection therewith, MGM Hotel will not agree to
subordinate or otherwise restrict MGM Grand, Inc.'s right to receive payments
under the Management Agreement.

Dated:

                                       MGM GRAND HOTEL, INC.                  
                                                                              
                                                                              
                                       By:________________________________    
                                                                              
                                       Name:______________________________    
                                                                              
                                       Title:_____________________________    
                                                                               
                                       5

Source: OneCLE Business Contracts.