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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2014
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 001-36906
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INTERNATIONAL GAME TECHNOLOGY PLC
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(Exact name of registrant as specified in its charter)
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England and Wales
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(Jurisdiction of incorporation or organization)
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11 Old Jewry, 6th Floor
London EC2R 8DU
United Kingdom
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(Address of Principal Executive Offices)
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Neil Abrams
General Counsel
10 Memorial Boulevard
Providence, RI 02903
Telephone: (401) 392-1000
Fax: (401) 392-4812
E-mail: Neil.Abrams@IGT.com
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(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Ordinary Shares, nominal value $0.10
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
Table of Contents
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
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198,595,887 ordinary shares, nominal value /$0.10 per share.
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
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No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934.
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Yes
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No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
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No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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Yes
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No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP
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International Financial Reporting Standards as issued by the International Accounting Standards Board
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Other
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If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow:
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Item 17 or
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Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes
x
No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
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Yes
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No
Table of Contents
PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION
International Game Technology PLC (“IGT PLC” or the “Company”) is incorporated in, and under the laws of, England and Wales. IGT PLC has its corporate headquarters in London, United Kingdom, and operating headquarters in Rome, Italy, Providence, Rhode Island, and Las Vegas, Nevada.
IGT PLC is the successor of GTECH S.p.A. (“GTECH”), an Italian corporation (
società per azioni
), and the parent of International Game Technology (“IGT”), a Nevada corporation. On April 7, 2015, GTECH merged (the “Holdco Merger”) with and into the Company, and IGT merged (the “Subsidiary Merger” and, together with the Holdco Merger, the “Mergers”) with and into Georgia Worldwide Corporation, a Nevada corporation and wholly owned subsidiary of the Company (“Sub”), with IGT surviving the Subsidiary Merger, all pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated as of July 15, 2014, as amended, by and among the Company, GTECH, GTECH Corporation, a Delaware corporation (solely with respect to Section 5.02(a) and Article VIII), Sub and IGT. The objective of the Mergers was to combine GTECH’s and IGT’s businesses.
In this document, unless otherwise specified, the terms “we,” “us” and “our,” the “Group,” and the “Company” refer to IGT PLC together with its consolidated subsidiaries and its predecessor prior to the completion of the Holdco Merger on April 7, 2015, or any or more of them, as the context may require. References to “GTECH” refer solely to GTECH S.p.A., the predecessor of IGT PLC prior to the HoldCo Merger. References to “IGT” refers to International Game Technology, a Nevada corporation, which has been acquired in connection with the Mergers.
We have historically conducted our business through GTECH, or the predecessor, up to the date of the Holdco Merger, and subsequent to the Holdco Merger, through IGT PLC, or the successor. The historical results of operations for IGT PLC, as successor, reflect the operations of GTECH, the predecessor, prior to the completion of the Holdco Merger on April 7, 2015. For additional information on the Mergers, see “Item 4. Information on the Company—A. History and Development of the Company—Acquisition of International Game Technology.”
This document includes the Consolidated Financial Statements of GTECH for the years ended December 31, 2014, 2013 and 2012 (the “GTECH Consolidated Financial Statements”) prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The financial information is presented in Euro except that, in some instances, information in U.S. dollars is provided in the GTECH Consolidated Financial Statements and elsewhere in this document. All references in this document to “Euro” and “€” refer to the currency introduced at the start of the third stage of the European Economic and Monetary Union pursuant to the Treaty on the Functioning of the European Union, as amended, and all references to “U.S. dollars,” “U.S. dollar,” “U.S.$” and “$” refer to the currency of the United States of America (or “U.S.”).
The language of the document is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law.
Certain totals in the tables included in this document may not add due to rounding.
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PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2.
Offer Statistics and Expected Timetable
Not Applicable.
Item 3.
Key Information
A.
Selected Financial Data
The following tables set forth summary historical consolidated financial and other information of IGT PLC for the periods indicated, and have been derived from:
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The GTECH Consolidated Financial Statements for the years ended December 31, 2014, 2013 and 2012, included in “Item 18. Financial Statements”; and
·
The consolidated financial statements of GTECH for the years ended December 31, 2011 and 2010, which are not included in this annual report.
The following information is presented in millions of Euro, unless otherwise specified.
The following information should be read in conjunction with “Presentation of Financial and Certain Other Information,” “Item 3—D. Risk Factors,” “Item 5—Operating and Financial Review,” and the GTECH Consolidated Financial Statements included in “Item 18. Financial Statements.”
Consolidated Income Statement Data
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For the Years Ended December 31,
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2014
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2013
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2012
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2011
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2010
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(€ million, except per share data)
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Total revenue
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3,069.7
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3,062.8
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3,075.7
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2,973.7
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2,314.1
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Operating income
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567.0
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559.0
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583.1
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539.3
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386.0
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Income before income tax expense
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287.6
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386.1
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424.0
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365.9
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113.5
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Net income(1)
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97.6
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205.2
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265.2
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205.7
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45.4
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Attributable to:
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Owners of the parent
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83.3
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175.4
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233.1
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173.1
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0.5
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Non-controlling interests
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14.3
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29.8
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32.1
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32.6
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44.9
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Basic earnings per ordinary share (in Euro)(1)
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0.48
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1.01
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1.35
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1.01
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—
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Diluted earnings per ordinary share (in Euro)(1)
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0.48
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1.01
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1.35
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1.01
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—
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Dividends declared per ordinary share (in Euro)(2)
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0.75
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0.73
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0.71
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—
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0.74
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Dividends declared per ordinary share (in U.S. Dollar)(3)
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1.04
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0.95
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0.93
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—
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0.99
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(1)
During the historical periods presented there were no discontinued operations.
(2)
Dividends declared per ordinary share represents dividends declared and paid per ordinary share, for which the dividends paid represent cash payments in the applicable year that generally relates to earnings of the previous year.
(3)
Translated into U.S. dollar at the exchange rates in effect on the dates the dividends were declared. These translations are examples only, and should not be construed as a representation that the Euro amount represents, or has been or could be converted into U.S. dollar at that or any other rate.
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Consolidated Statement of Financial Position Data
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At December 31,
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2014
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2013
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2012
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2011
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2010
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(€ million, except per share data)
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Cash and cash equivalents
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261.2
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419.1
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455.8
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190.7
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152.4
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Total assets
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7,126.5
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7,123.4
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7,277.3
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7,006.9
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6,962.9
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Debt(1)
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2,521.5
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2,856.6
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2,960.6
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2,802.4
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2,951.7
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Non-current liabilities
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2,034.3
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2,915.7
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3,056.2
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2,904.1
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3,149.7
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Total equity
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2,618.1
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2,603.5
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2,642.3
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2,609.2
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2,358.9
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Equity attributable to owners of the parent
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2,336.3
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2,199.9
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2,267.8
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2,187.1
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1,914.4
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Non-controlling interests
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281.8
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403.6
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374.5
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422.1
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444.5
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Issued capital
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175.0
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174.0
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172.5
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172.1
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172.0
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Ordinary shares issued (in thousands of shares)
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172,792
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173,992
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172,455
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172,141
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172,015
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(1) Debt is comprised of long term debt and short term borrowings.
Exchange Rates
As of May 14, 2015 (the latest practicable trading date prior to the date of this document), the exchange rate of U.S. dollars per Euro was 1.1380. The following tables show the high and low exchange rates of U.S. dollars per Euro for each month during the previous six months, and the average exchange rates of U.S. dollars per Euro for the five most recent financial years, calculated by using the average of the exchange rates on the last day of each month during each period.
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Reference Date
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Low
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High
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Month
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April
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1.0573
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1.1206
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March
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1.0485
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1.1241
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February
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1.1176
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1.1534
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January
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1.1098
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1.2109
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December
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1.2097
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1.2570
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November
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1.2358
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1.2600
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Reference Date
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Average
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Year
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2014
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1.3232
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2013
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1.3304
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2012
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1.2906
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2011
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1.3966
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2010
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1.3204
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The rates presented above may differ from the actual rates used in the preparation of IGT PLC’s financial statements and other financial information appearing in this document. IGT PLC’s inclusion of such rates is not meant to suggest that the U.S. dollar amounts actually represent Euro amounts or that such amounts could have been converted to U.S. dollars at any particular rate.
B.
Capitalization and Indebtedness
Not Applicable.
C.
Reasons for the Offer and Use of Proceeds
Not Applicable.
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D.
Risk Factors
The following risks should be considered in conjunction with “Item 5. Operating and Financial Review and Prospects” beginning on page 57 and the other risks described in the Safe Harbor Statement beginning on page 111. These risks may affect our operating results and, individually or in the aggregate, could cause our actual results to differ materially from past and anticipated future results. The following discussion of risks may contain forward-looking statements which are intended to be covered by the Safe Harbor Statement beginning on page 111. Except as may be required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. We invite you to consult any further related disclosures we make from time to time in materials filed with or furnished to the United States Securities and Exchange Commission (“SEC”).
Unless otherwise specified or the context otherwise indicates, all references in the following risk factors to “IGT PLC,” “we,” “us,” “our,” and the “Company” refer to the business and operations of IGT PLC as the successor of GTECH S.p.A. and the acquirer of IGT.
RISK FACTORS RELATING TO IGT PLC’S BUSINESS
IGT PLC is exposed to risks associated with the performance of the global economy, the Eurozone debt crisis and the prevailing economic conditions in the markets in which it operates, including Italy.
IGT PLC is exposed to risks associated with the performance of the global economy and the markets in which it operates. IGT PLC’s income and results of operations have been influenced, and will continue to be influenced, to a certain degree, by the general state and performance of the global economy. The volatility of the financial markets shows that there can be no assurance that any recovery is sustainable or that there will be no recurrence of the global financial and economic crisis or similar adverse market conditions.
IGT PLC’s business is particularly sensitive to reductions in discretionary consumer spending in the markets in which it operates, which may be affected by general economic conditions in these markets. Economic contraction, economic uncertainty and the perception by IGT PLC’s customers of weak or weakening economic conditions may cause a decline in demand for entertainment in the forms of the gaming services that IGT PLC offers. In addition, changes in discretionary consumer spending or consumer preferences could be driven by factors such as an unstable job market, perceived or actual disposable consumer income and wealth, or fears of war and future acts of terrorism.
In particular, the lack of resolution of the sovereign debt crisis of several countries of the Eurozone, including Greece, Italy, Cyprus, Ireland, Spain and Portugal, together with the risk of contagion to other—more stable—countries, particularly France and Germany, has raised a number of uncertainties regarding the stability and overall standing of the European Monetary Union. Concerns that the Eurozone sovereign debt crisis could worsen may lead to the reintroduction of national currencies in one or more Eurozone countries or, in particularly dire circumstances, the abandonment of the Euro. The departure or risk of departure from the Euro by one or more Eurozone countries and/or the abandonment of the Euro as a currency could have major negative effects on both existing contractual relations and the fulfillment of obligations by IGT PLC and/or its customers, which could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
A significant portion of IGT PLC’s total consolidated revenues is derived from government concessions in Italy including the Lotto and instant lottery concessions.
A substantial portion of IGT PLC’s revenues, equal to approximately 52.7% of GTECH’s total consolidated revenues for the year ended December 31, 2014 (52.4% and 54.8% for the years ended December 31, 2013 and 2012, respectively), is derived from exclusive and non-exclusive concessions awarded to IGT PLC by
Agenzia delle Dogane e Dei Monopoli
(“ADM”), the governmental authority responsible for regulating and supervising gaming in Italy. In particular, a substantial portion of IGT PLC’s revenues is derived from two exclusive concessions, one for the operation of the Lotto game (the “Lotto Concession”) and one for instant tickets (equal to approximately 13.8% and 12.1%, respectively, of GTECH’s total consolidated revenues for the year ended
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December 31, 2014, 13.3% and 12.3%, respectively, for the year ended December 31, 2013, and 13.1% and 12.4%, respectively, for the year ended December 31, 2012). The Lotto Concession and the instant ticket majority-owned concession have been respectively awarded by ADM to IGT PLC and its subsidiary, Lotterie Nazionali S.r.l. IGT PLC expects that the Lotto Concession will expire on June 8, 2016, while the instant ticket concession will expire on September 30, 2019.
IGT PLC’s management believes that in the future a significant portion of IGT PLC’s business and profitability will continue to depend upon the concessions awarded to IGT PLC by ADM and other Italian governmental entities. Therefore, a material reduction in IGT PLC’s revenues from these concessions, including as a result of an early termination or non-renewal of these concessions following their expiration, could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
Management believes that the Lotto Concession held by IGT PLC will expire on June 8, 2016 as was determined by an arbitral ruling in favor of IGT PLC on August 1, 2005, and confirmed by the Supreme Court of Cassation on February 3, 2014. The final expiration date of the Lotto Concession is subject to dispute by ADM, which argues that the Lotto Concession should have expired on April 17, 2012, and an appeal lodged by Stanley International Betting Limited (“Stanley”) is still pending. The outcome of this appeal before the State Council related to the ability of the Lotto Concession to be renewed after its first nine-year term could result in the earlier termination of IGT PLC’s Lotto prior to June 8, 2016, which could have a material adverse effect on IGT PLC’s business, results of operations and financial condition.
Despite several prior arbitral awards and judicial decisions in IGT PLC’s favor, ADM or other governmental or judicial authorities nonetheless may continue to seek monetary or other relief from IGT PLC in respect of these four disputed years of concession, potentially through additional legal, administrative or criminal action, investigations or proceedings. As described herein, although IGT PLC has strong arguments in defense of these allegations, an adverse finding or settlement could result in significant damages or other payments or sanctions (including, under certain circumstances, revocation of existing concessions or Italian Legislative Decree No. 231 of June 8, 2011 sanctions, see “—
We are exposed to significant risks in relation to compliance with anti-corruption and corporate criminal laws and regulations and economic sanction programs
”). It is uncertain what effect, if any, the ongoing dispute regarding the expiration of the Lotto Concession will have on IGT PLC’s ability to reacquire the Lotto Concession and, if re-awarded, the economics of the new concession.
IGT PLC relies on time-limited government concessions in order to conduct its main business activities. Termination of the Lotto Concession, instant lottery and machine gaming concessions in Italy would have a material adverse effect on IGT PLC’s revenues.
IGT PLC is required to obtain and maintain licenses from various jurisdictions in order to operate its business. Upon the expiration of IGT PLC’s concessions, new concessions may be awarded to one or more parties through a competitive bidding process open to parties other than IGT PLC or its subsidiaries. In addition, concessions may be terminated prior to their expiration dates upon the occurrence of certain events of default affecting IGT PLC or its subsidiaries or if their continuation is determined under applicable principles of law to be against the public interest.
Before the expiration date of the Lotto Concession in June 2016, the Italian government will issue a request for proposal (“RFP”) to award a new Lotto Concession. IGT PLC’s management does not anticipate any constraints to participating in the RFP for the new concession, but IGT PLC cannot be certain of the results of the tender, including whether IGT PLC will be awarded the new concession, or what costs will be associated with award of the concession.
The instant ticket concession is, in theory, renewable, but IGT PLC’s management does not believe it is likely. Instead, IGT PLC’s management believes that an RFP will be issued under a different law, with new rules, for a new concession. Under the new rules, the RFP may result in a non-exclusive concession (
i.e.
, more than one bidder may be awarded the concession), and award of the concession may entail payment of a lump sum.
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As with the above concessions, the non-exclusive concession for the operation of video lottery terminals (“VLTs”) and amusement with prize machines (“AWPs”) held by Lottomatica Videolot Rete S.p.A., as well as the betting concessions that expire in June 2016 held by Lottomatica Scommesses S.r.l., will be subject to the same concerns. Finally, the conditions for any new concession will be established by law and included in the rules of the new concession.
There can be no assurance that IGT PLC will be able to renew any of its existing concessions, and the loss, denial, non-renewal or renewal on different terms of any of its concessions could have a material adverse effect on its results of operations, business, financial condition or prospects.
IGT PLC’s obligation to transfer assets upon the termination of the Lotto Concession and other concessions could have a material adverse effect on IGT PLC’s financial position and results of operations.
Upon the termination or non-renewal of the Lotto Concession, the instant lottery or machine gaming concessions, IGT PLC will be required at the request of ADM to transfer to ADM, free of charge, ownership of certain assets that are part of its central system used to operate Lotto, the instant lottery or machine gaming and equipment such as terminals at the points of sale, facilities, software, data files, and any other related assets that may be necessary for the full functioning, operation, and operability of the system itself. As of December 31, 2014, the value of such assets was €48.2 million (the value of such assets was €61 million as of December 31, 2013) or approximately 0.7% of GTECH’s consolidated total assets and approximately 1.3% without goodwill (the value of such assets was approximately 0.9% of GTECH’s consolidated total assets and approximately 1.5% without goodwill as of December 31, 2013). The obligation to transfer the Lotto Concession assets may also have detrimental effects on certain other businesses operated by IGT PLC because IGT PLC uses terminals, central system hardware and software used in the operation of Lotto in connection with certain of its other businesses.
IGT PLC is subject to substantial penalties for failure to perform under its concessions and contracts.
IGT PLC’s Italian concessions, lottery contracts in the United States and in other jurisdictions and other service contracts often require substantial performance bonds to secure its performance under such contracts and require IGT PLC to pay substantial monetary liquidated damages in the event of non-performance by IGT PLC.
As of December 31, 2014, GTECH had outstanding performance bonds and letters of credit in an aggregate amount of approximately €995.6 million. These instruments present a potential for expense for IGT PLC and divert financial resources from other uses.
Claims on performance bonds, drawings on letters of credit and payment of liquidated damages could individually or in the aggregate have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
Slow growth or declines in sales of lottery goods and services could lead to lower revenues and cash flows for IGT PLC.
In recent years, as the lottery industry has matured in the primary markets where IGT PLC operates, the rate of lottery sales growth has moderated and some of IGT PLC’s customers have from time to time experienced a downward trend in sales. IGT PLC’s dependence on large jackpot games and, specifically, the decline in aggregate sales at similar jackpot levels (“jackpot fatigue”) has had a negative impact on revenue from this game category. These developments may in part reflect increased competition for consumers’ discretionary spending, including from a proliferation of destination gaming venues and an increased availability of Internet gaming opportunities. IGT PLC’s future success will depend, in part, on the success of the lottery industry, as a whole, in attracting and retaining new players in the face of such increased competition in the entertainment and gambling markets (which competition may continue to increase), as well as its own success in developing innovative services, products and distribution methods/systems to achieve this goal. In addition, there is a risk that new products and services may replace existing products and services. The replacement of old products and services with new products and services may offset the overall growth of sales of IGT PLC. A failure by IGT PLC to achieve these goals could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
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IGT PLC faces risks related to the extensive and complex governmental regulation applicable to its operations.
IGT PLC’s activities are subject to extensive and complex governmental regulation which varies from time to time and from jurisdiction to jurisdiction where IGT PLC operates, which includes restrictions on advertising, increases in or differing interpretations by authorities on taxation, limitations on the use of cash and anti-money laundering compliance procedures. IGT PLC believes that it has developed procedures designed to comply with such regulatory requirements. However, any failure by IGT PLC to so comply or its inability to obtain required suitability findings could lead regulatory authorities to seek to restrict IGT PLC’s business in their jurisdictions.
In addition, IGT PLC is subject to extensive background investigations in its lottery and gaming businesses. Authorities generally conduct such investigations prior to and after the award of a lottery contract or issuance of a gaming license. Such investigations frequently include individual suitability standards for officers, directors, major shareholders and key employees. Authorities are generally empowered to disqualify IGT PLC from receiving a lottery contract or operating a lottery system as a result of any such investigation. IGT PLC’s failure, or the failure of any of its personnel, systems or machines, in obtaining or retaining a required license or approval in one jurisdiction could negatively impact its ability to obtain or retain required licenses and approvals in other jurisdictions. Any such failure would decrease the geographic areas where IGT PLC may operate and as a result could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
Further, there have been, are currently, and may in the future continue to be, investigations of various types conducted by governmental authorities into possible improprieties and wrongdoing in connection with IGT PLC’s efforts to obtain or the awarding of lottery contracts and related matters. Because such investigations frequently are conducted in secret, IGT PLC may not necessarily know of the existence of an investigation in which it might be involved. Because IGT PLC’s reputation for integrity is an important factor in its business dealings with lottery and other governmental agencies, a governmental allegation or a finding of improper conduct by or attributable to IGT PLC in any manner or the prolonged investigation of these matters by governmental or regulatory authorities could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects, including its ability to retain existing contracts or to obtain new or renewed contracts, both in the subject jurisdiction and elsewhere. In addition, adverse publicity resulting from any such proceedings could have a material adverse effect on IGT PLC’s reputation, results of operations, business, financial condition or prospects.
In December 2013, GTECH paid €34.7 million to the Italian tax agency (Agenzia delle Entrate) in settlement of certain tax matters of which €28 million involved the corporate reorganization and subsequent restructuring of certain intercompany financing transactions during the years 2006, 2007, 2008 and 2009 related to the acquisition of GTECH in 2006. As required by Italian law, the Italian tax agency referred the matter to the Rome Public Prosecutor’s office, which had the obligation to start an investigation on both GTECH’s Chairman and its CEO as legal representatives of GTECH and signatories of the tax declarations. Charges, if any, would be based on the alleged errors and omissions of the tax declarations during the three years which were already the subject of the settlement by GTECH with the Italian tax agency.
On April 28, 2015, representatives of the Rome Public Prosecutor came to IGT PLC’s offices in Rome to collect documents and files. In addition, one senior executive and one member of the Board of Directors of IGT PLC were served with a notice that each is subject to a criminal investigation in Italy relating to Italian tax returns filed by IGT PLC’s predecessor company, GTECH S.p.A. (fka Lottomatica S.p.A. referred to herein as “GTECH”), for the tax years 2006-2013. Under the relevant Italian statutes, the signatories of the corporate tax returns, and not the corporation itself, are subject to investigation. The individuals are Lorenzo Pellicioli, then chairman of GTECH’s Board of Directors and currently Vice-Chairman of IGT PLC’s Board of Directors, who was GTECH’s legal representative who signed the Italian corporate tax return for the 2013 tax year; and Marco Sala, then GTECH’s CEO and the current CEO and a director of IGT PLC, who signed the Italian corporate tax returns for the 2006, 2007 and 2008 tax years. Renato Ascoli, then the general manager of GTECH’s Italian operations, who signed the Italian corporate tax returns for the 2009, 2010, 2011 and 2012 tax years, was also named in the notices, although he has not yet been served.
It is IGT PLC’s understanding that the current investigation is principally focused on the structuring of the original leveraged buyout of GTECH Holdings Corporation by Lottomatica S.p.A. and the subsequent conversion of a portion of the original debt incurred by GTECH Corporation into an equity increase from the parent company, Lottomatica S.p.A.
The Public Prosecutor is investigating whether GTECH’s income was under-reported in Italy for any of the tax years 2006-2013. If the Public Prosecutor determines that income was under-reported in one or more tax years, the Public Prosecutor may choose to bring criminal charges in Italy against any or all of the above referenced individuals.
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IGT believes that the actions of the Company and the relevant managers were appropriate and complied with all applicable tax and other laws and that the allegations underlying the investigation are without merit.
IGT PLC is exposed to significant risks in relation to compliance with anti-corruption and corporate criminal laws and regulations and economic sanction programs.
Doing business on a worldwide basis requires us to comply with the laws and regulations of various jurisdictions. In particular, our international operations are subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), the United Kingdom Bribery Act of 2010 (the “Bribery Act”), the Italian Legislative Decree No. 231 of June 8, 2001 and economic sanctions programs, including those administered by the UN, EU and OFAC and regulations set forth under the Comprehensive Iran Accountability Divestment Act. The FCPA prohibits providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. We may deal with both government and state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA. The provisions of the Bribery Act extend beyond bribery of foreign public officials and are more onerous than the FCPA in a number of other respects, including jurisdiction, non-exemption of facilitation payments and penalties. Under the Italian Legislative Decree No. 231 of June 8, 2001, we may be held responsible for certain crimes committed in Italy or abroad (including corruption, fraud against the state, corporate offenses and market abuse) in our interest or for our benefit, by individuals having a functional relationship with us at the time the relevant crime was committed, including third party agents or intermediaries. In such circumstances, we could be subject to fines, confiscation of profits or legal sanctions, such as termination of authorizations, licenses, concessions and financing agreements, suspension of our operations, or prohibitions on contracting with public authorities.
The duration of these disqualifications ranges from a minimum of three months to a maximum of two years, although in very serious cases, some of these disqualifications can be applied permanently. Certain of the above-mentioned legal sanctions may also be applied as interim measures during investigations. As an alternative to the legal sanctions, the court may appoint a judicial custodian to run the company, with the consequence that the profits gained during the receivership period are automatically confiscated. Economic sanctions programs restrict our business dealings with certain sanctioned countries.
As a result of doing business in foreign countries, we are exposed to a risk of violating anti-corruption laws and sanctions regulations applicable in those countries where we, our partners or agents operate. Some of the international locations in which we operate lack a developed legal system and have high levels of corruption. Our continued expansion and worldwide operations, including in developing countries, the development of joint venture relationships worldwide and the employment of local agents in the countries in which we operate increases the risk of violations of anti-corruption laws, OFAC or similar laws.
As a result, from time to time we may be subject to proceedings and investigations relating to such laws and regulations. Violations of anti-corruption laws and sanctions regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal fines and imprisonment. In addition, any major violations could have a significant impact on our reputation and consequently on our ability to win future business.
We have policies and procedures designed to assist compliance with applicable laws and regulations and have trained our employees to comply with such laws and regulations. While we believe that we have a strong culture of compliance and adequate systems of control, we seek to continuously improve our systems of internal controls and to remedy any weaknesses identified. There can be no assurance, however, that the policies and procedures have been or will be followed at all times or effectively detect and prevent violations of the applicable laws by one or more of our directors, officers, employees, consultants, agents or partners and, as a result, we could be subject to penalties and sanctions, which in turn could have a material adverse effect on our business, results of operations and financial condition.
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IGT PLC may be subject to an unfavorable outcome with respect to pending litigation, which could result in substantial monetary damages or other harm to IGT PLC.
Due to the nature of its business, IGT PLC is involved in a number of legal, regulatory, tax and arbitration proceedings regarding, among other matters, claims by and against it as well as injunctions by third parties arising out of the ordinary course of its business and is subject to investigations and compliance inquiries related to its ongoing operations. The outcome of these proceedings and similar future proceedings cannot be predicted with certainty. As of December 31, 2014, GTECH’s total provision for litigation risks was €5.6 million. However, it is difficult to accurately estimate the outcome of any proceeding. As such, the amounts of IGT PLC’s provision for litigation risk, accrued also on the basis of assessments made by external counsel, could vary significantly from the amounts IGT PLC may be asked to pay and from the amounts IGT PLC would ultimately pay in any such proceeding. In addition, unfavorable resolution of or significant delay in adjudicating such proceedings could require IGT PLC to pay substantial monetary damages or penalties and/or incur costs which may exceed any provision for litigation risks or, under certain circumstances, cause the termination or revocation of the relevant concession, license or authorization and thereby have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
IGT PLC faces risks in connection with its international operations and operations outside of traditional U.S. jurisdictions.
IGT PLC is a global business and derives a substantial portion of its revenues from operations outside of Italy and the United States (16.8% of GTECH’s total consolidated revenues for the year ended December 31, 2014; and 19.3% and 18.5% for the years ended December 31, 2013 and 2012, respectively). IGT PLC also operates in tribal jurisdictions with sovereign immunity which subjects it to certain inherent risks. In addition, certain aspects of IGT PLC’s domestic U.S. business, such as its supply chain, may be impacted by events and conditions internationally. Risks associated with IGT PLC’s international operations include increased governmental regulation of the online lottery and commercial gaming industries in the markets where it operates, exchange controls or other currency restrictions and significant political instability.
Other economic risks that IGT PLC’s international activity subjects it to include additional costs of international law compliance, inflation, currency devaluation, illiquid or restricted foreign exchange markets, high interest rates, debt default, unstable capital markets and foreign direct investment restrictions. Political risks include change of leadership, change of governmental policies, new foreign exchange controls regulating the flow of money into or out of a country, failure of a government to honor existing contracts, changes in tax laws and corruption, as well as global risk aversion driven by political unrest, war and terrorism. Finally, social instability risks include high crime in certain of the countries in which IGT PLC operates due to poor economic and political conditions, riots, unemployment and poor health conditions. These factors may affect IGT PLC’s workforce as well as the general business environment in a country. The materialization of such risks could have a negative impact on IGT PLC’s results of operations, business, financial condition or prospects.
If IGT PLC is unable to protect its intellectual property or prevent its use by third parties, its ability to compete in the market may be harmed.
IGT PLC protects its proprietary technology and intellectual property to ensure that its competitors do not use such technology and intellectual property. However, intellectual property laws in Italy, the United States and in other jurisdictions may afford differing and limited protection, may not permit IGT PLC to gain or maintain a competitive advantage, and may not prevent IGT PLC’s competitors from duplicating its products, designing around its patented products, or gaining access to its proprietary information and technology.
Although IGT PLC takes measures intended to prevent disclosure of its trade secrets and proprietary know-how through non-disclosure and confidentiality agreements and other contractual restrictions, IGT PLC may not be able to prevent the unauthorized disclosure or use of its technical knowledge or trade secrets. For example, there can be no assurance that consultants, vendors, former employees or current employees will not breach their
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obligations regarding non-disclosure and restrictions on use. In addition, anyone could seek to challenge, invalidate, circumvent or render unenforceable any IGT PLC patent. IGT PLC cannot provide assurance that any pending or future patent applications it holds will result in an issued patent, or that, if patents are issued, they would necessarily provide meaningful protection against competitors and competitive technologies and/or adequately protect IGT PLC’s then-current products and technologies. IGT PLC may not be able to detect the unauthorized use, or access from breaches of IGT PLC’s cybersecurity efforts, of its intellectual property or take appropriate steps to enforce its intellectual property rights effectively, and certain contractual provisions, including restrictions on use, copying, transfer and disclosure of licensed programs, may be unenforceable under the laws of certain jurisdictions.
IGT PLC licenses intellectual property rights from third parties. If such third parties do not properly maintain or enforce the intellectual property rights underlying such licenses, or if such licenses are terminated or expire without being renewed, IGT PLC could lose the right to use the licensed intellectual property, which could adversely affect its competitive position or its ability to commercialize certain of its technologies, products or services.
In addition, some of IGT PLC’s most popular games and features are based on trademarks, patents, and other intellectual property licensed from third parties. IGT PLC’s future success may depend upon its ability to obtain, retain and/or expand licenses for popular intellectual property rights with reasonable terms in a competitive market. In the event that IGT PLC cannot renew and/or expand existing licenses, it may be required to discontinue or limit IGT PLC’s use of the games or gaming machines that use the licensed technology or bear the licensed marks.
IGT PLC’s success may depend in part on its ability to obtain trademark protection for the names or symbols under which IGT PLC markets its products and to obtain copyright protection and patent protection of IGT PLC’s proprietary technologies, intellectual property and other game innovations. IGT PLC may not be able to build and maintain goodwill in IGT PLC’s trademarks or obtain trademark or patent protection, and there can be no assurance that any trademark, copyright or issued patent will provide competitive advantages for IGT PLC or that IGT PLC’s intellectual properties will not be successfully challenged or circumvented by competitors.
IGT PLC intends to enforce its intellectual property rights, and from time to time it may initiate claims against third parties that it believes are infringing its intellectual property rights if it is unable to resolve matters satisfactorily through negotiation. Litigation brought to protect and enforce IGT PLC’s intellectual property rights could be costly, time-consuming and distracting to management and could fail to obtain the results sought and could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
Third party intellectual property infringement claims against IGT PLC could limit or affect its ability to compete effectively.
IGT PLC cannot provide assurance that its products or methods do not infringe the patents or other intellectual property rights of third parties. Infringement and other intellectual property claims and proceedings brought against IGT PLC, whether successful or not, are costly, time-consuming and distracting to management, and could harm IGT PLC’s reputation. In addition, intellectual property litigation or claims could require IGT PLC to do one or more of the following: (1) cease selling or using any of its products that allegedly incorporate the infringed intellectual property, (2) pay substantial damages, (3) obtain a license from the third party owner, which license may not be available on reasonable terms, if at all, (4) rebrand or rename its products, and (5) redesign its products to avoid infringing the intellectual property rights of third parties, which may not be possible and, if possible, could be costly, time-consuming or result in a less effective product. The loss of proprietary technology or a successful claim against IGT PLC could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
IGT PLC’s business prospects and future success rely heavily upon the integrity of its employees, directors and agents and the security of its systems.
The real and perceived integrity and security of a lottery is critical to its ability to attract players. IGT PLC strives to set exacting standards of personal integrity for its employees and directors, as well as system security for the systems that it provides to its customers, and its reputation in this regard is an important factor in its business
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dealings with lottery and other governmental agencies. For this reason, an allegation or a finding of improper conduct on IGT PLC’s part, or on the part of one or more of its current or former employees, directors or agents that is attributable to IGT PLC, or an actual or alleged system security defect or failure attributable to IGT PLC, could have a material adverse effect upon IGT PLC’s results of operations, business, financial condition or prospects, including its ability to retain or renew existing contracts or obtain new contracts.
IGT PLC may not be able to respond to technological changes or to satisfy future technology demands of its customers, in which case it could fall behind its competitors.
Many of IGT PLC’s software and hardware products are based on proprietary technologies. While management believes that certain of IGT PLC’s technologies, such as the IGT PLC Enterprise Series open-architecture software platform, provide an industry standard, if IGT PLC were to fail to enhance its product and service offerings to take advantage of technological developments, it may fall behind its competitors and IGT PLC’s results of operations, business, financial condition or prospects could suffer.
IGT PLC’s lottery operations are dependent upon its continued ability to retain and extend its existing contracts and win new contracts.
IGT PLC derives a portion of its revenues and cash flow from its portfolio of long-term lottery contracts in the Americas and International segments (equal to approximately 28.4% of GTECH’s total consolidated revenues for the year ended December 31, 2014 and 27.9% for the year ended December 31, 2013, respectively), awarded through competitive procurement processes. In addition, IGT PLC’s U.S. lottery contracts typically permit a lottery authority to terminate the contract at any time for failure to perform and for other specified reasons, and many of these contracts in the U.S. permit the lottery authority to terminate the contract at will with limited notice and do not specify the compensation, if any, to which IGT PLC would be entitled were such termination to occur.
Further, in the event that IGT PLC is unable or unwilling to perform, some of its lottery contracts permit the lottery authority to acquire title to its system-related equipment and software during the term of the contract or upon the expiration or earlier termination of the contract, in some cases without paying IGT PLC any compensation related to the transfer of that equipment and software to the lottery authority.
The termination of or failure to renew or extend one or more of IGT PLC’s lottery contracts, or the renewal or extension of one or more of IGT PLC’s lottery contracts on materially altered terms or the transfer of its assets without compensation could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
IGT PLC has a concentrated customer base and the loss of any of its larger customers (or lower sales from any of these customers) could lead to significantly lower revenue.
Revenues from GTECH’s top ten customers outside of Italy accounted for approximately 18.2% of GTECH’s total consolidated revenues for the year ended December 31, 2014 (18.3% and 17.7% for the years ended December 31, 2013 and 2012, respectively). If IGT PLC were to lose any of these larger customers, or if these larger customers experience slow lottery ticket sales and consequently reduced lottery revenue, there could be a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
IGT PLC’s dependence on certain suppliers creates a risk of implementation delays if the supply contract is terminated or breached, and any delays may result in substantial penalties.
IGT PLC purchases most of the parts, components and subassemblies necessary for its lottery and machine gaming terminals and other system components from outside sources. IGT PLC outsources all of the manufacturing and assembly of certain lottery products to a single vendor while other products have portions outsourced to multiple qualified vendors. Although IGT PLC works closely with its manufacturing outsourcing vendor and IGT PLC is likely to be able to realign its manufacturing facilities to manufacture its products itself, IGT PLC’s operating results could be adversely affected if one or more of its manufacturing outsourcing vendors failed to meet production schedules. For example, while most of the parts, components and subassemblies can be purchased through more
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than one supplier, IGT PLC currently has approximately three material sole source vendors for lottery terminals for its lottery products. GTECH’s total purchases from these three vendors during the year ended December 31, 2014 was approximately 64% of its total consolidated purchases of parts, components and subassemblies for that product for that year. IGT PLC’s management believes that if a supply contract with one of these vendors were to be terminated or breached, IGT PLC would be able to replace the vendor. However, it may take time to replace the vendor under some circumstances and any replacement parts, components or subassemblies may be more expensive, which could reduce IGT PLC’s margins. Depending on a number of factors, including the level of the related part, component or subassembly in IGT PLC’s inventory, the time it takes to replace a vendor may result in a delay in its implementation for a customer. Generally, if IGT PLC fails to meet its delivery schedules under its contracts, it may be subject to substantial penalties or liquidated damages, or even contract termination, which in turn could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
New arrangements with state lotteries in the U.S. such as lottery manager contracts may increase the risks to IGT PLC in its dealings with state lotteries, including requiring the guarantee of income, upfront payments or similar arrangements.
In the United States, state lotteries are exploring lottery manager contracts as a means of maximizing lottery profits. Under these contracts (currently in Illinois, Indiana and New Jersey), IGT PLC is required to guarantee income levels to the state. In addition, in other states, agreements may require upfront payments for concessions. Arrangements such as the guarantee of income when not achieved, large upfront payments or other similar arrangements may have a material adverse effect on IGT PLC’s results of operation, business, financial condition or prospects.
IGT PLC’s business may be adversely affected by competition.
The gaming business is highly competitive. IGT PLC faces competition from a number of companies in Italy, the United States and worldwide. Although IGT PLC is making investments, including the recently completed acquisition of International Game Technology, intended to position it to exploit the opportunities in the machine gaming, interactive gaming and sports betting markets, it expects significant competition in these markets from other companies. Competition could cause IGT PLC to lose players or customers and could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects. The online lottery industry has faced increased competition from the entertainment and gambling industries in recent years, including from a proliferation of destination gaming venues, and an increased availability of gaming opportunities including gaming opportunities on the Internet. In recent years there has been increased competition in the gaming industry and, in some instances, IGT PLC observed extremely aggressive pricing from these competitors in an effort to gain market share. Increased competition and aggressive pricing practices from competitors could adversely affect IGT PLC’s ability to retain business, to win new business and may impact the margin of profitability on contracts that IGT PLC is successful in retaining or winning. Also, awards of contracts to IGT PLC are, from time to time, challenged by its competitors. Increased competition also may have a material adverse effect on the profitability of contracts which IGT PLC does obtain. Over the past several fiscal years, IGT PLC has experienced and may continue to experience a reduction in the percentage of lottery ticket sales that it receives from certain customers resulting from contract rebids, extensions and renewals due to a number of factors, including the substantial growth of lottery sales, reductions in the cost of technology and telecommunications services and general and competitive dynamics.
IGT PLC may also be affected by increased competition as a result of consolidation among gaming equipment and technology companies. IGT PLC expects the trend toward consolidation in its global industry to continue as gaming equipment and technology companies attempt to strengthen or expand their market positions in the gaming industry through mergers and acquisitions. Several acquisitions of slot machine and other gaming equipment makers by gaming technology companies have occurred recently, such as the acquisition of Bally Technologies by Scientific Games Corp. and the acquisition of Multimedia Games by Global Cash Access Holdings Inc. IGT PLC believes that industry consolidation such as these acquisitions may result in stronger competitors that are better able to compete by increasing their scale and operating efficiencies. Consolidation may also result in competitors with greater resources which may be directed toward accelerating innovation and product development, resulting in a broader service and product offering. Such changes in the competitive landscape could potentially reduce IGT PLC’s market share and lead to declining sales volumes and prices for its products and services. If any of these risks are realized, IGT PLC’s competitive position and therefore its business, results of operations and financial condition may be materially adversely affected.
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The gaming and betting industry is highly regulated.
The gaming and betting industry is highly regulated. In Italy, this regulation determines, among others, (1) games that may be operated and amounts that may be charged by operators, (2) the prizes for the players, (3) the compensation paid to concessionaires, including IGT PLC, (4) the kinds of points of sale and (5) the applicable tax regulations. Renewing existing and applying for new licenses, concessions, permits and approvals can be costly and time-consuming and there is no assurance of success. Any failure to renew or obtain any such license, concession, permit or approval could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects. Any changes in the legal or regulatory framework or other changes, such as increases in the taxation of gaming or betting, changes in the compensation paid to concessionaires or increases in the number of licenses, authorizations or concessions awarded to competitors of IGT PLC could materially and adversely affect its profitability. For instance, the profitability of the video lottery terminal (“VLT”) sector has declined since 2012, after ADM increased taxation on VLTs from 2% to 4% in January 2012, and then to 5% during 2013 and 2014.
In the United States and in many international jurisdictions where IGT PLC currently operates or seeks to do business, lotteries are not permitted unless expressly authorized by law. The successful implementation of IGT PLC’s growth strategy and its business could be materially adversely affected if jurisdictions that do not currently authorize lotteries do not approve new lotteries or if those jurisdictions that currently authorize lotteries do not continue to permit such activities.
Once authorized, the ongoing operations of lotteries and lottery operators are typically subject to extensive and evolving regulation. In the United States, in particular, lottery authorities generally conduct an investigation of the winning vendor and its employees prior to and after the award of a lottery contract. Further, lottery authorities may require the removal of any of the vendor’s employees deemed to be unsuitable and are generally empowered to disqualify IGT PLC from receiving a lottery contract or operating a lottery system as a result of any such investigation. Some jurisdictions also require extensive personal and financial disclosure and background checks from persons and entities beneficially owning a specified percentage (typically 5% or more) of IGT PLC’s securities. The failure of these beneficial owners to submit to such background checks and provide required disclosure could jeopardize the award of a lottery contract to IGT PLC or provide grounds for termination of an existing lottery contract. Additional restrictions are often imposed by international jurisdictions upon foreign corporations, such as IGT PLC, seeking to do business there.
Finally, sales generated by lottery games frequently are dependent upon decisions over which IGT PLC has no control made by lottery authorities with respect to the operation of these games, such as matters relating to the marketing and prize payout features of lottery games. Because IGT PLC is typically compensated in whole or in part based on a jurisdiction’s gross lottery sales, lower than anticipated sales due to these factors could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
The illegal gaming market could negatively affect IGT PLC’s business.
A significant threat for the entire gaming and betting industry arises from illegal activities. Such illegal activities may drain significant betting volumes away from the regulated industry. In particular, illegal gaming could take away a portion of the present players that are the focus of IGT PLC’s business. The loss of such players could have a material adverse effect on IGT PLC’s results of operations, business, financial condition or prospects.
Slow growth in the establishment of new gaming jurisdictions or the number of new casinos, declines in the rate of replacement of existing gaming machines and ownership changes and consolidation in the casino industry could limit or reduce IGT PLC’s future profits.
Demand for IGT PLC’s products is driven substantially by the establishment of new land-based and/or online gaming jurisdictions, the addition of new casinos or expansion of existing casinos within existing gaming jurisdictions and the replacement of existing gaming machines. The establishment or expansion of gaming in any
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jurisdiction, whether land-based or online, typically requires a public referendum or other legislative action. As a result, gaming continues to be the subject of public debate, and there are numerous active organizations that oppose gaming. Opposition to gaming could result in restrictions on, or even prohibitions of, gaming operations or the expansion of operations in any jurisdiction.
In addition, the construction of new casinos or expansion of existing casinos fluctuates with demand, general economic conditions and the availability of financing. Slow growth in the establishment of new gaming jurisdictions, delays in the opening of new or expanded casinos and declines in, or low levels of demand for, machine replacements could reduce the demand for IGT PLC’s products and IGT PLC’s future profits. Because a substantial portion of IGT PLC’s sales come from repeat customers, its business could be affected if one or more of IGT PLC’s customers consolidates with another entity that utilizes more of the products and services of IGT PLC’s competitors or that reduces spending on IGT PLC’s products or causes downward pricing pressures. Such consolidations could lead to order cancellations, a slowing in the rate of gaming machine replacements, or require IGT PLC’s current customers to switch to IGT PLC’s competitors’ products, any of which could negatively impact IGT PLC’s results of operations.
Demand for IGT PLC’s products and the level of play of IGT PLC’s products could be adversely affected by changes in player and operator preferences.
As a supplier of gaming machines, IGT PLC must offer themes and products that appeal to gaming operators and players. There is constant pressure to develop and market new game content and technologically innovative products. IGT PLC’s revenues are dependent on the earning power and life span of IGT PLC’s games. IGT PLC therefore faces continuous pressure to design and deploy new and successful game themes to maintain IGT PLC’s revenue and remain competitive. If IGT PLC is unable to anticipate or react in a timely manner to any significant changes in player preferences, such as a negative change in the level of acceptance of IGT PLC’s newest systems innovations or jackpot fatigue (
i.e
., declining play levels on smaller jackpots), the demand for and level of play of IGT PLC’s gaming products could decline. Further, IGT PLC’s products could suffer a loss of floor space to table games or competitors’ products, or operators may reduce revenue sharing arrangements, each of which would harm IGT PLC’s sales and financial results. In addition, general changes in consumer behavior, such as reduced travel activity or redirection of entertainment dollars to other venues, could result in reduced demand and reduced play levels for IGT PLC’s gaming products.
The gaming industry is intensely competitive. IGT PLC faces competition from a growing number of companies and, if IGT PLC is unable to compete effectively, IGT PLC’s business could be negatively impacted.
Competition is intense among gaming and systems providers, including manufacturers of electronic gaming equipment and systems products. Competition in IGT PLC’s industry is primarily based on the amount of profit IGT PLC’s products generate for its customers, together with cost savings, convenience, and other benefits. Additionally, IGT PLC competes on the basis of price, pricing models, and financing terms made available to customers, the appeal of game content and features to the end player, and the features and functionality of IGT PLC’s hardware and software products. IGT PLC’s competitors range from small, localized companies to large, multi-national corporations, several of which have substantial resources.
Competition in the gaming industry has accelerated due to the increasing number of providers, combined with the limited number of operators and jurisdictions in which they operate. In particular, IGT PLC has observed an influx of small gaming equipment manufacturers entering the market over the last few years. In addition, several casinos have recently ceased operations due to unfavorable economic conditions. This combination of a growing number of providers and a limited number of operators has resulted in an increased focus on price to value. To compete effectively, providers must offer innovative products, with increasing features and functionality benefiting the operators along with game content appealing to the end player, at prices and, in certain cases, financing terms that are attractive to operators.
Obtaining space and favorable placement on casino gaming floors is also a competitive factor in IGT PLC’s industry. In addition, the level of competition among equipment providers has increased significantly due to consolidation among casino operators and cutbacks in capital spending by casino operators resulting from the economic downturn and resulting decreased player spend.
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IGT PLC’s online social gaming and online real-money gaming operations are also subject to intense competition. In particular, the online social gaming casino operated by DoubleDown is relatively new and has lower barriers to entry. Several companies have launched social casino offerings, and new competitors are likely to continue to emerge, some of which may be operated by social gaming companies with a larger base of existing users, or by casino operators with more experience in operating a casino. If the products offered through IGT PLC’s online businesses do not maintain their popularity, or fail to grow in a manner that meets IGT PLC’s expectations, IGT PLC’s results of operations and financial condition could be harmed.
IGT PLC’s success in the competitive gaming industry depends in large part on its ability to develop and manage frequent introductions of innovative products.
The gaming industry is characterized by dynamic customer demand and technological advances, both for land-based and online gaming products. As a result, IGT PLC must continually introduce and successfully market new themes and technologies in order to remain competitive and effectively stimulate customer demand. The process of developing new products and systems is inherently complex and uncertain. It requires accurate anticipation of changing customer needs and end-user preferences as well as emerging technological trends. If IGT PLC’s competitors develop new game content and technologically innovative products and IGT PLC fails to keep pace, IGT PLC’s business could be adversely affected. To remain competitive, IGT PLC invests resources towards its research and development efforts to introduce new and innovative games with dynamic features to attract new customers and retain existing customers. If IGT PLC fails to accurately anticipate customer needs and end-user preferences through the development of new products and technologies, IGT PLC could lose business to its competitors, which would adversely affect IGT PLC’s results of operations and financial position.
IGT PLC intends to continue investing resources toward its research and development efforts. There is no assurance that IGT PLC’s investments in research and development will lead to successful new technologies or timely new products. IGT PLC invests heavily in product development in various disciplines: platform hardware, platform software, online services, content (game) design and casino software systems. Because IGT PLC’s newer products are generally more technologically sophisticated than those IGT PLC has produced in the past, IGT PLC must continually refine its design, development and delivery capabilities across all channels to meet the needs of IGT PLC’s product innovation. If IGT PLC cannot efficiently adapt its processes and infrastructure to meet the needs of its product innovations, IGT PLC’s business could be negatively impacted.
IGT PLC’s customers will accept a new game product only if it is likely to increase operator profits more than competitors’ products. The amount of operator profits primarily depends on consumer play levels, which are influenced by player demand for IGT PLC’s product. There is no certainty that IGT PLC’s new products will attain this market acceptance or that IGT PLC’s competitors will not more effectively anticipate or respond to changing customer preferences. In addition, any delays by IGT PLC in introducing new products could negatively impact IGT PLC’s operating results by providing an opportunity for IGT PLC’s competitors to introduce new products and gain market share ahead of IGT PLC.
IGT PLC’s online social gaming casino offering is conducted largely through Facebook and Apple’s iOS platform, and IGT PLC’s business and IGT PLC’s growth prospects would suffer if IGT PLC fails to maintain good relationships with Facebook and Apple, or if Facebook or Apple were to alter the terms of IGT PLC’s relationship.
DoubleDown Casino, which is IGT PLC’s online social gaming casino offering, operates largely through Facebook and Apple’s IOS platform. Consequently, IGT PLC’s operating platform, growth prospects and future revenues from this online offering are dependent on IGT PLC’s continued relationships with Facebook and Apple. While DoubleDown Casino has historically maintained good relationships with Facebook and Apple, IGT PLC’s online social gaming casino offering would suffer if IGT PLC is unable to continue these relationships in the future.
In addition, IGT PLC’s relationships with Facebook and Apple are not governed by a contract, but rather by Facebook and Apple’s standard terms and conditions for application developers. Facebook and Apple each modify these terms and conditions as well as their respective privacy policies from time to time, and any future changes, including any changes required as a result of government regulation, could have a material adverse impact on IGT PLC’s business. For example, if Facebook and Apple were to increase the fees they charge application
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developers, IGT PLC’s gross profit and operating income would suffer. Additionally, if users were to limit IGT PLC’s ability to use their personal information, if Facebook and Apple were to develop competitive offerings, either on its own or in cooperation with another competitor, or if Facebook and Apple were to alter their operating platform to IGT PLC’s detriment, IGT PLC’s growth prospects would be negatively impacted.
IGT PLC’s gaming machines and online gaming operations may experience losses due to technical problems or fraudulent activities.
IGT PLC’s success depends on IGT PLC’s ability to avoid, detect, replicate and correct software and hardware anomalies and fraudulent manipulation of its gaming machines, systems, and online offerings. IGT PLC incorporates security features into the design of its gaming machines and other systems, including those features responsible for IGT PLC’s online operations, which are designed to prevent it and its patrons from being defrauded. IGT PLC also monitors its software and hardware to avoid, detect and correct any technical errors. However, there can be no guarantee that IGT PLC’s security features or technical efforts will continue to be effective in the future. If IGT PLC’s security systems fail to prevent fraud or if IGT PLC experiences any significant technical difficulties, its operating results could be adversely affected. Additionally, if third parties breach IGT PLC’s security systems and defraud its patrons, or if IGT PLC’s hardware or software experiences any technical anomalies, the public may lose confidence in IGT PLC’s gaming products and online operations or it could become subject to legal claims by its customers or to investigation by gaming authorities.
IGT PLC’s gaming machines and online offerings have experienced anomalies and fraudulent manipulation in the past. Games and gaming machines may be replaced by casinos and other gaming machine operators if they do not perform according to expectations, or may be shut down by regulators. The occurrence of anomalies in, or fraudulent manipulation of, IGT PLC’s games, gaming machines, systems, or online games and systems may give rise to claims for lost revenues and related litigation by IGT PLC’s customers and may subject it to investigation or other action by gaming regulatory authorities, including suspension or revocation of IGT PLC’s gaming licenses, or other disciplinary action.
IGT PLC’s online casino offerings are part of a new and evolving industry, which presents significant uncertainty and business risks.
Online gaming, including social casino-style gaming, is a relatively new industry that continues to evolve. The success of this industry and IGT PLC’s online business will be affected by future developments in social networks, mobile platforms, legal or regulatory developments (such as the passage of new laws or regulations or the extension of existing laws or regulations to social casino-style gaming activities), taxation of gaming activities, data privacy and cybersecurity laws and regulations, and other factors that IGT PLC is unable to predict, and are beyond IGT PLC’s control. This environment can make it difficult to plan strategically and can provide opportunities for competitors to grow revenues at IGT PLC’s expense. Consequently, IGT PLC’s future operating results relating to its online offerings may be difficult to predict and IGT PLC cannot provide assurance that its online offerings will grow at the rates IGT PLC expects, or be successful in the long term.
In addition, IGT PLC uses social media platforms, such as Facebook, YouTube and Twitter, as marketing tools. These platforms allow individuals access to a broad audience of consumers and other interested persons. Negative commentary regarding IGT PLC or the products it sells may be posted on social media platforms and similar devices at any time and may be adverse to IGT PLC’s reputation or business. As laws and regulations rapidly evolve to govern the use of these platforms and mobile devices, the failure by IGT PLC, its employees or third parties acting at its direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact IGT PLC’s business, financial condition and results of operations or subject it to fines or other penalties.
Systems, network or telecommunications failures or cyber-attacks may disrupt IGT PLC’s business and have an adverse effect on its results of operations.
Any disruption in IGT PLC’s network or telecommunications services, or those of third parties that IGT PLC utilizes in its operations, could affect IGT PLC’s ability to operate its games or financial systems, which would result in reduced revenues and customer downtime. IGT PLC’s network and databases of business and customer
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information, including intellectual property, trade secrets, and other proprietary business information and those of third parties IGT PLC utilizes, are susceptible to outages due to fire, floods, power loss, break-ins, cyber-attacks, network penetration, data privacy or security breaches, denial of service attacks, and similar events, including inadvertent dissemination of information due to increased use of social media. Despite the implementation of network security measures and data protection safeguards by IGT PLC and third parties IGT PLC utilizes, including a disaster recovery strategy for back office systems, IGT PLC’s servers and computer resources, and those of third parties IGT PLC utilizes, are vulnerable to viruses, malicious software, hacking, break-ins or theft, third party security breaches, employee error or malfeasance, and other potential compromises. Disruptions from unauthorized access to or tampering with IGT PLC’s computer systems, or those of third parties IGT PLC utilizes, in any such event could result in a wide range of negative outcomes, including devaluation of IGT PLC’s intellectual property, increased expenditures on data security, and costly litigation, each of which could have a material adverse effect on IGT PLC’s business, reputation, operating results and financial condition.
Any disruption in IGT PLC’s network or telecommunications services could affect IGT PLC’s ability to operate its games or financial systems, which would result in reduced revenues and customer downtime. IGT PLC’s network and databases of business and customer information, including intellectual property, trade secrets, and other proprietary business information, are susceptible to outages due to fire, floods, power loss, break-ins, cyber-attacks, network penetration, data privacy or security breaches, denial of service attacks, and similar events, including inadvertent dissemination of information due to increased use of social media. Despite IGT PLC’s implementation of network security measures and data protection safeguards, including a disaster recovery strategy for back office systems, IGT PLC’s servers and computer resources are vulnerable to viruses, malicious software, hacking, break-ins or theft, third party security breaches, employee error or malfeasance, and other potential compromises. Disruptions from unauthorized access to or tampering with IGT PLC’s computer systems in any such event could result in a wide range of negative outcomes, including devaluation of IGT PLC’s intellectual property, increased expenditures on data security, and costly litigation, adverse publicity or regulatory action, each of which could have a material adverse effect on IGT PLC’s business, reputation, operating results and financial condition. In addition, sophisticated hardware and operating system software and applications that IGT PLC procures from third parties may contain defects in design or manufacture that could unexpectedly interfere with IGT PLC’s operations. The cost to alleviate security risks, defects in software and hardware and address any problems that occur could negatively impact IGT PLC’s sales, distribution and other critical functions, as well as its financial results.
A decline in and/or sustained low interest rates causes an increase in IGT PLC’s jackpot expense which could limit or reduce its future profits.
Changes in prime and/or treasury and agency interest rates during a given period cause fluctuations in jackpot expense largely due to the revaluation of future winner liabilities. When rates increase, jackpot liabilities are reduced as it costs less to fund the liability. However, when interest rates decline, the value of the liability (and related jackpot expense) increases because the cost to fund the liability increases. IGT PLC’s results may continue to be negatively impacted by a continued low interest rate environment or any or further decline in interest rates, resulting in increased jackpot expense and a reduction of IGT PLC’s investment income, which could limit or reduce IGT PLC’s future profits.
IGT PLC’s results of operations could be affected by natural events in the locations in which IGT PLC or its customers or suppliers operate.
IGT PLC, its customers, and its suppliers have operations in locations subject to natural occurrences such as severe weather and other geological events, including hurricanes, earthquakes, floods, or tsunamis that could disrupt operations. Any serious disruption at any of IGT PLC’s facilities or the facilities of its customers or suppliers due to a natural disaster could have a material adverse effect on IGT PLC’s revenues and increase IGT PLC’s costs and expenses. If there is a natural disaster or other serious disruption at any of IGT PLC’s facilities, it could impair IGT PLC’s ability to adequately supply its customers, cause a significant disruption to its operations, cause it to incur significant costs to relocate or reestablish these functions and negatively impact IGT PLC’s operating results. While IGT PLC insures against certain business interruption risks, such insurance may not adequately compensate IGT PLC for any losses incurred as a result of natural or other disasters. In addition, any natural disaster that results in a prolonged disruption to the operations of IGT PLC’s customers or suppliers may adversely affect IGT PLC’s business, results of operations or financial condition.
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New conflict minerals regulations may cause IGT PLC to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing IGT PLC’s products.
On August 22, 2012, the SEC adopted a new rule requiring disclosures of specific minerals, known as conflict minerals, that are necessary to the functionality or production of products manufactured, or contracted to be manufactured, by public companies. The new rule requires companies to verify and disclose whether or not such minerals originate from the Democratic Republic of Congo or an adjoining country. The first disclosure report, relating to the calendar year of 2013, was filed by IGT with the SEC on June 2, 2014.
There are costs associated with complying with these disclosure requirements, including the diligence to determine the sources of conflict minerals used in IGT PLC’s products and other potential changes to products, processes or sources of supply as a consequence of such verification activities. The implementation of this rule could adversely affect the sourcing, supply and pricing of materials used in IGT PLC’s products. The new rule could affect the availability in sufficient quantities and at competitive prices of certain minerals used in the manufacture of IGT PLC’s products, given that there may be only a limited number of ‘conflict free’ minerals, which could result in increased material and component costs and additional costs associated with changes in IGT PLC’s supply chain. IGT PLC may also face reputational challenges if it determines that certain of its products contain minerals not determined to be conflict free or if IGT PLC is unable to sufficiently verify the origins for all conflict minerals used in its products through the procedures IGT PLC may implement.
Changes in consumer preferences and behavior could affect the popularity of the gaming industry.
The popularity and acceptance of gaming is influenced by the prevailing social mores, and changes in social mores could result in reduced acceptance of gaming as a leisure activity. The Company’s future financial success will depend on the appeal of its gaming offerings to its customers and players and the acceptance of gaming generally. If IGT PLC is not able to anticipate and react to changes in consumer preferences and social mores, its competitive and financial position may be adversely affected. In addition, the Company’s future success will also depend on the success of the gaming industry as a whole in attracting and retaining players in the face of increased competition for players’ entertainment dollars. Gaming may lose popularity as new leisure activities arise or as other leisure activities become more popular. If the popularity of gaming declines for any reason, IGT PLC’s business, financial condition and results of operations may be adversely affected.
Negative perceptions and publicity surrounding the gaming industry could lead to increased gaming regulation.
From time to time, the gaming industry is exposed to negative publicity related to gaming behavior, gaming by minors, the presence of gaming machines in too many shops, risks related to online gaming and alleged association with money laundering. Publicity regarding problem gaming and other concerns with the gaming industry, even if not directly connected to IGT PLC, could adversely impact its business, results of operations and financial condition. For example, if the perception develops that the gaming industry is failing to address such concerns adequately, the resulting political pressure may result in the industry becoming subject to increased regulation. Such an increase in regulation could adversely impact our business, results of operations and financial condition.
RISK FACTORS RELATING TO THE COMPANY FOLLOWING COMPLETION OF THE MERGERS
The Company may not realize the cost savings, synergies and other benefits that the parties expect to achieve from the Mergers.
The combination of two independent companies is a complex, costly and time-consuming process. As a result, the Company is required to devote significant management attention and resources to integrating the business practices and operations of IGT PLC and IGT. The integration process may disrupt the business of either or both of the companies and, if implemented ineffectively, could preclude realization of the full benefits expected by IGT PLC, including $280 million of potential EBITDA synergies, driven by potential cost savings of $230 million and revenue synergies of $50 million, which we expect to achieve by fiscal year 2018. The failure of the Company to meet the challenges involved in successfully integrating the operations of IGT PLC and IGT or otherwise to realize
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the anticipated benefits of the Mergers could cause an interruption of the activities of the Company and could seriously harm its results of operations. In addition, the overall integration of the two companies may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of client relationships, and diversion of management’s attention, and may cause the Company’s stock price to decline. The difficulties of combining the operations of the companies include, among others:
·
managing a significantly larger company;
·
coordinating geographically separate organizations;
·
the potential diversion of management focus and resources from other strategic opportunities and from operational matters;
·
retaining existing customers and attracting new customers;
·
maintaining employee morale and retaining key management and other employees;
·
integrating two unique business cultures, which may prove to be incompatible;
·
the possibility of faulty assumptions underlying expectations regarding the integration process;
·
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
·
issues in integrating information technology, communications and other systems;
·
unanticipated changes in applicable laws and regulations;
·
managing tax costs or inefficiencies associated with integrating the operations of the Company; and
·
unforeseen expenses or delays associated with the Mergers.
Many of these factors are outside of the Company’s control and any one of them could result in increased costs, decreased revenues and diversion of management’s time and energy, which could materially impact the Company’s businesses, financial condition and results of operations. In addition, even if the operations of IGT PLC and IGT are fully integrated successfully, the Company may not realize the full benefits of the Mergers, including the synergies, cost savings or sales or growth opportunities that the Company expects. These benefits may not be achieved within the anticipated time frame, or at all.
Restrictive covenants in the Company’s debt instruments may restrict its ability to operate its business, and the Company’s failure to comply with these covenants could materially and adversely affect its financial condition and results of operations.
Any ratings downgrades could lead to enhanced covenant restrictions under the Company’s debt instruments, including in respect of dividend payments and share repurchases. In addition, future borrowings under circumstances in which the Company’s debt is rated below investment grade may contain further covenant restrictions that impose significant restrictions on the way the Company operates its business, including restrictions on its ability to:
·
make acquisitions or investments;
·
make loans or otherwise extend credit to others;
·
incur indebtedness;
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·
create security;
·
pay dividends;
·
sell or lease assets;
·
merge or consolidate with other companies; and
·
transact with affiliates.
Certain of the Company’s debt instruments will require it to comply with certain affirmative covenants and certain specified financial covenants and ratios.
These restrictions could affect its ability to operate its business and may limit its ability to react to market conditions or take advantage of potential business opportunities as they arise. For example, such restrictions could adversely affect the Company’s ability to finance its operations, make strategic acquisitions, investments or alliances, restructure its organization or finance its capital needs. Additionally, the Company’s ability to comply with these covenants and restrictions may be affected by events beyond its control such as prevailing economic, financial, regulatory and industry conditions. If it breaches any of these covenants (including financial covenants or ratios) or restrictions, the company could be in default under one or more of its debt instruments, which, if not cured or waived, could result in acceleration of the indebtedness under such agreements and cross defaults under its other debt instruments. Any such actions could result in the enforcement of its lenders’ security interests and/or force the Company into bankruptcy or liquidation, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’s inability to integrate recently acquired businesses or to successfully complete future acquisitions could limit its future growth or otherwise be disruptive to its ongoing business.
From time to time, the Company expects it will pursue acquisitions in support of its strategic goals. In connection with any such acquisitions, the Company could face significant challenges in managing and integrating its expanded or combined operations, including acquired assets, operations and personnel. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all or that IGT PLC will be able to obtain necessary financing or regulatory approvals to complete potential acquisitions. The Company’s ability to succeed in implementing its strategy will depend to some degree upon the ability of its management to identify, complete and successfully integrate commercially viable acquisitions. Acquisition transactions may disrupt the Company’s ongoing business and distract management from other responsibilities.
Future changes to U.S. and foreign tax laws could adversely affect IGT PLC.
IGT PLC believes that, under current law, it is treated as a foreign corporation for U.S. federal tax purposes. However, changes to the inversion rules in Section 7874 of the Internal Revenue Code or the U.S. Treasury Regulations promulgated thereunder or other guidance from the U.S. Internal Revenue Service (“IRS”) could adversely affect IGT PLC’s status as a foreign corporation for U.S. federal tax purposes or otherwise adversely affect IGT PLC for U.S. federal income tax purposes, and any such changes could have prospective or retroactive application to IGT PLC, its shareholders and affiliates. In addition, recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, and such legislation, if passed, could have an adverse effect on IGT PLC. Furthermore, the Department of the Treasury and the IRS provided notice in September 2014 that the agencies intend to issue regulations to reduce the tax benefit of or preclude entirely certain inversion transactions.
Moreover, the U.S. Congress, the Organization for Economic Co-operation and Development and other government agencies in jurisdictions where IGT PLC and its affiliates do business are focusing on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit shifting,” where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in the United States and other countries in which IGT PLC and its affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect IGT PLC and its affiliates.
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IGT PLC intends to operate so as to be treated exclusively as a resident of the U.K. for tax purposes, but the relevant tax authorities may treat it as also being a resident of another jurisdiction for tax purposes.
IGT PLC is a company incorporated in the U.K. Current United Kingdom (“U.K.”) law, the decisions of the U.K. courts and the published practice of Her Majesty’s Revenue & Customs, or HMRC, suggest that IGT PLC, a group holding company, is likely to be regarded as being a U.K. resident from incorporation and remaining so if, as IGT PLC intends that, (i) all major meetings of its board of directors and most routine meetings are held in the U.K. with a majority of directors present in the U.K. for those meetings; (ii) at those meetings there are full discussions of, and decisions are made regarding, the key strategic issues affecting IGT PLC and its subsidiaries; (iii) those meetings are properly minuted; (iv) at least some of the most senior employees of IGT PLC, together with supporting staff, are based in the U.K.; and (v) IGT PLC has permanent staffed office premises in the U.K. sufficient to discharge its functions as a holding company.
Even if IGT PLC is resident of the U.K. for tax purposes, as expected, it would nevertheless not be treated as a resident of the U.K. if (a) it were concurrently resident of another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the U.K. and (b) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction.
Residence of IGT PLC for Italian tax purposes is largely a question of fact based on all relevant circumstances. A rebuttable presumption of residence in Italy may apply under Article 73(5-bis) of the Italian Consolidated Tax Act, or CTA. However, IGT PLC intends to set up its management and organizational structure in such a manner that it should be regarded as resident in the U.K. from its incorporation for the purposes of the Italy-U.K. tax treaty. Because this analysis is highly factual and may depend on future changes in IGT PLC’s management and organizational structure, there can be no assurance regarding the final determination of IGT PLC’s tax residence. Should IGT PLC be treated as an Italian tax resident, it would be subject to taxation in Italy on its worldwide income and may be required to comply with withholding tax and/or reporting obligations provided under Italian tax law, which could result in additional costs and expenses.
Should Italian withholding taxes be imposed on future dividends or distributions with respect to IGT PLC ordinary shares, whether such withholding taxes are creditable against a tax liability to which a shareholder is otherwise subject depends on the laws of such shareholder’s jurisdiction and such shareholder’s particular circumstances. Shareholders are urged to consult their tax advisors in respect of the consequences of the potential imposition of Italian withholding taxes.
The loyalty voting structure to be implemented in connection with the Mergers may concentrate voting power in a small number of IGT PLC shareholders and such concentration may increase over time.
A relatively large proportion of the voting power of IGT PLC could be concentrated in a relatively small number of shareholders who would have significant influence over us. As of May 14, 2015, De Agostini S.p.A. and DeA Partecipazioni S.p.A. (collectively, “De Agostini”) had a voting interest in IGT PLC of approximately 52.1%. See “Item 7. Major Shareholders and Related Party Transactions” for additional information.
In addition, IGT PLC shareholders that maintain their ownership of IGT PLC ordinary shares continuously for at least three years will be entitled, upon election, to direct the voting rights in respect of one special voting share per ordinary share held for such period, provided that such shareholders meet the conditions described in “Item 10—B. Memorandum and Articles of Association—Loyalty Plan” beginning on page 144. If IGT PLC shareholders maintaining ownership of a significant number of IGT PLC ordinary shares for an uninterrupted period of at least three years elect to receive the right to direct the exercise of the voting rights attaching to special voting shares, it is possible that a relatively large proportion of the voting power of IGT PLC could be further concentrated in a relatively small number of shareholders who would have significant influence over IGT PLC.
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The loyalty voting structure may prevent or frustrate attempts by IGT PLC shareholders to change IGT PLC’s management and hinder efforts to acquire a controlling interest in IGT PLC, and the IGT PLC ordinary share price may be lower as a result.
The provisions of the IGT PLC Articles establishing the loyalty voting structure may make it more difficult for a third party to acquire, or attempt to acquire, control of IGT PLC, even if a change of control were considered favorably by shareholders holding a majority of IGT PLC ordinary shares. As a result of the loyalty voting structure, it is possible that a relatively large proportion of the voting power of IGT PLC could be concentrated in a relatively small number of holders who would have significant influence over IGT PLC. Such shareholders participating in the loyalty voting structure could reduce the likelihood of change of control transactions that may otherwise benefit holders of IGT PLC ordinary shares.
The loyalty voting structure may also prevent or discourage shareholders’ initiatives aimed at changes in IGT PLC’s management.
Tax consequences of the loyalty voting structure are uncertain.
No statutory, judicial or administrative authority has provided public guidance on how the receipt, ownership, or loss of the entitlement to instruct the
nominee appointed by IGT PLC (the “Nominee”), which is currently Computershare Company Nominees Limited,
on how to vote in respect of special voting shares and, as a result, the tax consequences are uncertain.
The fair market value of the IGT PLC special voting shares, which may be relevant to the tax consequences, is a factual determination and is not governed by any guidance that directly addresses such a situation. Because, among other things, (i) the special voting shares are not transferrable (other than in very limited circumstances as provided for in the loyalty voting structure), (ii) on a return of capital of IGT PLC on a winding up or otherwise, the holders of the special voting shares will only be entitled to receive out of IGT PLC assets available for distribution to its shareholders, in aggregate, $1, and (iii) loss of the entitlement to instruct the Nominee on how to vote in respect of special voting shares will occur for nil consideration, IGT PLC believes and intends to take the position that the value of each special voting share is minimal. However, the relevant tax authorities could assert that the value of the special voting shares as determined by IGT PLC is incorrect. The tax treatment of the loyalty voting structure is unclear and shareholders are urged to consult their tax advisors as to the tax consequences of receipt, ownership and loss of the entitlement to instruct the Nominee on how to vote in respect of special voting shares. See “Material United States Federal Income Tax Considerations,” “Material U.K. Tax Considerations” and “Material Italian Tax Considerations” for a further discussion.
The Company is exposed to foreign currency exchange risk.
The Company transacts business in numerous countries around the world and expects that a significant portion of its business will continue to take place in international markets. IGT PLC will prepare its consolidated financial statements in its functional currency, while the financial statements of each of its subsidiaries will be prepared in the functional currency of that entity. Accordingly, fluctuations in the exchange rate of the functional currencies of the Company’s foreign currency entities against the functional currency of IGT PLC will impact its results of operations and financial condition. As such, it is expected that the Company’s revenues and earnings will continue to be exposed to the risks that may arise from fluctuations in foreign currency exchange rates, which could have a material adverse effect on IGT PLC’s business, results of operation or financial condition.
Item 4.
Information on the Company
A.
History and Development of the Company
IGT PLC is incorporated in, and organized as a public limited company under, the laws of England and Wales. IGT PLC’s principal office is located at 11 Old Jewry, 6th Floor, London EC2R 8DU, United Kingdom, telephone number +44 (0) 203 131 0300. The Company’s agent for service in the United States is CSC Services Of Nevada, Inc., 2215-B Renaissance Drive, Las Vegas, NV 89119 (telephone number: +1 518 433 4740) and the company’s registered agent in the U.K. is Elian Corporate Services (UK) Limited (formerly Ogier Corporate Services (UK) Ltd.), whose address is 11 Old Jewry, 6th Floor, London, EC2R 8DU, United Kingdom, and its telephone number is +44 (0) 207 160 5000.
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IGT PLC was formed as a business combination shell company on July 11, 2014 under the name “Georgia Worldwide Limited.” On September 16, 2014, it changed its legal name to “Georgia Worldwide PLC,” and on February 26, 2015, it changed its legal name to “International Game Technology PLC.” IGT PLC did not conduct any material activities other than those incident to its formation and the matters contemplated by the Merger Agreement, such as the formation of Georgia Worldwide Corporation, the making of certain required securities law filings and the preparation of the proxy statement/prospectus filed in connection with the Mergers.
Acquisition of International Game Technology
The Mergers
IGT PLC is the successor of GTECH, an Italian corporation (
società per azioni
), and the parent of IGT, a Nevada corporation.
On July 15, 2014, the Company, GTECH, GTECH Corporation (solely with respect to Section 5.02(a) and Article VIII), Sub and IGT signed the Merger Agreement, which was subsequently amended. On November 4, 2014, the extraordinary general shareholders’ meeting of GTECH approved the Holdco Merger, and on February 10, 2015, the special shareholders’ meeting of International Game Technology approved the Subsidiary Merger. On April 7, 2015, GTECH merged with and into the Company, and IGT merged with and into Sub, with IGT surviving the Subsidiary Merger, all pursuant to the Merger Agreement. The objective of the Mergers was to combine GTECH’s and IGT’s businesses.
In connection with the Holdco Merger, GTECH shareholders received one newly issued ordinary share in IGT PLC (having a nominal value of $0.10 each) for each ordinary share held in GTECH (having a nominal value of €1.00 each). In connection with the Subsidiary Merger, each IGT common share (having a par value of $0.00015625 each) was converted into the right to receive (1) $14.3396 in cash without interest and (2) 0.1819 ordinary shares, nominal value $0.10 per share, of IGT PLC (the “Exchange Ratio”). The final per share merger consideration payable to IGT shareholders was determined pursuant to the process outlined in the Merger Agreement, which included the calculation of the “Gold Share Trading Price” of $20.2379, wherein an average U.S. dollar converted volume-weighted average price for GTECH shares was calculated from ten trading days selected randomly from a 20-trading day window. The total share merger consideration payable to IGT shareholders amounted to €3.3 billion ($3.6 billion) and 45 million IGT PLC shares.
In connection with the closing of the Mergers, IGT PLC issued 198,526,804 ordinary shares to GTECH and IGT shareholders on the basis of the established exchange ratios described above. On April 7, 2015, IGT PLC ordinary shares began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “IGT.” For information on our share capital, see “Item 10. Additional Information—B. Memorandum and Articles of Association.”
Settlement of Cash Exit Rights
Under Italian law, GTECH shareholders who did not approve the Holdco Merger were entitled to exercise cash exit rights (“
diritto di recesso
”). On April 2, 2015, the 19,796,852 GTECH shares for which entitled GTECH shareholders exercised cash exit rights in relation to the Holdco Merger were settled at the cash exit price of €19.174 per share. Holders of the 62,607 GTECH cash exit shares that had been purchased in a pre-emptive offer pursuant to Article 2437-
quater
of the Italian Civil Code received ordinary shares of IGT PLC on the basis of the Exchange Ratio, and an interim dividend equal to €0.75. The residual 19,734,245 cash exit shares were purchased by GTECH pursuant to Article 2437-
quater
, para. 5, of the Italian Civil Code for a total cash consideration of €378.4 million and cancelled in the Holdco Merger, together with the 2,183,503 treasury shares held at that time by GTECH.
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Dividend Payment
On January 21, 2015, we declared an interim dividend of €0.75 per share, resulting in an aggregate of €129.6 million, of which €114.7 million was paid.
Other Transactions
On March 25, 2014, GTECH acquired from UniCredit S.p.A. (“UniCredit”), through the exercise of a call option, the entire 12.5% interest held by UniCredit in SW Holding S.p.A. (“SW”) for cash consideration of €72.2 million. In 2010, through its investment in SW, UniCredit had made an indirect equity investment in Lotterie Nazionali S.r.l. (“LN”), a majority-owned GTECH subsidiary that holds an instant ticket concession license in Italy. GTECH’s direct and indirect ownership in LN has increased from 51.5% to 64% as a result of the buyout of UniCredit’s interest. Following the completion of this buyout, on December 1, 2014, and effective from December 3, 2014, SW was merged with and into GTECH.
In April 2014, GTECH’s subsidiary Big Easy S.r.l. (“Big Easy”), a machine operator company, signed a contract with Gioco Better S.r.l. to acquire gaming halls where AWPs and VLTs managed and operated by Lottomatica Videolot Rete S.p.A. (“Videolot”), GTECH’s wholly owned subsidiary, are installed.
In May 2014, GTECH completed the acquisition of the share capital of Probability plc, a U.K.-based, AIM-listed mobile gaming solutions company.
In June 2014, Siderbet S.r.l merged into Lottomatica Scommesse S.r.l.
In July 2014, GTECH’s subsidiary, LIS S.p.A. executed an ongoing business concern transfer agreement whereby it transferred its sports and events ticketing business (“LisTicket”) to the international operator TicketOne, CTS Eventim Group. Under the agreement, LIS S.p.A. retains its role as service provider.
In July 2014, Videolot, through its wholly owned subsidiary Optima Gaming Service S.r.l. (“Optima”), acquired, as part of a project known as “downstream integration,” a 36-month lease of Royal S.r.l.’s going concern to operate as a retail operator in the Italian gaming machines market; the lease agreement includes a call option to purchase the going concern from Royal.
On November 26, 2014, effective from December 1, 2014, Totobit Informatica Software e Sistemi S.p.A. (“Totobit”), a wholly owned subsidiary of LIS S.p.A. whose sole activity consists of selling mobile top-ups and stamp duties at bars and newspaper shops, was merged with and into LIS S.p.A.
On December 17, 2014, GTECH transferred to its wholly owned Italian subsidiary, Lottomatica Holding S.r.l., its entire holdings in Lottomatica Italia Servizi S.p.A. (100%), Sed Multitel S.r.l. (100%), and Lottomatica Scommesse S.r.l. (100%), by way of in-kind contributions, as well as Lotterie Nazionali S.r.l. (64%) and Lottomatica Videolot Rete S.p.A. (100%), by way of sale and purchase agreements, effective December 31, 2014. The capital increases of Lottomatica Holding S.r.l. serving the in-kind contributions and the stock purchases consideration amounted to €908 million and €1,442 million, respectively.
Effective April 1, 2015, GTECH contributed in-kind its ongoing business related to the Lotto concession to its wholly owned subsidiary Lottomatica S.p.A., by way of increasing Lottomatica S.p.A.’s capital by €378 million. Thereafter, effective April 3, 2015, GTECH contributed in-kind its wholly owned subsidiary Lottomatica S.p.A. to its wholly owned subsidiary Lottomatica Holding S.r.l. by increasing Lottomatica Holding S.r.l.’s capital by €811 million.
In April 2015, Invest Games S.A., a wholly owned subsidiary of IGT PLC organized under the laws of the Grand Duchy of Luxembourg, was converted to Invest Games S.á.r.l, a private limited liability company (“Invest Games”). IGT then purchased all of the shares of Invest Games by way of an intercompany loan agreement and promissory note.
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Other than as described above, including in relation to the Mergers (see “—Acquisition of International Game Technology”), there have not been any public takeover offers by third parties in respect of IGT PLC’s shares or by IGT PLC in respect of other companies’ shares which have occurred during the last current financial years.
Capital Expenditures
Capital expenditures are defined as investments for the period in systems, equipment and other assets related to contracts, property, plant and equipment, intangible assets and investments in associates as shown in our cash flow statement. For a description, including the amount invested, of the Company’s principal capital expenditures and divestitures (including interests in other companies) for the years ended December 31, 2014, 2013 and 2012, see “Item 5—B. Liquidity and Capital Resources—Capital Expenditures.” The tables below sets forth a breakdown of total capital expenditures for the three months ended on March 31, 2015:
|
|
|
For the Three Months Ended March 31, 2015
|
|
|
(
€ thousands)
|
|
Systems,
equipment and
other assets
related to
contracts
|
|
Property, plant
and equipment
|
|
Intangible
Assets
|
|
Investments in
Associates
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
34,249
|
|
71
|
|
—
|
|
—
|
|
|
Italy
|
|
9,451
|
|
—
|
|
2,901
|
|
—
|
|
|
International
|
|
14,512
|
|
4
|
|
—
|
|
—
|
|
|
|
|
58,212
|
|
75
|
|
2,901
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Products and Services
|
|
484
|
|
845
|
|
1,536
|
|
—
|
|
|
Corporate
|
|
91
|
|
598
|
|
—
|
|
—
|
|
|
|
|
58,787
|
|
1,518
|
|
4,437
|
|
—
|
|
Americas segment
Investments in systems, equipment and other assets related to contracts of €34.2 million principally for systems and equipment in Mexico, Tennessee, Missouri, New Jersey, Pennsylvania and Texas.
Italy segment
Investments in systems, equipment and other assets related to contracts of €9.5 million principally relate to spending to expand systems in machine gaming, sports betting and lotto. Investments in intangible assets of €2.9 million principally relate to software and concessions and licenses.
International segment
Investments in systems, equipment and other assets related to contracts of €14.5 million principally for systems and equipment in Greece, the Czech Republic and China.
B.
Business Overview
The following description refers to the business and operations of GTECH S.p.A., as predecessor to IGT PLC, for the financial years ended December 31, 2014, 2013 and 2012. All references to IGT PLC in this section refer to GTECH as a standalone group, except where the context otherwise requires.
IGT PLC operates and provides a full range of services and leading-edge technology products across all gaming markets, including lotteries, machine gaming, sports betting and interactive gaming. IGT PLC also provides high-volume processing of commercial transactions. IGT PLC’s state-of-the-art information technology platforms and software enable distribution through land-based systems, Internet and mobile devices. IGT PLC provides business-to-consumer (“B2C”) and business-to-business (“B2B”) products and services to customers in approximately 100 countries worldwide on six continents and had 8,811 employees as of December 31, 2014.
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IGT PLC is organized into three global geographic regions—Italy, Americas and International—and each operating segment is supported by a central products and services organization. Each of these segments offers lottery, machine gaming, sports betting, commercial services and interactive gaming.
Revenues for IGT PLC by segment for the years ended December 31, 2014, 2013 and 2012 were as follows:
|
|
|
Year Ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Italy
|
|
1,745,180
|
|
1,737,090
|
|
1,815,931
|
|
|
Americas
|
|
988,703
|
|
994,085
|
|
872,429
|
|
|
International
|
|
335,222
|
|
331,117
|
|
386,969
|
|
|
Purchase Accounting(1)
|
|
548
|
|
542
|
|
356
|
|
|
Total Revenues
|
|
3,069,653
|
|
3,062,834
|
|
3,075,685
|
|
(1)
Purchase accounting represents the amortization of certain intangible assets in connection with acquired companies.
Products and Services
Lottery
IGT PLC operates or acts in a growing number of jurisdictions as the provider of lottery management services and is responsible for the day-to-day operations of the lottery and its core functions. In this respect, IGT PLC leverages its years of experience accumulated from being the sole concessionaire for the Italian Lotto game, the world’s largest lottery, which includes management of all of the activities along the lottery value chain and operation of both online lotteries and games and off-line lotteries. IGT PLC also operates an exclusive concession for instant lotteries in Italy, where instant tickets are available for sale at approximately 67,000 points of sale.
IGT PLC supplies a unique set of solutions to more than 100 customers worldwide, including 38 of the 45 U.S. state lotteries. IGT PLC designs, sells and operates a complete suite of lottery-enabled point-of-sale terminals that are electronically linked with a centralized transaction processing system that reconciles lottery funds between the retailer, where a transaction is enabled, and the lottery authority. Among those solutions, IGT PLC provides and operates highly secure, online lottery transaction processing systems which are capable of processing over 500,000 transactions per minute. IGT PLC provides more than 400,000 point-of-sale devices to lottery customers and lotteries that IGT PLC operates.
IGT PLC is also a major instant ticket game supplier. As an end-to-end provider of instant tickets and related services, IGT PLC specializes in the fast delivery of high-quality instant ticket games and provides printing services, instant ticket marketing plans and graphic design, programming, production, packaging, shipping and delivery services.
IGT PLC has developed and continues to develop new lottery games, licenses new game brands from third parties and installs a range of new lottery distribution devices, all of which are designed to maintain a strong level of same store sales growth for IGT PLC customers. In connection with its delivery of lottery services, IGT PLC actively advises its customers on growth strategies.
IGT PLC also provides marketing services, in particular retail optimization and branding. IGT PLC employs marketing and sales staff who are directly responsible for developing and helping execute marketing programs that grow sales of lottery games.
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IGT PLC also works closely with lottery customers and retailers to help retailers sell lottery games more effectively. These programs include product merchandising and display recommendations, selection of appropriate lottery product mix for each location, and account reviews to plan lottery sales growth strategy.
For the years ended December 31, 2014, 2013 and 2012, IGT PLC generated lottery revenues of €1.751 billion,€1.696 billion and €1.693 billion, or approximately 57.0%, 55.4% and 55.0% of total revenues, respectively.
Lottery Contracts
IGT PLC’s lottery services are provided through concession or operator contracts, lottery management services contracts, facilities management contracts, and product sales contracts.
Concession or Operator Contracts; Lottery Management Services Contracts.
A portion of IGT PLC’s revenues, primarily from its Italy segment, is derived from operating contracts. Under operating contracts, IGT PLC manages all the activities along the lottery value chain, including collecting wagers, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials for the games. The service revenues IGT PLC earns in return for operating these concessions are based on a percentage of wagers. For certain concessions this percentage decreases as the total wagers increase during an annual period, while for others the fee is fixed based on the percentage of wagers.
Facilities Management Contracts.
IGT PLC’s facilities management contracts typically require IGT PLC to construct, install and operate the lottery system for an initial term, which is typically five to ten years. IGT PLC’s facilities management contracts usually contain options permitting the lottery authority to extend the contract under the same terms and conditions, or similar or predetermined terms and conditions, for additional periods, generally ranging from one to five years. IGT PLC’s customers also occasionally renegotiate extensions on different terms and conditions.
IGT PLC’s revenues under facilities management contracts are generally service fees which are paid to IGT PLC directly from the lottery authority based on a percentage of such lottery’s gross online and instant ticket sales. The level of lottery ticket sales within a given jurisdiction is determined by many factors, including population density, the types of games played and the games’ design, the number of terminals, the size and frequency of prizes, the nature of the lottery’s marketing efforts and the length of time the online lottery system has been in operation.
Under a number of IGT PLC’s facilities management contracts, in addition to constructing, installing and operating the lottery systems, IGT PLC provides a wide range of support services and equipment for the lottery’s instant ticket games, such as marketing, distribution and automation of validation, inventory and accounting systems, for which IGT PLC receives fees based upon a percentage of the sales of the instant ticket games. In limited instances, IGT PLC provides instant tickets and online lottery systems and services under the same facilities management contract.
Product Sales Contracts.
Under product sales contracts, IGT PLC constructs, sells, delivers and installs turnkey lottery systems or lottery equipment and licenses the software for a fixed price, and the lottery authority subsequently operates the lottery system or equipment. IGT PLC also sells additional terminals and central computers to expand existing systems and/or replace existing equipment under product sales contracts and will also provide ancillary maintenance and support services related to the systems, equipment sold and software licensed.
Machine Gaming
IGT PLC designs, develops, manufactures and provides top performing cabinets, games, systems and software to customers in legal gaming markets throughout the world under fixed fee, participation and product sales contracts. IGT PLC provides video lottery terminals (“VLTs”), VLT central systems and VLT games to government customers in North America and Europe and provides VLTs and games to operators in the United States. IGT PLC also provides video and traditional mechanical reel slot machines and casino systems to casino operators in Europe, Asia and the Americas and to Native American casinos in the United States. In addition, IGT PLC provides amusement with prize (“AWP”) machines and games to licensed operators in Europe.
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Table of Contents
IGT PLC’s machine gaming terminals and systems serve customers on five continents, with IGT PLC holding more than 400 gaming licenses, including from the Nevada Gaming Commission.
IGT PLC is a platinum member of the Gaming Standards Association™ and supports open industry standards such as Game to System® (G2S®) and System to System® (S2S®) protocols.
For the years ended December 31, 2014, 2013 and 2012, IGT PLC generated machine gaming revenues of €837.1 million, €902.2 million and €913.4 million, or approximately 27.3%, 29.4% and 29.7% of total revenues, respectively.
VLT and Central Systems
IGT PLC offers VLTs and a complete end-to-end solution comprised of the INTELLIGEN™ central system, gaming terminals, the sensys EP™ development platform, and content created using IGT PLC’s proprietary game development process. IGT PLC also provides a dedicated client service team to each of its VLT and VLT systems customers.
Commercial Casino, Cabinets, Games and Systems
IGT PLC’s growth continues to be strong in the North American commercial casino segment with the True 3D™ cabinet. Recurring revenue products, including games under the PopCap® license (Plants vs. Zombies™ Gargantuar, Plants vs. Zombies™ Backyard Showdown, Zuma™, and Bejeweled®) and DEAL OR NO DEAL™ licensed brands have contributed to IGT PLC’s recent growth in the casino market.
IGT PLC also offers a comprehensive range of GALAXIS™ system modules for all areas of casino management, JP2go™, a standalone, turnkey jackpot system developed to boost machine play, and SYSTEM2go™, an all-inclusive, packaged slot system with accounting, remote monitoring, a jackpot system and advanced cashless and player tracking features.
The Italian AWP market, also known as Comma 6a, is the largest AWP market in Europe with approximately 400,000 machines in more than 80,000 bar and arcade gaming locations. Since IGT PLC entered the Italian AWP market in 2010, it has become the leading content provider.
Sports Betting
IGT PLC operates an expansive land-based betting network in Italy through its “Better” and “Totosi” brands. IGT PLC also offers a sports betting platform comprised of a core engine and associated support modules which serves leading lotteries and commercial operators around the world. IGT PLC offers trading services, fully managed partnerships, or “software only” technical solutions to create a complete one-stop solution or to integrate new functionality to existing operations. IGT PLC’s modular approach enables IGT PLC to fit the components to the customers’ architectures and create a unique product. IGT PLC also provides secure retail betting solutions, point-of-sale display systems, call center facilities, Internet betting technology, and fixed odds or pool betting options. Through sports betting point-of-sale locations, IGT PLC also offers directly to customers betting on sporting events, motor sports and non-sporting events such as those involving entertainment, music, culture and current affairs.
For the years ended December 31, 2014, 2013 and 2012, IGT PLC generated sports betting revenues of €195.5 million, €170.5 million and €152.3 million, or approximately 6.4%, 5.6% and 5.0% of total revenues, respectively.
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Table of Contents
Trading Services
IGT PLC provides “trading services,” including odds-making and risk management services, which allow IGT PLC’s customers to better manage their betting business profitably and balance wager liabilities on fixed-odds betting by coordinating the wagers received among its customers through IGT PLC’s business-to-business platform.
Using IGT PLC’s centralized trading service infrastructure, assisted by IGT PLC’s own advanced mathematical models and derivative engines, and supported by integration to the industry’s most prominent feed services, IGT PLC’s trading department offers a full suite of betting products, both pre-live and in-running. IGT PLC’s trading department is capable of offering more than 70,000 pre-live events and more than 30,000 in-running events annually. IGT PLC’s trading department can customize the offer and odds according to a customer’s needs and market positioning.
IGT PLC can take full responsibility for the trading operations, and also provide one-off or ongoing support to an existing trading team, depending on customers’ requirements and preferences. If required, IGT PLC is able to provide guaranteed payout levels. This unique feature allows IGT PLC to position its service so that customers can run a risk-free operation.
Content Management and Marketing Support
IGT PLC’s content team provides sports-related website content, such as banners, live score consoles, specialized coupons and promotions, news, and articles, which optimizes the look and feel of a betting offering in order to maximize impact. IGT PLC leverages its global experiences and merges that experience with local market needs to create solutions that are fully tailored to the operator.
Commercial Services
IGT PLC develops innovative technology to enable lotteries to offer commercial services over their existing lottery infrastructure or over standalone networks separate from the lottery. Such commercial services include high-volume transaction processing of commercial transactions such as prepaid cellular telephone recharges, prepaid mobile data, prepaid electricity and other utility bill payments, credit card transactions, social security contributions and payments and prepaid cards. In addition, IGT PLC provides collection services and processing and network services on behalf of third parties, and issues electronic money through immediate conversion of funds received, as well as other related activities.
IGT PLC is the leading provider of commercial services in Italy and the leading provider of electronic bill payment services in Poland. GTECH offers four types of prepaid cards, two of which are co-branded with Paypal and Pokerstars. Additionally, in Latin America and the Caribbean, through its brands Sencillito in Chile and VIA in Colombia and Trinidad & Tobago, IGT PLC offers a range of bill payment and eRecharge services (electronic vouchers and electronic top-ups). Independent of its VIA and Sencillito brands, IGT PLC offers eRecharge services in eight other Caribbean countries.
For the years ended December 31, 2014 and December 31, 2013, IGT PLC generated Commercial Service revenues of €182.0 million and €189.3 million, or approximately 5.9% and 6.2% of total revenues, in both periods, respectively.
Interactive Gaming
Interactive gaming (or iGaming) enables game play via the Internet for real money or for fun. Interactive games include poker, casino games, bingo, iLottery, sports betting, horseracing and skill-based games.
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Table of Contents
IGT PLC offers comprehensive solutions for the interactive gaming market, providing a full suite of award winning products and services for Internet gaming. IGT PLC designs, manufactures, and distributes Internet poker, bingo, table games, slots, iLottery and Gaming Management Systems (“GMSs”). All of IGT PLC’s Internet games are customizable. Additionally, IGT PLC provides player services, including marketing, portal, player acquisition, Customer Relationship Management (CRM), VIP, player support, payment solutions, fraud and collusion protection, responsible gaming, game management, migration, and trading services. IGT PLC holds more than 24 interactive gaming licenses worldwide. IGT PLC also acts as a mobile casino operator through its subsidiary, Probability plc.
IGT PLC’s diverse interactive customer base in iGaming includes Lottomatica (Italy), Veikkaus (Finland), LNB (Belgium), Polla de Chilena (Chile), and Szerencsejáték (SRZT, Hungary), the Illinois Lottery and the Georgia Lottery.
For the years ended December 31, 2014 and December 31, 2013, IGT PLC generated interactive gaming revenues of €103.4 million and €104.0 million, or approximately 3.4% and 3.4% of total revenues, respectively.
Interactive Products
Poker.
IGT PLC’s poker product is the industry’s first fully compliant Mac poker product, making it 100% compatible with all leading platforms and devices. Offering a player-friendly interface and sophisticated graphics, IGT PLC’s poker product is scalable and flexible, and tailored to the specific needs of customers and their player base. The platform is modern and able to address the changing dynamics of online poker.
Online Casino.
IGT PLC’s online casino products include a wide selection of table and slot games with single, multiplayer and tournament play. IGT PLC casino content includes branded titles and select third party content. Available in download, instant, or mobile formats and as play-for-fun or real-money solutions, casino games are available anytime, anywhere, and on any device.
Bingo.
IGT PLC’s bingo solution includes a social and interactive Bingo Live offering, available in four countries and in four languages, with the content adjusted to suit specific regions. IGT PLC Bingo is flexible and scalable to meet regulatory requirements and all levels of certification and testing, and is offered as play-for-fun or a real-money solution across multiple channels and currencies.
iLottery.
IGT PLC’s complete suite of iLottery solutions, services, and professional expertise allows lotteries to fully engage their players on any interactive channel in regulated markets. Existing lottery game portfolios are extended to the interactive channel to provide a spectrum of engaging content.
IGT PLC offers a vast library of mobile content available on any device. IGT PLC’s mobile portfolio includes poker, casino, bingo, lottery, and sports betting, all with user intuitive touch controls, bonus features and HD graphics.
Systems
iGaming.
IGT PLC’s iGaming systems cover every vertical from a 360-degree view of the player, web design and an engine to accelerate more game content to customers’ websites.
IGT PLC’s iGaming systems offering includes:
·
Player Account Management, the master of player profiles and player accounts, which pulls all player, reward, and financial activity together in one place and provides a one-stop integrated CRM system that allows for advanced marketing and analytical capabilities.
·
GMS Light, which is the integration layer of the IGT PLC Player Account Management system and includes game integration and network layers. GMS Light integrates with third party player account management systems, third party game engines, and regulatory systems.
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Remote Games Server.
IGT PLC also offers a Remote Games Server, which is a fast gateway to extensive content. For customers operating their own or third party systems, IGT PLC is able to provide a simple plug-and-play approach to all of IGT PLC’s and IGT PLC’s premium suppliers’ content.
IGT PLC OnePay.
IGT PLC OnePay is natively integrated within IGT PLC Player Account Management. It is a highly reliable and secure payment system that allows for a wide range of different payment methods across continents.
IGT PLC Governance.
IGT PLC Governance is a dynamic web application framework providing cross-cutting functionalities such as authentication and authorization. Within this framework, the user interfaces for customer service, management workflows, module administration and third party integrations are uniformly managed.
Services
IGT PLC offers a complete range of services to support iGaming customers. IGT PLC services are aimed at helping lower the cost of player acquisition and increasing lifetime player value. IGT PLC’s player service centers are located worldwide to serve players 24 hours a day, 365 days a year.
IGT PLC Marketing Intelligence Services manages the player lifecycle to maximize player yield while ensuring the player is entertained and plays responsibly.
Results by Business Activity
Revenues for IGT PLC by business activity for the years ended December 31, 2014, 2013 and 2012 were as follows:
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Lottery
|
|
1,751,097
|
|
1,696,283
|
|
1,692,956
|
|
|
Machine Gaming
|
|
837,051
|
|
902,223
|
|
913,393
|
|
|
Sports Betting
|
|
195,488
|
|
170,529
|
|
152,276
|
|
|
Commercial Services
|
|
182,047
|
|
189,252
|
|
193,743
|
|
|
Interactive Gaming
|
|
103,422
|
|
104,005
|
|
122,961
|
|
|
Purchase Accounting(1)
|
|
548
|
|
542
|
|
356
|
|
|
Total Revenues
|
|
3,069,653
|
|
3,062,834
|
|
3,075,685
|
|
(1)
Purchase accounting represents the amortization of certain intangible assets in connection with acquired companies.
Business Segments
Italy
The Italy segment operates and provides a full range of business-to-customer (“B2C”) gaming products including all five product lines of IGT PLC: Lottery, Machine Gaming, Sports Betting, Commercial Services and Interactive Gaming. For the years ended December 31, 2014 2013 and 2012, the Italy segment generated revenues of €1.7 billion, €1.7 billion and €1.8 billion, respectively.
In this segment, IGT PLC holds the following main concessions:
·
An exclusive concession for the activation and operation of the network for the Lotto game, which expires in June 2016. The indicated expiration date is subject to a dispute with the ADM, the governmental authority responsible for regulating and supervising gaming in Italy, as described in “Item 3—D. Risk Factors—A significant portion of IGT PLC’s total consolidated revenues is derived from government concessions in Italy including the Lotto and instant lottery concessions” beginning on page 4.
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·
An exclusive concession for the operation of the National Lotteries for instant lotteries from October 1, 2010 to September 30, 2019, held by Lotterie Nazionali s.r.l., a 64%-owned subsidiary of IGT PLC.
·
A non-exclusive concession held by Videolot, a direct wholly owned subsidiary of IGT PLC, for the activation and operation of the network for the telematic operation of legalized gaming machines, including AWP and up to 11,261 VLT machines, which commenced in March 2013 and will expire in March 2022.
·
Non-exclusive, non-renewable concessions held by Lottomatica Scommesse (which is a direct wholly owned subsidiary of IGT PLC), including:
·
for (1) the activation and operation of the network for sports gaming, toto (pari-mutuel) betting and sports betting, operated through physical and interactive channels, and (2) the operation of skill games through interactive channels. This concession commenced in March 2007 and expires in June 2016;
·
for the activation and operation of horse gaming, toto betting and horse betting, operated through physical and interactive channels. This concession commenced in March 2007 and will expire in June 2016;
·
for the activation and operation of horse gaming, toto betting and horse betting. This concession commenced in August 2009 and expires in June 2016;
·
for the activation and operation of the network for sports and horse gaming, toto betting, sports and horse betting and virtual betting. This concession commenced in July 2013 and expires in June 2016; and
·
for the activation and operation of the network for sports and horse gaming, toto betting, sports and horse betting and skill games, operated through interactive channels. This concession commenced in October 2011 and expires in October 2020.
Lottery
Since 1993, IGT PLC has been the sole concessionaire for the Italian Lotto game. IGT PLC has gained substantial experience in managing all the activities along the lottery value chain, such as collecting wagers through its network, paying out prizes, managing all accounting and other back-office functions, running advertising and promotion, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials including play slips, tickets and receipts, and marketing and point-of-sale materials for the game.
In Italy, IGT PLC also operates online lotteries, which are conducted through computerized systems in which lottery terminals are connected to a central computer system, such as Lotto, instant ticket lotteries and traditional lotteries, which are games involving pre-printed paper tickets.
Online Lottery
Lotto is a traditional game that was played off-line for centuries and that originated roughly 500 years ago in Genoa, Italy. Lotto is now an online lottery in which players select and bet on a draw of up to five numbers, or combinations thereof. In June 2009, ADM introduced the new form of Lotto game called “10 and Lotto,” in which players bet on the draw of ten numbers out of twenty drawn in a basket from 1 to 90. This new form is run through the Lotto network. In September 2010, ADM authorized a new form of “10 and Lotto” where drawings are held every five minutes and players can bet from one to ten numbers out of 20 drawn.
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For the Lotto Concession, IGT PLC receives from ADM a fee equal to a percentage of ticket sales, which decreases as the total wagers increase during an annual period. Under the Italian budget law for 2015, the fee received by the concessionaire from ADM will be equal to 6% of wagers (the annual average fee rates we received from ADM was approximately 6.42% and 6.43% for the years ended December 31, 2014 and 2013, respectively).
Upon termination of the Lotto Concession, IGT PLC is required to transfer, free of charge, to ADM upon its request, ownership of the entire automated systems which relate to the operation of the Lotto game. A similar requirement exists with respect to the termination of the other concessions.
Instant and Traditional Lotteries
In October 2003, the Ministry of Economy and Finance granted to
Consorzio Lotterie Nazionali
, a consortium 63%-owned by IGT PLC, the exclusive concession to operate instant and traditional lotteries, which prior to that time had been operated by ADM. The remaining ownership of the consortium was held by Scientific Games International, Inc. (“Scientific Games”) (20%), Arianna 2001 S.p.A. (“Arianna”) (15%) and others. The concession expired in September 2010.
In August 2010, Lotterie Nazionali, a company that was 64%-owned by IGT PLC, executed the new instant lottery concession with ADM, which commenced in October 2010 and will expire in September 2019. The remaining ownership of Lotterie Nazionali is held by Scientific Games Luxembourg (20%), Arianna (15%) and others. Instant lotteries are available at approximately 67,000 points of sale (of which approximately 33,000 are also Lotto points of sale).
For the new concession, the fee has been established as 3.9% of annual total wagers.
Machine Gaming
IGT PLC operates in the machine gaming concession in Italy through Videolot and through Videolot’s subsidiaries Big Easy and Optima, as gaming machines operator and retailer, respectively. As of December 31, 2014, Videolot operates 68,824 AWP machines and 11,141 VLT machines on its networks.
Sports Betting
Sports events (including basketball, soccer, cycling, downhill skiing, cross country skiing, tennis, sailing and volleyball), motor sports (car and motorcycle racing), and non-sports events connected with the world of entertainment, music, culture, and current affairs of primary national and international importance are the subjects of legal betting in Italy.
The betting can be:
·
pari-mutuel
—where the total pool of wagers placed, minus a specified percentage, is divided among the winning players according to a formula set by ADM. A winner will be paid an amount equal to his or her share of the prize pool; or
·
fixed odds
—where the payout amount is agreed upon in advance between the player and the bookmaker. In the case of a win, the bookmaker pays an amount equal to the bet multiplied by the odds fixed at the moment of the bet. The maximum prize for a ticket cannot exceed €10,000.
As of December 31, 2014, IGT PLC’s business in Italy had 299 sports betting point-of-sale locations, of which 296 were operational and 1,224 corner points of sale, of which 1,188 were operational during the year ended December 31, 2014. IGT PLC has also been granted rights by ADM to operate horse betting at 549 corner points of sale, of which 355 were operational during the year 2014.
33
Table of Contents
Commercial Services
Leveraging its distribution network and secure transaction processing experience, IGT PLC offers high-volume transaction processing of commercial transactions such as prepaid cellular telephone recharges. IGT PLC also provides collection and payment services in Italy for the payment of utility bills, local fines and duties and also collects payments due on behalf of creditors and offers money transfer services as well as top-ups for digital terrestrial TV cards, payment of car road taxes, fidelity card services and stamp duty services.
IGT PLC has been providing commercial, payment and processing services in Italy since 1998. IGT PLC’s commercial services network comprises about 70,000 points of sale divided among tobacconists, bars, petrol stations, newspaper stands and motorway restaurants.
Interactive Gaming
IGT PLC provides all of the Internet games currently authorized in the Italian market, including skill games such as poker and other board and soft games; bingo; casino games such as roulette and blackjack and reel games; live dealer roulette, blackjack, baccarat, and poker; horse and sports betting (fixed odds); pool games, such as a local game based on soccer events (pari-mutuel); virtual betting on events such as car, motorcycle, horse, and dog races and tennis or soccer matches; lottery including Lotto and “10 and Lotto” and Superenalotto with “Win for Life,” “Eurojackpot”; and instant lottery (iGratta e Vinci on Line).
Americas
The Americas segment offers all five of the IGT PLC product lines. The Americas segment generated revenues of €988.7 million, €994.1 million and €872.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Lottery
In the majority of jurisdictions in this segment, lottery authorities generally award contracts through a competitive bidding process. After the expiration of the initial or extended contract term, a lottery authority generally may either seek to negotiate further extensions or commence a new competitive bidding process. From time to time, there are challenges or other proceedings relating to the awarding of the lottery contracts.
Online Lottery
IGT PLC has contracts for the installation and operation of lottery systems in 42 jurisdictions in the Americas, including contracts in 23 United States jurisdictions, 6 jurisdictions throughout the Caribbean and Latin America, and 2 in South America, where IGT PLC provides online lottery systems and a wide range of services and products to help operate governmental lotteries. These contracts expire between 2015 and 2029. In addition, in each jurisdiction where IGT PLC has contracts listed below under the heading “—Lottery—Management Services Contracts,” IGT PLC also provides for the installation and operation of lottery systems as part of the management contracts or under separate facilities management contracts.
The table below sets forth the lottery authorities and customers with which IGT PLC had facilities management contracts (“FMC”) for the installation and operation of lottery systems as of December 31, 2014, and as to which IGT PLC is the sole supplier of central computers and terminals and material services in the Americas, as well as product sale contracts (“PSC”) under which customers have, since January 2012, purchased (or have agreed to purchase) from IGT PLC new online systems, software and/or terminals and equipment in connection with the expansion or replacement of existing lottery systems. For FMCs, the table also sets forth information regarding the term of each contract and, as of December 31, 2014, the approximate number of terminals installed in each jurisdiction. The table below does not include FMCs in jurisdictions where IGT PLC also has contracts listed below under the heading “—Lottery Management Services Contracts.”
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Table of Contents
|
Jurisdiction
|
|
FMC or
PSC
|
|
Approximate
Number of
Lottery
Terminals
Installed(1)
|
|
Date of
Commencement
of Current
Contract*
|
|
Date of Expiration
of Current
Contract Term
|
|
Current
Extension
Options**
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
Arizona
|
|
FMC
|
|
2,900
|
|
November 2005
|
|
August 2016
|
|
—
|
|
California
|
|
FMC
|
|
21,600
|
|
October 2003
|
|
October 2019
|
|
(2)
|
|
Colorado
|
|
FMC
|
|
3,000
|
|
January 2014
|
|
September 2020
|
|
—
|
|
Florida
|
|
FMC
|
|
13,550
|
|
January 2005
|
|
September 2015
|
|
—
|
|
Georgia
|
|
FMC
|
|
9,400
|
|
September 2003
|
|
September 2018
|
|
—
|
|
Illinois(3)
|
|
FMC
|
|
8,200
|
|
July 2011
|
|
June 2021
|
|
4 one-year
|
|
Kansas
|
|
FMC
|
|
1,900
|
|
July 2008
|
|
June 2018
|
|
—
|
|
Kentucky
|
|
FMC
|
|
3,300
|
|
July 2011
|
|
July 2021
|
|
5 one-year
|
|
Massachusetts
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Michigan
|
|
FMC
|
|
11,000
|
|
January 2009
|
|
January 2017
|
|
4 one-year
|
|
Minnesota
|
|
FMC
|
|
3,200
|
|
June 2002
|
|
February 2016(4)
|
|
—
|
|
Missouri
|
|
FMC
|
|
4,900
|
|
December 2004
|
|
June 2015(5)
|
|
5 one-year on mutual agreement
|
|
Nebraska
|
|
FMC
|
|
1,250
|
|
December 2010
|
|
June 2017
|
|
4 one-year
|
|
New York
|
|
FMC
|
|
19,000
|
|
September 2009
|
|
August 2017
|
|
Up to 3 years
|
|
North Carolina
|
|
FMC
|
|
6,950
|
|
January 2006
|
|
March 2017
|
|
—
|
|
Oregon(6)
|
|
FMC
|
|
3,450
|
|
October 2007
|
|
November 2020
|
|
—
|
|
Pennsylvania—Scientific Games International, Inc.
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Rhode Island
|
|
FMC
|
|
1,200
|
|
July 2003
|
|
June 2023
|
|
—
|
|
South Dakota
|
|
FMC
|
|
600
|
|
August 2009
|
|
August 2019
|
|
—
|
|
Tennessee
|
|
FMC
|
|
5,000
|
|
April 2015
|
|
June 2022
|
|
Up to 7 years
|
|
Texas
|
|
FMC
|
|
18,450
|
|
September 2011
|
|
August 2020
|
|
3 two-year
|
|
Virginia
|
|
FMC
|
|
5,350
|
|
June 2006
|
|
October 2017
|
|
—
|
|
Washington
|
|
FMC
|
|
3,750
|
|
July 2006
|
|
June 2016(7)
|
|
—
|
|
West Virginia
|
|
FMC
|
|
1,500
|
|
June 2009
|
|
June 2016
|
|
—
|
|
Wisconsin
|
|
FMC
|
|
3,750
|
|
November 2003
|
|
June 2015
|
|
—
|
|
Canada:
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic Lottery Corporation
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Ontario Lottery and Gaming Corporation
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Caribbean and Latin America:
|
|
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
|
|
|
|
|
|
|
|
|
|
—Boldt Gaming S.A.(Buenos Aires Lottery/IPLC)(8)
|
|
PSC
|
|
4,573
|
|
November 1999
|
|
September 2016
|
|
—
|
|
—Slot Machines S.A. (San Luis Province/Agencia Financiera de Loterías, Casinos y Juegos de Azar)
|
|
FMC
|
|
310
|
|
April 2012
|
|
October 2021
|
|
Extension options at sole discretion of Agencia
|
|
Chile—Polla Chilena de Beneficencia
|
|
|
|
2,500
|
|
September 2008
|
|
August 2016
|
|
Up to 24 months
|
|
Dominican Republic—Loto Real Del Cibao, C.X.A.
|
|
FMC
|
|
1,247
|
|
August 2008
|
|
August 2015(9)
|
|
—
|
|
Jamaica—Supreme Ventures Limited
|
|
FMC
|
|
1,100
|
|
November 2000
|
|
January 2026
|
|
—
|
|
Mexico—Pronosticos Para La Asistencia Publica
|
|
FMC
|
|
9,161
|
|
September 2005
|
|
September 2015(10)
|
|
—
|
|
Paraguay—Entretenimientos Generales, S.A.
|
|
PSC
|
|
300
|
|
April 2014
|
|
April 2019
|
|
|
*
Reflects the date upon which the contract became effective.
**
Reflects extensions available to the lottery authority under the same terms as the current contract. Lottery authorities occasionally negotiate extensions on different terms and conditions.
35
Table of Contents
(1)
Total does not include instant ticket validation terminals or instant ticket vending machines.
(2)
At the end of the final extension option period, the contract will remain in effect under the same terms and conditions until either party provides at least two years’ notice of termination.
(3)
The lottery services management contract (the “Illinois Contract”) between Northstar Lottery Group, LLC (“Northstar”), a consortium in which IGT PLC indirectly holds an 80% controlling interest, was terminated pursuant to a termination agreement, dated December 9, 2014, between Northstar and the Illinois Department of Lottery. Northstar will continue to provide lottery management services in Illinois for a transitional period, as outlined in the termination agreement. IGT PLC will retain its separate facility management contract through June 30, 2021. Over one month after its execution by the Governor of the State of Illinois, the Illinois Attorney General notified the State of Illinois that it “disapproves” of the “proposed” termination agreement. Relying on the Attorney General’s “disapproval,” the Governor’s Office informed Northstar that it believed the termination agreement was invalid and unenforceable, and therefore, the Illinois Contract remained in effect. Both Northstar and IGT PLC believe that the termination agreement is valid and binding on the parties.
(4)
In April 2015, IGT PLC entered into a contract with the Minnesota State Lottery to provide new lottery technology, an intellectual property-communications network, multimedia displays, self-service products, and ongoing support services. The new contract is for a term of seven and a half (7½) years, with an option to renew for an additional three (3) years, and will commence upon the expiration of the current contract.
(5)
In November 2014, IGT PLC was awarded a new contract by the Missouri Lottery, which will commence upon the expiration of the current contract. The new contract is for a term of seven years, with an option to renew for an additional three-year term in the Missouri Lottery’s sole discretion.
(6)
In November 2010, IGT PLC entered into a separate contract with the Oregon State Lottery Commission for the provision of a hosted player loyalty program, marketing and gaming management system services. In February 2013, IGT PLC and the Oregon State Lottery Commission entered into an Amended and Restated Application Service Provider contract which amended and restated the November 2010 agreement. The services to be provided under this contract include a contractor-hosted player database, player web portal, “second-chance” lottery game and promotional drawing functionality and player communication services. The agreement is for a five-year term, and may be extended by the parties’ written agreement for an additional three years.
(7)
In October 2014, GTECH was awarded a new 10-year contract by the Washington’s Lottery. The proposed contract is expected to commence on July 1, 2016 and includes the opportunity for an extension of ten years.
(8)
Under this contractual arrangement, Boldt, as operator for the lottery authorities, purchased the lottery system and related software license from IGT PLC at the commencement of the contract. Boldt received a three-year extension to operate the ILPC lottery in September 2013 and in turn ILPC renewed IGT PLC’s software license and support agreement for three years.
(9)
In August 2014, IGT PLC and Loto Real mutually agreed to terminate the Master Agreement between the parties, and on the same date executed a Transition Agreement, pursuant to which IGT PLC agreed to continue to operate and maintain the lottery system that IGT PLC provided to Loto Real under the Master Agreement for a period of nine months.
(10)
In December 2014, IGT PLC signed a six-year full-service contract to provide an integrated draw-based instant ticket system, lottery terminals, a communications network, as well as additional lottery products and ongoing services to Pronósticos para la Asistencia Pública, the online lottery operator in Mexico. The contract is expected to commence in September 2015.
Lottery Management Services Contracts
IGT PLC is the lottery management services provider in three U.S. jurisdictions—Illinois, Indiana, and New Jersey. In each jurisdiction, IGT PLC manages the day-to-day operations of the lottery and its core functions, subject to lottery oversight. In Illinois and New Jersey, IGT PLC provides lottery management services as part of a joint venture or consortium, respectively, and in Indiana, through a wholly owned subsidiary. As compensation for
36
Table of Contents
its lottery management services in each state, IGT PLC receives an annual incentive compensation fee to the extent the net income earned by the relevant state department of lottery in a given fiscal year exceeds such state’s minimum guaranteed net income levels for such fiscal year, as provided under each relevant contract. The incentive compensation is subject to an annual cap of 5% of lottery net income in the case of New Jersey and was subject to an annual cap of 5% of lottery net income in Illinois up until the date the Illinois Contract (as defined below) was executed. In the case of Indiana, the annual cap is 5% of minimum guaranteed net income levels. In the event the actual net income of the lottery is less than the guaranteed net income in a contract year, IGT PLC is required to pay the lottery for such shortfall. Such shortfall payments are capped at 5% in Indiana and Illinois and 2% in New Jersey.
U.S. State Lottery Operations.
IGT PLC provides lottery management services in Illinois through Northstar Lottery Group, LLC (“Northstar”), a consortium in which IGT PLC indirectly holds an 80% controlling interest. Northstar manages the day-to-day operations and core functions of the Illinois lottery, subject to the oversight of the Illinois Department of Lottery (the “State of Illinois”). IGT PLC provides certain hardware, equipment, software and support services to Northstar. On December 9, 2014, the State of Illinois and Northstar entered into an agreement to terminate their relationship under the lottery management services contract (the “Illinois Contract”) between them. Under the termination agreement, the State of Illinois will pay a termination for convenience fee and disentanglement services fees to Northstar for a 12-month period. Disentanglement services constitute all services that Northstar currently provides to the State of Illinois under the Illinois Contract and Northstar will continue providing those services until the earlier of (1) a transition of Northstar’s responsibilities to the State of Illinois or to another private manager, or (2) 12 months from the termination notice date, unless otherwise extended by the State of Illinois, which may extend the provision of disentanglement services under the termination agreement for up to three six-month periods. As part of the termination agreement, the State of Illinois and Northstar have agreed to cease a dispute resolution process intended to adjudicate all outstanding litigation and other disputes between the parties.
IGT PLC will retain its separate facilities management agreement through June 30, 2021. The parties have agreed that Northstar will assign the IGT PLC facilities management agreement to another private manager, or to the State of Illinois, if another private manager is not selected. The agreement may be extended for up to four additional one-year terms, to June 30, 2025, at the discretion of the new manager with the approval of the State of Illinois, if required. If the State of Illinois selects another private manager, the private manager has the option of issuing a competitive procurement for services provided by IGT PLC under the facilities management agreement after June 30, 2018, subject to certain conditions.
Over one month after its execution by the Governor of the State of Illinois, the Illinois Attorney General notified the State of Illinois that it “disapproves” of the “proposed” termination agreement. Relying on the Attorney General’s “disapproval,” the Governor’s Office informed Northstar that it believed the termination agreement was invalid and unenforceable, and therefore, the Illinois Contract remained in effect. Both Northstar and IGT PLC believe that the termination agreement is valid and binding on the parties.
In Indiana, IGT PLC manages the day-to-day operations and core functions of the Hoosier Lottery through GTECH Indiana, LLC (“GTECH Indiana”), a wholly owned subsidiary, which has a 15-year agreement with the Hoosier Lottery expiring on June 30, 2028, subject to early termination provisions. The Hoosier Lottery has control over all significant business decisions with respect to the management of the lottery.
In New Jersey, IGT PLC manages the day-to-day operations and core functions of the New Jersey lottery through Northstar New Jersey Lottery Group, LLC (“Northstar New Jersey”), a consolidated joint venture comprised of GTECH Corporation, Scientific Games New Jersey, a subsidiary of Scientific Games International, Inc., and OSI LTT NJ Grantor Trust, an affiliated entity of Ontario Municipal Employees Retirement System in which IGT PLC indirectly holds an approximate 41% interest. IGT PLC also provides certain hardware, equipment, software and support services and certain instant ticket goods and services. Northstar New Jersey is party to a lottery management agreement with the State of New Jersey Department of the Treasury, Division of Purchase and Property and Division of Lottery which expires on June 30, 2029, subject to early termination provisions.
37
Table of Contents
The table below sets forth the lottery authorities with which IGT PLC had operator contracts or lottery management services contracts as of December 31, 2014 for the day-to-day operation of core lottery functions, and management of lottery systems, and as to which IGT PLC is the supplier of central computers and terminals and material services. The table also sets forth information regarding the term of each contract and, as of December 31, 2014, the approximate number of terminals installed in each jurisdiction.
|
Jurisdiction
|
|
Approximate
Number of Lottery
Terminals Installed(1)
|
|
Date of
Commencement of
Current Contract*
|
|
Date of
Expiration of
Current Contract
|
|
Current
Extension
Options**
|
|
United States:
|
|
|
|
|
|
|
|
|
|
Illinois
|
|
8,200
|
|
July 2011
|
|
January 2016(2)
|
|
Option to extend for up to three six-month periods
|
|
Indiana
|
|
4,500
|
(3)
|
October 2012
|
|
June 2028
|
|
Ten one-year
|
|
New Jersey
|
|
7,100
|
|
June 2013
|
|
June 2029
|
|
—
|
|
Caribbean and Latin America:
|
|
|
|
|
|
|
|
|
|
Colombia
|
|
|
|
|
|
|
|
|
|
ETESA/ COLJUEGOS(4)
|
|
6,000
|
|
April 2012
|
|
April 2017
|
|
—
|
|
Grupo Empresarial En Linea, S.A.
|
|
3,800
|
|
September 2011
|
|
April 2017
|
|
—
|
|
Costa Rica
|
|
|
|
|
|
|
|
|
|
Junta de Protección Social
|
|
1,200
|
|
June 2013
|
|
June 2019
|
|
Automatic renewals for two-year periods up to a total of ten years unless the Junta gives notice of non-renewal
|
|
Trinidad & Tobago—National Lotteries Control Board
|
|
800
|
|
December 1993
|
|
March 2021
|
|
Automatic extension for one three-year period
|
|
Anguilla—LILHCo
|
|
10
|
|
May 2007
|
|
May 2017
|
|
—
|
|
Antigua/Barbuda—LILHCo
|
|
55
|
|
September 1996
|
|
September 2016
|
|
—
|
|
Barbados—LILHCo
|
|
232
|
|
June 2005
|
|
June 2023
|
|
—
|
|
Bermuda—LILHCo
|
|
2
|
|
—
|
|
—
|
|
Automatic annual renewal
|
|
St. Kitts/Nevis—LILHCo
|
|
53
|
|
October 2013
|
|
October 2016
|
|
Three years
|
|
St. Maarten—LILHCo
|
|
44
|
|
September 2007
|
|
September 2017
|
|
One ten-year(5)
|
|
U.S. Virgin Islands—LILHCo
|
|
87
|
|
December 2001
|
|
December 2016
|
|
One five-year
|
*
Reflects the date upon which the contract became effective.
**
Reflects extensions available to the lottery authority under the same terms as the current contract. Lottery authorities occasionally negotiate extensions on different terms and conditions.
(1)
Total does not include instant ticket validation terminals or instant ticket vending machines.
(2)
Reflects revised period under termination agreement between Northstar and the State of Illinois dated December 9, 2014.
(3)
In addition to the installation of its own lottery terminals, IGT PLC has contracted with Scientific Games International, Inc. for the provision of the hardware of Scientific Games’ WAVE™ lottery terminals.
(4)
Equipment will vest in ETESA or its successor at the end of the contract term.
(5)
The extension option for this contract may be exercised on mutual agreement of the parties.
Instant and Traditional Lotteries
IGT PLC provides Self-Service Terminals (“SSTs”), including instant ticket vending machines (“ITVMs”) and other self-service devices pursuant to existing facilities management contracts mentioned above, separate SST facilities management contracts, and through product sales contracts in 27 United States jurisdictions. These contracts expire between 2015 and 2017.
38
Table of Contents
The table below sets forth the lottery authorities with which IGT PLC has facilities management contracts for the provision of SSTs. This table also provides (except where noted) information respecting the number of SSTs that are currently in service under various SST product sales contracts. Finally, the table below sets forth information regarding the term of each FMC, as well as the approximate number of SSTs installed in each FMC jurisdiction, as of December 31, 2014.
|
Jurisdiction
|
|
FMC or
PSC
|
|
Approximate
Number of SSTs
in Service
|
|
Date of
Commencement
of Current FMC
Contract*
|
|
Date of Expiration
of Current FMC
Contract Term
|
|
Current
Extension
Options**
|
|
Arizona
|
|
FMC
|
|
840
|
|
February 2009
|
|
January 2016
|
|
five one-year
|
|
California
|
|
(1)
|
|
6,800
|
|
—
|
|
—
|
|
—
|
|
Colorado
|
|
(1)
|
|
2,050
|
|
—
|
|
—
|
|
—
|
|
Connecticut
|
|
(2)
|
|
200
|
|
July 2010
|
|
September 2015
|
|
two one-year
|
|
Florida
|
|
(1)
|
|
2,050
|
|
—
|
|
—
|
|
—
|
|
Georgia
|
|
(1)
|
|
1,250
|
|
—
|
|
—
|
|
—
|
|
Illinois
|
|
(1)
|
|
3,300
|
|
—
|
|
—
|
|
—
|
|
Indiana
|
|
PSC(3)
|
|
1,000
|
|
—
|
|
—
|
|
—
|
|
Kentucky
|
|
(1)
|
|
800
|
|
—
|
|
—
|
|
—
|
|
Maine
|
|
(4)
|
|
210
|
|
September 2004
|
|
June 2015
|
|
—
|
|
Maryland
|
|
PSC
|
|
850
|
|
—
|
|
—
|
|
—
|
|
Massachusetts
|
|
PSC
|
|
2,600
|
|
—
|
|
—
|
|
—
|
|
Michigan
|
|
(1)
|
|
2,300
|
|
—
|
|
—
|
|
—
|
|
Minnesota
|
|
(1)
|
|
400
|
|
—
|
|
—
|
|
—
|
|
Missouri
|
|
FMC
|
|
1,350
|
|
March 2007
|
|
June 2015
|
|
(5)
|
|
New Jersey
|
|
(1)
|
|
1,600
|
|
—
|
|
—
|
|
—
|
|
New York
|
|
(1)
|
|
4,900
|
|
—
|
|
—
|
|
—
|
|
North Carolina
|
|
(1)
|
|
1,150
|
|
—
|
|
—
|
|
—
|
|
Oregon
|
|
PSC
|
|
400
|
|
—
|
|
—
|
|
—
|
|
Pennsylvania
|
|
PSC
|
|
4,500
|
|
—
|
|
—
|
|
—
|
|
Rhode Island
|
|
(1)
|
|
250
|
|
—
|
|
—
|
|
—
|
|
South Dakota
|
|
(1)
|
|
50
|
|
—
|
|
—
|
|
—
|
|
Tennessee
|
|
(1)
|
|
500
|
|
—
|
|
—
|
|
—
|
|
Texas
|
|
(1)
|
|
2,400
|
|
—
|
|
—
|
|
—
|
|
Virginia
|
|
(5)
|
|
2,000
|
|
June 2004
|
|
October 2017
|
|
—
|
|
Washington
|
|
(1)
|
|
1,650
|
|
—
|
|
—
|
|
—
|
|
West Virginia
|
|
(1)
|
|
250
|
|
—
|
|
—
|
|
—
|
|
Wisconsin
|
|
(1)
|
|
500
|
|
—
|
|
—
|
|
—
|
*
Reflects the date upon which the contract became effective.
**
Reflects extensions available to the lottery authority under the same terms as the current contract. Lottery authorities occasionally negotiate extensions on different terms and conditions.
(1)
Represents SSTs installed under an online lottery facilities management contract. See the facilities management contracts table above for additional information.
(2)
IGT PLC’s contract with the Connecticut Lottery Corporation is not a traditional facilities management contract, but rather is a lease agreement for a monthly fee in which IGT PLC provides related services.
(3)
In May 2012, IGT PLC entered into an agreement with the State Lottery Commission of Indiana for the provision of ITVM maintenance services. As a result of the execution of the Integrated Services Agreement between the Hoosier Lottery and GTECH Indiana, the maintenance agreement was assigned to GTECH Indiana, with GTECH Corporation retaining all responsibilities under the agreement. The agreement will continue through June 30, 2028.
(4)
IGT PLC’s contract with the Maine Department of Administrative & Financial Services, Bureau of Alcoholic Beverages & Lottery Operations is not a traditional facilities management contract, but rather is a lease agreement for a monthly fee in which IGT PLC provides related services.
(5)
The Virginia Lottery has contracted with Scientific Games International, Inc. (successor in interest to Oberthur Gaming Technologies Corporation), pursuant to which contract IGT PLC has subcontracted to provide SSTs and management of warehousing and distribution of instant tickets. Additionally, SSTs have been provided by IGT PLC under an FMC. See the facilities management contracts table above for additional information.
39
Table of Contents
Instant Ticket Printing and Production Services
IGT PLC is a major technologically advanced instant game supplier and has a total production capacity of more than 11 billion instant tickets annually. As an end-to-end provider of instant tickets and related services, IGT PLC specializes in the fast delivery of high-quality instant ticket games. In addition to printing, IGT PLC provides its customers with instant ticket marketing plans, graphic design, programming, production, packaging, shipping and delivery services. Instant tickets are sold at numerous types of retail outlets but most successfully in grocery and convenience stores.
Government-sponsored lotteries grant printing contracts on both an exclusive and non-exclusive basis where there is typically one primary vendor and one or more secondary vendors. A primary contract permits the vendor to supply the majority of the lottery’s ticket printing needs and includes the complete production process from concept development through production and shipment. It also typically includes marketing and research support. A primary printing contract can also include any or all of the following services: warehousing, distribution, telemarketing, and sales/field support. A secondary printing contract includes providing backup printing services and alternate product sources. It may or may not include a guarantee of a minimum or maximum number of games. Instant ticket contracts are priced based on a percentage of ticket sales revenues or on a price per unit basis and generally range from two to five years with extension opportunities.
As of December 31, 2014, IGT PLC had contracts to provide instant ticket printing and production services to 37 customers throughout the Americas, including 29 U.S. jurisdictions, one in Canada, one in Mexico, five in the Caribbean and Central America, and one in South America.
Machine Gaming
IGT PLC has agreements with casino customers to provide gaming machines, including fixed fee and participation contracts, and contracts in which customers have purchased (or have agreed to purchase) products. As of December 31, 2014, IGT PLC had contracts with 717 casino customers in the Americas segment, including 249 in Latin America and 468 in North America.
The Americas has long-term government-sponsored contracts in eight jurisdictions in the United States, five jurisdictions in Canada, and one in South America to provide VLTs and/or systems on a fixed fee or participation basis (percentage of sales or net win). These contracts, listed in the table below, expire between 2014 and 2023.
The table below lists jurisdictions in which IGT PLC has agreements with government-sponsored customers to provide gaming machines and/or video central systems as of December 31, 2014, including fixed fee and participation contracts, and contracts in which customers have purchased (or have agreed to purchase) products since January 2012. The table also provides information regarding the term of certain contracts and, as of December 31, 2014, the approximate number of gaming machines installed in each jurisdiction.
|
Jurisdiction
|
|
Nature of Contract
|
|
Approximate
Number of
Gaming
Machines
|
|
Date of
Commencement
of Current
Contract
|
|
Date of
Expiration of
Current
Contract
|
|
Current
Extension
Options**
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
Delaware
|
|
Gaming Machines—Participation
|
|
223
|
|
May 2014
|
|
October 2018
|
|
three two-year
|
|
Kansas
|
|
Central System—Participation
|
|
—
|
|
November 2008
|
|
December 2019
|
|
Upon mutual agreement
|
|
Louisiana
|
|
Central System—Product Sale
|
|
—
|
|
December 2005
|
|
December 2015
|
|
—
|
|
Maryland
|
|
Gaming Machines—Product Sale
|
|
2,194
|
|
April 2010
|
|
May 2020
|
|
one five-year
|
|
|
|
Central System—Fixed Fee
|
|
—
|
|
January 2010
|
|
September 2020
|
|
one five-year
|
|
New York
|
|
Gaming Machines—Participation
|
|
1,391
|
|
May 2003
|
|
December 2017
|
|
—
|
|
Oregon
|
|
Gaming Machines—Product Sale
|
|
2,485
|
|
—
|
|
—
|
|
—
|
40
Table of Contents
|
Jurisdiction
|
|
Nature of Contract
|
|
Approximate
Number of
Gaming
Machines
|
|
Date of
Commencement
of Current
Contract
|
|
Date of
Expiration of
Current
Contract
|
|
Current
Extension
Options**
|
|
|
|
Gaming Machines—Product Sale #2
|
|
1,500
|
|
October 2013
|
|
February 2020
|
|
—
|
|
|
|
Central System—Fixed Fee
|
|
—
|
|
November 1995
|
|
September 2015
|
|
—
|
|
|
|
Central System replacement—Fixed Fee
|
|
—
|
|
January 2013
|
|
(1)
|
|
Upon mutual agreement
|
|
Pennsylvania
|
|
Central System—Participation
|
|
—
|
|
September 2011
|
|
(2)
|
|
—
|
|
Rhode Island
|
|
Gaming Machines—Participation
|
|
2,782
|
|
July 2003
|
|
July 2023
|
|
—
|
|
|
|
Central System—Participation
|
|
—
|
|
July 2003
|
|
July 2023
|
|
—
|
|
Canada:
|
|
|
|
|
|
|
|
|
|
|
|
Alberta Gaming & Liquor Commission
|
|
Central System—Product Sale
|
|
—
|
|
June 2011
|
|
June 2016
|
|
five one-year
|
|
|
|
Gaming Machines—Product Sale
|
|
2,087
|
|
November 2011
|
|
November 2018
|
|
—
|
|
Atlantic Lottery Corporation
|
|
Gaming Machines—Product Sale
|
|
1,700
|
|
May 2012
|
|
November 2019
|
|
—
|
|
|
|
Gaming Machines—Product Sale #2
|
|
950
—
|
|
January 2014
|
|
January 2021
|
|
—
|
|
|
|
Central System—Product Services(4)
|
|
—
|
|
October 2012
|
|
(3)
|
|
seven one-year
|
|
Manitoba Lotteries Corporation
|
|
Gaming Machines—Product Sale
|
|
2,057
|
|
July 2012
|
|
July 2019
|
|
—
|
|
|
|
Central System—Product Sale
|
|
—
|
|
July 2012
|
|
June 2018
|
|
seven one-year
|
|
Quebec (Société des lotteries video du Québec)
|
|
Gaming Machines—Product Sale
|
|
4,986
|
|
August 2010
|
|
August 2015
|
|
one period of three years and one period of two years
|
|
|
|
Central System—Product Sale
|
|
—
|
|
July 2010
|
|
July 2015
|
|
(5)
|
|
Saskatchewan Liquor and Gaming Authority
|
|
Central System—Product Sale
|
|
—
|
|
August 2012
|
|
November 2020
|
|
(6)
|
|
|
|
Gaming Machines—Product Sale
|
|
1,400
|
|
November 2012
|
|
November 2017
|
|
—
|
|
|
|
Central System—Services(5)
|
|
|
|
|
|
|
|
|
|
South America:
|
|
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
Central System—Participation
|
|
—
|
|
March 2010
|
|
September 2023
|
|
one two-year
|
*
Reflects the dates upon which the contract became effective.
**
Reflects extensions available to the customer under the same terms as the current contract. Customers occasionally negotiate extensions on different terms and conditions.
(1)
In January 2013, GTECH USA, LLC signed a contract to lease to the Oregon Lottery its Intelligen™ video lottery gaming system, to replace the video lottery central computer system leased to the Oregon Lottery in November 1995. The term of the new lease is for seven years after rollout, and may be extended on mutual agreement of the parties.
(2)
IGT PLC was awarded a new contract by the Commonwealth of Pennsylvania (the “Commonwealth”) to supply a new central control computer system and related services, which is anticipated to be deployed in June 2015. In order to secure the uninterrupted and statutorily mandated provision of a central control computer system and related services until such time, the Commonwealth and IGT PLC have extended the existing contract on a month-to-month basis.
(3)
The initial term of the central system contract is seven years after final acceptance, following which the customer may extend the term for up to seven additional one-year periods. Acceptance occurred in April 2014.
(4)
Represents video central system maintenance agreements.
(5)
Following the initial expiration period in July 2015, the customer has the option to extend so that the initial term expires on the fifth anniversary of the date of commencement of operation of the central system. The customer has further options to extend for two additional periods, one for three years and the second for two years.
(6)
The initial term of the central system contract is seven years after final acceptance, which occurred in November 2013, and is then automatically extended for successive one-year periods unless the customer elects not to renew.
41
Table of Contents
Sports Betting
IGT PLC is the technology provider in retail and interactive channels for sports betting in Chile and Mexico.
In Mexico, IGT PLC provides four pool-based games and managed services and risk and event management for a daily fixed-odds game. The pool-based games and fixed-odds game are available at retail locations.
In Chile, IGT PLC provides two pool-based games. In addition, IGT PLC provides managed services and risk and event management for a daily fixed-odds game. Both the pool-based games and daily fixed-odds game can be played at retail locations and over the Internet.
Commercial Services
IGT PLC is an established provider of financial services, bill payment and access to eRecharge products (electronic vouchers and electronic top-up services) in major markets across Latin America and the Caribbean. IGT PLC operates in Chile through its Sencillito brand and in Colombia and Trinidad & Tobago through its VIA brand.
Independent of its VIA and Sencillito brands, IGT PLC offers eRecharge products and processes millions of transactions annually in eight other Caribbean countries, including the United States Virgin Islands, Jamaica, Antigua and Barbados.
Interactive Gaming
IGT PLC offers a variety of interactive game products, including poker, casino, bingo, iLottery, and mobile systems. In the United States, IGT PLC is the leading iLottery provider, introducing iKeno in Georgia, and iLottery and the mobile app in Illinois.
In December 2010, IGT PLC and Societé des Lotteries du Québec (Loto-Québec) launched the first regulated online poker network in North America, with British Columbia Lottery Corporation (“BCLC”) joining in 2011.
In June 2014, IGT PLC announced that it entered into an agreement for a four-year term with two two-year extension options, with Loto-Québec and BCLC to provide interactive bingo software, games and related services to these Canadian lotteries through June 2018. The contract represents North America’s first government-regulated interactive bingo network.
International Segment
The International segment offers all five IGT PLC product lines: lottery, machine gaming, sports betting, commercial services and interactive gaming. The International segment generated revenues of €335.2 million, €331.1 million and €387.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.
Lottery
Online Lottery
IGT PLC has contracts for the installation and operation of lottery systems in eleven jurisdictions in the International segment. These contracts expire between 2015 and 2023.
42
Table of Contents
The table below sets forth the lottery authorities and customers with which IGT PLC had FMCs as of December 31, 2014 for the installation and operation of lottery systems, and as to which IGT PLC is the sole supplier of central computers and terminals and material services in the International segment, as well as PSCs under which customers have, since January 2012, purchased (or have agreed to purchase) from IGT PLC new online systems, software and/or terminals and equipment in connection with the expansion or replacement of existing lottery systems. For FMCs, the table also sets forth information regarding the term of each contract and, as of December 31, 2014, the approximate number of terminals installed in each jurisdiction.
|
Jurisdiction
|
|
FMC or
PSC
|
|
Approximate
Number of
Lottery
Terminals
Installed(1)
|
|
Date of
Commencement
of Current
Contract*
|
|
Date of
Expiration of
Current
Contract Term
|
|
Current Extension
Options**
|
|
Belgium—Loterie Nationale de Belgique
|
|
PSC
|
|
|
|
|
|
|
|
|
|
China
|
|
|
|
|
|
|
|
|
|
|
|
—Beijing Welfare Lottery
|
|
FMC
|
|
2,800
|
|
January 2012
|
|
December 2020
|
|
Automatic two one-year terms unless a party gives at least 180 days’ notice before the end of initial or extension term
|
|
—Shenzhen Welfare Lottery
|
|
FMC
|
|
2,053
|
|
July 2010
|
|
April 2021
|
|
Automatic two eighteen-month terms unless a party gives at least 180 days’ notice before the end of the initial or extension term
|
|
Czech Republic—SAZKA a.s. (f/k/a Czech Republic—SAZKA sázková kancelář a.s.)
|
|
FMC
|
|
7,000
|
|
November 2011
|
|
December 2022
|
|
—
|
|
Denmark—Danske Spil A/S
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Finland—Veikkaus Oy
|
|
PSC
|
|
|
|
|
|
|
|
|
|
France—La Française des Jeux
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
|
|
|
|
|
|
|
|
|
—Lotterietreuhandgesellschaft mbH Thüringen
|
|
PSC
|
|
|
|
|
|
|
|
|
|
—Sächsische Lotto GmbH
|
|
PSC
|
|
|
|
|
|
|
|
|
|
—Westdeutsche Lotterie GmbH
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Ireland—An Post Nat’l Lottery Company
|
|
FMC
|
|
3,700
|
|
June 2002
|
|
June 2015
|
|
—
|
|
Israel—Mifal Hapayis
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Lithuania—UAB Lotelita
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Luxembourg—Loterie Nationale
|
|
FMC
|
|
420
|
|
March 2013
|
|
March 2021
|
|
five one-year terms
|
|
Madagascar—Reel Mada SA, Damalot Technical Services LTD and Gamlot Technologies LTD
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Malaysia—Pan Malaysian Pools
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Mauritius—Lottotech Ltd.
|
|
PSC
|
|
|
|
|
|
|
|
|
|
New Zealand—Lotto New Zealand
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Nigeria—Secure Electronic Technology plc.
|
|
FMC
|
|
3,500(2)
|
|
November 2008
|
|
December 2016(2)
|
|
ten years
|
|
Poland—Totalizator Sportowy
|
|
FMC
|
|
14,400
|
|
December 2011
|
|
November 2018
|
|
three one-year or three years
|
|
Portugal—Santa Casa de Misericordia de Lisboa
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Singapore—Singapore Pools (Pte) Ltd.
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Slovak Republic—TIPOS, National Lottery Company, a.s.
|
|
FMC
|
|
2,600
|
|
March 1996
|
|
December 2018
|
|
—
|
|
Spain
|
|
|
|
|
|
|
|
|
|
|
|
—Organizacion Nacional de Ciegos Españoles (ONCE)(3)
|
|
FMC/ PSC
|
|
6,874
|
|
May 2010
|
|
December 2020
|
|
five years and subsequently for biannual periods unless either party elects to terminate with prior notice of two years
|
|
—UTE Logista IGT PLC, Law 18/1982, No. 1
|
|
PSC
|
|
|
|
|
|
|
|
|
|
—Ibermatica S.A.
|
|
PSC
|
|
|
|
|
|
|
|
|
43
Table of Contents
|
Jurisdiction
|
|
FMC or
PSC
|
|
Approximate
Number of
Lottery
Terminals
Installed(1)
|
|
Date of
Commencement
of Current
Contract*
|
|
Date of
Expiration of
Current
Contract Term
|
|
Current Extension
Options**
|
|
Switzerland
|
|
|
|
|
|
|
|
|
|
|
|
—Loterie de la Suisse Romande
|
|
PSC
|
|
|
|
|
|
|
|
|
|
—Swisslos Interkantonale Landeslotterie
|
|
PSC
|
|
|
|
|
|
|
|
|
|
Turkey—Turkish National Lottery(4)
|
|
FMC
|
|
5,000
|
|
February 1996
|
|
November 2015(4)
|
|
(4)
|
|
Ukraine—Ukraine National Lottery
|
|
PSC
|
|
|
|
|
|
|
|
|
|
United Kingdom—The National Lottery(5)
|
|
FMC
|
|
47,000
|
|
February 2009
|
|
January 2023
|
|
—
|
*
Reflects the date upon which the contract became effective.
**
Reflects extensions available to the lottery authority under the same terms as the current contract. Lottery authorities occasionally negotiate extensions on different terms and conditions.
(1)
Total does not include instant ticket validation terminals or instant ticket vending machines.
(2)
The terminals in use in this contract are not IGT PLC terminals, but are Secure Electronic Technology plc’s (SET) handheld terminals. IGT PLC’s contract expires on the date of expiry of SET’s license, which is in December 2016 with an option to extend for 10 years.
(3)
In October 2009, GTECH Global Lottery S.L., jointly with its Spanish partner Logista SA, created a UTE (Temporary Union of Companies) called UTE Logista GTECH, Law 18/1982, No. 1. In October 2009, the UTE signed an agreement with ONCE to create a complementary channel of non-blind ONCE retailers, which was launched in May 2010. This agreement was amended by the parties on December 18, 2013 to revise the business model in order to improve the results and ensure the project’s viability, thereby limiting the purpose of the agreement to the provision of certain logistics and technological services.
(4)
The term of the contract with the Turkey lottery authority renews for successive one-year extension terms unless either party gives timely notice of non-renewal. In addition, the Turkey lottery authority has the option to assume responsibility for the provision of certain lottery services at any time after the second anniversary of system start-up.
(5)
Operated by Camelot U.K. Lotteries Limited on a facilities management basis. The approximate number of lottery terminals installed includes 6,000 Compact Lottery Terminals which are capable of selling online lottery tickets, but currently only sell instant tickets.
Instant and Traditional Lotteries
In addition to the above facilities management contracts, IGT PLC has PSCs for the provision of SSTs, including ITVMs and other self-service devices in eight jurisdictions in the International segment.
The table below sets forth the lottery authorities with which IGT PLC’s International segment has PSCs for the provision of SSTs as of December 31, 2014. This table also provides (except where noted) information reflecting the number of SSTs that are currently in service under various PSCs. Finally, the table below sets forth information regarding the term of each service agreement related to the PSC, as well as the approximate number of SSTs installed in each jurisdiction, as of December 31, 2014.
|
Jurisdiction
|
|
Approximate
Number of SSTs In
Service
|
|
Date of
Commencement of
Current Service
Agreement*
|
|
Date of Expiration
of Current Service
Agreement Term
|
|
Current Extension
Options**
|
|
Belgium
|
|
19
|
|
—
|
|
—
|
|
—
|
|
France
|
|
1,075
|
|
October 2005
|
|
November 2022(2)
|
|
—
|
|
Hungary
|
|
16
|
(3)
|
|
|
|
|
—
|
|
Iceland
|
|
25
|
|
—
|
|
—
|
|
—
|
|
Luxembourg(1)
|
|
130
|
|
|
|
|
|
|
|
Poland(1)
|
|
300
|
|
—
|
|
—
|
|
—
|
|
Singapore—Singapore Pools
|
|
48
|
|
—
|
|
—
|
|
—
|
|
Switzerland
|
|
205
|
|
—
|
|
—
|
|
—
|
*
Reflects the date upon which the contract became effective.
**
Reflects extensions available to the lottery authority under the same terms as the current contract. Lottery authorities occasionally negotiate extensions on different terms and conditions.
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Table of Contents
(1)
Represents SSTs installed under an online lottery facilities management contract. See facilities management contracts table above for additional information.
(2)
IGT PLC currently has two ITVM maintenance services agreements, covering two different SST products. The first contract, which was entered into in October 2005, expires in October 2015. The second, entered into in March 2012, expires in November 2022.
(3)
In December 2013, GTECH entered into a Standalone ITVM Purchase and Supply Agreement with Szerencsejáték Zártkörűn Működő Részvénytársaság in Hungary for the sale of ten Gemini Compact ITVMs and six Instant to Go® ITVMs.
Instant Ticket Printing and Production Services
As of December 31, 2014, IGT PLC’s International segment had contracts with 14 customers including eleven in Europe, two in Africa and one in Australia to provide instant ticket printing and production services.
Machine Gaming
Commercial Casino
IGT PLC’s International segment has agreements with casino and other machine operators to provide gaming machines to licensed operations. The most common business models are direct sale, fixed fee or participation contracts. In addition to gaming machines, IGT PLC also generates revenues by providing content-sale only, game conversion upgrades, spare parts and machine merchandise. As of December 31, 2014, IGT PLC had contracts with approximately 475 casino and machine customers in Europe, Africa, Russia and Asia, and has gained a steady and strong presence across most gaming floors in this region.
In addition to providing machines, IGT PLC also has become a supplier in the industry for online accounting solutions for land-based operations with over 200 customers in Europe, Africa and Asia.
Government-Sponsored Gaming
The International segment has long-term government-sponsored contracts in two jurisdictions to provide VLTs and/or systems on a fixed fee or participation basis (percentage of sales or net win). These contracts, listed in the table below, expire between 2016 and 2023.
The table below lists jurisdictions in which IGT PLC has agreements with government-sponsored customers to provide gaming machines and/or video central systems as of December 31, 2014.
|
Jurisdiction
|
|
Nature of Contract
|
|
Approximate
Number of
Gaming
Machines
|
|
Date of
Commencement
of Current
Contract*
|
|
Date of
Expiration of
Current
Contract
|
|
Current
Extension
Options**
|
|
Sweden (AB Svenska Spel)
|
|
Gaming Machine and Central System Product Sales
|
|
5,900
|
|
May 2007
|
|
June 2016
|
|
two two-year
|
|
|
|
Central System Product Sale
|
|
—
|
|
May 2003
|
|
—
|
|
—
|
|
Switzerland (Loterie de la Suisse Romande)
|
|
Gaming Machine and Central System Product Sales
|
|
750
|
|
July 2010
|
|
December 2023
|
|
—
|
*
Reflects the dates upon which the contract became effective.
**
Reflects extensions available to the customer under the same terms as the current contract. Customers occasionally negotiate extensions on different terms and conditions.
In July 2014, IGT PLC was selected to provide its INTELLIGEN system to Greek lottery operator OPAP to provide OPAP’s VLT Central Information System to monitor and control up to 35,000 VLTs in OPAP’s planned new network. IGT PLC is expected to connect its INTELLIGEN Central Information System to OPAP and concessionaire VLTs beginning in the first half of 2015, following system certification by the Hellenic Gaming Commission.
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Sports Betting
IGT PLC provides betting technology to lotteries and commercial operators in regulated markets. World Lottery Association customers of IGT PLC include OPAP, Lottery National Belgium (LNB) and Marca, the Spanish national daily sports newspaper owned by Unidad Editorial in Spain, and Szerencsejáték Zrt (National Lottery in Hungary).
Commercial Services
Leveraging its distribution network and secure transaction processing experience, IGT PLC offers high-volume transaction processing of commercial transactions, including prepaid cellular telephone recharges, collection and payment services for the payment of utility bills, and money transfer services, as well as ticketing for sporting and musical events. Additionally, IGT PLC provides a processing and network service on behalf of third parties, without collecting amounts due.
The following table depicts jurisdictions where the International segment currently has agreements to provide commercial services, as of December 31, 2014, and the approximate number of points of sale in operation under the respective agreements.
In addition to certain commercial services relative to its contract with the Polish lottery, IGT PLC also provides commercial service products in Poland through its BillBird subsidiary with approximately 18,000 POS terminals and electronic cash registers, processing more than 4 million transactions per month. BillBird is the leading provider of electronic bill payment services in Poland. BillBird also provides mobile prepaid and money transfer services.
Interactive Gaming
IGT PLC offers a variety of interactive gaming products within the International segment, including poker, casino, bingo and mobile systems.
World Lottery Association members Svenska Spel in Sweden and Norsk Tipping in Norway are among IGT PLC’s interactive bingo platform and services customers. Svenska Spel, the State Lottery of Sweden, has been operating their Interactive Poker using IGT PLC platforms since 2006.
The State Lottery of Finland, Veikkaus Oy, has been a customer of IGT PLC since 1989. In 2010, Veikkaus awarded a contract to IGT PLC to supply its interactive bingo platform.
In April 2009, IGT PLC announced that it entered into an agreement with Societé de Loterie Romande (LoRo) to provide interactive games (draw games, instant games, sports and horse riding) and related services (monitoring and operations of the system).
IGT PLC also entered into an agreement with Lottery National Belgium (LNB) in April 2009 to provide interactive games (draw games, instant games and sports betting) and related services (monitoring and operations of the system).
In June 2013, the Spanish interactive gaming market became regulated and IGT PLC acquired ten customers offering casino table games, the Spanish Poker Network and the Spanish Bingo Network.
IGT PLC also provides its casino content to an array of commercial operators, including bet365, Gala Bingo, Ladbrokes, Rank Group and William Hill.
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Product Development
IGT PLC devotes substantial resources on research and development, incurring €84.1 million, €77.6 million and €72.2 million of related expenses during the years ended December 31, 2014, 2013 and 2012, respectively.
Intellectual Property
Trademarks
IGT PLC owns registered trademarks in the United States, Canada, Italy and the rest of Europe, as well as other countries and uses other marks that may not yet have been registered.
Software Development
IGT PLC has developed certain software for use in the management of a range of lottery, betting, and gaming functions and products, including leveraging integration with other software components. The intellectual property of the software is managed according to concession requirements. Software developed by IGT PLC is used:
(1)
in the central system for the centralized management of (a) functions connected to the services provided by IGT PLC through the points of sale of Lotto, of the lotteries, machine gaming and betting, and to other commercial services not connected to games, such as telephonic top-up services or utilities payment services, (b) functions connected to the services provided through websites for online gaming and (c) back-office functions for the centralized management of data relating to the points of sale and machine gaming, for the connection of the central system with terminals located at the points of sale, for IGT PLC’s online payments, for trouble ticketing of the terminals, for management of the points of sale, for updating of the terminals through the network, for updating of content for machine gaming, for management of the network and data exchange and for management of the data archive of IGT PLC; and
(2)
in the terminals for the management of Lotto, of the lotteries, machine gaming, betting and online payments, for the provision of gaming and non-gaming content, as well as in the integration with other devices such as mobile phones.
Historically, IGT PLC generally has sought to obtain patents on its products on a limited scale, but also relied heavily on trade secret protection, believing that its technical “know-how” and the creative skills of its personnel would be of substantially more importance to its success than the benefit which patent protection ordinarily would afford. As IGT PLC continues to advance the development of new technological solutions and expand its presence in other market segments, it has begun to pursue comprehensive intellectual property protection, including patents where appropriate, for these solutions. IGT PLC is currently pursuing protection of some of its newest advances in technology and gaming. IGT PLC has obtained patent protection in certain of its key business methods in the areas of infrastructure systems, terminal improvements and creative game design. Many of IGT PLC’s products bear recognizable brand names that it either owns or has the right to use pursuant to license agreements. IGT PLC owns trademark registrations in the United States and in foreign countries and uses other marks that have not been registered. IGT PLC also licenses certain trademarks from third parties such as Who Wants to be a Millionaire™, Caesars™, Harrah’s™, The Three Stooges™, World Series of Poker™, Rio™, Sons of Anarchy™, Plants v. Zombies™, Bejeweled™, Zuma™ and Billboard™.
Market
In most countries, the gaming market is heavily regulated. Each country governs the gaming sector, from a regulatory and administrative point of view, with its own solutions. Lotteries and other gaming activities are typically regulated by a specialized governing body. The organizational model varies from country to country, although, more frequently, the operation of games is conducted by one or more dedicated public or private entities. In certain countries, the operation of games is conducted by several operators. In the United States, there is a lottery authority or a commission for gaming activities in each state.
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Table of Contents
On a worldwide basis, the supply of gaming products is varied and can be broken down by game lines, such as gaming (casino, VLT and other games), lotteries (online, instant and traditional lotteries) and betting. The development of these game lines among different countries is highly diversified. This is attributable, in particular, to macroeconomic factors, but also to player preferences and local legislation.
Lotteries
Lotteries are operated by state and governmental bodies and their licensees in over 200 jurisdictions worldwide. Governments have authorized lotteries primarily as a means of generating non-tax revenues. Global lottery sales were equal to approximately U.S. $284.3 billion in 2014 (source: La Fleur’s 2015 World Lottery Almanac).
Italian Gaming Market
IGT PLC is a market leader in the Republic of Italy in the overall regulated gaming industry. Based on ADM’s 2014 statistics, the Italian B2C gaming market is valued at €84.5 billion in wagers.
The Italian B2C gaming market is highly regulated. Games are operated by privately owned companies based on concessions awarded by the Government and its regulatory body, ADM. In 2014, 20.4% of wagers were generated by the lotteries segment, compared to 55.6% by machine gaming, while 23.9% of wagers came from all the other games, including sports betting, horse betting, and a number of interactive games, including poker and casino games, and bingo.
U.S. Gaming Market
In the United States, lottery revenues are frequently designated for particular purposes, such as education, economic development, conservation, transportation and aid to the elderly. Many states have become increasingly dependent on their lotteries as revenues from lottery ticket sales are often a significant source of funding for these programs.
According to La Fleur’s 2015 World Lottery Almanac (containing data for the fiscal year 2014), approximately 50% to 65% of sales of instant and online lottery tickets in the United States is returned to the public in the form of prizes. The remaining amount is generally used to fund the operations of the lottery, including the cost of advertising, sales commissions to point-of-sale retailers and service fees to vendors such as IGT PLC.
According to La Fleur’s 2015 World Lottery Almanac, U.S. lotteries’ consolidated revenues (including traditional sales as well as non-traditional products such as table games and VLTs) totaled $70.1 billion. In recent years, as the United States lottery industry has matured, the rate of lottery sales growth has moderated and certain of IGT PLC’s customers have from time to time experienced a downward trend in sales.
There are currently 44 states, plus the District of Columbia, that authorize the operation of online lotteries in the United States. Implementation of lotteries in other jurisdictions will depend upon successful completion of legislative, regulatory and administrative processes.
Machine Gaming Market
The North America machine gaming B2B market accounted for $4.0 billion in 2014, showing a clear recovery trend since 2010, with a compound annual growth rate (“CAGR”) of 2.5% from 2010-2014, after a steep decline from 2008-2010, with a CAGR for that period equal to -9%.
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Table of Contents
The machine gaming market comprises different product segments:
·
“slot machines” with two different revenue models:
·
sold for a set price (“equipment sales” or “product sales”) representing units replaced every year or new installations (approximately 134,000 machines shipped in 2014 globally); and
·
leased for a fixed daily fee or in participation (“recurring revenue” or “gaming operations”), with 328,000 machines installed in 2014 globally; and
·
“slot systems” represented by central systems that manage a set of slot machines positioned on the floor.
Slot machines form a substantial portion of the total machine gaming market (86% of total market in 2014). The equipment sales component decreased in 2010 to approximately 45% of total slot machine revenues (due to operators financial difficulties during the economic crisis), but have since recovered to approximately 33% in line with historical levels.
From a geographical perspective, while the international business weight has significantly increased over time, North America still accounts for the majority of the overall market.
Casino game content plays an increasingly important role in the interactive B2B and social casino B2C segments which continue to be driven by monetization of content libraries and intellectual property across distribution platforms. (All figures included in this section were obtained from Eilers Research, Gaming Suppliers KPIs,4Q2014.)
Interactive Gaming Market
The global interactive gaming market includes casino (slots and table games), poker, bingo, sports betting, horseracing, skill-based games and lotteries. The 2014 global market is estimated by H2 Gambling Capital at €32.5 billion in GGY and consists of operators and suppliers participating in the regulated and unregulated markets, which H2 Gambling Capital estimates at €13.1 billion and €19.4 billion, respectively.
According to H2 Gambling Capital, the global interactive gaming market grew at a CAGR of approximately 9% between 2008 and 2014, which was primarily driven by improved broadband penetration and capacity, increased mobile penetration, and a growing number of market participants.
The largest interactive market by player location is the U.K., which accounts for about 16% of the total market, according to H2 Gambling Capital (source: H2 Gambling Capital, Global Summary, April 20, 2014).
Competition
Lotteries
The lottery technology business is highly competitive and subject to strong price-based competition. IGT PLC provides facilities management, lottery services or the combination of the two to lottery operators in regulated markets to approximately 100 customers globally. IGT PLC’s primary competitors in the lottery technology business include Scientific Games Corporation and Intralot S.A.
The instant tickets game business is also highly competitive and subject to strong price-based competition. IGT PLC’s competitors in the United States include Scientific Games Corporation and Pollard Banknote Limited. Internationally, a number of instant ticket game vendors compete with us, including the competitors mentioned above, as well as diversified printing companies such as Eagle Press of India.
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Table of Contents
The private manager, operator and licensee sector continues to emerge globally. Competitors in this market primarily consist of a handful of commercial lottery operators active mainly in their domestic markets, such as Tattersalls, Sisal S.p.A. (“Sisal”), Sazka, and OPAP, and also includes a few commercial lottery operators, such as IGT PLC and Camelot, which compete globally. IGT PLC is the leading commercial operator in the United States and manages the day-to-day operations of the Illinois, Indiana, and New Jersey lotteries and their core functions, subject to the state’s control over all significant business decisions. Camelot U.K. Lotteries Ltd. operates the UK National Lottery and the Ireland National Lottery.
Italy
IGT PLC has leading market positions across all gaming markets, through a broadly diversified B2C product portfolio.
Lottery concessions are awarded on an exclusive basis through a competitive procurement process. IGT PLC currently manages two out of the three existing concessions, Lotto (the traditional online lottery) and Gratta & Vinci (instant tickets). The third concession is for a jackpot-lottery—Superenalotto—and is managed by Sisal.
Machine gaming concessions have been awarded to a dozen operators, who have the right to operate both AWP and VLT machines. AWPs are the mass-market gaming machines, with low limits set for the maximum bet and the maximum win (€1 and €100, respectively). VLTs have higher betting and winning limits (€10 and up to a €500,000 jackpot, respectively) and can only be installed in exclusive gaming locations such as gaming halls, bingo halls and sports betting shops. IGT PLC is a market leader in the Italian machine gaming space. Other operators include Italian and foreign companies like Gamenet, Sisal, Cogetech, Novomatic, and Snai. In the machine gaming B2B space, IGT PLC supplies central systems, VLT machines and AWP kits to a high number of machine gaming operators. In the central systems and VLT machines space, IGT PLC is a market leader together with its Austrian competitor Novomatic.
All of the other B2C gaming markets, including sports betting and interactive gaming, are based on a multi-concession system, where several operators can be awarded a concession. IGT PLC is among the leading operators in this fragmented market. Many Italian and foreign companies compete for market share in one or more segments of this market, including Bwin, Paddy Power, Pokerstars, Sisal, Snai, and William Hill.
Outside the regulated gaming industry, IGT PLC also offers payment and transaction services in the Italian market. Services are also provided through IGT PLC’s retail network. The main competitors in this business are the banks and the postal services, together with some other private companies.
Machine Gaming
Following a wave of supplier diversification in the market, where new entrants have been gaining market share, the industry is experiencing significant consolidation. This can largely be attributable to a slowdown in North American traditional slot machine revenues as regional gaming revenue headwinds, such as declines in same store sales, impact the demand for slot machines. As such, the machine gaming sector is evolving from just the sale and leasing of slot machines to include: (1) multi-channel systems and table games equipment for traditional land-based casino, (2) lottery technology, (3) real-money interactive gaming, and (4) online and mobile social casino gaming.
Interactive Gaming
Outside of Italy, IGT PLC participates in the global regulated interactive gaming market as a B2B provider, primarily supplying lottery and commercial operator clients in regulated European and North American markets. IGT PLC designs, manufactures, and distributes a wide range of games, technology solutions, and services, available via desktop and mobile devices. IGT PLC also competes as a mobile casino operator through its subsidiary, Probability.
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Table of Contents
The interactive gaming B2B competitive landscape has evolved to mirror industry-wide trends of product and channel (online and mobile) convergence and vertical integration. IGT PLC faces competition from operators, such as 888 Holdings and bwin.party, which have developed broad, cross-channel product offerings and solutions for internal use and as a supplier to third parties. IGT PLC also competes with broad-based traditional B2B providers, such as Playtech plc and Microgaming Software Systems, which have developed extensive interactive casino content and broad cross-channel product offerings. IGT PLC also faces competition from traditional machine gaming suppliers, which either supply third parties with interactive casino games, such as Scientific Games, or which have multi-product offerings and solutions, such as Amaya Gaming.
As a mobile casino operator in the U.K., through its subsidiary, Probability, IGT PLC primarily competes with broad-based gaming operators, such as William Hill plc and Paddy Power plc.
Regulatory Framework
IGT PLC currently does business in approximately 100 countries worldwide. The gaming and betting industry in Italy is regulated in all aspects by government authorities. The Italian gaming and betting regulatory authority is ADM. In the United States, the manufacture and distribution of gaming equipment, systems and services, as well as the operation of casinos, is subject to regulation by a variety of local and federal agencies, with most oversight provided by individual state agencies.
Italian Gaming and Betting Regulations
IGT PLC operates in Italy in the gaming and betting sectors. As of December 31, 2014, IGT PLC held concessions for (1) the activation and operation of the network for the Lotto game, (2) the operation of instant and traditional lotteries, (3) the activation and operation of the network for the telematic operation of legalized AWP machine (new slot), and (4) the collection of pari-mutuel and fixed odds betting through physical points of sale and interactive channels.
Gaming in Italy is an activity reserved to the State. Any game that is carried out without proper authorization is illegal and subject to criminal penalties. Italian law grants the Ministry of Economy and Finance the power to introduce games and to manage gaming and betting activities directly or by granting concessions to third parties. The process of creating and granting gaming and betting concessions in Italy is heavily regulated.
Gaming and betting concessions are granted pursuant to a public tender procurement process. The concession provides for all of the concessionaire’s activities and duties, including collection of the game’s revenues, the payment of winnings, the payment of the point of sale, the drawings and the management of all of the technological assets to operate gaming. However, pursuant to Article 24, paragraph 11-26 of Law no. 88/2009, the exercise and remote collection of bets and games is not based on a tender process but rather the authorization of applicants meeting certain qualifications. Concessions are for a determined time period and are not renewable unless indicated in the concession agreement; in such event, the renewal is not on the same terms. In certain cases, the concession may be extended at the option of the governmental authority. Under certain circumstances, which are typically defined in the concession agreement, the concession may be revoked or terminated. Most cases of early termination are related to the breach of the terms of the concession agreement or the non-fulfillment of conditions of that agreement. In some cases, the early termination of the concession allows the State to draw upon the entire amount of the performance bond presented by the concessionaire. Upon governmental request, the concessionaire has an obligation to transfer, free of charge, the assets subject of the concession to the State at the end of the term of the concession or in the event of its revocation or early termination. Each single concession contains specific provisions enacting such general obligation.
The ongoing operations of Italian gaming and betting operators are typically subject to extensive and evolving regulation. In general, the regulatory requirements include:
·
licenses and/or permits;
·
findings of suitability for the company, as well as individual officers, directors, major stockholders and key employees;
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Table of Contents
·
documentation of qualification, including evidence of financial stability;
·
the provision of financial guarantees (bid bond and performance bond);
·
information on shareholders owning more than 2% with regard to bidding processes;
·
specific approvals for gaming equipment manufacturers and distributors;
·
good standing of directors, manager and shareholders owning more than 2% of the concessionaire;
·
certain economic and financial requirements;
·
taxation and financial requirements;
·
taxation on the wagers coming from illegal gaming;
·
permission of the State in case of change of control of the concessionaires;
·
registration of all operators in the gaming machine industry; and
·
anti-money laundering compliance.
United States Gaming Regulations
Gaming is regulated by state law in the United States, which typically prohibits gaming except as authorized and regulated by the particular state. There are currently 45 jurisdictions that authorize the operation of online lotteries in the United States. The ongoing operations of lotteries and lottery operators are typically subject to extensive and evolving regulation, which vary state-by-state. While the regulatory requirements vary from jurisdiction to jurisdiction, most require:
·
licenses and/or permits;
·
findings of suitability for the company, as well as individual officers, directors, major stockholders and key employees;
·
documentation of qualification, including evidence of financial stability; and
·
specific approvals for gaming equipment manufacturers and distributors.
State lottery authorities generally conduct intensive investigations of vendors and their employees prior to and after awarding a vendor a contract with the lottery. State lottery authorities may require the removal of any of the vendor’s employees deemed to be unsuitable and are generally empowered to disqualify a vendor from receiving a lottery contract or operating a lottery system as a result of any such investigation. Some states also require extensive personal and financial disclosure and background checks from persons and entities beneficially owning a specified percentage (typically 5% or more) of a company.
EU Proposed Gaming Regulation
The European Union is considering setting out a harmonizing regulation on online gambling. The European Commission is unveiling an action plan, with a series of initiatives over the next two years, aimed at clarifying the regulation of online gambling and encouraging cooperation between Member States. While Member States are, in principle, free to set the objectives of their policies on online gambling, the purpose of the European Commission is to develop a well-regulated, safer online gambling sector in the European Union. The European Commission will adopt three recommendations addressed to the Member States, namely on (1) common protection of consumers; (2) responsible gambling advertising; and (3) the prevention of betting-related match-fixing.
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Table of Contents
Seasonality; Source of Materials
In general, IGT PLC’s business is not materially affected by seasonal variation. However, in the sports betting business, the volume of bets that IGT PLC collects over the year can be affected by the schedules of sporting events and the particular season of such sports. The volume of bets IGT PLC collects can also be affected by schedules of significant sporting events that occur at regular, but infrequent, intervals, such as the FIFA Football World Cup. In the lottery business, lottery consumption and gaming may decrease over the summer months due to the tendency of consumers to be on vacation during that time.
The main raw material used in the IGT PLC production processes is paper, used both for the production of tickets, and for office work, which accounts for over half of the materials that enter production. Metal is the second raw material in order of significance, followed by electronic components. A significant part of the material used involves packaging, which is mainly based on cardboard and paper. Printing also involves a significant consumption of toner and ink. Management believes that adequate supplies and alternate sources of IGT PLC’s principal raw materials are available and does not believe that the prices of these raw materials are especially volatile.
C.
Organizational Structure
A listing of IGT PLC’s directly and indirectly owned subsidiaries as of December 31, 2014, is included in the GTECH Consolidated Financial Statements included herein. A listing of IGT PLC’s directly and indirectly owned subsidiaires as of the date of this document is set forth in Exhibit 8.1 to this annual report on Form 20-F.
On April 7, 2015, GTECH merged with and into the Company, and IGT merged with and into Sub, with IGT surviving the Subsidiary Merger, all pursuant to the conditions set forth in the Merger Agreement. As a result, the Company is the successor of GTECH and the parent of IGT. For detailed information, see “—A. History and Development of the Company” beginning on page 22.
The following is a diagram of the Company and certain of its subsidiaries and associated companies, including all U.S. regulated entities, following the completion of the Mergers and certain reorganization transactions which are described under “—A. History and Development of the Company—Other Transactions”:
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Table of Contents
* Accumulated shareholdings of De Agostini S.p.A., which holds 47.02%, and DeA Partecipazioni S.p.A., which holds 5.07% of the IGT PLC ordinary shares.
D.
Property, Plant and Equipment
IGT PLC’s principal office is located at 11 Old Jewry, 6th Floor, London EC2R 8DU, United Kingdom, telephone number +44 (0) 203 131 0300. As of May 14, 2014, IGT PLC leased approximately 139 properties in the United States and 99 properties outside of the United States, and owned a number of facilities and properties, including:
·
fourteen properties in Italy and Belgium, including properties located (1) at Zona Industriale, 85050 Tito, Potenza and (2) at Via Staro, 20134, Milan;
·
an approximately 140,000 square foot manufacturing and central storage facility in Coventry, Rhode Island;
·
an approximately 13,000 square foot enterprise data center in West Greenwich, Rhode Island;
·
an approximately 113,000 square foot manufacturing, research and development and office building in Moncton, New Brunswick, Canada;
·
an approximately 43,000 square foot manufacturing and office facility in Gross St. Florian, Austria;
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Table of Contents
·
an approximately 607,221 square foot office/game studio/systems software/showroom facility in Las Vegas, Nevada; and
·
an over 1.1 million square foot office/warehouse/game studio/engineering/global manufacturing/global data center in Reno, Nevada.
The following table shows IGT PLC’s material owned and leased properties as of May 14, 2015:
U.S. Properties
|
Location
|
|
Square
Feet
|
|
Use and Productive Capacity
|
|
Extent of
Utilization
|
|
Holding
Status
|
|
Products
Produced
|
|
55 Technology Way,
West Greenwich, RI
|
|
170,000
|
|
WG Technology Center: Office; research and testing; storage and distribution
|
|
100
|
%
|
Leased
|
|
N/A
|
|
1372 Main Street,
Coventry, RI
|
|
140,000
|
|
Manufacturing Center: Manufacturing and assembly; office; repair; storage and distribution
|
|
100
|
%
|
Owned
|
|
ITVMs, ticket checkers
|
|
10 Memorial Blvd.,
Providence, RI
|
|
120,315
|
|
IGT PLC Headquarters: Office
|
|
100
|
%
|
Leased
|
|
N/A
|
|
4100 South Frontage Road,
Lakeland, FL
|
|
98,280
|
|
IGT PLC Printing Plant: Printing facility; storage and distribution; office
|
|
100
|
%
|
Leased
|
|
Printed tickets
|
|
8520 Tuscany Way,
Bldg. 6, Suite 100,
Austin, TX
|
|
81,933
|
|
Texas Warehouse and National Response Center: Contact center; storage and distribution; office
|
|
95
|
%
|
Leased
|
|
N/A
|
|
5300 Riata Park Court,
Bldg. E, Suite 100,
Austin, TX
|
|
42,537
|
|
Austin Tech Campus: Research and test; office
|
|
90
|
%
|
Leased
|
|
N/A
|
|
8200 Cameron Road,
Suite E120,
Austin, TX
|
|
24,320
|
|
Data Center of the Americas: Data center; network operations; office
|
|
80
|
%
|
Leased
|
|
N/A
|
|
47 Technology Way,
West Greenwich, RI
|
|
11,500
|
|
Enterprise Data Center: Data center; network operations
|
|
75
|
%
|
Owned
|
|
N/A
|
|
75 Baker Street,
Providence, RI
|
|
10,640
|
|
RI National Response Center: Office; contact center
|
|
100
|
%
|
Leased
|
|
N/A
|
|
403 Westcoat Road,
Egg Harbor Township,
NJ 08234
|
|
30,698
|
|
Service Office, Warehouse, Game Studio, MJP Monitoring
|
|
75
|
%
|
Leased
|
|
NA
|
|
6355 S. Buffalo Dr.,
Las Vegas, NV 89113
|
|
607,221
|
|
Office, Game Studio, Systems Software, Showroom
|
|
50
|
%
|
Owned
|
|
NA
|
|
1000 Sandhill Rd.,
Reno, NV 89521
|
|
52,500
|
|
Office, Warehouse, Global Test & Interoperability Center
|
|
60
|
%
|
Owned
|
|
NA
|
|
9295 Prototype Dr.,
Reno, NV 89521
|
|
1,180,418
|
|
Office, Warehouse, Game Studios, Hardware/Software Engineering; Global Mfg Center, Global DC
|
|
90
|
%
|
Owned
|
|
EGM’s
|
|
405 Howard Street, The Orrick Building, Floor 6, San Francisco, CA 94105
|
|
45,884
|
|
Office, Interactive
|
|
50
|
%
|
Leased
|
|
NA
|
55
Table of Contents
Non-U.S. Properties
|
Location
|
|
Square
Feet
|
|
Use and Productive Capacity
|
|
Extent of
Utilization
|
|
Holding
Status
|
|
Products
Produced
|
|
Viale del Campo Boario 56/D 00154
Roma, Italy
|
|
13,000
|
|
IGT PLC Headquarter in Italy: Office Italy Data Center: Data center; network operations
|
|
100
|
%
|
Leased
|
|
N/A
|
|
Via delle Monachelle snc
Pomezia (RM), Italy
|
|
12,000
|
|
Warehouse for sorting materials to the sales network
|
|
100
|
%
|
Leased
|
|
N/A
|
|
328 Urquhart Ave,
Moncton, New Brunswick, Canada
|
|
113,000
|
|
Canada HQ: Manufacturing; office; research and test
|
|
100
|
%
|
Owned
|
|
VLTs
|
|
Seering 13-14,
Unterpremstatten, Austria
|
|
73,776
|
|
Austria Gaming HQ: Office; research and test
|
|
90
|
%
|
Leased
|
|
N/A
|
|
Lasnitzstrasse 19, Gross St.
Florian, Austria
|
|
50,808
|
|
Austria Manufacturing: Manufacturing; storage and distribution
|
|
75
|
%
|
Owned
|
|
VLTs
|
|
Brama Building,
Warsaw, Poland
|
|
48,420
|
|
International Tech Hub: Office; research and test
|
|
95
|
%
|
Leased
|
|
N/A
|
|
5-13 Rosebery Avenue, WH1&2, G2, 801, 900,702, Rosebery, New South Wales, Australia
|
|
77,117
|
|
Office, Warehouse, Game Studio, Systems Software, Sales, AUS Final Assembly
|
|
80
|
%
|
Leased
|
|
NA
|
|
29, Suzhoujie Street, Viva Plaza, Haidian District,
Room No. 1-20, 18th Floor, Beijing 100080, China
|
|
28,516
|
|
Game Studio, Systems Software, Office
|
|
100
|
%
|
Leased
|
|
NA
|
|
29, Suzhoujie Street, Viva Plaza, Haidian District, Room No. 1-20, 11th Floor, Beijing 100080, China
|
|
28,382
|
|
Game Studio, Systems Software, Office
|
|
100
|
%
|
Leased
|
|
NA
|
|
1 Changi North Street 1,
02-01 and 02-03,
Singapore, 498789
|
|
25,462
|
|
Office, AsiaPac Final Assembly, Warehouse
|
|
50
|
%
|
Leased
|
|
EGM’s
|
|
Bijlmermeerstraat 30, Hoofddorp, 2131,
Netherlands
|
|
35,306
|
|
Office, EMEA Final Assembly, Warehouse
|
|
80
|
%
|
Leased
|
|
EGM’s
|
IGT PLC’s facilities are in good condition and are adequate for its present needs and there are no known environmental issues that may affect IGT PLC’s utilization of its real property assets.
IGT PLC does not have any plans to construct, expand or improve its facilities in any material manner other than general maintenance of facilities. As such, no increase in productive capacity is anticipated.
None of IGT PLC’s properties is subject to mortgages or other security interests granted to secure indebtedness to certain financial institutions.
Item 4A.
Unresolved Staff Comments
None.
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Table of Contents
Item 5.
Operating and Financial Review and Prospects
As discussed above in the section “Item 4. Information on the Company—A. History and Development of the Company—Acquisition of International Game Technology,” as of December 31, 2014, IGT PLC did not conduct any material activities, other than those incident to its formation and the matters contemplated by the Merger Agreement, such as the formation of Georgia Worldwide Corporation, the making of certain required securities law filings and the preparation of the proxy statement/prospectus filed in connection with the Mergers.
The following discussion and analysis of GTECH’s financial condition and results of operations should be read in conjunction with the GTECH Consolidated Financial Statements, including the notes thereto, included in this annual report, as well as “Presentation of Financial and Certain Other Information,” “Risk Factors,” “Selected Financial Data” and “Item 4—B. Business Overview.”
The following discussion includes certain forward-looking statements. Actual results may differ materially from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report, including in “—G. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995” and “Item 3—D. Risk Factors.”
In the following discussion, unless otherwise specified or the context otherwise indicates, all references to “IGT PLC,” “we,” “us,” “our,” and the “Company” refer to the business and operations of GTECH S.p.A., as predecessor to IGT PLC, for the financial years ended December 31, 2014, 2013 and 2012. All such references refer to GTECH as a standalone group, except where the context otherwise requires.
A.
Operating Results
Overview
IGT PLC (formerly GTECH S.p.A.) is a leading commercial operator and provider of technology in the regulated worldwide gaming markets. IGT PLC operates and provides a full range of services and leading-edge technology products across all gaming markets, including lotteries, machine gaming, sports betting and interactive gaming. We also provide high-volume processing of commercial transactions. Our state-of-the-art information technology platforms and software enable distribution through land-based systems, Internet and mobile devices. The Company provides business-to-consumer (B2C) and business-to-business (B2B) products and services to customers in approximately 100 countries worldwide on six continents and had 8,811 employees at December 31, 2014.
The structure of IGT PLC’s internal organization is aligned around three global geographic regions. Consequently, for management purposes, IGT PLC’s operating segments are organized geographically into three reportable operating segments based on those regions—Americas, International and Italy—and supported by a central products and services structure. Each of these segments offers lottery, machine gaming, sports betting, commercial services and interactive gaming.
Key Factors Affecting Operations and Financial Condition
The following are a description of the principal factors which have affected our results of operations and financial condition for the years ended December 31, 2014, 2013 and 2012 and/or which may affect results of operations and financial condition for future periods.
The IGT Acquisition and Related Financing Transactions
:
As further described in the “
Item 4. Information on the Company—A. History and Development of the Company—Acquisition of International Game Technology
” section of this annual report, on July 15, 2014, IGT PLC entered into the Merger Agreement with IGT. IGT PLC recorded €35.0 million of professional fees and expenses related to the acquisition of IGT in 2014 which are recorded in “Unusual expense, net” in our consolidated income statements. In addition, IGT PLC incurred €70.1 million of debt extinguishment costs and €41.8 million of interest expense on the Bridge Facility in 2014, which are recorded in Other expense and Interest expense, respectively in our consolidated income statements.
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Table of Contents
Effects of Foreign Exchange Rates
:
We are affected by fluctuations in foreign exchange rates (1) through translation of foreign currency financial statements into euros for consolidation, which we refer to as the translation impact, and to a lesser extent (2) through transactions by subsidiaries in currencies other than their own functional currencies, which we refer to as the transaction impact. Translation impacts arise in preparation of the consolidated financial statements; in particular, we prepare our
Consolidated Financial Statements
in euro, while the financial statements of each of our subsidiaries are prepared in the functional currency of that subsidiary. In preparing consolidated financial statements, we translate assets and liabilities measured in the functional currency of the subsidiaries into euros using the exchange rate prevailing at the balance sheet date, while we translate income and expenses using the average exchange rates for the period covered. Accordingly, fluctuations in the exchange rate of the functional currencies of our subsidiaries against the euro impacts our results of operations. We are particularly exposed to movements in the euro/U.S. dollar exchange rate. For example, our revenues in the Americas segment decreased by €5.4 million, or 0.5% in 2014 compared to 2013; however, on a constant currency basis (as described below under “Constant Currency Information”), our revenues in the Americas segment would have decreased by €6.7 million, or 0.7%. Although the fluctuations in foreign exchange rates has had a material impact on our revenues, the impact on our operating income and our cash flows is less significant in that revenues are mostly matched by costs denominated in the same currency.
Regulation
:
We operate on an international basis in regulated gaming markets, where the regulatory markets are subject to continuous evolution. Our ability to enter new markets or to offer new products in existing markets depends on decisions made by the market regulator, which often follow a period of political debate. For example, in November 2011, a bill was signed into law that permits the establishment of casinos in Massachusetts and, in September 2014, a developer was awarded a license that permits the construction of a casino resort in the greater Boston area. Accordingly, we are not in control of the timing of new opportunities, including the outsourcing of gaming operations, the award of new contracts, the introduction of new instant ticket price points and the launch of new games.
The Italian betting and gaming market is regulated by the Italian government through
Agenzia delle Dogane e Dei Monopoli
(“ADM”), the national regulator and other bodies responsible for the control and regulation of this market. From time to time, regulatory changes could be introduced which might affect our existing business in certain jurisdictions, including opening hours for points of sale, restrictions on the sale of certain products, the awarding, monitoring and renewal of gaming concessions, the minimum payout ratios on certain games, gaming tax increases and other legislation designed to encourage responsible gaming. For example, the tax on VLTs in Italy increased from four percent of wagers in 2012 to five percent of wagers in 2013. Our machine gaming revenues are recorded net of tax, and therefore any changes in taxation can impact our revenues and results of operations. Moreover, the Italian budget law for 2015 introduces a number of new laws, effective from January 1, 2015, that will impact the public tender procurement process for the award of the Lotto Concession (including by introducing a starting price for the tender of €700 million, to be paid by the winning bidder in three installments) and the fees and commissions regime applicable to the operation of VLTs and AWPs (including by reducing the fees due to concessionaires and operators in aggregate by €500 million per year, starting from 2015).
The profitability of our gaming products is affected by taxes imposed and the minimum payout ratios. Some of our gaming products have payout ratios greater than the minimum payout ratios allowed by the regulators and, for these products, we may be able to decrease the payout ratio in order to mitigate the effect of any tax increases applied on them. However, in order to minimize any negative impact on prizes and volumes, we would generally seek to decrease such payout ratios gradually over time. Accordingly, there can be a time delay between increases in taxes and decreases in payout ratios which would result in a temporary reduction in our profitability.
Macroeconomic Factors and Demographics:
Gaming is a form of entertainment and, as such, competes with other forms of entertainment for the discretionary spending of the local population. In general, countries and regions with higher GDPs will tend to have higher levels of discretionary spending that can be directed to gaming and other forms of entertainment. Similarly, although we believe that gaming tends to be more resilient than other forms of entertainment, when a country or region experiences a decline in GDP or a rise in inflation, spending on gaming may also decline. Demographic changes may also affect results of operations. In addition, changing social habits, such as longer working hours that result in a decrease in time spent on entertainment, may adversely affect results of operations.
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Table of Contents
Existing Contracts, New Contracts and Contractual Rates:
Our revenue is significantly impacted by the renewal or loss of existing contracts, as well as our ability to secure new contracts. Service revenue represented 91.7% of our total revenue for the year ended December 31, 2014, with the majority of such revenue being derived from contracts with a duration (including extension options) at December 31, 2014 of five or more years. Our top ten customers outside of Italy represented 18.2% of our total revenue for the year ended December 31, 2014. Accordingly, the retention, loss or addition of a significant contract or customer can have a material effect on our results of operations. Further, our Lotto Concession in Italy, which represented 13.8% of our total revenue for the year ended December 31, 2014, expires in June 2016 and accordingly will be subject to a public tender process in 2015. In addition, our results of operations are significantly impacted by the level of fees we receive under our contracts. For the Lotto Concession, we receive from ADM a fee equal to a percentage of ticket sales, which decreases as the total wagers increases during an annual period. Under the Italian budget law for 2015, the fee received by the concessionaire from ADM will be equal to 6% of wagers (the annual average fee rates we received from ADM was approximately 6.42% and 6.43% for the years ended December 31, 2014 and 2013, respectively).
Jackpots and Late Numbers
:
We believe that the performance of lottery products is influenced by the size of available jackpots in jurisdictions that offer such jackpots. In general, when jackpots increase, sales of lottery tickets also increase, further increasing the jackpot. We also believe that consumers in Italy monitor “late numbers” (numbers which have not been drawn for more than 100 draws) and when there is a good pipeline of late numbers, wagers in Italy increase. Under both of these circumstances, our service revenues are positively impacted.
Seasonality
:
Our business is not impacted significantly by seasonality. In our sports betting business, the volume of bets which we collect over the year are affected by the schedule of sports events and the particular season of that applicable sport. The volume of bets which we collect is also affected by schedules of other significant sporting events that occur at regular but infrequent intervals, such as the FIFA Football World Cup. Additionally, during the summer months, lottery consumption and gaming in general may decrease when consumers go on vacation.
Product Sales
:
Pursuant to product sales contracts, we construct, sell, deliver and install turnkey lottery or machine gaming systems or equipment and license the computer software for a fixed price. The customer then subsequently operates the system. We may also sell additional terminals and central computers to expand existing systems and/or replace existing equipment. Our product sales fluctuate from year to year due to the mix, volume and timing of the product sales transactions. In general, our product sales contracts are dependent on the timing of replacement cycles. In particular, the growth in product sales in 2013 was driven by a significant VLT replacement in Canada. Product
sales amounted to €254.2 million, €279.1 million, and €253.4 million, or approximately 8.3%, 9.1% and 8.2% of total revenues, in 2014, 2013 and 2012, respectively.
Restructuring Costs
:
During the historical periods presented we have undertaken restructuring plans and initiatives principally related to the streamlining of our interactive gaming operations, optimization projects for Lottery and costs associated with the overall management reorganization announced in 2013. We recorded restructuring costs associated with these plans of €18.4 million, €20.5 million,
and €0.8 million
in 2014, 2013, and 2012, respectively.
Penalties Under Minimum Profit Contracts
:
We have three contracts where we have provided customers with minimum profit level guarantees (the Illinois Contract, Indiana Contract and New Jersey Contract, which are discussed in further detail in “Critical Accounting Estimates—Minimum profit level guarantees”). In relation to the Illinois Contract, we guaranteed a minimum profit level to the State of Illinois for each fiscal year of the agreement, commencing with the State of Illinois’s fiscal year ended June 30, 2012. The amounts guaranteed and therefore amounts owed by the Company as shortfall payments under the Illinois Contract were under dispute. As part of the December 2014 global settlement of disputes in the termination contract between the Company and the State of Illinois, the shortfall payments the Company is required to make in relation to its obligation to guarantee minimum profit levels under the Illinois Contract for the fiscal years 2012, 2013 and 2014 have been agreed upon and settled for $21.8 million, $38.6 million and $37.1 million, respectively. No further cash impact will result from this shortfall payments final determination. The Company will not be responsible for the payment of any other shortfall payment, nor will it be entitled to receive any incentive compensation, for all or any portion of fiscal year 2015, or any subsequent fiscal year. In our 2014 fourth quarter we recorded $18.0 million (€14.8 million) as a reduction of service revenue related to the global settlement.
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Table of Contents
In relation to the Indiana Contract, we guaranteed a minimum profit level to the State of Indiana commencing with the contract year starting July 1, 2013. We recorded $17.6 million (€13.9 million) as a reduction of service revenue related to the minimum profit level guarantee in 2014 related to the State of Indiana’s fiscal years June 30, 2014 and June 30, 2015, of which $1.6 million was settled and related to the State of Indiana’s fiscal year ending June 30, 2014.
Settlement of Litigation Related to Machine Gaming and Certain Italian Tax Matters
:
In December 2014, the Company reached agreement with the Italian Tax Agency for the settlement of certain tax matters. The settlement payment was €15.1 million, which includes €13.0 million of tax and €2.0 million of interest and €0.1 million of penalties. Further, i
n December 2014, the Company implemented part of an internal reorganization, resulting in the realization of capital gains with related taxes of €27.2 million.
In our Italy segment, we recorded €30.0 million of expense in our financial statement for 2013 in relation to the settlement of litigation between the Italian machine gaming regulator and all machine gaming operators in Italy. We paid the settlement in the fourth quarter of 2013.
In December 2013, we paid €34.7 million to the Italian tax agency (
Agenzia delle Entrate
) in settlement of certain tax matters, of which €28 million involved the corporate reorganization and subsequent restructuring of certain intercompany financing transactions during the years 2007, 2008 and 2009 related to the acquisition of GTECH Holdings Corporation in August 2006. Of the €34.7 million settlement, €6.3 million had already been recorded as a provision in previous periods.
Research and Development Activities
:
We devote substantial resources on research and development and incurred €84.1 million, €77.6 million and €72.2 million of related expenses in 2014, 2013, and 2012, respectively. Following the completion of the acquisition of IGT (the “IGT Acquisition”), we expect our investments in research and development to increase.
Critical Accounting Estimates
The GTECH Consolidated Financial Statements have been prepared in conformity with International Financial Reporting Standards in accordance with IASB which require the use of estimates, judgments and assumptions that affect the carrying amount of assets and liabilities and the amounts of income and expenses recognized. The estimates and underlying assumptions are based on information available at the date that the financial statements are prepared, on historical experience, judgments and assumptions considered to be reasonable and realistic.
We periodically and continuously review the estimates and assumptions. Actual results for those areas requiring management judgment or estimates may differ from those recorded in the GTECH
Consolidated Financial Statements
due to the occurrence of events and the uncertainties which characterize the assumptions and conditions on which the estimates are based.
The areas which require greater subjectivity of management in making estimates and judgments and where a change in such underlying assumptions could have a significant impact on our GTECH
Consolidated Financial Statements
are discussed below.
Revenue Recognition
Revenue is recognized to the extent that it is probable the economic benefits associated with the transaction will flow to us and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts. Determining when the specific recognition criteria have been met requires us to make assumptions and exercise judgment that could significantly affect the timing and amount of revenue reported each period. The application of our revenue recognition policies and changes in our assumptions or judgments also affect the timing and amount of revenue and costs recognized. Determinations are subject to judgment and may change depending on the circumstances surrounding the substance or nature of the transactions.
60
Table of Contents
Impairment of Systems, Equipment and Other Assets Related to Contracts
The carrying values of systems, equipment and other assets related to contracts are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable. This requires management to make an estimate of the expected future cash flows from the assets and also to choose an appropriate discount rate in order to calculate the present value of those cash flows. The carrying amount of systems, equipment and other assets related to contracts at December 31, 2014 and December 31, 2013 was €910.1 million and €899.5 million, respectively. We recorded impairments of systems, equipment and other assets related to contracts of €0.7 million, €6.3 million and €6.2 million in 2014, 2013, and 2012, respectively.
Impairment of Goodwill
Goodwill is tested for impairment at least annually, or more frequently if facts or circumstances indicate that it may be impaired. The carrying amount of goodwill amounted to €3.4 billion and €3.1 billion at December 31, 2014 and December 31, 2013, respectively. There were no goodwill impairment charges recorded in 2014, 2013 or 2012.
For the purposes of impairment testing, goodwill and intangible assets with indefinite useful lives are allocated to operating segments or to cash generating units (“CGUs”) within the operating segments, which represent the lowest level at which goodwill is monitored for internal management purposes in accordance with IAS 36—
Impairment of Assets
. The impairment test is performed by comparing the carrying amount and the recoverable amount of each CGU or group of CGUs to which goodwill has been allocated. The recoverable amount of a CGU is the higher of its fair value less costs of disposal and its value in use.
The impairment test requires an estimation of the
“
fair value less costs of disposal
”
of the CGU. Estimating a fair value less costs of disposal amount requires management to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows.
We have six CGUs, comprising four cash generating units in Italy, with Americas and International each being a single cash generating unit. A portion of the carrying amount of goodwill and intangible assets with indefinite lives could not be allocated to the individual CGUs in Italy on a non-arbitrary basis and was therefore allocated (as permitted by IAS 36) to the group of four CGUs in Italy (Italy region).
The recoverable amounts and carrying amounts of the Company’s cash generating units are summarized as follows:
|
(€ thousands)
|
|
Recoverable
Amount
|
|
Carrying Amount
|
|
Excess
|
|
|
Italy region
|
|
2,560,000
|
|
2,137,626
|
|
422,374
|
|
|
Italy:
|
|
|
|
|
|
|
|
|
Lottery
|
|
2,070,000
|
|
970,771
|
|
1,099,229
|
|
|
Commercial Services
|
|
190,000
|
|
180,168
|
|
9,832
|
|
|
Sports Betting
|
|
300,000
|
|
103,835
|
|
196,165
|
|
|
Machine Gaming
|
|
700,000
|
|
382,175
|
|
317,825
|
|
|
Americas
|
|
2,726,299
|
|
2,346,951
|
|
379,348
|
|
|
International
|
|
1,531,999
|
|
950,940
|
|
581,059
|
|
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Table of Contents
The after-tax discount rates and annual growth rates needed to render the recoverable amounts equal to the carrying amounts are as follows:
|
|
|
After-Tax
Discount Rate
|
|
Annual Growth Rate
After 2019
|
|
|
Italy region
|
|
10.45
|
%
|
-1.96
|
%
|
|
Italy:
|
|
|
|
|
|
|
Lottery
|
|
16.65
|
%
|
-13.86
|
%
|
|
Commercial Services
|
|
7.79
|
%
|
-0.35
|
%
|
|
Sports Betting
|
|
19.05
|
%
|
-17.32
|
%
|
|
Machine Gaming
|
|
19.97
|
%
|
-27.32
|
%
|
|
Americas
|
|
8.00
|
%
|
2.18
|
%
|
|
International
|
|
12.28
|
%
|
-2.23
|
%
|
Impairment of Intangible Assets
Intangible assets with indefinite useful lives are tested for impairment at least on an annual basis or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Intangible assets with finite useful lives are assessed for impairment whenever there is an indication that the intangible asset may not be recoverable. This requires us to make an estimate of the expected future cash flows from the assets and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of intangible assets at December 31, 2014 and December 31, 2013 was €1.2 billion and €1.3 billion, respectively. We recorded an impairment recovery of €2.4 million in 2014 and impairment charges of €2.6 million and €1.1 million in 2013 and 2012, respectively.
Litigation Provisions
Due to the nature of our business, we are involved in a number of legal, regulatory and arbitration proceedings regarding, among other matters, claims by and against us, injunctions by third parties arising out of the ordinary course of our business and investigations and compliance inquiries related to our ongoing operations. The outcome of these proceedings and similar future proceedings cannot be predicted with certainty. It is difficult to accurately estimate the outcome of any proceeding. As such, the amounts of the provision for litigation risk, which has been accrued on the basis of assessments made by external counsel, could vary significantly from the amounts which we would ultimately be obligated or agree to pay to settle any such proceeding. In addition, unfavorable resolution of or significant delay in adjudicating such proceedings could require us to pay substantial monetary damages or penalties and/or incur costs which may exceed any provision for litigation risks or, under certain circumstances, cause the termination or revocation of the relevant concession, license or authorization and thereby have a material adverse effect on our consolidated results of operations, business, financial condition or prospects. At December 31, 2014 and December 31, 2013, provisions for litigation matters amounted to €5.6 million and €8.5 million, respectively.
Share-based Payments
We measure the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments on the date they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant, and incorporates assumptions to the valuation model inputs, including the expected life of the option, volatility, dividend yield and risk-free interest rate. We recorded share-based payment expense of €7.8 million, €8.6 million and €12.3 million in 2014, 2013, and 2012, respectively.
Minimum Profit Level Guarantees
We have three contracts where we have provided customers with minimum profit level guarantees as summarized below. Our estimates of liabilities for minimum profit level guarantees take into consideration contract terms and financial information provided by our customers, the availability and timing of which could significantly impact our estimates. At the inception of the contract, we estimate whether we expect to incur an obligation for the minimum profit level guarantee during the term of the contract. In the event a liability for the obligation is required, we record a liability based on our estimate with an offsetting asset as we consider it to be a cost incurred directly related to the future benefits of the contract. We amortize the asset over the contract term as a reduction of service revenue. In situations where the Company and the customer have not agreed to the methodology for calculating the
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Table of Contents
minimum profit level guarantee, the Company continues to adjust the estimated liability with an offset to the asset until the Company and the customer reach a mutual understanding on the methodology. Any difference between the liability recorded and the actual amount owed to the customer is recorded as an adjustment to service revenue in the period when such difference becomes probable.
Northstar
In January 2011, Northstar Lottery Group, LLC (
“Northstar”)
, a consortium in which GTECH Corporation holds an 80% controlling interest, entered into a ten-year lottery management services contract (the “Illinois Contract”), subject to early termination provisions, with the State of Illinois, acting through the Department of the Lottery (as the statutory successor to the Department of Revenue, Lottery Division) (the “State of Illinois”). Under the Illinois Contract, Northstar, subject to the State of Illinois’s oversight, manages the day-to-day operations of the lottery and its core functions. Northstar guaranteed the State of Illinois a minimum profit level for each fiscal year of the Illinois Contract, commencing with the State of Illinois’s fiscal year ended June 30, 2012. The amounts guaranteed and therefore owed by Northstar as shortfall payments under the Illinois Contract were in dispute.
In August 2014, the Illinois Governor’s Office directed the State of Illinois to end its relationship with Northstar, and in December 2014, the Illinois Contract was terminated pursuant to a termination agreement between Northstar, GTECH Corporation, Scientific Games International, Inc. (“SGI”), and the State of Illinois. Northstar will continue to provide lottery management services in Illinois for a transitional period, as outlined in the termination agreement. GTECH Corporation will retain its separate facilities management contract through June 30, 2021. Over one month after its execution by the Governor of Illinois and the State of Illinois, the Illinois Attorney General notified the State of Illinois that it “disapproves” of the “proposed” termination agreement. Relying on the Attorney General’s “disapproval,” the Governor’s Office informed Northstar that it believed the termination agreement was invalid and unenforceable and therefore the Illinois Contract remained in effect. Both Northstar and GTECH Corporation believe that the termination agreement is valid and binding on the parties.
As part of the December 2014 global settlement of disputes in the termination agreement between Northstar, GTECH Corporation, SGI, and the State of Illinois, the shortfall payments Northstar is required to make in relation to its obligation to guarantee minimum profit levels under the Illinois Contract for the fiscal years 2012, 2013 and 2014 have been agreed upon and settled for $21.8 million, $38.6 million and $37.1 million, respectively. No further cash impact will result from this shortfall payments final determination. Northstar will not be responsible for the payment of any other shortfall payment, nor will it be entitled to receive any incentive compensation, for all or any portion of fiscal year 2015, or any subsequent fiscal year.
Included in non-current assets on our consolidated statement of financial position at December 31, 2014 is €56.1 million related to the minimum revenue guarantee which we are amortizing against service revenue over its estimated useful life. See Notes 22 and
38 to the
GTECH
Consolidated Financial Statements
included herein for further information.
GTECH Indiana
In October 2012, GTECH Indiana, LLC (
“GTECH Indiana”), a wholly owned subsidiary of GTECH Corporation, entered into a 15-year contract with the State Lottery Commission of Indiana (the “State of Indiana”) whereby GTECH Indiana manages the day-to-day operations of the lottery and its core functions, subject to the State of Indiana’s control over all significant business decisions. GTECH Indiana guaranteed the State of Indiana a minimum profit level in each year of the contract, commencing with the contract year ending June 30, 2014.
We recorded $17.6 million (€13.9 million) as a reduction of service revenue related to the minimum profit level guarantee in 2014 for the State of Indiana’s fiscal years ending June 30, 2014 and June 30, 2015, of which $1.6 million was settled and related to the State of Indiana’s fiscal year ending June 30, 2014.
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Table of Contents
Northstar New Jersey
In June 2013, Northstar New Jersey Lottery Group, LLC (
“Northstar NJ”), a consolidated joint venture in which GTECH Corporation indirectly holds an approximate 41% interest, entered into a contract with the State of New Jersey (the “State of New Jersey”), Department of the Treasury, Division of Purchase and Property and Division of Lottery (the “New Jersey Lottery”) whereby Northstar NJ manages a wide range of the New Jersey Lottery’s marketing, sales, and related functions, which is subject to the New Jersey Lottery’s continuing control and oversight over the conduct of lottery operations. Northstar NJ guaranteed the State of New Jersey a minimum profit level in each year of the contract, commencing with the contract year ending June 30, 2014.
At December 31, 2014, our best estimate, based on unaudited results, is that the impact of a Net Income Shortfall will result in the use of $14.2 million (€11.7 million at the December 31, 2014 exchange rate) of Northstar NJ’s $20 million credit for the State’s fiscal year ended June 30, 2014 and therefore we have not recorded any amounts in our GTECH
Consolidated Financial Statements
related to the minimum profit level guarantee. Based on information available to date, the Company currently believes that the impact of any Net Income Shortfalls for the remaining term of the arrangement with the State of New Jersey will not exceed the remaining balance of $5.8 million of Northstar NJ’s $20 million credit.
Further details of these guarantees, which require management to make estimates and assumptions concerning profit levels, are provided in Note 38 to the GTECH
Consolidated Financial Statements
included herein.
Income Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Due to the wide range of our international business relationships and the long-term nature and complexity of our contracts, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to taxable income and income tax expense already recorded. We record provisions for income tax expense, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which we operate. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of our companies.
Deferred tax assets are recognized for unused tax losses and tax credits to the extent that it is probable that taxable income will be available against which the losses and tax credits can be utilized. Significant judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income together with future tax planning strategies.
Based upon the consideration of these factors, the value of deferred tax assets related to operating losses and tax assets related to tax credits are as follows:
|
|
|
December 31,
|
|
|
(€ millions)
|
|
2014
|
|
2013
|
|
|
Recognized deferred tax assets related to operating losses
|
|
90.9
|
|
96.1
|
|
|
Unrecognized deferred tax assets related to operating losses
|
|
63.4
|
|
53.6
|
|
|
Recognized deferred tax assets related to tax credits
|
|
2.5
|
|
1.8
|
|
|
Unrecognized deferred tax assets related to tax credits
|
|
21.2
|
|
18.7
|
|
Contingent Consideration Resulting from Business Combinations
We have made a number of minor acquisitions in the Italy segment consisting of strategic investments to exploit growth opportunities in the sports betting and machine gaming markets. Some of these acquisitions include provisions for the payment of contingent consideration if certain wager or network performance conditions are achieved. Contingent consideration resulting from business combinations is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently re-measured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions include the probability of meeting each performance target and the discount factor. At December 31, 2014 and 2013, our consolidated statement of financial position includes €1.0 million and €1.2 million, respectively, of contingent consideration payable within current and non-current liabilities.
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Table of Contents
Income Statement Overview
Revenue
Our revenue comprises service revenue and product sales. Our service revenue is principally derived from multi-year contracts under which we earn revenue over time as we provide the related services. Service revenue comprises the majority of our revenue, amounting to €2.8 billion, or approximately 91.7% of total revenues in 2014. Product sales are derived principally from the installation of new and replacement systems, software and terminals. Product sales in our business fluctuate due to the mix, volume and timing of product sales contracts and therefore may not be comparable from period to period.
Summarized below by operating segment are the principal services and products we provide:
Italy Segment
The majority of the revenue we earn in the Italy segment is derived from Lottery and Machine Gaming concessions which amounted to €1.4 billion, or approximately 78.4% of our Italy segment service revenues in 2014. We also earn service revenue under Sports Betting, Commercial Services and Interactive Gaming concessions. Summarized below is an overview of the key services within the Italy segment:
Lottery
Under our Lotto and
Gratta e Vinci
(
“
Scratch and Win”) concessions we manage all of the activities along the value chain, including collecting wagers, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials for the games. The service revenues we earn in return for operating these concessions are based on a percentage of wagers. For the Lotto Concession this percentage of wagers decreases as the total wagers increase during an annual period, while for the Scratch and Win concession our fee is a fixed percentage of wagers. ADM pays us our Lotto fee on a weekly basis and our Scratch and Win fee on a monthly basis. For Lotto, we deposit wagers, net of prizes paid and retailer commissions retained by the retailer at point of sale into bank accounts owned by ADM. We do not consolidate such accounts on our consolidated statement of financial position as they are the property of ADM. Scratch and Win sales to the retailers are recorded as a receivable on our consolidated statement of financial position with a corresponding payable to ADM. We collect Scratch and Win wagers from retailers, net of prizes paid directly by retailers and the retailers’ fee, on a weekly basis. On a monthly basis, we remit amounts due to ADM. Expenses associated with providing services under these concessions principally consist of consumable costs, postage and freight, network costs, marketing and advertising of the games, cost of personnel dedicated to these activities and depreciation and amortization of tangible and intangible assets.
Machine Gaming
Under our Machine Gaming concessions we directly manage amusement with prize (AWP) machines and video lottery terminals (VLTs) that are installed in various retail outlets linked to a central system. For machine gaming we collect the wagers, deduct the applicable gaming taxes, and pay prizes to winners and fees to retailers. The service revenue we earn in return for operating these concessions is generally based on a percentage of wagers net of applicable gaming taxes. We record service revenue net, equal to total wagers less the payout for prizes and applicable gaming taxes. Expenses associated with providing services under these concessions principally consist of point-of-sale fees, network costs, marketing and advertising of the games, cost of personnel dedicated to these activities, concession fees and depreciation and amortization of tangible and intangible assets. We also provide systems and machines to other machine gaming concessionaires, either as a product sale or with long-term fee-based contracts.
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Table of Contents
Sports Betting
We have a number of concessions to operate sports betting (including horse race competitions) and the
right to operate sports betting over the internet. Sports betting concessions principally comprise arrangements under which we collect the wagers, pay prizes and pay fees to retailers. We retain the remaining cash as our profit, after paying gaming taxes. We record service revenue net, equal to total wagers less the estimated payout for prizes. Expenses associated with providing services under these concessions principally consist of point-of-sale commissions, taxes and depreciation and amortization of tangible and intangible assets.
Commercial Transaction Processing Services
We leverage our distribution networks and offer high-volume transaction processing services which include bill payments, electronic tax payments, utility payments, prepaid cellular telephone recharges, prepaid cards and retail-based programs. We earn a fee for processing such transactions that is transaction-based (a fixed fee per transaction or a fee based on a percentage of monetary volume processed). We recognize these fees as service revenue at the time a transaction is processed. Expenses associated with providing services under these concessions principally consist of point-of-sale commissions, network costs, banking fees and depreciation of tangible assets.
Interactive Gaming
We provide interactive skill games such as poker and other board and soft games through
the Internet and mobile channels. For these services, we generally record service revenue equal to
wagers less prizes and taxes.
Expenses associated with providing services
under these concessions principally consist of marketing and advertising of the games and taxes.
Americas and International Segments
The majority of the revenue we earn in the Americas and International segments is derived from lottery and machine gaming contracts which amounted to €1.22 billion, or approximately 92.2% of our total revenues in these segments in 2014. We also earn service revenue under Sports Betting, Commercial Services and Interactive Gaming contracts.
Lottery and Machine Gaming
Lottery and machine gaming service revenue in the Americas and International segments is derived from contracts, under which we design, install, operate and retain ownership of the gaming system. These contracts generally provide for a variable amount of monthly or weekly service fees paid to us directly from our customer based on a percentage of sales or net machine income. We recorded fees earned under these contracts as service revenue in the period earned. Expenses associated with providing services under these contracts principally consist of cost of personnel, telecommunications, equipment maintenance and repair, consumables for the games and depreciation of tangible assets.
Lottery and machine gaming product sales in the Americas and International segments are derived from contracts under which we construct, sell, deliver and install a turnkey system or deliver equipment, and license the computer software for a fixed price, and our customer subsequently operates the system or equipment. Revenue attributable to any ongoing services (such as post-contract support) provided subsequent to customer acceptance, are recorded as service revenue in the period earned.
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Table of Contents
Operating Costs
Raw Materials, Services and Other Costs
Raw materials, services and other costs principally comprise the following:
·
Operating expenses—principally including:
·
point-of-sale fees—fees paid to point-of-sale retailers for gaming and commercial transactions;
·
concession fees—fees paid to governmental bodies principally in the Italy segment for machine gaming;
·
advertising and marketing costs—costs incurred to promote and advertise gaming goods and services, including advertising, designing advertising campaigns, producing marketing collateral, booth space at trade shows and conducting market research;
·
trransportation and postage costs relating to delivering lottery tickets to the points of sale, maintenance and repair costs for terminals; and
·
license fees—fees paid to third parties for the ongoing use of their proprietary solutions in customer locations or internally.
·
outside services—costs associated with outside service providers, including technical and financial services and government relations;
·
cost of product sales—the costs directly attributable to our product sales, including material, personnel and overhead costs;
·
consumables—cost for materials used by consumers and retailers in a point-of-sale location, including instant ticket stock, printer receipt paper rolls, selection slips, terminal ribbons, pop-up cards, sports tickets, better play slips and receipts and advertising brochures;
·
insurance, miscellaneous taxes and other—costs, including workers compensation, property and vehicle insurance and property, sales and use, franchise, municipal and VAT taxes;
·
occupancy—costs incurred for the occupation and maintenance of business facilities, including facility operating leases, rentals, utilities, facility maintenance, and environmental compliance;
·
telecommunications—costs associated with using third party communications networks, including telephone, mobile, Internet and satellite for internal and external networks; and
·
travel—costs incurred by employees while traveling on Company business or conducting business, including airfare, lodging, car rentals and meals.
Personnel
Personnel expenses primarily include the wages and salaries expense related to our workforce, incentive and stock compensation, which is performance-based, statutory benefits such as social security contributions and staff severance fund costs in Italy and Company benefits provided to the employees, such as healthcare plans.
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Table of Contents
Depreciation
Depreciation relates to the depreciation of systems, equipment and other assets related to contracts over their estimated useful life and, to a lesser extent, depreciation of property, plant, and equipment. Systems, equipment and other assets relate to assets that primarily support our operating contracts and facilities management contracts. The cost of such assets generally comprises (1) hard costs (for example—terminals, mainframe computers, and communications equipment) which are generally depreciated over the base term of the contract plus any extension period defined in the contract, up to a maximum of ten years and (2) soft costs (for example—software development) which are generally depreciated over the base term of the contract defined in the contract, up to a maximum of ten years.
Amortization
Amortization expense relates to the amortization of intangible assets over their estimated useful life. Our amortization expense primarily relates to concessions and licenses and, to a lesser extent, customer contracts, capitalized computer software and sports betting and horse racing betting rights.
Impairment Loss (Recovery), Net
Impairment loss (recovery), net relates to the net amount of impairment losses and recoveries of impairment losses. Impairment losses relate to the write-down of systems, equipment and other assets related to contracts, intangible assets and investments in associates and joint ventures. In circumstances where there is objective evidence that the impairment loss no longer exists, we record an impairment recovery.
Capitalization of Internal Construction Costs
Capitalization of internal construction costs primarily comprises internal personnel costs and, to a lesser extent, overhead costs incurred in the construction of assets for facilities management contracts and product sale contracts. These costs are principally recorded within Personnel in our consolidated income statement. The costs directly related to the construction of such assets is credited to the income statement in the line item “Capitalization of internal construction costs” and recorded in the
statement of financial position
as follows:
·
Facilities management contracts
:
internal labor and overhead costs directly related to the construction of assets under facility management contracts are capitalized as “Systems equipment and other assets related to contracts” in our consolidated statements of financial position. During the construction phase such costs are recorded as “Contracts in Progress,” and once the asset becomes available for use such costs are reclassified to the appropriate category within “Systems equipment and other assets related to contracts.” The majority of costs relate to terminals and systems. Depreciation of the asset commences once the asset enters into operation.
·
Product sales contracts
:
internal labor and overhead costs directly related to the construction of assets for product sales contracts are recorded as inventories on our consolidated statements of financial position. Once the revenue recognition criteria have been met, the cost is transferred from inventories to cost of product sales within the consolidated income statement caption “Raw materials, services and other costs.”
Unusual Expense, Net
Starting from the preparation of the unaudited interim condensed consolidated income statement for the three months ended September 30, 2014, we have presented “Unusual expense, net” as a separate line item on our consolidated income statement. Unusual items recorded within this line item include transaction costs on significant business combinations and significant gains and losses incurred on disposals of group entities or businesses. Such items are classified as unusual as they are only incidentally related to our ordinary activities, are not expected to occur frequently, and hinder comparability of our period-over-period performance. Due to the significance and magnitude of these items, we believe that separate identification of this line item allows the users of the financial statements to take them into appropriate consideration when analyzing our performance and assists them in understanding our financial performance period over period.
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Table of Contents
Non-Operating Costs
Interest Income
Interest income comprises the interest which we earn on cash and financial assets.
Equity Loss, Net
Equity loss, net comprises our share of the results of operations of associates and joint ventures over which we have significant influence but not control or joint control.
Other Income
Other income primarily relates to non-operating gains such as discounts taken.
Other Expense
Other expense primarily relates to non-operating costs such as securitization and other financing fees.
Foreign Exchange Loss, Net
Foreign exchange loss, net represents the gain or loss on transactions in currencies other than an entity’s functional currency.
Interest Expense
Interest expense relates to the interest costs in connection with our financial liabilities.
Other Measures
We also use certain additional key performance indicators and terminology, which in our view are useful in explaining the trends of our business, including:
Constant Currency Information
The “Consolidated Results” discussion below includes information calculated at constant currency. We calculate constant currency by applying the prior-year/period average exchange rates to current financial data expressed in local currency in order to eliminate the impact of foreign exchange rate fluctuations originating from translating the income statement of our foreign entities into the euro. These constant currency measures are non-GAAP measures. Although we do not believe that these measures are a substitute for GAAP measures, we do believe that such results excluding the impact of currency fluctuations period-on-period provide additional useful information to investors regarding our operating performance on a local currency basis.
For example, if an entity with U.S. dollar functional currency recorded net revenues of U.S. $100 million for 2014 and 2013, we would report €75.2 million in net revenues for 2014 (using an average exchange rate of 1.33) compared to €76.9 million for 2013 (using an average exchange rate of 1.30). The constant currency presentation would translate the 2014 net revenue using the 2013 exchange rates, and indicate that the underlying net revenue on a constant currency basis were unchanged year-on-year. We present such information in order to assess how the underlying business has performed prior to the translation impact of fluctuations in foreign currency exchange rates.
Same Store Revenue
We refer to the growth in sales from existing customers as same store revenue. Revenue generated from new customers are referred to as “new contracts” or “contract wins.”
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Table of Contents
Late Numbers
If one of the 90 numbers of the Lotto game in Italy has not been drawn for one hundred drawings, it becomes a late number, or a “centenarian.” We believe that consumers in Italy monitor late numbers and wager more on them than on other numbers, although the probability for a number to be drawn is always the same, being it a centenarian or not. Our service revenue is favorably impacted by an increase in late number wagers as is the case when there is a good pipeline of late numbers.
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Table of Contents
Comparison of the Year Ended December 31, 2014 and 2013
|
|
|
For the Year Ended
|
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(
€ thousands)
|
|
€
|
|
% of Revenue
|
|
€
|
|
% of Revenue
|
|
|
Service revenue
|
|
2,815,410
|
|
91.7
|
|
2,783,727
|
|
90.9
|
|
|
Product sales
|
|
254,243
|
|
8.3
|
|
279,107
|
|
9.1
|
|
|
Total revenue
|
|
3,069,653
|
|
100.0
|
|
3,062,834
|
|
100.0
|
|
|
Raw materials, services and other costs
|
|
1,548,934
|
|
50.5
|
|
1,585,303
|
|
51.8
|
|
|
Personnel
|
|
571,618
|
|
18.6
|
|
568,266
|
|
18.6
|
|
|
Depreciation
|
|
249,477
|
|
8.1
|
|
254,599
|
|
8.3
|
|
|
Amortization
|
|
206,336
|
|
6.7
|
|
189,684
|
|
6.2
|
|
|
Impairment loss (recovery), net
|
|
(2,195
|
)
|
(0.1
|
)
|
6,058
|
|
0.2
|
|
|
Capitalization of internal construction costs
|
|
(100,788
|
)
|
(3.3
|
)
|
(100,208
|
)
|
(3.3
|
)
|
|
Unusual expense, net
|
|
29,242
|
|
1.0
|
|
—
|
|
0.0
|
|
|
|
|
2,502,624
|
|
81.5
|
|
2,503,702
|
|
81.7
|
|
|
Operating income
|
|
567,029
|
|
18.5
|
|
559,132
|
|
18.3
|
|
|
Interest income
|
|
3,658
|
|
0.1
|
|
3,334
|
|
0.1
|
|
|
Equity loss, net
|
|
(1,514
|
)
|
0.0
|
|
(965
|
)
|
0.0
|
|
|
Other income
|
|
4,007
|
|
0.1
|
|
1,131
|
|
0.0
|
|
|
Other expense
|
|
(79,977
|
)
|
(2.6
|
)
|
(11,177
|
)
|
(0.4
|
)
|
|
Foreign exchange loss, net
|
|
(1,413
|
)
|
0.0
|
|
(2,309
|
)
|
(0.1
|
)
|
|
Interest expense
|
|
(204,211
|
)
|
(6.7
|
)
|
(163,074
|
)
|
(5.3
|
)
|
|
|
|
(279,450
|
)
|
(9.1
|
)
|
(173,060
|
)
|
(5.7
|
)
|
|
Income before income tax expense
|
|
287,579
|
|
9.4
|
|
386,072
|
|
12.6
|
|
|
Income tax expense
|
|
189,970
|
|
6.2
|
|
180,837
|
|
5.9
|
|
|
Net income
|
|
97,609
|
|
3.2
|
|
205,235
|
|
6.7
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
83,309
|
|
2.7
|
|
175,434
|
|
5.7
|
|
|
Non-controlling interest
|
|
14,300
|
|
0.5
|
|
29,801
|
|
1.0
|
|
|
|
|
97,609
|
|
3.2
|
|
205,235
|
|
6.7
|
|
71
Table of Contents
Service Revenue
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
|
|
Italy
|
|
1,742,632
|
|
1,734,246
|
|
8,386
|
|
0.5
|
|
|
Americas
|
|
827,564
|
|
800,959
|
|
26,605
|
|
3.3
|
|
|
International
|
|
244,666
|
|
247,980
|
|
(3,314
|
)
|
(1.3
|
)
|
|
|
|
2,814,862
|
|
2,783,185
|
|
31,677
|
|
1.1
|
|
|
Purchase accounting
|
|
548
|
|
542
|
|
6
|
|
1.1
|
|
|
|
|
2,815,410
|
|
2,783,727
|
|
31,683
|
|
1.1
|
|
Service revenue in 2014 increased by €31.7 million, or 1.1% compared to 2013. On a constant currency basis, service revenue in 2014 increased by €34.6 million, or 1.2% compared to 2013.
Service revenue in the Italy segment in 2014 increased by €8.4 million, or 0.5% compared to 2013, principally driven by an increase in sports betting revenues of €19.8 million, which were partially offset by a decrease in machine gaming revenues of €11.0 million.
Service revenue in the Americas segment in 2014 increased by €26.6 million, or 3.3%, compared to 2013, principally driven by an increase in lottery service revenues of €17.8 million and a net increase of €5.7 million in service revenues from Lottery Management Services agreements in New Jersey, Illinois, and Indiana. These increases were partially offset by unfavorable foreign exchange impacts of €5.0 million. On a constant currency basis, service revenue in the Americas segment increased by €31.6 million, or 3.9% compared to 2013.
Service revenue in the International segment decreased by €3.3 million, or 1.3% compared to 2013, principally driven by a decrease in lottery service revenues of €7.6 million. On a constant currency basis, service revenues in the International segment in 2014 decreased by €5.7 million, or 2.3% compared to 2013.
Further information on the key performance drivers related to service revenues is provided in the Operating segment section of this report.
Product Sales
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Americas
|
|
161,139
|
|
193,126
|
|
(31,987
|
)
|
(16.6
|
)
|
|
International
|
|
90,556
|
|
83,137
|
|
7,419
|
|
8.9
|
|
|
Italy
|
|
2,548
|
|
2,844
|
|
(296
|
)
|
(10.4
|
)
|
|
|
|
254,243
|
|
279,107
|
|
(24,864
|
)
|
(8.9
|
)
|
Product sales fluctuate from period to period due to the mix, volume and timing of product sales transactions. Product sales in 2014 decreased by €24.9 million, or 8.9% compared with 2013. On a constant currency basis, product sales in 2014 decreased by €19.3 million, or 6.9% compared to 2013.
Product sales in the Americas segment in 2014 decreased by €32.0 million, or 16.6% compared to 2013, principally driven by a decrease in machine gaming sales associated with the Canadian VLT replacement cycle, principally to customers in Quebec and Saskatchewan and unfavorable foreign exchange impacts. These decreases were partially offset by an increase in 2014 in Lottery product sales principally to customers in California and Pennsylvania. On a constant currency basis, product sales in 2014 decreased by €25.0 million or 12.9% compared to 2013.
72
Table of Contents
Product sales in the International segment in 2014 increased by €7.4 million, or 8.9% compared to 2013, principally driven by an increase in Lottery product sales of €6.7 million. On a constant currency basis, product sales in 2014 increased by €5.9 million or 7.1% compared to 2013.
Further information on the key performance drivers related to product sales is provided in the Operating segment section of this report.
Raw materials, services and other costs
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Operating expenses
|
|
778,785
|
|
813,594
|
|
(34,809
|
)
|
(4.3
|
)
|
|
Outside services
|
|
258,247
|
|
234,603
|
|
23,644
|
|
10.1
|
|
|
Cost of product sales
|
|
145,089
|
|
161,176
|
|
(16,087
|
)
|
(10.0
|
)
|
|
Consumables
|
|
116,669
|
|
125,664
|
|
(8,995
|
)
|
(7.2
|
)
|
|
Insurance, taxes and other
|
|
103,621
|
|
100,817
|
|
2,804
|
|
2.8
|
|
|
Occupancy
|
|
67,716
|
|
59,161
|
|
8,555
|
|
14.5
|
|
|
Telecommunications
|
|
52,002
|
|
57,794
|
|
(5,792
|
)
|
(10.0
|
)
|
|
Travel
|
|
26,354
|
|
31,246
|
|
(4,892
|
)
|
(15.7
|
)
|
|
Write-down of inventories
|
|
451
|
|
1,248
|
|
(797
|
)
|
(63.9
|
)
|
|
|
|
1,548,934
|
|
1,585,303
|
|
(36,369
|
)
|
(2.3
|
)
|
Raw materials, services and other costs in 2014 decreased by €36.4 million, or 2.3% compared to 2013, principally driven by a decrease in Operating expenses and Cost of product sales, which were partially offset by a €23.6 million increase in Outside services costs. As a percentage of revenues, raw materials, services and other costs amounted to 50.5% and 51.8% in 2014 and 2013, respectively. On a constant currency basis, Raw materials, services and other costs in 2014 decreased by €31.7 million, or 2.0% compared to 2013.
Operating expenses in 2014 decreased by €34.8 million driven by a €46.7 million decrease in the Italy segment principally related to the €30.0 million provision for AWP litigation, which was recorded in the third quarter of 2013.
Cost of product sales in 2014 decreased by €16.1 million principally due to the €24.9 million decrease in product sales. As a percentage of revenues from product sales, cost of product sales amounted to 57.1% and 57.7% in 2014 and 2013, respectively.
Outside services costs in 2014 increased by €23.6 million principally related to €12.0 million of costs which are principally reimbursable, associated with Lottery Management Services Agreements in New Jersey and Indiana which commenced operations on October 1, 2013 and July 1, 2013, respectively; and an increase of €14.1 million of cost in the Italy segment principally related to the reclassification of certain items to better reflect the nature of the costs.
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Table of Contents
Personnel
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Payroll
|
|
420,202
|
|
413,306
|
|
6,896
|
|
1.7
|
|
|
Incentive compensation
|
|
50,918
|
|
53,536
|
|
(2,618
|
)
|
(4.9
|
)
|
|
Statutory benefits
|
|
40,791
|
|
42,543
|
|
(1,752
|
)
|
(4.1
|
)
|
|
Company benefits
|
|
36,514
|
|
35,288
|
|
1,226
|
|
3.5
|
|
|
Share-based payment
|
|
7,768
|
|
8,611
|
|
(843
|
)
|
(9.8
|
)
|
|
Net benefits for staff severance fund
|
|
4,861
|
|
4,887
|
|
(26
|
)
|
(0.5
|
)
|
|
Other
|
|
10,564
|
|
10,095
|
|
469
|
|
4.6
|
|
|
|
|
571,618
|
|
568,266
|
|
3,352
|
|
0.6
|
|
Personnel expense in 2014 increased by €3.4 million, or 0.6% compared to 2013. On a constant currency basis, Personnel expense in 2014 increased by €2.5 million, or 0.4% compared to 2013.
The increase in Personnel expense of €3.4 million in 2014 was principally driven by an increase in payroll expense of €6.9 million related to annual salary increases, partially offset by a decrease of €2.6 million in incentive compensation which is performance based and a decrease in statutory benefits of €1.8 million due to a reduction in employees at our Vaxjo Office in Sweden in October 2013 related to the outsourcing of certain interactive gaming activities previously conducted internally in Sweden. Our average number of employees during 2014 and 2013 was 8,737 and 8,726, respectively. As a percentage of revenues, personnel costs amounted to 18.6% in both 2014 and 2013.
Depreciation
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Systems, equipment and other assets related to contracts
|
|
235,791
|
|
241,257
|
|
(5,466
|
)
|
(2.3
|
)
|
|
Property, plant and equipment
|
|
13,686
|
|
13,342
|
|
344
|
|
2.6
|
|
|
|
|
249,477
|
|
254,599
|
|
(5,122
|
)
|
(2.0
|
)
|
Depreciation expense in 2014 decreased by €5.1 million, or 2.0% compared to 2013, principally driven by changes to the estimated useful lives of Machine Gaming terminals in the Italy segment and lottery system assets in the Americas segment to reflect the longer useful lives that we determined were associated with those assets. We periodically evaluate the useful lives of assets used in our business and make appropriate adjustments to useful lives whenever necessary.
Amortization
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Amortization expense
|
|
206,336
|
|
189,684
|
|
16,652
|
|
8.8
|
|
|
|
|
206,336
|
|
189,684
|
|
16,652
|
|
8.8
|
|
74
Table of Contents
Amortization expense in 2014 increased by €16.7 million, or 8.8% compared to 2013, driven by an increase in amortization expense of €5.7 million in the Italy segment related to the acquisition of intangible assets in 2013 and 2014, principally composed of concessions and licenses, software and sports betting rights, and an increase in amortization expense of €4.6 million in the Americas segment related to the June 2013 upfront payment of $120 million (€91.7 million) required under the Services Agreement that Northstar New Jersey Lottery Group, LLC signed with the State of New Jersey to manage a wide range of the lottery’s marketing, sales and related functions. Amortization of the upfront payment commenced in October 2013.
Capitalization of Internal Construction Costs
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Capitalization of internal construction costs
|
|
(100,788
|
)
|
(100,208
|
)
|
580
|
|
0.6
|
|
|
|
|
(100,788
|
)
|
(100,208
|
)
|
580
|
|
0.6
|
|
Capitalization of internal construction costs fluctuates based on the volume and timing of new business and requirements of existing customers. Capitalization of internal construction costs in 2014 increased by €0.6 million, or 0.6% compared to 2013.
Unusual Expense, Net
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
IGT acquisition costs
|
|
34,986
|
|
—
|
|
34,986
|
|
—
|
|
|
Gain on sale of ticketing business
|
|
(5,744
|
)
|
—
|
|
(5,744
|
)
|
—
|
|
|
|
|
29,242
|
|
—
|
|
29,242
|
|
—
|
|
On July 15, 2014, we entered into an Agreement and Plan of Merger with IGT. We recorded €35.0 million of professional fees and expenses related to the potential acquisition of IGT in 2014.
In July 2014, we sold our sports and events ticketing business (“LisTicket”) to the international operator TicketOne, CTS Eventim Group for €13.9 million and recorded a gain on the sale of €5.7 million.
Operating Income
Operating income in 2014 was €567.0 million, an increase of €7.9 million, or 1.4% compared to 2013. The increase was principally due to an increase in operating income of €43.8 million in the Italy segment, principally driven by the absence of the provision of €30.0 million for AWP litigation, which was recorded in the third quarter of 2013. Operating income also benefited from an increase in operating income in the International segment of €23.1 million principally related to the increase in product sales and a change in contract terms with a European lottery customer, which lowered revenue yet increased profit. These increases were partially offset by a decrease of €33.6 million in operating income from the Americas segment principally due to a decrease of €41.1 million from Lottery Management Services agreements in Indiana, Illinois and New Jersey related to non-reimbursable expenses and contractual penalties associated with minimum profit level guarantees. Operating income was further impacted by an increase in corporate support expenses of €27.1 million principally driven by €35.0 million of professional fees and expenses related to the planned acquisition of IGT. Operating margins were 18.5% in 2014 compared to 18.3% in 2013. On a constant currency basis, operating income would have increased marginally to €573.6 million.
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Table of Contents
Other Expense
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Make-whole
|
|
(72,999
|
)
|
—
|
|
72,999
|
|
—
|
|
|
Unamortized debt issuance cost
|
|
(2,621
|
)
|
—
|
|
2,621
|
|
—
|
|
|
Swap gain
|
|
8,321
|
|
—
|
|
(8,321
|
)
|
—
|
|
|
Subtotal 2009 Notes (due 2016)
|
|
(67,299
|
)
|
—
|
|
67,299
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs — Facilities
|
|
(2,837
|
)
|
—
|
|
2,837
|
|
—
|
|
|
Other
|
|
(9,841
|
)
|
(11,177
|
)
|
(1,336
|
)
|
(12.0
|
)
|
|
|
|
(79,977
|
)
|
(11,177
|
)
|
68,800
|
|
>200.0
|
|
Other expense in 2014 increased by €68.8 million compared to 2013, driven by certain refinancing activities related to the planned acquisition of IGT, including the early extinguishment of the 2009 Notes (due 2016) and the refinancing of the existing Facilities as detailed in the table above.
Interest Expense
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Capital Securities
|
|
(64,531
|
)
|
(64,531
|
)
|
—
|
|
—
|
|
|
Bridge Facility
|
|
(41,753
|
)
|
—
|
|
41,753
|
|
—
|
|
|
2009 Notes (due 2016)
|
|
(34,501
|
)
|
(37,395
|
)
|
(2,894
|
)
|
(7.7
|
)
|
|
2010 Notes (due 2018)
|
|
(28,041
|
)
|
(27,696
|
)
|
345
|
|
1.2
|
|
|
2012 Notes (due 2020)
|
|
(18,852
|
)
|
(18,509
|
)
|
343
|
|
1.9
|
|
|
Facilities
|
|
(11,463
|
)
|
(11,360
|
)
|
103
|
|
0.9
|
|
|
Other
|
|
(5,070
|
)
|
(3,583
|
)
|
1,487
|
|
41.5
|
|
|
|
|
(204,211
|
)
|
(163,074
|
)
|
41,137
|
|
25.2
|
|
Interest expense in 2014 increased by €41.1 million, or 25.2% compared to 2013, driven by interest expense of €41.8 million associated with the Bridge Facility we entered into in connection with the planned acquisition of IGT. Interest expense on the 2009 Notes (due 2016) decreased by €2.9 million due to their early redemption on December 8, 2014. See “—B. Liquidity and Capital Resources—Credit Facilities and Indebtedness” of this report for the terms of our debt instruments.
Income Tax Expense
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
|
(
€ thousands, except percentages)
|
|
2014
|
|
2013
|
|
|
Income tax expense
|
|
189,970
|
|
180,837
|
|
|
Income before income tax expense
|
|
287,579
|
|
386,072
|
|
|
Effective income tax rate
|
|
66.1
|
%
|
46.8
|
%
|
Our effective income tax rate of 66.1% was higher than the effective income tax rate of 46.8% for the prior year principally due to Italian capital gains tax associated with the reorganization of our Italian business, a tax audit settlement in Italy and non-deductible acquisition costs on the planned acquisition of IGT.
76
Table of Contents
Operating Segment Results
The following section sets forth an overview of our revenue and operating income by operating segment.
|
|
|
For the Year Ended
|
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
Change
|
|
|
(€ thousands)
|
|
Italy
|
|
Americas
|
|
International
|
|
Total
|
|
Italy
|
|
Americas
|
|
International
|
|
Total
|
|
Italy
|
|
Americas
|
|
International
|
|
Total
|
|
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lottery
|
|
795,097
|
|
606,521
|
|
170,568
|
|
1,572,186
|
|
785,046
|
|
588,406
|
|
175,730
|
|
1,549,182
|
|
10,051
|
|
18,115
|
|
(5,162
|
)
|
23,004
|
|
|
Lottery Management Services
|
|
—
|
|
95,467
|
|
—
|
|
95,467
|
|
—
|
|
91,402
|
|
—
|
|
91,402
|
|
—
|
|
4,065
|
|
—
|
|
4,065
|
|
|
Total Lottery
|
|
795,097
|
|
701,988
|
|
170,568
|
|
1,667,653
|
|
785,046
|
|
679,808
|
|
175,730
|
|
1,640,584
|
|
10,051
|
|
22,180
|
|
(5,162
|
)
|
27,069
|
|
|
Machine Gaming
|
|
569,918
|
|
79,811
|
|
24,910
|
|
674,639
|
|
580,874
|
|
74,899
|
|
27,098
|
|
682,871
|
|
(10,956
|
)
|
4,912
|
|
(2,188
|
)
|
(8,232
|
)
|
|
Sports Betting
|
|
178,533
|
|
2,944
|
|
7,864
|
|
189,341
|
|
158,739
|
|
2,463
|
|
5,937
|
|
167,139
|
|
19,794
|
|
481
|
|
1,927
|
|
22,202
|
|
|
Commercial Services
|
|
127,677
|
|
36,209
|
|
18,161
|
|
182,047
|
|
132,111
|
|
37,907
|
|
19,234
|
|
189,252
|
|
(4,434
|
)
|
(1,698
|
)
|
(1,073
|
)
|
(7,205
|
)
|
|
Interactive Gaming
|
|
71,407
|
|
6,612
|
|
23,163
|
|
101,182
|
|
77,476
|
|
5,882
|
|
19,981
|
|
103,339
|
|
(6,069
|
)
|
730
|
|
3,182
|
|
(2,157
|
)
|
|
Total service revenue
|
|
1,742,632
|
|
827,564
|
|
244,666
|
|
2,814,862
|
|
1,734,246
|
|
800,959
|
|
247,980
|
|
2,783,185
|
|
8,386
|
|
26,605
|
|
(3,314
|
)
|
31,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lottery
|
|
—
|
|
56,154
|
|
27,290
|
|
83,444
|
|
—
|
|
35,480
|
|
20,219
|
|
55,699
|
|
—
|
|
20,674
|
|
7,071
|
|
27,745
|
|
|
Machine Gaming
|
|
2,548
|
|
104,985
|
|
54,879
|
|
162,412
|
|
2,844
|
|
157,646
|
|
58,862
|
|
219,352
|
|
(296
|
)
|
(52,661
|
)
|
(3,983
|
)
|
(56,940
|
)
|
|
Sports Betting
|
|
—
|
|
—
|
|
6,147
|
|
6,147
|
|
—
|
|
—
|
|
3,390
|
|
3,390
|
|
—
|
|
—
|
|
2,757
|
|
2,757
|
|
|
Interactive Gaming
|
|
—
|
|
—
|
|
2,240
|
|
2,240
|
|
—
|
|
—
|
|
666
|
|
666
|
|
—
|
|
—
|
|
1,574
|
|
1,574
|
|
|
Total product sales
|
|
2,548
|
|
161,139
|
|
90,556
|
|
254,243
|
|
2,844
|
|
193,126
|
|
83,137
|
|
279,107
|
|
(296
|
)
|
(31,987
|
)
|
7,419
|
|
(24,864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue
|
|
1,745,180
|
|
988,703
|
|
335,222
|
|
3,069,105
|
|
1,737,090
|
|
994,085
|
|
331,117
|
|
3,062,292
|
|
8,090
|
|
(5,382
|
)
|
4,105
|
|
6,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting
|
|
|
|
|
|
|
|
548
|
|
|
|
|
|
|
|
542
|
|
|
|
|
|
|
|
6
|
|
|
Total revenue
|
|
|
|
|
|
|
|
3,069,653
|
|
|
|
|
|
|
|
3,062,834
|
|
|
|
|
|
|
|
6,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
543,467
|
|
88,599
|
|
73,756
|
|
705,822
|
|
499,661
|
|
122,164
|
|
50,655
|
|
672,480
|
|
43,806
|
|
(33,565
|
)
|
23,101
|
|
33,342
|
|
|
Corporate support(1)
|
|
|
|
|
|
|
|
(83,170
|
)
|
|
|
|
|
|
|
(56,065
|
)
|
|
|
|
|
|
|
(27,105
|
)
|
|
Purchase accounting
|
|
|
|
|
|
|
|
(55,623
|
)
|
|
|
|
|
|
|
(57,283
|
)
|
|
|
|
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
|
567,029
|
|
|
|
|
|
|
|
559,132
|
|
|
|
|
|
|
|
7,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating margin
|
|
31.1
|
%
|
9.0
|
%
|
22.0
|
%
|
23.0
|
%
|
28.8
|
%
|
12.3
|
%
|
15.3
|
%
|
22.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income margin
|
|
|
|
|
|
|
|
18.5
|
%
|
|
|
|
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
(1) Corporate support expenses are principally comprised of general and administrative expenses and other expenses that are managed at the corporate level, including Restructuring, Corporate Headquarters and board of directors expenses.
77
Table of Contents
Italy segment
Revenues in the Italy segment in 2014, increased by €8.1 million, or 0.5% compared to 2013. Revenues in the Italy segment are predominantly euro based and therefore an analysis of revenues at constant currency is not presented below.
Service Revenue
Service revenue in the Italy segment in 2014 increased by €8.4 million, or 0.5% compared to 2013, driven by an increase in Sports Betting service revenues of €19.8 million partially offset by a decrease of €11.0 million in Machine Gaming revenue. The movements in service revenues for each of the core activities within the Italy segment are discussed below.
Lottery service revenue in the Italy segment increased by €10.1 million, or 1.3% compared to 2013, as an increase in service revenue from Lotto was partially offset by a decrease in instant tickets revenue. The following table sets forth an analysis of our Lottery service revenues in the Italy segment:
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
€
|
|
%
|
|
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
Lotto
|
|
424,932
|
|
407,612
|
|
17,320
|
|
4.2
|
|
|
Instant tickets
|
|
370,165
|
|
377,434
|
|
(7,269
|
)
|
(1.9
|
)
|
|
Lottery
|
|
795,097
|
|
785,046
|
|
10,051
|
|
1.3
|
|
Lotto
Lotto service revenue in 2014 increased by €17.3 million, or 4.2% compared to 2013, due to an increase in core wagers driven by higher wagers from successful product innovation in 10eLotto, which was partially offset by a decrease in late number wagers as detailed below:
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2014
|
|
2013
|
|
Wagers
|
|
%
|
|
|
Core wagers
|
|
6,170.6
|
|
5,678.5
|
|
492.1
|
|
8.7
|
|
|
Wagers for late numbers
|
|
458.7
|
|
654.2
|
|
(195.5
|
)
|
(29.9
|
)
|
|
|
|
6,629.3
|
|
6,332.7
|
|
296.6
|
|
4.7
|
|
Instant tickets
Instant ticket service revenue in 2014 decreased by €7.3 million, or 1.9% compared to 2013, principally due to a 3.4% decrease in the number of tickets sold which was only partially offset by a 1.6% increase in the average price point (the average value of the ticket sold), as detailed below.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
|
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
|
Total sales (in millions)
|
|
€
|
9,403.3
|
|
€
|
9,573.8
|
|
€
|
(170.5
|
)
|
(1.8
|
)
|
|
Total tickets sold (in millions)
|
|
1,902.9
|
|
1,970.8
|
|
(67.9
|
)
|
(3.4
|
)
|
|
Average price point
|
|
€
|
4.94
|
|
€
|
4.86
|
|
€
|
0.08
|
|
1.6
|
|
78
Table of Contents
Machine Gaming
Machine Gaming service revenue in 2014 decreased by €11.0 million, or 1.9% compared to 2013, primarily due to an 8.0% decrease in wagers as detailed below. The decrease in wagers was driven by a 13.3% decrease in VLT wagers and a 0.5% decrease in AWP Wagers. The 8.0% decrease in wagers did not result in a proportional impact on service revenues due to the increase in AWP wagers as a percentage of overall wagers, and a resulting change in the mix. In particular, due to the nature of the product, a higher proportion of AWP wagers are converted into revenue. In the year ended December 31, 2014, AWP wagers represented 44.6% of our total wagers compared to 41.2% in 2013. This change in mix had a positive impact on service revenues.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2014
|
|
2013
|
|
Amount
|
|
%
|
|
|
VLT wagers
|
|
5,599.9
|
|
6,458.5
|
|
(858.6
|
)
|
(13.3
|
)
|
|
AWP wagers
|
|
4,510.9
|
|
4,532.4
|
|
(21.5
|
)
|
(0.5
|
)
|
|
Total wagers
|
|
10,110.8
|
|
10,990.9
|
|
(880.1
|
)
|
(8.0
|
)
|
|
(Installed at the end of December)
|
|
|
|
|
|
|
|
|
|
|
VLTs installed
|
|
10,956
|
|
10,596
|
|
360
|
|
3.4
|
|
|
AWP machines installed
|
|
65,316
|
|
70,203
|
|
(4,887
|
)
|
(7.0
|
)
|
|
Total machines installed
|
|
76,272
|
|
80,799
|
|
(4,527
|
)
|
(5.6
|
)
|
Total wagers and machines installed correspond to the management of VLTs and AWPs under our concession.
Sports Betting
Sports Betting service revenue in 2014 increased by €19.8 million, or 12.5% compared to 2013, principally due to the 14.7% increase in wagers (as detailed below), including the introduction of virtual betting in the first quarter of 2014, which was offset by an increase in the payout percentage (80.2% in 2014; 79.4% in 2013).
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2014
|
|
2013
|
|
Wagers
|
|
%
|
|
|
Fixed odds sports betting and other wagers
|
|
893.3
|
|
778.5
|
|
114.8
|
|
14.7
|
|
Commercial Services
Commercial Services service revenue in 2014 decreased by €4.4 million, or 3.4% compared to 2013, principally due to a decrease in the number of transactions processed.
Interactive Gaming
Interactive Gaming service revenue in 2014 decreased by €6.1 million, or 7.8% compared to 2013, driven by a 9.0% decrease in game wagers principally resulting from a decrease in poker wagers.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2014
|
|
2013
|
|
Wagers
|
|
%
|
|
|
Interactive game wagers
|
|
1,812.2
|
|
1,990.9
|
|
(178.7
|
)
|
(9.0
|
)
|
79
Table of Contents
Product Sales
Product sales in the Italy segment amounted to €2.5 million and €2.8 million in 2014 and 2013, respectively.
Segment operating income
Operating income in the Italy segment in 2014 increased by €43.8 million, or 8.8% compared to 2013, while segment operating margin amounted to 31.1% and 28.8% in 2014 and 2013, respectively, principally driven by:
·
An increase of €30.0 million associated with the absence of the 2013 Machine Gaming settlement of AWP litigation in 2013;
·
An increase of €24.6 million associated with Lotto due to an increase in wagers and cost optimization.
Americas segment
Revenue in the Americas segment in 2014 decreased by €5.4 million, or 0.5% compared to 2013, driven by a €32.0 million decrease in product sales, partially offset by a €26.6 million increase in service revenue. At constant currency, revenue in the Americas segment in 2014 increased by €6.7 million, or 0.7% compared to 2013.
Service revenue
Service revenue in the Americas segment in 2014 increased by €26.6 million, or 3.3% (€31.6 million or 3.9% at constant currency) compared to 2013.
The following table sets forth changes in service revenue for 2014 compared to 2013, on a constant currency basis:
|
|
|
Service Revenue Change
|
|
|
(€ thousands)
|
|
Constant
Currency
|
|
Foreign
Currency
|
|
Change
|
|
|
Lottery
|
|
17,789
|
|
326
|
|
18,115
|
|
|
Lottery Management Services
|
|
5,721
|
|
(1,656
|
)
|
4,065
|
|
|
Machine Gaming
|
|
5,589
|
|
(677
|
)
|
4,912
|
|
|
Commercial Services
|
|
1,126
|
|
(2,824
|
)
|
(1,698
|
)
|
|
Interactive Gaming
|
|
897
|
|
(167
|
)
|
730
|
|
|
Sports Betting
|
|
515
|
|
(34
|
)
|
481
|
|
|
|
|
31,637
|
|
(5,032
|
)
|
26,605
|
|
The principal drivers of the €26.6 million increase in service revenue were as follows:
·
An increase in Lottery service revenue of €17.8 million driven by:
·
An increase of €6.1 million related to new lottery contracts in Indiana, Costa Rica and Colorado;
·
An increase of €5.2 million due to contractual rate changes with customers in the United States;
·
An increase of €4.4 million related to additional equipment provided to a customer in the United States.
80
Table of Contents
·
A net increase of €5.7 million in Lottery Management Services revenues, related to a full year of service revenue in 2014 from the New Jersey and Indiana agreements which commenced operations on October 1, 2013 and July 1, 2013, respectively, partially offset by decreases in service revenue of €14.8 million and €13.9 million related to the minimum profit level guarantees we provided the States of Illinois and Indiana, respectively;
·
An increase of €5.6 million in Machine Gaming service revenue associated with increased machine placements in North America;
·
A decrease of €5.0 million related to unfavorable foreign exchange impacts.
Product Sales
Product sales in the Americas segment in 2014 decreased by €32.0 million, or 16.6% (€25.0 million or 12.9% at constant currency) compared to 2013.
The following table sets forth changes in product sales for year ended December 31, 2014 compared to the same period in 2013 on a constant currency basis:
|
|
|
Product Sales Change
|
|
|
(€ thousands)
|
|
Constant
Currency
|
|
Foreign
Currency
|
|
Change
|
|
|
Machine Gaming
|
|
(48,611
|
)
|
(4,050
|
)
|
(52,661
|
)
|
|
Lottery
|
|
23,637
|
|
(2,963
|
)
|
20,674
|
|
|
|
|
(24,974
|
)
|
(7,013
|
)
|
(31,987
|
)
|
The principal drivers of the €32.0 million decrease in product sales were as follows:
·
A decrease of €48.6 million in sales of Machine Gaming equipment principally related to the winding down of the Canadian replacement cycle;
·
A decrease of €7.0 million related to unfavorable foreign exchange impacts;
·
An increase of €23.6 million in Lottery product sales principally associated with sales to customers in California and Pennsylvania.
Segment operating income
Operating income in the Americas segment in 2014 decreased by €33.6 million, or 27.5% (€28.7 million, or 23.5% on a constant currency basis) compared to 2013, while segment operating margin decreased from 12.3% in 2013 to 9.0% in 2014. The decrease in segment operating income was principally driven by:
·
A decrease of €38.2 million associated with Lottery Management Service agreements in Illinois, Indiana (which commenced operations on July 1, 2013) and New Jersey (which commenced operations on October 1, 2013) principally related to the settlement with the State of Illinois and the impact of the minimum profit level guarantee in the State of Indiana;
·
A decrease of €7.9 million associated with the €32.0 million decrease in product sales.
International segment
Revenue in the International segment in 2014 increased by €4.1 million, or 1.2% compared to 2013, driven by a €7.4 million increase in product sales, partially offset by a €3.3 million decrease in service revenue. At constant currency, revenue in the International segment in 2014 increased by €0.2 million, or 0.1%.
81
Table of Contents
Service revenue
Service revenue in the International segment in 2014 decreased by €3.3 million, or 1.3% (€5.7 million or 2.3% at constant currency) compared to 2013.
The following table sets forth changes in service revenue for 2014 compared to 2013, on a constant currency basis:
|
|
|
Service Revenue Change
|
|
|
(€ thousands)
|
|
Constant
Currency
|
|
Foreign
Currency
|
|
Change
|
|
|
Lottery
|
|
(7,605
|
)
|
2,443
|
|
(5,162
|
)
|
|
Machine Gaming
|
|
(1,315
|
)
|
(873
|
)
|
(2,188
|
)
|
|
Commercial Services
|
|
(1,096
|
)
|
23
|
|
(1,073
|
)
|
|
Sports Betting
|
|
1,537
|
|
390
|
|
1,927
|
|
|
Interactive Gaming
|
|
2,797
|
|
385
|
|
3,182
|
|
|
|
|
(5,682
|
)
|
2,368
|
|
(3,314
|
)
|
The principal drivers of the €3.3 million decrease in service revenue were as follows:
·
A decrease in Lottery service revenue of €7.6 million driven by a decrease of €8.0 million related to a change in contract terms with a European lottery customer which lowered revenue yet increased profit;
·
An increase of €2.4 million related to unfavorable foreign exchange impacts;
·
An increase in Interactive Gaming service revenue of €2.8 million related to a new contract in Norway.
Product Sales
Product sales in the International segment in 2014 increased by €7.4 million, or 8.9% (€5.9 million or 7.1% at constant currency) compared to 2013.
The following table sets forth changes in product sales for 2014 compared to 2013, on a constant currency basis:
|
|
|
Product Sales Change
|
|
|
(€ thousands)
|
|
Constant
Currency
|
|
Foreign
Currency
|
|
Change
|
|
|
Lottery
|
|
6,692
|
|
379
|
|
7,071
|
|
|
Sports Betting
|
|
2,337
|
|
420
|
|
2,757
|
|
|
Interactive Gaming
|
|
1,528
|
|
46
|
|
1,574
|
|
|
Machine Gaming
|
|
(4,691
|
)
|
708
|
|
(3,983
|
)
|
|
|
|
5,866
|
|
1,553
|
|
7,419
|
|
The principal drivers of the €7.4 million increase in product sales were as follows:
·
An increase in Lottery sales of €6.7 million due to a sale to our customer in Belgium, partially offset by the absence of prior year sales to customers in New Zealand, Singapore and Turkey;
·
An increase of €2.3 million in Sports Betting sales;
·
A decrease of €4.7 million in Machine Gaming sales due to a decrease in sales of games to our distributor in Italy partially offset by an increase in commercial gaming sales in Europe.
82
Table of Contents
Segment operating income
Operating income in the International segment in 2014 increased by €23.1 million, or 45.6% (€21.8 million, or 43.1% on a constant currency basis) compared to 2013, while segment-operating margin increased from 15.3% in 2013 to 22.2% in 2014.
Comparison of the year ended December 31, 2013 and 2012
|
|
|
For the Year Ended
|
|
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
|
(€ thousands)
|
|
€
|
|
% of Revenue
|
|
€
|
|
% of Revenue
|
|
|
Service revenue
|
|
2,783,727
|
|
90.9
|
|
2,822,279
|
|
91.8
|
|
|
Product sales
|
|
279,107
|
|
9.1
|
|
253,406
|
|
8.2
|
|
|
Total revenue
|
|
3,062,834
|
|
100.0
|
|
3,075,685
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials, services and other costs
|
|
1,585,303
|
|
51.8
|
|
1,611,173
|
|
52.4
|
|
|
Personnel
|
|
568,266
|
|
18.6
|
|
539,346
|
|
17.5
|
|
|
Depreciation
|
|
254,599
|
|
8.3
|
|
249,921
|
|
8.1
|
|
|
Amortization
|
|
189,684
|
|
6.2
|
|
185,909
|
|
6.0
|
|
|
Impairment loss, net
|
|
6,058
|
|
0.2
|
|
6,227
|
|
0.2
|
|
|
Capitalization of internal construction costs
|
|
(100,208
|
)
|
(3.3
|
)
|
(100,038
|
)
|
(3.3
|
)
|
|
|
|
2,503,702
|
|
81.7
|
|
2,492,538
|
|
81.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
559,132
|
|
18.3
|
|
583,147
|
|
19.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
3,334
|
|
0.1
|
|
2,462
|
|
0.1
|
|
|
Equity income (loss)
|
|
(965
|
)
|
0.0
|
|
1,015
|
|
0.0
|
|
|
Other income
|
|
1,131
|
|
0.0
|
|
3,686
|
|
0.1
|
|
|
Other expense
|
|
(11,177
|
)
|
(0.4
|
)
|
(9,729
|
)
|
(0.3
|
)
|
|
Foreign exchange loss, net
|
|
(2,309
|
)
|
(0.1
|
)
|
(1,214
|
)
|
0.0
|
|
|
Interest expense
|
|
(163,074
|
)
|
(5.3
|
)
|
(155,364
|
)
|
(5.1
|
)
|
|
|
|
(173,060
|
)
|
(5.7
|
)
|
(159,144
|
)
|
(5.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
386,072
|
|
12.6
|
|
424,003
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
180,837
|
|
5.9
|
|
158,778
|
|
5.2
|
|
|
Net income
|
|
205,235
|
|
6.7
|
|
265,225
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
175,434
|
|
5.7
|
|
233,136
|
|
7.6
|
|
|
Non-controlling interests
|
|
29,801
|
|
1.0
|
|
32,089
|
|
1.0
|
|
|
|
|
205,235
|
|
6.7
|
|
265,225
|
|
8.6
|
|
Service revenue
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Operating segment
|
|
|
|
|
|
|
|
|
|
|
Italy
|
|
1,734,246
|
|
1,807,282
|
|
(73,036
|
)
|
(4.0
|
)
|
|
Americas
|
|
800,959
|
|
755,727
|
|
45,232
|
|
6.0
|
|
|
International
|
|
247,980
|
|
258,914
|
|
(10,934
|
)
|
(4.2
|
)
|
|
|
|
2,783,185
|
|
2,821,923
|
|
(38,738
|
)
|
(1.4
|
)
|
|
Purchase accounting
|
|
542
|
|
356
|
|
186
|
|
52.2
|
|
|
|
|
2,783,727
|
|
2,822,279
|
|
(38,552
|
)
|
(1.4
|
)
|
83
Table of Contents
Service revenue decreased by €38.6 million, or 1.4% compared to the same period in 2012. At constant currency, service revenue decreased by €3.9 million, or less than 1% compared to the same period in 2012.
Service revenue in the Italy segment decreased by €73.0 million, or 4.0% compared to the same period in 2012, principally driven by a decrease in Machine Gaming revenues of €84.0 million due to an increase in machine gaming tax; a decrease in instant ticket revenues of €4.8 million related to a decrease in instant tickets sold; and lower Interactive Gaming revenues of €9.8 million related to a decrease in game wagers principally resulting from lower poker wagers. These decreases were partially offset by an increase in Sports Betting revenues of €18.9 million related to a lower payout percentage, which was partially offset by a decrease in Sports Betting wagers and an increase in Lotto service revenue of €5.8 million due to an increase in late numbers wagers.
Service revenue in the Americas segment increased by €45.2 million, or 6.0%, compared to the same period in 2012, principally driven by a 3.1% increase on Lottery same store revenue; the commencement of Lottery Management Services agreements in New Jersey and Indiana on October 1, 2013 and July 1, 2013, respectively and an increase in service revenue related to other new contracts in Indiana and Costa Rica. These increases were partially offset by unfavorable foreign exchange impacts. On a constant currency basis, service revenue in the Americas segment increased by €74.5 million, or 9.9% compared to the same period in 2012.
Service revenue in the International segment decreased by €10.9 million, or 4.2% compared to the same period in 2012, principally due to a decrease in Interactive Gaming service revenue and unfavorable foreign exchange impacts. These decreases were partially offset by increases in Machine Gaming service revenue. On a constant currency basis, service revenue in the International segment decreased by €5.9 million, or 2.3% compared to the same period in 2012.
Further information on the key performance drivers related to service revenues is provided in the Operating segment section of this report.
Product Sales
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Operating segment
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
193,126
|
|
116,702
|
|
76,424
|
|
65.5
|
|
|
International
|
|
83,137
|
|
128,055
|
|
(44,918
|
)
|
(35.1
|
)
|
|
Italy
|
|
2,844
|
|
8,649
|
|
(5,805
|
)
|
(67.1
|
)
|
|
|
|
279,107
|
|
253,406
|
|
25,701
|
|
10.1
|
|
Product sales fluctuate from period to period due to the mix, volume and timing of product sales transactions. Product sales increased by €25.7 million, or 10.1% compared to the same period in 2012.
Product sales in the Americas segment increased by €76.4 million, or 65.5% compared to the same period in 2012, principally driven by an increase in sales of Machine Gaming equipment related to the Canadian VLT replacement cycle in 2013.
Product sales in the International segment decreased by €44.9 million, or 35.1% compared to the same period in 2012, when we recorded significant product sales to customers in the United Kingdom, France, Turkey and Lithuania, which did not recur in 2013.
Further information on the key performance drivers related to product sales is provided in the Operating segment section of this report.
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Table of Contents
Raw Materials, Services and Other Costs
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Operating expenses
|
|
813,594
|
|
845,091
|
|
(31,497
|
)
|
(3.7
|
)
|
|
Outside services
|
|
234,603
|
|
231,416
|
|
3,187
|
|
1.4
|
|
|
Cost of product sales
|
|
161,176
|
|
144,445
|
|
16,731
|
|
11.6
|
|
|
Consumables
|
|
125,664
|
|
132,908
|
|
(7,244
|
)
|
(5.5
|
)
|
|
Insurance, taxes and other
|
|
100,817
|
|
112,888
|
|
(12,071
|
)
|
(10.7
|
)
|
|
Occupancy
|
|
59,161
|
|
56,216
|
|
2,945
|
|
5.2
|
|
|
Telecommunications
|
|
57,794
|
|
55,962
|
|
1,832
|
|
3.3
|
|
|
Travel
|
|
31,246
|
|
31,060
|
|
186
|
|
0.6
|
|
|
Write-down of inventories
|
|
1,248
|
|
1,187
|
|
61
|
|
5.1
|
|
|
|
|
1,585,303
|
|
1,611,173
|
|
(25,870
|
)
|
(1.6
|
)
|
Raw materials, services and other costs decreased by €25.9 million, or 1.6% compared to the same period in 2012, principally driven by a decrease in Operating expenses and Insurance, taxes and other expenses which were partially offset by an increase in Cost of product sales. As a percentage of revenues, raw materials, services and other costs amounted to 51.8% and 52.4% in 2013 and 2012, respectively. On a constant currency basis, Raw materials, services and other costs decreased by €1.1 million, or 0.1% compared to the same period in 2012.
Operating expenses decreased by €31.5 million, or 3.7% compared to the same period in 2012, principally related to decreases of €34.7 million in the Italy segment, €10.7 million in the Products and Services support organization and €7.2 million of favorable foreign exchange impacts. These decreases were partially offset by an increase in operating expenses of €6.3 million in the International segment and €15.3 million in the Americas segment.
The decrease in Operating expenses in the Italy segment principally relates to a decrease in variable costs related to the decrease of €84.0 million in Machine Gaming service revenue. These decreases were partially offset by the €30 million settlement of AWP litigation recorded in 2013. The decrease in Operating expenses in the Products and Services support organization principally related to a decrease in costs in the Italy segment associated with the renegotiation of information technology contracts. These decreases were partially offset by increases in Operating expenses of €15.3 million in the Americas segment principally associated with the commencement of Lottery Management Services agreements in New Jersey and Indiana on October 1, 2013 and July 1, 2013, respectively, and an increase in operating expenses of €6.3 million in the International segment principally due to the reclassification in 2013 of certain costs to Outside services to better align them with similar costs incurred by other segments.
Insurance, taxes and other decreased by €12.1 million, or 10.7% compared to the same period in 2012, due to a decrease of €4.8 million in the Americas segment principally related to a provision of €3.0 million for a legal matter in 2012 that did not recur in 2013, a decrease of €3.1 million in the International segment related to the payment of a Spanish Gaming tax in 2012 related to retroactive change in law that did not recur in 2013 and a decrease of €2.9 million in the Italy segment related to a decrease in betting excise taxes.
Cost of product sales increased by €16.7 million in 2013 due to the €25.7 million increase in product sales. As a percentage of revenues from product sales, cost of product sales amounted to 57.7% in 2013 and 57.0% in 2012.
85
Table of Contents
Personnel
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Payroll
|
|
413,306
|
|
385,188
|
|
28,118
|
|
7.3
|
|
|
Incentive compensation
|
|
53,536
|
|
55,450
|
|
(1,914
|
)
|
(3.5
|
)
|
|
Statutory benefits
|
|
42,543
|
|
39,751
|
|
2,792
|
|
7.0
|
|
|
Company benefits
|
|
35,288
|
|
32,804
|
|
2,484
|
|
7.6
|
|
|
Share-based payment
|
|
8,611
|
|
12,349
|
|
(3,738
|
)
|
(30.3
|
)
|
|
Net benefits for staff severance fund
|
|
4,887
|
|
4,529
|
|
358
|
|
7.9
|
|
|
Other
|
|
10,095
|
|
9,275
|
|
820
|
|
8.8
|
|
|
|
|
568,266
|
|
539,346
|
|
28,920
|
|
5.4
|
|
Personnel expense increased by €28.9 million, or 5.4% compared to the same period in 2012. On a constant currency basis, personnel expenses increased by €42.1 million, or 7.8% compared to the same period in 2012. The increase in personnel expense relates principally to increases in payroll expense driven by higher average headcount in 2013 compared to 2012. Our average headcount was 8,726 employees in 2013 compared to 8,310 employees in 2012.
Depreciation
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Systems, equipment and other assets related to contracts, net
|
|
241,257
|
|
236,065
|
|
5,192
|
|
2.2
|
|
|
Property, plant and equipment
|
|
13,342
|
|
13,856
|
|
(514
|
)
|
(3.7
|
)
|
|
|
|
254,599
|
|
249,921
|
|
4,678
|
|
1.9
|
|
Depreciation expense increased by €4.7 million, or 1.9% compared to the same period in 2012, principally driven by increases in depreciation in the Americas and Italy segments of €7.0 million and €3.6 million, respectively, which were partially offset by favorable foreign exchange rates of €4.7 million.
The increases in depreciation in the Americas and Italy segments principally relate to capital expenditures for systems, equipment and other assets related to contracts in 2013 and 2012 as further described in the Capital Expenditures section of this report.
Amortization
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Amortization expense
|
|
189,684
|
|
185,909
|
|
3,775
|
|
2.0
|
|
|
|
|
189,684
|
|
185,909
|
|
3,775
|
|
2.0
|
|
Amortization expense increased by €3.8 million, or 2.0% compared to the same period of 2012. This increase was principally driven by increases in amortization expense in the Italy and Americas segments of €7.7 million and €1.5 million, respectively, partially offset by a decrease in amortization expense of €2.7 million associated with fully amortized intangible assets related to the acquisition of GTECH Holdings Corporation in August 2006 and favorable foreign exchange rates of €1.4 million. The increases in amortization expense in the Italy and Americas segments principally relate to spending for intangible assets in 2013 and 2012 as further described in the Capital Expenditures section of this report.
86
Table of Contents
Impairment Loss, Net
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Systems, equipment and other assets related to contracts, net
|
|
6,313
|
|
480
|
|
5,833
|
|
>200.0
|
|
|
Intangible assets, net
|
|
2,613
|
|
1,082
|
|
1,531
|
|
141.5
|
|
|
Investment in associates and joint ventures
|
|
939
|
|
4,481
|
|
(3,542
|
)
|
(79.0
|
)
|
|
Recover
|
|
(3,807
|
)
|
184
|
|
(3,991
|
)
|
>200.0
|
|
|
|
|
6,058
|
|
6,227
|
|
(169
|
)
|
(2.7
|
)
|
The 2013 asset impairment loss principally relates to a €6.3 million loss in systems, equipment and other assets related to contracts, net due to the lower expected profitability of a lottery contract over its remaining term in the International segment. This contract was subsequently renegotiated in 2013, reducing revenues but increasing profitability. The impairment recovery of €3.8 million in 2013 resulted from the receipt of cash associated with an impairment loss recorded in 2008 related to a lottery system we deployed for an international customer, which has not launched due to a sustained period of political instability.
The 2012 asset impairment loss of €6.2 million principally relates to the lower expected profitability of an equity method joint venture in the International segment due to a delay in governmental approval of an increase in prize payout levels.
Capitalization of Internal Construction Costs
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Capitalization of internal construction costs
|
|
(100,208
|
)
|
(100,038
|
)
|
170
|
|
0.2
|
|
|
|
|
(100,208
|
)
|
(100,038
|
)
|
170
|
|
0.2
|
|
Capitalization of internal construction costs fluctuates based on the volume and timing of new business and requirements of existing customers. Capitalization of internal construction costs increased by €0.2 million, or 0.2% compared to the same period in 2012.
Operating Income
Operating income in 2013 was €559.1 million, a decrease of €24.0 million, or 4.1% compared to the same period in 2012, principally due to lower operating income of €41.9 million in the Italy segment, €4.9 million in the International segment and an increase in corporate support expenses of €14.9 million. Corporate support expenses increased by €14.9 million, principally due to €14.5 million of restructuring provisions incurred by our Products and Services organization resulting from the 2013 reorganization. These decreases were partially offset by an increase in operating income in the Americas segment of €33.5 million, principally resulting from the sale of gaming equipment into the Canadian market. On a constant currency basis, operating income in 2013 would have been €563.4 million.
87
Table of Contents
Interest Expense
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Capital Securities
|
|
(64,531
|
)
|
(64,319
|
)
|
212
|
|
0.3
|
|
|
2009 Notes (due 2016)
|
|
(37,395
|
)
|
(38,634
|
)
|
(1,239
|
)
|
(3.2
|
)
|
|
2010 Notes (due 2018)
|
|
(27,696
|
)
|
(27,652
|
)
|
44
|
|
0.2
|
|
|
2012 Notes (due 2020)
|
|
(18,509
|
)
|
(1,292
|
)
|
17,217
|
|
>200.0
|
|
|
Facilities
|
|
(11,360
|
)
|
(16,703
|
)
|
(5,343
|
)
|
(32.0
|
)
|
|
Other
|
|
(3,583
|
)
|
(6,764
|
)
|
(3,181
|
)
|
(47.0
|
)
|
|
|
|
(163,074
|
)
|
(155,364
|
)
|
7,710
|
|
5.0
|
|
Interest expense increased by €7.7 million, or 5.0% compared to the same period of 2012, principally due to a different mix of debt as proceeds from the 2012 Notes (due 2020) issued in December 2012 were used to repay certain outstanding facilities.
Income Tax Expense
|
|
|
For the Year Ended
December 31,
|
|
|
(€ thousands, except percentages)
|
|
2013
|
|
2012
|
|
|
Income tax expense
|
|
180,837
|
|
158,778
|
|
|
Income before income tax expense
|
|
386,072
|
|
424,003
|
|
|
Effective income tax rate
|
|
46.8
|
%
|
37.4
|
%
|
Our effective income tax rate during 2013 was 46.8% compared to 37.4% during 2012. The increase in the effective income rate principally relates to the tax settlement that was reached with the Italian Tax Agency (
Agenzia delle Entrate
) for the settlement of certain tax matters. In December 2013, IGT PLC (formerly Lottomatica) paid €34.7 million to the Italian Tax Agency in settlement of certain tax matters, of which €28 million involved the corporate reorganization and subsequent restructuring of certain intercompany financing transactions during the years 2007, 2008 and 2009 related to the acquisition of GTECH in 2006. As required by Italian law, the Italian Tax Agency referred the matter to the Rome Public Prosecutor’s office, which had the obligation to start an investigation on both GTECH’s Chairman and its CEO, respectively, as legal representative of the Company and signatories of the 2007 and 2008 tax declarations. Charges, if any, would be based on the alleged errors and omissions of the tax declarations during the three years which were already the subject of the settlement by IGT PLC with the Italian Tax Agency. The investigation remains in process. Although there can be no assurance, the Company does not believe that it would experience a material adverse effect even if the prosecutor ultimately determines to pursue criminal charges. Of the €34.7 million settlement, €6.3 million had already been recorded as a provision in previous periods. Absent this settlement, our effective income tax rate during 2013 was 39.8%, slightly higher than 2012 due to higher foreign losses principally in Spain and the United Kingdom where the future tax benefits of those losses could not be currently recorded.
88
Table of Contents
Operating Segment Results
The following section sets forth an overview of our revenue and operating income by operating segment.
|
|
|
For the Year Ended
|
|
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
Change
|
|
|
(€ thousands)
|
|
Italy
|
|
Americas
|
|
International
|
|
Total
|
|
Italy
|
|
Americas
|
|
International
|
|
Total
|
|
Italy
|
|
Americas
|
|
International
|
|
Total
|
|
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lottery
|
|
785,046
|
|
588,406
|
|
175,730
|
|
1,549,182
|
|
784,114
|
|
572,364
|
|
180,065
|
|
1,536,543
|
|
932
|
|
16,042
|
|
(4,335
|
)
|
12,639
|
|
|
Lottery Management Services
|
|
—
|
|
91,402
|
|
—
|
|
91,402
|
|
—
|
|
66,226
|
|
—
|
|
66,226
|
|
—
|
|
25,176
|
|
—
|
|
25,176
|
|
|
Total Lottery
|
|
785,046
|
|
679,808
|
|
175,730
|
|
1,640,584
|
|
784,114
|
|
638,590
|
|
180,065
|
|
1,602,769
|
|
932
|
|
41,218
|
|
(4,335
|
)
|
37,815
|
|
|
Machine Gaming
|
|
580,874
|
|
74,899
|
|
27,098
|
|
682,871
|
|
664,918
|
|
69,998
|
|
21,741
|
|
756,657
|
|
(84,044
|
)
|
4,901
|
|
5,357
|
|
(73,786
|
)
|
|
Sports Betting
|
|
158,739
|
|
2,463
|
|
5,937
|
|
167,139
|
|
139,849
|
|
2,223
|
|
7,675
|
|
149,747
|
|
18,890
|
|
240
|
|
(1,738
|
)
|
17,392
|
|
|
Commercial Services
|
|
132,111
|
|
37,907
|
|
19,234
|
|
189,252
|
|
131,122
|
|
39,916
|
|
18,751
|
|
189,789
|
|
989
|
|
(2,009
|
)
|
483
|
|
(537
|
)
|
|
Interactive Gaming
|
|
77,476
|
|
5,882
|
|
19,981
|
|
103,339
|
|
87,279
|
|
5,000
|
|
30,682
|
|
122,961
|
|
(9,803
|
)
|
882
|
|
(10,701
|
)
|
(19,622
|
)
|
|
Total service revenue
|
|
1,734,246
|
|
800,959
|
|
247,980
|
|
2,783,185
|
|
1,807,282
|
|
755,727
|
|
258,914
|
|
2,821,923
|
|
(73,036
|
)
|
45,232
|
|
(10,934
|
)
|
(38,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lottery
|
|
—
|
|
35,480
|
|
20,219
|
|
55,699
|
|
—
|
|
34,286
|
|
55,901
|
|
90,187
|
|
—
|
|
1,194
|
|
(35,682
|
)
|
(34,488
|
)
|
|
Machine Gaming
|
|
2,844
|
|
157,646
|
|
58,862
|
|
219,352
|
|
8,649
|
|
82,416
|
|
65,671
|
|
156,736
|
|
(5,805
|
)
|
75,230
|
|
(6,809
|
)
|
62,616
|
|
|
Sports Betting
|
|
—
|
|
—
|
|
3,390
|
|
3,390
|
|
—
|
|
—
|
|
2,529
|
|
2,529
|
|
—
|
|
—
|
|
861
|
|
861
|
|
|
Commercial Services
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Interactive Gaming
|
|
—
|
|
—
|
|
666
|
|
666
|
|
—
|
|
—
|
|
3,954
|
|
3,954
|
|
—
|
|
—
|
|
(3,288
|
)
|
(3,288
|
)
|
|
Total product sales
|
|
2,844
|
|
193,126
|
|
83,137
|
|
279,107
|
|
8,649
|
|
116,702
|
|
128,055
|
|
253,406
|
|
(5,805
|
)
|
76,424
|
|
(44,918
|
)
|
25,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue
|
|
1,737,090
|
|
994,085
|
|
331,117
|
|
3,062,292
|
|
1,815,931
|
|
872,429
|
|
386,969
|
|
3,075,329
|
|
(78,841
|
)
|
121,656
|
|
(55,852
|
)
|
(13,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting
|
|
|
|
|
|
|
|
542
|
|
|
|
|
|
|
|
356
|
|
|
|
|
|
|
|
186
|
|
|
Total revenue
|
|
|
|
|
|
|
|
3,062,834
|
|
|
|
|
|
|
|
3,075,685
|
|
|
|
|
|
|
|
(12,851
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income
|
|
499,661
|
|
122,164
|
|
50,655
|
|
672,480
|
|
541,552
|
|
88,684
|
|
55,578
|
|
685,814
|
|
(41,891
|
)
|
33,480
|
|
(4,923
|
)
|
(13,334
|
)
|
|
Corporate support(1)
|
|
|
|
|
|
|
|
(56,065
|
)
|
|
|
|
|
|
|
(41,184
|
)
|
|
|
|
|
|
|
(14,881
|
)
|
|
Purchase accounting
|
|
|
|
|
|
|
|
(57,283
|
)
|
|
|
|
|
|
|
(61,483
|
)
|
|
|
|
|
|
|
4,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
|
559,132
|
|
|
|
|
|
|
|
583,147
|
|
|
|
|
|
|
|
(24,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating margin
|
|
28.8
|
%
|
12.3
|
%
|
15.3
|
%
|
22.0
|
%
|
29.8
|
%
|
10.2
|
%
|
14.4
|
%
|
22.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income margin
|
|
|
|
|
|
|
|
18.3
|
%
|
|
|
|
|
|
|
19.0
|
%
|
|
|
|
|
|
|
|
|
(1) Corporate support expenses are principally comprised of general and administrative expenses and other expenses that are managed at the corporate level, including Restructuring, Corporate Headquarters and board of directors expenses.
89
Table of Contents
Italy Segment
Revenues in the Italy segment decreased by €78.8 million, or 4.3% compared to the same period in 2012. Revenues in the Italy segment are predominantly euro-based and therefore an analysis of revenues at constant currency is not presented below.
Service Revenue
Service revenue in the Italy segment decreased by €73.0 million, or 4.0% compared to the same period in 2012, principally due to a decrease in Machine Gaming and, to a lesser extent, Interactive Gaming revenues, which were partially offset by an increase in Sports Betting revenues. The movement in service revenues for each of the core activities within the Italy segment is discussed below.
Lottery service revenue in the Italy segment was substantially unchanged in 2013 compared to the same period in 2012. The following table sets forth an analysis of our Lottery service revenues in the Italy segment:
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ thousands)
|
|
2013
|
|
2012
|
|
€
|
|
%
|
|
|
Service revenue
|
|
|
|
|
|
|
|
|
|
|
Lotto
|
|
407,612
|
|
401,840
|
|
5,772
|
|
1.4
|
|
|
Instant tickets
|
|
377,434
|
|
382,274
|
|
(4,840
|
)
|
(1.3
|
)
|
|
Lottery
|
|
785,046
|
|
784,114
|
|
932
|
|
0.1
|
|
Lotto
Lotto service revenue in 2013 increased by €5.8 million, or 1.4% compared to the same period in 2012, principally due to an increase in late number wagers as detailed below. The decrease in core wagers was partially offset by higher wagers from 10eLotto.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2013
|
|
2012
|
|
Wagers
|
|
%
|
|
|
Core wagers
|
|
5,678.5
|
|
5,680.9
|
|
(2.4
|
)
|
(0.0
|
)
|
|
Wagers for late numbers
|
|
654.2
|
|
540.3
|
|
113.9
|
|
21.1
|
|
|
|
|
6,332.7
|
|
6,221.2
|
|
111.5
|
|
1.8
|
|
Instant Tickets
Instant ticket service revenue in 2013 decreased by €4.8 million, or 1.3% compared to the same period in 2012, principally due to a 6.1% decrease in the number of tickets sold which was only partially offset by a 4.7% increase in the average price point (the average value of the ticket sold), as detailed below.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
|
|
2013
|
|
2012
|
|
Amount
|
|
%
|
|
|
Total sales (in millions)
|
|
€
|
9,573.8
|
|
€
|
9,729.0
|
|
€
|
(155.2
|
)
|
(1.6
|
)
|
|
Total tickets sold (in millions)
|
|
1,970.8
|
|
2,098.2
|
|
(127.4
|
)
|
(6.1
|
)
|
|
Average price point
|
|
€
|
4.86
|
|
€
|
4.64
|
|
€
|
0.22
|
|
4.7
|
|
Machine Gaming
Machine Gaming service revenue is principally comprised of revenue related to the management of VLT’s and AWP’s under our concession and also includes participation revenue. Machine Gaming service revenue in 2013 de-creased by €84.0 million, or 12.6% compared to the same period in 2012. The decrease in service revenue was principally driven by a decrease in VLT wagers and an increase in tax rates, partially offset by a higher installed ma-chine base and a change in mix of the wagers, with a higher proportion derived from AWPs.
90
Table of Contents
Total Machine Gaming wagers decreased by 9.5% in 2013 compared to the same period in 2012, driven by a 15.6% decrease in VLT wagers, which was only partially offset by an increase in AWP wagers as detailed below. The 15.6% decrease in VLT wagers did not result in a proportional impact on service revenues due to the increase in AWP wagers and a resulting change in the mix. In particular, due to the nature of the product, a higher proportion of AWP wagers are converted into revenue. In 2013, AWP wagers represented 41.2% of our total wagers compared to 36.9% in 2012. This change in mix had a positive impact in service revenues. In addition to the changes in wagers, our revenues were impacted by an increase in the VLT and AWP tax rates, which increased from 4.0% in 2012 to 5.0% in 2013 for VLTs and from 11.8% in 2012 to 12.7% in 2013 for AWPs. As our revenues are stated net of tax, the increase in taxation contributed to the decrease in revenues. Some of our gaming products have payout ratios in excess of the minimum ratios required by the Italian Gaming Regulator ADM and for these products we are able to decrease the payout in order to mitigate the effect of any tax increases applied. However, in order to mitigate the impact on gaming prizes and player volumes, we generally seek to make such reductions over time.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2013
|
|
2012
|
|
Amount
|
|
%
|
|
|
VLT wagers
|
|
6,458.5
|
|
7,654.9
|
|
(1,196.4
|
)
|
(15.6
|
)
|
|
AWP wagers
|
|
4,532.4
|
|
4,483.3
|
|
49.1
|
|
1.1
|
|
|
Total wagers
|
|
10,990.9
|
|
12,138.2
|
|
(1,147.3
|
)
|
(9.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Installed at the end of December)
|
|
|
|
|
|
|
|
|
|
|
VLT’s installed
|
|
10,596
|
|
10,535
|
|
61
|
|
0.6
|
|
|
AWP machines installed
|
|
70,203
|
|
65,345
|
|
4,858
|
|
7.4
|
|
|
Total machines installed
|
|
80,799
|
|
75,880
|
|
4,919
|
|
6.5
|
|
Sports Betting
Sports betting service revenue in 2013 increased by €18.9 million, or 13.5% compared to the same period in 2012, principally due to a decrease in payout percentage (79.4% in 2013 versus 84.3% in 2012), which was partially offset by a decrease in wagers as detailed below. As of December 31, 2013, we had 1,338 fixed odds sports betting and 340 sports pool points of sale locations operational compared to 1,174 and 347 at December 31, 2012.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2013
|
|
2012
|
|
Wagers
|
|
%
|
|
|
Fixed odds sports betting and other wagers
|
|
778.5
|
|
885.3
|
|
(106.8
|
)
|
(12.1
|
)
|
Commercial Services
Commercial Services service revenue in 2013 increased by €1.0 million, or 0.8% compared to the same period in 2012, principally due to a higher number of transactions processed.
Interactive Gaming
Interactive Gaming service revenue in 2013 decreased by €9.8 million, or 11.2% compared to the same period in 2012, driven by a 6.7% decrease in game wagers principally resulting from a decrease in poker wagers.
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
Change
|
|
|
(€ millions)
|
|
2013
|
|
2012
|
|
Wagers
|
|
%
|
|
|
Interactive Gaming wagers
|
|
1,990.9
|
|
2,134.7
|
|
(143.8
|
)
|
(6.7
|
)
|
91
Table of Contents
Product Sales
Product sales in the Italy segment amounted to €2.8 million and €8.6 million in 2013 and 2012, respectively. Machine Gaming product sales represents revenue related to VLT’s and AWP’s operated by other concessionaires.
Segment Operating Income
Operating income in the Italy segment decreased by €41.9 million, or 7.7% compared to the same period in 2012, while segment operating margin was relatively unchanged, amounting to 28.8% and 29.8% in 2013 and 2012, respectively, principally driven by:
·
A decrease of €67.0 million associated with Machine Gaming related to an increase in the previously mentioned VLT and AWP taxation and €30.0 million settlement of AWP litigation;
·
An increase of €21.0 million associated with a lower Sports Betting payout.
Americas Segment
Revenue in the Americas segment in 2013 increased by €121.7 million, or 13.9% compared to the same period in 2012, driven principally by an increase in Lottery Management Services, Lottery and Machine Gaming revenues, partially offset by a decrease in Commercial Services revenue. At constant currency, revenue in the Americas segment increased by €159.5 million, or 18.3% compared to the same period in 2012.
Service Revenue
Service revenue in the Americas segment increased by €45.2 million, or 6.0% (€74.5 million, or 9.9% at constant currency) compared to the same period in 2012.
The following table sets forth changes in service revenue in 2013 compared to the same period in 2012, on a constant currency basis:
|
|
|
Service Revenue Change
|
|
|
|
|
2013 Compared to 2012
|
|
|
(€ thousands)
|
|
Constant Currency
|
|
Foreign Currency
|
|
Change
|
|
|
Lottery
|
|
36,873
|
|
(20,831
|
)
|
16,042
|
|
|
Lottery Management Services
|
|
28,269
|
|
(3,093
|
)
|
25,176
|
|
|
Machine Gaming
|
|
7,583
|
|
(2,682
|
)
|
4,901
|
|
|
Interactive Gaming
|
|
933
|
|
(51
|
)
|
882
|
|
|
Commercial Services
|
|
573
|
|
(2,582
|
)
|
(2,009
|
)
|
|
Sports Betting
|
|
303
|
|
(63
|
)
|
240
|
|
|
|
|
74,534
|
|
(29,302
|
)
|
45,232
|
|
The principal drivers of the €45.2 million increase in service revenue were as follows:
·
An increase in Lottery service revenue of €36.9 million driven by:
·
An increase of €15.6 million associated with a 3.1% increase in lottery same store revenues. Lottery same store revenue benefited from multistate jackpot activity as well as growth in instant ticket sales, principally in Texas, North Carolina and California;
·
An increase of €10.1 million related to new lottery facility management contracts in Indiana and Costa Rica;
92
Table of Contents
·
An increase of €28.3 million associated with Lottery Management Services agreements in New Jersey and Indiana which commenced operations on October 1, 2013 and July 1, 2013, respectively;
·
A decrease of €29.3 million related to unfavorable foreign exchange impacts.
Product Sales
Product sales in the Americas segment increased by €76.4 million, or 65.5% (€85.0 million, or 72.8% at constant currency) compared to the same period in 2012.
The following table sets forth changes in product sales in 2013 compared to the same period in 2012, on a constant currency basis:
|
|
|
Product Sales Change
|
|
|
|
|
2013 Compared to 2012
|
|
|
(€ thousands)
|
|
Constant Currency
|
|
Foreign Currency
|
|
Change
|
|
|
Machine Gaming
|
|
81,377
|
|
(6,147
|
)
|
75,230
|
|
|
Lottery
|
|
3,592
|
|
(2,398
|
)
|
1,194
|
|
|
|
|
84,969
|
|
(8,545
|
)
|
76,424
|
|
The principal drivers of the €76.4 million increase in product sales were as follows:
·
An increase of €81.4 million in sales of Machine Gaming equipment related to the Canadian VLT replacement cycle, principally in Quebec and Saskatchewan.
·
A decrease of €8.6 million related to unfavorable foreign exchange impacts.
Segment Operating Income
Operating income in the Americas segment increased by €33.5 million, or 37.8% compared to the same period in 2012, while segment operating margins increased from 10.2% in 2012 to 12.3% in 2013, principally driven by:
·
An increase of €25.5 million associated with the increase in sales of Machine Gaming equipment;
·
An increase of €17.3 million due to an increase in lottery same store revenues;
·
A decrease of €8.1 million related to unfavorable foreign exchange impacts.
International Segment
Revenue in the International segment in 2013 decreased by €55.9 million, or 14.4% (€48.0 million, or 12.4% at constant currency) compared to the same period in 2012.
Service Revenue
Service revenue in the International segment decreased by €10.9 million, or 4.2% (€5.9 million, or 2.3% at constant currency) compared to the same period in 2012.
93
Table of Contents
The following table sets forth changes in service revenue in 2013 compared to the same period in 2012, on a constant currency basis:
|
|
|
Service Revenue Change
|
|
|
|
|
2013 Compared to 2012
|
|
|
(€ thousands)
|
|
Constant Currency
|
|
Foreign Currency
|
|
Change
|
|
|
Interactive Gaming
|
|
(9,568
|
)
|
(1,133
|
)
|
(10,701
|
)
|
|
Sports Betting
|
|
(1,592
|
)
|
(146
|
)
|
(1,738
|
)
|
|
Lottery
|
|
(1,090
|
)
|
(3,245
|
)
|
(4,335
|
)
|
|
Commercial Services
|
|
694
|
|
(211
|
)
|
483
|
|
|
Machine Gaming
|
|
5,647
|
|
(290
|
)
|
5,357
|
|
|
|
|
(5,909
|
)
|
(5,025
|
)
|
(10,934
|
)
|
The principal drivers of the €10.9 million decrease in service revenue were as follows:
·
A decrease of €9.6 million in Interactive Gaming service revenue related to restrictions placed by various countries in Europe, including Spain and Denmark, against cross border betting;
·
A decrease of €1.6 million in Sports Betting service revenue related to restrictions placed by various countries in Europe, including Spain and Denmark, against cross border betting;
·
A decrease of €5.0 million related to unfavorable foreign exchange impacts;
·
An increase in Machine Gaming service revenue of €5.6 million driven by an increase of €3.6 million in deferred service revenue recognized in 2013 related to a European customer that did not occur in 2012.
Product Sales
Product sales in the International segment decreased by €44.9 million, or 35.1% (€42.1 million, or 32.9% at constant currency) compared to the same period in 2012.
The following table sets forth changes in product sales in 2013 compared to the same period in 2012, on a constant currency basis:
|
|
|
Product Sales Change
|
|
|
|
|
2013 compared to 2012
|
|
|
(€ thousands)
|
|
Constant Currency
|
|
Foreign Currency
|
|
Change
|
|
|
Lottery
|
|
(34,972
|
)
|
(710
|
)
|
(35,682
|
)
|
|
Machine Gaming
|
|
(4,793
|
)
|
(2,016
|
)
|
(6,809
|
)
|
|
Interactive Gaming
|
|
(3,258
|
)
|
(30
|
)
|
(3,288
|
)
|
|
Sports Betting
|
|
930
|
|
(69
|
)
|
861
|
|
|
|
|
(42,093
|
)
|
(2,825
|
)
|
(44,918
|
)
|
The principal drivers of the €44.9 million decrease in product sales were as follows:
·
A decrease of €35.0 million in Lottery product sales; in 2012 we recorded significant product sales to customers in the United Kingdom, France, Turkey and Lithuania which did not recur in 2013;
·
A decrease of €4.8 million in sales of Machine Gaming equipment principally due to a decrease in sales of games to our distributor in Italy;
·
A decrease of €3.3 million in Interactive Gaming;
·
A decrease of €2.8 million related to unfavorable foreign exchange impacts.
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Table of Contents
Segment Operating Income
Operating income in the International segment decreased by €4.9 million, or 8.9% compared to the same period in 2012. As a percentage of revenue, segment operating income marginally increased from 14.4% in 2012 to 15.3% in 2013 driven by the following:
·
A decrease of €7.5 million related to the decrease in product sales;
·
A decrease of €6.5 million related to the decrease in Interactive Gaming service revenue;
·
A decrease of €3.7 million related to unfavorable foreign exchange impacts;
·
An increase of €3.2 million related to lower costs associated with a change in contract terms with a European customer;
·
A net increase of €4.4 million related to a decrease in impairment charges and a payment in 2012 of Spanish Gaming tax related to a retroactive change in law which did not recur in 2013;
·
An increase of €5.2 million associated with deferred service revenue recognized in 2013 that did not occur in 2012 and improved performance from a customer in Eastern Europe.
B.
Liquidity and Capital Resources
Our business is capital intensive and therefore we require liquidity in order to meet our obligations and fund our growth. Historically, our primary sources of liquidity have been cash flows from operations and, to a lesser extent, cash proceeds from financing activities, including amounts available under our $2.6 billion (€2.1 billion) Revolving Credit Facilities. In addition to our general working capital and operational needs, our liquidity requirements arise primarily from our need to meet debt service requirements and to fund capital expenditures. We also require liquidity to fund any acquisitions and associated costs. Our cash flows generated from operating activities together with our cash flows generated from financing activities have historically been sufficient to meet our liquidity requirements.
We believe our ability to generate cash from operations to reinvest in our business, primarily due to the long-term nature of our contracts, is one of our fundamental financial strengths. Combined with funds currently available and committed borrowing capacity, we expect to have sufficient liquidity to meet our financial obligations and working capital requirements in the ordinary course of business for at least the next twelve months.
The cash management, funding operations and investment of excess liquidity are centrally coordinated by a dedicated treasury team with the objective of ensuring effective and efficient management of funds.
At December 31, 2014, our total available liquidity was €1.526 billion, including €1.265 billion available under our
Revolving Credit Facilities
and €261.2 million of cash and cash equivalents. The following table summarizes our total available liquidity:
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Table of Contents
|
|
|
At December 31,
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
|
Cash and cash equivalents
|
|
261,184
|
|
419,118
|
|
|
Revolving Credit Facilities(1)
|
|
1,264,597
|
|
—
|
|
|
Facilities
|
|
—
|
|
898,806
|
|
|
Total liquidity
|
|
1,525,781
|
|
1,317,924
|
|
(1)
The
Revolving
Credit Facilities has covenants and restrictions including, among other things, requirements relating to the maintenance of certain financial ratios and limitations on certain acquisitions and disposing of assets, none of which are expected to impact our liquidity or capital resources. We have complied with all covenant requirements for the periods represented above. For further information, see “—Credit Facilities and Indebtedness”. The amounts set forth above do not include the Bridge Facility.
Our liquidity is principally denominated in euros and, to a lesser extent, U.S. dollars. At December 31, 2014, our cash and cash equivalents amounted to €261.2 million, of which
51%
was denominated in euros and
23%
was denominated in U.S. dollars (€
59.9
million). The remaining
26
% was denominated among several other currencies. At December 31, 2013, our cash and cash equivalents amounted to €419.1 million, of which 69% was denominated in euros and 14% was denominated in U.S. dollars (€59.2 million). The remaining 17% was denominated among several other currencies. We hold insignificant amounts of cash in countries where there may be restrictions on transfer due to regulatory or governmental bodies. Based on our review of such transfer restrictions and the cash balances held in such territories, we do not believe such transfer restrictions have an adverse impact on our ability to meet liquidity requirements at the dates represented above.
To further support our liquidity requirements, in 2014 and 2013 w
e entered into two agreements with major European financial institutions to sell certain accounts receivable on a non-recourse basis, from our Italy segment’s Scratch & Win and Commercial Services concessions. The agreements have a three- and five-year duration, respectively, and are subject to early termination by either party. The aggregate amount of outstanding accounts receivables is limited to a maximum amount of €300 million and €150 million for the Scratch & Win and Commercial Services concessions, respectively. At December 31, 2014, receivables of €116.0 million and €41.6 million had been sold for the Scratch & Win and Commercial Services concessions, respectively (€82.1 million at December 31, 2013 for the Commercial Services concession).
We made €130.5 million, €125.9 million and €122.2 million of dividend payments in 2014, 2013 and 2012, respectively.
Following the completion of the acquisition of IGT, our primary sources of liquidity are expected to be cash flows from operations and, to a lesser extent, cash proceeds from financing activities, including amounts available under the
Revolving
Credit Facilities and an €800 million four-year senior facility term loan that we entered into in January 2015, after the close of calendar 2014.
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Table of Contents
Summary Statements of Cash Flows
The following table summarizes our statements of cash flows for 2014 and 2013. A complete statement of cash flows is provided in the
GTECH
Consolidated Financial Statements
included herein.
Comparison of the Year Ended December 31, 2014, 2013 and 2012
|
|
|
For the Year Ended
December 31,
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Cash flows before changes in operating assets and liabilities
|
|
883,898
|
|
843,114
|
|
855,692
|
|
|
Changes in operating assets and liabilities
|
|
96,713
|
|
(146,865
|
)
|
(92,363
|
)
|
|
Net cash flows from operating activities
|
|
980,611
|
|
696,249
|
|
763,329
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of systems, equipment and other assets related to contracts
|
|
(191,895
|
)
|
(183,878
|
)
|
(211,833
|
)
|
|
Acquisitions, net of cash acquired
|
|
(26,230
|
)
|
(7,345
|
)
|
—
|
|
|
Purchases of intangible assets
|
|
(24,689
|
)
|
(134,919
|
)
|
(30,336
|
)
|
|
Investment in associates
|
|
—
|
|
(19,800
|
)
|
—
|
|
|
Other investing activities, net
|
|
4,508
|
|
4,371
|
|
(9,128
|
)
|
|
Net cash flows used in investing activities
|
|
(238,306
|
)
|
(341,571
|
)
|
(251,297
|
)
|
|
|
|
|
|
|
|
|
|
|
Net (payments)/proceeds on long-term debt
|
|
(320,632
|
)
|
(102,810
|
)
|
181,195
|
|
|
Interest paid
|
|
(158,577
|
)
|
(143,390
|
)
|
(184,479
|
)
|
|
Dividends paid
|
|
(130,525
|
)
|
(125,920
|
)
|
(122,220
|
)
|
|
Make-whole paid in connection with the early extinguishment of debt
|
|
(72,999
|
)
|
—
|
|
—
|
|
|
Acquisition of non-controlling interest
|
|
(72,328
|
)
|
—
|
|
—
|
|
|
Return of capital—non-controlling interest
|
|
(55,163
|
)
|
(40,087
|
)
|
(42,562
|
)
|
|
Payments on bridge facility
|
|
(52,713
|
)
|
—
|
|
—
|
|
|
Treasury shares purchased
|
|
(40,211
|
)
|
—
|
|
—
|
|
|
Dividends paid—non-controlling interest
|
|
(33,079
|
)
|
(34,062
|
)
|
(32,116
|
)
|
|
Capital increase—non-controlling interest
|
|
6,188
|
|
71,973
|
|
—
|
|
|
Other financing activities, net
|
|
29,868
|
|
(4,157
|
)
|
(43,354
|
)
|
|
Net cash flows used in financing activities
|
|
(900,171
|
)
|
(378,453
|
)
|
(243,536
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash flows
|
|
(157,866
|
)
|
(23,775
|
)
|
268,496
|
|
Analysis of Cash Flows
Net Cash Flows From Operating Activities
During 2014, we generated €980.6 million of net cash flows from operating activities, an increase of €284.4 million compared to the same period in 2013, principally due to changes in operating assets and liabilities. Net cash flows from operating activities were €696.2 million in 2013 compared to €763.3 million in 2012. The decrease of €67.1 million is attributable to changes in operating assets and liabilities, the payment of €30 million for the Italy Machine Gaming litigation settlement and the payment of a portion of the €28 million December 2013 Italy tax matter settlement.
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Table of Contents
The following table sets forth the movements in operating assets and liabilities:
|
|
|
For the Year Ended
December 31,
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Trade and other receivables
|
|
127,234
|
|
(108,594
|
)
|
(143,678
|
)
|
|
Other current liabilities
|
|
20,090
|
|
3,900
|
|
1,296
|
|
|
Advance billings
|
|
5,741
|
|
(4,176
|
)
|
(2,283
|
)
|
|
Other assets
|
|
3,605
|
|
3,816
|
|
(1,469
|
)
|
|
Non-current financial liabilities
|
|
3,410
|
|
(1,696
|
)
|
(2,590
|
)
|
|
Inventories
|
|
3,312
|
|
14,423
|
|
(19,974
|
)
|
|
Advance payments from customers
|
|
714
|
|
(29,466
|
)
|
18,811
|
|
|
Accounts payable
|
|
(396
|
)
|
(45,220
|
)
|
114,899
|
|
|
Non-current financial assets
|
|
(518
|
)
|
(288
|
)
|
16
|
|
|
Provisions
|
|
(902
|
)
|
(1,946
|
)
|
(1,483
|
)
|
|
Accrued expenses
|
|
(905
|
)
|
11,055
|
|
(13,836
|
)
|
|
Taxes other than income taxes
|
|
(1,027
|
)
|
(904
|
)
|
2,286
|
|
|
Current financial assets
|
|
(1,616
|
)
|
(2,574
|
)
|
1,613
|
|
|
Other liabilities
|
|
(2,176
|
)
|
(1,127
|
)
|
(563
|
)
|
|
Employee compensation
|
|
(4,797
|
)
|
528
|
|
7,589
|
|
|
Other current assets
|
|
(11,232
|
)
|
(11,415
|
)
|
(71,028
|
)
|
|
Deferred revenue
|
|
(17,894
|
)
|
22,265
|
|
16,298
|
|
|
Current financial liabilities
|
|
(25,930
|
)
|
4,554
|
|
1,733
|
|
|
Changes in operating assets and liabilities
|
|
96,713
|
|
(146,865
|
)
|
(92,363
|
)
|
Trade and other receivables generated €127.2 million of cash flows in 2014 principally due to a decrease in Lottery receivables within the Italy segment primarily due to factoring and a decrease in sales compared to December 31, 2013.
Trade and other receivables used €108.6 million of cash flows in 2013 principally due to an increase in Lottery receivables within the Italy segment primarily due to the timing of cash collections. Accounts payable used €45.2 million of cash flows in 2013 principally due to the timing of payments to suppliers and intermediaries in all of our segments.
Trade and other receivables used €143.7 million of cash flows in 2012 due to an increase in Lottery and Commercial Services receivables within the Italy segment and the timing of cash collections. Other current assets used €71.0 million of cash flows in 2012 principally due to an adjustment in the second quarter of 2012 related to an April 2012 banking law change in Italy as a result of which €49.3 million was reclassified from cash and cash equivalents into other current assets, along with an increase in concession fees receivable from the Italian gaming regulator. Accounts payable generated €114.9 million of cash flows in 2012 due to the timing of payments to suppliers and intermediaries in the Italy and Americas segments.
Net Cash Flows Used In Investing Activities
During 2014, 2013, and 2012, we used €238.3 million, €341.6 million, and €251.3 million, respectively, of net cash flows in investing activities.
Investing activities for the year ended December 31, 2014
·
We invested €191.9 million in systems, equipment and other assets principally as follows:
·
€109.8 million in the Americas segment for systems and equipment in Colorado, Tennessee, New Jersey, Ontario, Texas and Trinidad & Tobago;
·
€58.6 million in the Italy segment for Machine Gaming, Sports Betting and Lotto;
·
€21.5 million in the International segment for systems and equipment in the United Kingdom, Greece, and Poland.
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Table of Contents
·
We made payments of €26.2 million for acquisitions of subsidiaries, net of cash acquired, principally comprised of €19.7 million related to the May 2014 acquisition of 100% of the shares of Probability Plc, a mobile gaming solutions company that provides us with immediate access to a mobile solution in slots and table games, as well as enhanced player acquisition and retention experience.
Investing activities for the year ended December 31, 2013
·
We invested €183.9 million in systems, equipment and other assets principally as follows:
·
€86.3 million in the Americas segment for systems and equipment in California, Indiana, Georgia, Texas, New Jersey, Illinois, Rhode Island and New York;
·
€71.8 million in the Italy segment for Machine Gaming, Lotto and Sports Betting;
·
€23.4 million in the International segment for systems and equipment in the United Kingdom and Beijing, China.
·
We invested €134.9 million in intangible assets principally related to the June 2013 upfront payment of $120 million (€91.7 million) required under the Services Agreement that Northstar New Jersey Lottery Group, LLC signed with the State of New Jersey to manage a wide range of the lottery’s marketing, sales and related functions.
Investing activities for the year ended December 31, 2012
·
We invested €211.8 million in systems, equipment and other assets principally as follows:
·
€91.9 million in the Americas segment for systems and equipment in Georgia, Texas, Illinois, Costa Rica, New York, Rhode Island and California and VLT participation markets in the United States;
·
€86.4 million in the Italy segment for Machine Gaming, Lotto and Sports Betting;
·
€28.2 million in the International segment for systems and equipment in Luxembourg, Beijing China, Poland and the United Kingdom.
·
We invested €30.3 million in intangible assets principally related to software, concessions and licenses acquired in the Italy segment;
·
We recovered €4.5 million related to a previously impaired foreign investment in the International segment.
Net cash flows used in financing activities
During 2014, 2013, and 2012, we used €900.2 million, €378.5 million, and €243.5 million, respectively, of net cash flows in financing activities.
Financing activities for the year ended December 31, 2014
·
We made net payments on long-term debt of €320.6 million. In November 2014, we entered into a $2.6 billion (€2.1 billion at the December 31, 2014 exchange rate) five-year senior facilities agreement. The agreement for the senior facilities provides for a $1.4 billion multicurrency revolving credit facility for GTECH Corporation and an €850 million multicurrency revolving credit facility for IGT PLC. With proceeds from the Revolving Credit Facilities, we repaid outstanding amounts due under our Term Loan Facility and Revolving Facility B (which were scheduled to expire in 2015) and to redeem our 2009 Notes due 2016, in November 2014 and December 2014, respectively;
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Table of Contents
·
We paid €158.6 million of interest primarily related to the Capital Securities, the 2009 Notes due 2016 and the 2010 Notes due 2018;
·
We paid dividends of €130.5 million (€0.75 per share) to shareholders for calendar 2013 results;
·
In connection with the redemption of the 2009 Notes (due 2016), we paid a €73.0 million make-whole to note holders;
·
In March 2014, we acquired from UniCredit S.p.A. (“UniCredit”), through the exercise of a call option, the entire 12.5% interest held by UniCredit in SW Holding S.p.A. (“SW”) for cash consideration of €72.3 million, including transaction costs. In 2010, through its investment in SW, UniCredit had made an indirect equity investment in Lotterie Nazionali S.r.l. (“LN”), a majority-owned IGT PLC subsidiary that holds an instant ticket concession license in Italy. IGT PLC’s direct and indirect ownership in LN has increased from 51.5% to 64% as a result of the buyout of UniCredit’s interest;
·
We returned €55.2 million of capital and paid €33.1 million of dividends to non-controlling shareholders;
·
We paid €52.7 million of fees related to our 364-day senior bridge term loan credit facility we entered into in July 2014 in connection with our planned acquisition of IGT;
·
We paid €40.2 million to purchase 2,183,503 shares of our Company’s stock.
Financing activities for the year ended December 31, 2013
·
We paid dividends of €125.9 million (€0.73 per share) to shareholders for calendar 2012 results;
·
We paid €143.4 million of interest primarily related to the Capital Securities, the 2009 Notes due 2016 and the 2010 Notes due 2018;
·
We returned €40.1 million of capital and paid €34.1 million of dividends to non-controlling shareholders;
·
We received capital contributions of €72.0 million from our partners in Northstar New Jersey Lottery Group, LLC and Northstar Lottery Group, LLC.
Financing activities for the year ended December 31, 2012
·
In December 2012, we issued €500 million of guaranteed notes, the proceeds of which, net of associated costs, were used in part to repay existing indebtedness under the revolving credit facilities and the term loan principal payment due December 2012;
·
We paid €184.5 million of interest primarily related to the Capital Securities, the 2009 Notes due 2016 and the 2010 Notes due 2018;
·
We paid dividends of €122.2 million (€0.71 per share) to shareholders for calendar 2011 results;
·
We returned €42.6 million of capital and paid €32.1 million of dividends to non-controlling shareholders.
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Table of Contents
Capital Expenditures
Capital expenditures are defined as investments for the period in Systems, equipment and other assets related to contracts, property, plant and equipment, intangible assets and investments in associates as shown in our cash flow statement. The table below sets forth a breakdown of total capital expenditures for the periods indicated:
|
|
|
For the Year Ended December 31, 2014
|
|
|
(
€ thousands)
|
|
Systems, equipment
and other assets
related to contracts
|
|
Property, plant
and equipment
|
|
Intangible
Assets
|
|
Investments in
Associates
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
109,824
|
|
615
|
|
—
|
|
—
|
|
|
Italy
|
|
58,574
|
|
—
|
|
19,642
|
|
—
|
|
|
International
|
|
21,456
|
|
62
|
|
82
|
|
—
|
|
|
|
|
189,854
|
|
677
|
|
19,724
|
|
—
|
|
|
Products and Services
|
|
1,015
|
|
6,042
|
|
4,965
|
|
—
|
|
|
Corporate
|
|
1,026
|
|
1,173
|
|
—
|
|
—
|
|
|
|
|
191,895
|
|
7,892
|
|
24,689
|
|
—
|
|
Americas Segment
Investments in systems, equipment and other assets related to contracts of €109.8 million principally for systems and equipment in Colorado, Tennessee, New Jersey, Ontario, Texas and Trinidad & Tobago.
Italy Segment
Investments in systems, equipment and other assets related to contracts of €58.6 million principally relate to spending to expand systems in Machine Gaming, Sports Betting and Lotto. Investments in intangible assets of €19.6 million principally relate to software and concessions and licenses.
International Segment
Investments in systems, equipment and other assets related to contracts of €21.5 million principally for systems and equipment in the United Kingdom, Greece and Poland.
|
|
|
For the Year Ended December 31, 2013
|
|
|
(
€ thousands)
|
|
Systems, equipment
and other assets
related to contracts
|
|
Property, plant
and equipment
|
|
Intangible
Assets
|
|
Investments in
Associates
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
86,279
|
|
1,371
|
|
92,521
|
|
—
|
|
|
Italy
|
|
71,834
|
|
—
|
|
40,911
|
|
—
|
|
|
International
|
|
23,350
|
|
707
|
|
—
|
|
19,800
|
|
|
|
|
181,463
|
|
2,078
|
|
133,432
|
|
19,800
|
|
|
Products and Services
|
|
2,121
|
|
7,623
|
|
1,487
|
|
—
|
|
|
Corporate
|
|
294
|
|
669
|
|
—
|
|
—
|
|
|
|
|
183,878
|
|
10,370
|
|
134,919
|
|
19,800
|
|
Americas Segment
Investments in systems, equipment and other assets related to contracts of €86.3 million principally for systems and equipment in California, Indiana, Georgia, Texas, New Jersey, Illinois, Rhode Island and New York. Investments in intangible assets of €92.5 million relate to
a $120 million upfront payment required under the Services Agreement that Northstar New Jersey Lottery Group, LLC signed with the State of New Jersey, Department of the Treasury, Division of Purchase and Property and Division of Lottery in June 2013 to manage a wide range of the lottery’s marketing, sales, and related functions.
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Table of Contents
Italy Segment
Investments in systems, equipment and other assets related to contracts of €71.8 million principally for Machine Gaming, Lotto and Sports Betting. Investments in intangible assets of €40.9 million principally relate to sports betting rights, concessions and licenses, and software.
International Segment
Investments in systems, equipment and other assets related to contracts of €23.4 million principally for systems and equipment in the United Kingdom and Beijing, China. Investments in associates of €19.8 million relate to our investment in Yeonama Holdings Co. Limited, a shareholder in Emma Delta Limited, the fund that holds a 33% interest in OPAP S.A., the Greek gaming and football betting operator.
Credit Facilities and Indebtedness
|
|
|
December 31,
|
|
|
(
€ thousands)
|
|
2014
|
|
2013
|
|
|
Long-term debt, including current portion
|
|
|
|
|
|
|
Capital Securities
|
|
792,865
|
|
790,209
|
|
|
2009 Notes (due 2016)(1)
|
|
—
|
|
759,484
|
|
|
Revolving Credit Facilities
|
|
722,127
|
|
—
|
|
|
2010 Notes (due 2018)
|
|
509,386
|
|
520,677
|
|
|
2012 Notes (due 2020)
|
|
486,637
|
|
507,259
|
|
|
2009 Notes (due 2016)
|
|
—
|
|
759,484
|
|
|
Facilities
|
|
—
|
|
276,347
|
|
|
Other
|
|
1,601
|
|
1,780
|
|
|
|
|
2,512,616
|
|
2,855,756
|
|
|
Short-term borrowings
|
|
|
|
|
|
|
Short-term borrowings
|
|
8,895
|
|
851
|
|
|
|
|
8,895
|
|
851
|
|
|
Total debt
|
|
2,521,511
|
|
2,856,607
|
|
(1)
The 2009 Notes were repaid in 2014.
102
Table of Contents
The key terms of our material debt are summarized as follows:
|
Borrowing
|
|
Initial
Principal Amount
|
|
Interest Rate (Per Annum)
|
|
Maturity
|
|
Revolving Credit Facilities
|
|
$1.4 billion and €850 million(1)
|
|
LIBOR or EURIBOR + margin
|
|
November 2019
|
|
2009 Notes (due 2016)(2)
|
|
€750 million
|
|
5.375%
|
|
December 2016
|
|
2010 Notes (due 2018)
|
|
€500 million
|
|
5.375%(3)
|
|
February 2018
|
|
2012 Notes (due 2020)
|
|
€500 million
|
|
3.5%(3)
|
|
March 2020
|
|
Capital Securities
|
|
€750 million
|
|
8.25% through March 2016 Six-month EURIBOR + 505 basis points thereafter
|
|
March 2066(4)
|
|
Term Loan Facility(5)
|
|
$700 million
|
|
EURIBOR + 505 basis points thereafter LIBOR + margin
|
|
December 2015
|
|
Revolving Facilities(5)
|
|
€900 million
|
|
LIBOR or EURIBOR + margin
|
|
December 2015
|
Debt issuance costs, which are net against amounts borrowed, are amortized to interest expense through the maturity dates with the exception of the Capital Securities that are amortized through April 2016.
(1)
Maximum principal amount.
(2)
2009 Notes were repaid in 2014.
(3)
Subject to adjustment as described below.
(4)
A significant portion of the Capital Securities extinguished in 2015.
(5)
Term Loan Facility and Revolving Facilities were repaid in 2014.
Revolving Credit Facilities
On November 4, 2014, IGT PLC and GTECH Corporation entered into a five-year senior facilities agreement with a syndicate of international banks providing for the following credit facilities:
|
Facility
|
|
Borrower
|
|
$1.4 billion multi-currency revolving credit facility
(the “U.S. Dollar Revolving Credit Facility”)
|
|
GTECH Corporation
|
|
€850 million multi-currency revolving credit facility
(the “Euro Revolving Credit Facility”)
|
|
IGT PLC
|
The U.S. Dollar Revolving Credit Facility and the Euro Revolving Credit Facility are collectively referred to as the “Revolving Credit Facilities.”
Upon completion of the acquisition of IGT, the U.S. Dollar Revolving Credit Facility was increased to $1.5 billion. The Revolving Credit Facilities may be utilized by way of letters of credit up to certain sub-limits and the U.S. Dollar Revolving Credit Facility may be used by way of U.S. dollar swingline loans. The Revolving Credit Facilities may be used for general corporate purposes, including repayment of existing indebtedness.
We repaid outstanding amounts due under our Term Loan Facility (as defined below) and Revolving Facility B (as defined below) with proceeds of utilizations under the Revolving Credit Facilities.
IGT PLC and GTECH Corporation are the original borrowers and original guarantors under the agreement for the Revolving Credit Facilities. A mechanism is included in the agreement for the Revolving Credit Facilities to enable certain subsidiaries to accede as borrowers subject to certain conditions and also requires that subsidiaries representing 85% of adjusted group assets and 85% of adjusted group EBITDA guarantee the obligations of the borrowers under the Revolving Credit Facilities.
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Table of Contents
Interest is generally payable between one and six months in arrears at a variable interest rate plus a margin based on our long-term credit ratings. At December 31, 2014, the effective interest rate on the Revolving Credit Facilities was 1.78%.
The agreement for the Revolving Credit Facilities provides that the following fees are payable quarterly in arrears:
|
Fee
|
|
Terms
|
|
Commitment
|
|
Between 35% and 37.5% of the applicable margin depending on our long-term credit ratings per annum on the aggregate undrawn and unconcealed amount of the Revolving Credit Facilities.
|
|
Utilization
|
|
Payable on the aggregate drawn amount of the Revolving Credit Facilities at a rate determined upon such drawn amount.
|
The agreement for the Revolving Credit Facilities contains, among other terms, covenants with respect to the maintenance of certain financial ratios and restrictions with respect to:
·
payment of dividends and making of distributions to shareholders;
·
changing the general nature of our business;
·
incurrence of certain indebtedness by subsidiaries which are not borrowers or guarantors;
·
granting of certain guarantees;
·
granting certain security;
·
disposing of assets; and
·
making of certain acquisitions.
Violation of these covenants may result in the full principal amounts of the Revolving Credit Facilities being immediately payable upon written notice. At December 31, 2014, we were in compliance with all covenants.
Notes
IGT PLC issued notes in December 2010 due 2018 (the “2010 Notes (due 2018)”), and December 2012 due 2020 (the “2012 Notes (due 2020)”) (the 2010 Notes (due 2018) and 2012 Notes (due 2020) are collectively, the “Notes”) which are all unconditionally and irrevocably guaranteed by GTECH Corporation, GTECH Holdings Corporation, GTECH Rhode Island LLC and Invest Games S.A. The Notes are listed on the Luxembourg Stock Exchange and have received credit ratings of Baa3 and BBB- by Moody’s Investors Service Inc. (“Moody’s”) and Standard & Poor’s Ratings Services (
“S&P”)
, respectively. GTECH Holdings Corporation, GTECH Rhode Island LLC and Invest Games S.A. are collectively referred to as the “Other Guarantors.”
IGT PLC may redeem the Notes in whole, but not in part, as follows:
·
at the greater of 100% of their principal amount together with any accrued interest or at an amount specified in the trust deeds governing the Notes; and
·
at 100% of their principal amount in the event of certain changes affecting taxation in Italy, the United States or Luxembourg.
Holders of the Notes may require IGT PLC to redeem such issuance in whole or in part at 100% of their principal amount plus accrued interest following the occurrence of certain specified events.
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Table of Contents
Interest is payable at fixed interest rates that are subject to a 1.25% per annum adjustment in the event of an increase or decrease in credit ratings. The adjustment is subject to a 6.625% ceiling and a 5.375% floor for the 2010 Notes (due 2018) and a 4.75% ceiling and a 3.5% floor for the 2012 Notes (due 2020).
Interest is payable annually in arrears as follows:
|
Borrowing
|
|
Payment Date
|
|
2010 Notes (due 2018)
|
|
February 2
|
|
2012 Notes (due 2020)
|
|
March 5
|
On October 23, 2014, IGT PLC solicited the holders of each series of the Notes to approve by extraordinary resolutions proposals to: (1) approve the merger of GTECH S.p.A. with and into Georgia Worldwide Plc (now known as International Game Technology Plc) (the “Holdco Merger”) and certain related transactions generally and in accordance with and for purposes of any applicable statutory or court creditor process, (2) agree that no put event (as defined in the conditions of each series of the Notes) will be deemed to occur as a result of or in connection with the Holdco Merger and such related transactions and (3) waive any and all events of default, potential events of default (as such terms are defined in the trust deed governing each series of the Notes) and any other breach of the conditions of each series of the Notes or the trust deeds governing the Notes that had been, are or may be, within the period of twelve months from the passing of the extraordinary resolutions, triggered by or in connection with Holdco Merger or such related transactions. On November 24, 2014, holders of the requisite principal amounts of each series of the Notes passed extraordinary resolutions approving the proposals. IGT PLC paid an aggregate of €31.3 million in consent fees to the relevant holders of the Notes in connection therewith with proceeds of utilizations under the Revolving Credit Facilities.
IGT PLC also issued notes in December 2009 due 2016 (the “2009 Notes (due 2016)”) which were unconditionally and irrevocably guaranteed by GTECH Corporation and the Other Guarantors. The 2009 Notes (due 2016) were listed on the Luxembourg Stock Exchange and received credit ratings of Baa3 and BBB- by Moody’s and
S&P
, respectively. Interest on the 2009 Notes (due 2016) was payable at a fixed interest rate of 5.375% per annum that was subject to a 1.25% per annum adjustment in the event of an increase or decrease in credit ratings.
On December 8, 2014, IGT PLC redeemed the 2009 Notes (due 2016) for a redemption price of €823.0 million with proceeds of utilizations under the Revolving Credit Facilities. In connection with the redemption, IGT PLC paid a €73.0 million make-whole to note holders and wrote off unamortized debt issuance costs of €2.6 million. IGT PLC also held €150 million notional amount of interest rate swaps, which were designated as hedges of fixed interest rates with respect to the 2009 Notes (due 2016), which were settled in December 2014 in connection with the redemption, resulting in a €8.3 million gain. See Note 29 for additional information.
Capital Securities
IGT PLC issued subordinated interest-deferrable capital Securities due 2066 in May 2006 (the “Capital Securities”) which are redeemable at maturity, at par from March 31, 2016, or at any interest payment date thereafter, upon the occurrence of certain tax events, through open market purchases, by public cash tender offer or if a change of control event occurs. The Capital Securities are listed on the Luxembourg Stock Exchange and received ratings of Ba2 and BB by Moody’s and S&P, respectively.
Interest is payable annually at a fixed interest rate through March 31, 2016 and thereafter has a variable interest rate payable semi-annually.
The terms of the Capital Securities allow IGT PLC to optionally defer interest payments and mandates deferral of interest payments if IGT PLC is in breach of the coverage ratio as defined in the trust deed. Under certain specified circumstances, IGT PLC is required to settle deferred interest payments with cash and, in some circumstances, from the proceeds of an issue, offer and sale of equity. IGT PLC paid €61.9 million of interest on the Capital Securities in 2014 and 2013.
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Table of Contents
IGT PLC is required to authorize the issuance of ordinary shares in accordance with a resolution approved by its shareholders. At each annual general meeting, the value of the ordinary shares authorized for issuance must be at least equivalent to the interest payments due during the following two-year period. As of December 31, 2013, the authorization was in place for the issuance of capital up to €125 million. Interest payments over the next two years are approximately €124 million.
On December 18, 2014, IGT PLC invited the holders of the Capital Securities to: (1) tender the Capital Securities for purchase by IGT PLC for cash and (2) approve proposals by extraordinary resolutions to: (a) acknowledge that a condition of the Capital Securities did not apply to the offer to purchase the Capital Securities and (b) approve certain amendments to the conditions of the Capital Securities and the trust deed governing the Capital Securities.
In January 2015, after the close of calendar 2014, holders of the Capital Securities tendered €704.5 million of the Capital Securities for purchase by IGT PLC and holders of the requisite principal amount of the Capital Securities passed extraordinary resolutions approving the proposals and IGT PLC purchased all of the Capital Securities tendered for purchase and paid an aggregate of €816.9 million in consideration to the relevant holders of the Capital Securities in connection therewith with proceeds of utilizations under the Revolving Credit Facilities.
Facilities
We had the following unsecured and unsubordinated credit facilities (which were scheduled to expire in 2015):
|
Facility
|
|
Borrower
|
|
$700 million term loan (the “Term Loan Facility”)
|
|
GTECH Corporation
|
|
€500 million multi-currency revolving credit facility (“Revolving Facility A”)
|
|
GTECH Corporation
|
|
€400 million multi-currency revolving credit facility (“Revolving Facility B”)
|
|
IGT PLC
|
Revolving Facility A and Revolving Facility B are collectively referred to as the “Revolving Facilities” and the Term Loan Facility and the Revolving Facilities are collectively referred to as the “Facilities.”
The Term Loan Facility and Revolving Facility A were fully and unconditionally guaranteed by IGT PLC and the Other Guarantors. Revolving Facility B was fully and unconditionally guaranteed by GTECH Corporation and the Other Guarantors.
In November 2014, we terminated the agreement for the Facilities and repaid outstanding amounts due under the Term Loan Facility of $385.0 million (€308.4 million) with proceeds of utilizations under the Revolving Credit Facilities and we wrote off unamortized debt issuance costs of €2.8 million. See Note 29 to the
GTECH
Consolidated Financial Statements
included herein for additional information.
Interest was generally payable between one and six months in arrears at a variable interest rate plus a margin based on our ratio of total net debt to earnings before interest, taxes, depreciation and amortization. At December 31, 2013, the effective interest rate on the Facilities was 1.25%.
The agreement for the Facilities provided that certain fees were payable quarterly in arrears as follows:
|
Fee
|
|
Terms
|
|
Commitment
|
|
37.5% of margin per annum on the total available commitment under the Revolving Facilities.
|
|
Utilization
|
|
Between 0% and 0.4% per annum based on the average daily amount outstanding under the Revolving Facilities.
|
106
Table of Contents
The agreement for the Facilities contained, among other terms, covenants with respect to the maintenance of certain financial ratios and restrictions with respect to:
·
payment of dividends and making of distributions to shareholders;
·
changing the general nature of our business;
·
incurrence of certain indebtedness by subsidiaries which are not borrowers or guarantors;
·
granting of certain guarantees;
·
granting certain security;
·
disposing of assets;
·
making certain acquisitions; and
·
limitations on the repayment, cancellation, redemption, purchase and repurchases of the Capital Securities.
Violation of these terms may have resulted in the full principal amounts of the Facilities being immediately payable upon written notice. At December 31, 2013, we were in compliance with all covenants.
Letters of Credit
In connection with certain customer contracts, we are required to issue letters of credit that primarily secure our performance under customer contracts. For letters of credit outside of the Revolving Facilities, we enter into agreements as required and pay a fee to the third party based on the amount issued.
|
|
|
Letters of Credit Outstanding
|
|
|
|
|
(€ thousands)
|
|
Outside the
Revolving Facilities
|
|
Under the
Revolving Facilities
|
|
Total
|
|
Weighted Average
Annual Cost
|
|
|
December 31, 2014
|
|
655,957
|
|
—
|
|
655,957
|
|
0.94
|
%
|
|
December 31, 2013
|
|
689,602
|
|
1,194
|
|
690,796
|
|
1.05
|
%
|
Bridge Facility
On July 15, 2014, in connection with our planned acquisition of IGT, IGT PLC obtained a debt commitment letter, pursuant to which affiliates of Credit Suisse AG, Barclays PLC and Citigroup Inc. provided commitments to fund a 364-day senior bridge term loan credit facility (the “Bridge Facility”) in an aggregate principal amount of approximately $10.7 billion, of which approximately 45% was denominated in euros and approximately 55% of which was denominated in U.S. dollars. The Bridge Facility consisted of four sub-facilities, the proceeds of which were to be used, among other things, to pay the cash portion of the merger consideration, to fund transaction expenses, to redeem and/or refinance existing specified indebtedness of IGT PLC and IGT, to the extent applicable, and to fund cash payments to IGT PLC shareholders exercising rescission rights.
Upon entering into the debt commitment letter for the Bridge Facility, we incurred a fee of €59.1 million, which was payable in full upon the earliest occurrence of certain events set forth in the related agreements, including, among others, the closing of the acquisition of IGT or the date the Bridge Facility terminated in accordance with its terms. The fees of €59.1 million were recorded within current financial liabilities, with an offsetting entry in other current assets on the consolidated statements of financial position. The cost deferred in other current assets was being amortized to interest expense over the estimated duration of the Bridge Facility (11½ months beginning July 15, 2014). In addition, a daily ticking fee accrued on the aggregate amount of the commitments in respect of the Bridge Facility during the period from and including July 15, 2014, to but excluding
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Table of Contents
the date upon which the Bridge Facility was terminated, at a rate equal to 0.25% per annum. The ticking fee was payable in full on the earlier of (1) termination or expiration of the commitment letter and (2) the closing of the acquisition of IGT. The ticking fee was recorded as interest expense in the consolidated income statement and accrued within current financial liabilities on the consolidated statements of financial position. In 2014, we recorded €41.8 million of interest expense relating to the Bridge Facility and paid €52.7 million of Bridge Facility fees.
On February 16, 2015, after the close of calendar 2014, the Bridge Facility was automatically terminated, following the issuance of the Temporary New Notes (as defined below).
Credit Facilities and Indebtedness Developments After Calendar Year 2014
Term Loan Facilities
In January 2015, IGT PLC entered into a four-year senior facilities agreement with a syndicate of European banks providing for two €400 million term loan facilities, the proceeds of which may be used for general corporate purposes, including repayment of existing indebtedness. Upon the merger of GTECH S.p.A. with and into IGT PLC, IGT PLC became the borrower under one of the term loan facilities and a principal Italian operating subsidiary became the borrower under the other term loan facility.
Credit Ratings
In January 2015, S&P announced that the credit ratings of the 2010 Notes (due 2018) and the 2012 Notes (due 2020) were decreased to BB+ and that the credit rating of the Capital Securities was decreased to B+. As a result of the credit ratings actions with respect to the 2010 Notes (due 2018) and the 2012 Notes (due 2020), the interest rate applicable to the 2010 Notes (due 2018) has been increased from 5.375% to 6.625% per annum effective February 2, 2015 and the interest rate applicable to the 2012 Notes (due 2020) has been increased from 3.5% to 4.75% per annum effective March 5, 2015.
Temporary New Notes
In February 2015, IGT PLC caused Cleopatra Finance Limited, a special purpose vehicle incorporated in and existing under the laws of the Bailiwick of Jersey, to issue:
·
$600,000,000 5.625% senior secured notes due 2020;
·
$1,500,000,000 6.250% senior secured notes due 2022;
·
$1,100,000,000 6.500% senior secured notes due 2025;
·
€700,000,000 4.125% senior secured notes due 2020; and
·
€850,000,000 4.750% senior secured notes due 2023.
in the form of temporary new notes (the “Temporary New Notes”) and caused the proceeds of the Temporary New Notes to be deposited into escrow. IGT PLC used the proceeds of the Temporary New Notes (which were exchanged for permanent notes issued by IGT PLC in connection with the completion of the Holdco Merger and the acquisition of IGT) to pay part of the cash component of the merger consideration for the acquisition of IGT and acquisition-related costs and possibly to refinance certain existing indebtedness of IGT PLC and IGT.
C.
Research and Development, Patents and Licenses, etc.
We devote substantial resources on research and development and incurred €84.1 million, €77.6 million and €72.7 million of related expenses in 2014, 2013 and 2012, respectively. Following the completion of the IGT Acquisition, we expect our investments in research and development to increase.
108
Table of Contents
D.
Trend Information
See “Item 5. Operating and Financial Review—A. Operating Results” and “Item 5. Operating and Financial Review—B. Liquidity and Capital Resources.”
E.
Off-Balance Sheet Arrangements
We have the following off-balance sheet arrangements:
Performance and other bonds
In connection with certain contracts and procurements, we have been required to deliver performance bonds for the benefit of customers and bid and litigation bonds for the benefit of potential customers, respectively. These bonds, on which customers and potential customers have never made a claim, give the beneficiary the right to obtain payment and/or performance from the issuer of the bond if certain specified events occur. In the case of performance bonds, which generally have a term of one year, such events include our failure to perform our obligations under the applicable contract. The following table provides information related to potential commitments for bonds outstanding at December 31, 2014:
|
(€ thousands)
|
|
At December 31, 2014
|
|
|
Performance bonds
|
|
300,444
|
|
|
Litigation bonds
|
|
33,528
|
|
|
All other bonds
|
|
5,705
|
|
|
|
|
339,677
|
|
Loxley GTECH Technology Co., LTD guarantee
We have a 49% interest in Loxley GTECH Technology Co., LTD (“LGT”), which is accounted for as an asset held for sale with a
de minimis
value. LGT is a joint venture that was formed to provide an online lottery system in Thailand.
The Company has guaranteed, along with the 51% shareholder in LGT, performance bonds provided to LGT by an unrelated commercial lender. The performance bonds relate to LGT’s performance under the July 2005 contract between the Government Lottery Office of Thailand and LGT should such contract become operational. The Company is jointly and severally liable with the other shareholder in LGT for this guarantee. There is no scheduled termination date for the Company’s guarantee obligation. The maximum liability under the guarantee is Baht 375 million (€9.4 million). At December 31, 2014, the Company does not have any obligation related to this guarantee because the July 2005 contract to provide the online lottery system is not in operation due to continuing political instability in Thailand.
Commonwealth of Pennsylvania indemnification
We will indemnify the Commonwealth of Pennsylvania and any related state agencies for claims made relating to the state’s approval of GTECH Corporation’s manufacturer’s license in the Commonwealth of Pennsylvania.
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Table of Contents
F.
Tabular Disclosure of Contractual Obligations
The following table summarizes payments due under our significant contractual commitments as of December 31, 2014:
|
|
|
Payments by Calendar Year
|
|
|
(€ thousands)
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020 and
there-
after
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Securities (due 2066)(1)
|
|
704,505
|
|
|
|
—
|
|
—
|
|
—
|
|
45,495
|
|
750,000
|
|
|
2010 Notes (due 2018)
|
|
—
|
|
—
|
|
—
|
|
500,000
|
|
—
|
|
—
|
|
500,000
|
|
|
2012 Notes (due 2020)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
500,000
|
|
500,000
|
|
|
Revolving Credit Facilities
|
|
—
|
|
—
|
|
—
|
|
—
|
|
738,914
|
|
—
|
|
738,914
|
|
|
Other
|
|
147
|
|
1,380
|
|
73
|
|
—
|
|
—
|
|
—
|
|
1,600
|
|
|
Long-term Debt(2)
|
|
704,652
|
|
1,380
|
|
73
|
|
500,000
|
|
738,914
|
|
545,495
|
|
2,490,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on Long-term debt(3)
|
|
61,796
|
|
55,796
|
|
54,858
|
|
30,412
|
|
26,317
|
|
3,068
|
|
232,247
|
|
|
Operating lease obligations(4)
|
|
29,385
|
|
18,987
|
|
14,149
|
|
12,295
|
|
8,768
|
|
7,214
|
|
90,798
|
|
|
Finance leases(5)
|
|
11,385
|
|
11,436
|
|
11,487
|
|
5,254
|
|
5,136
|
|
16,965
|
|
61,663
|
|
|
Bridge facility fees
|
|
44,673
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
44,673
|
|
|
Note consent fees
|
|
28,627
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
28,627
|
|
|
Acquisition contingent consideration
|
|
446
|
|
529
|
|
—
|
|
—
|
|
—
|
|
—
|
|
975
|
|
|
|
|
176,312
|
|
86,748
|
|
80,494
|
|
47,961
|
|
40,221
|
|
27,247
|
|
458,983
|
|
|
|
|
880,964
|
|
88,128
|
|
80,567
|
|
547,961
|
|
779,135
|
|
572,742
|
|
2,949,497
|
|
(1)
The Capital Securities are redeemable at maturity, at par beginning March 31, 2016 or at any interest payment date thereafter. On December 18, 2014, GTECH S.p.A invited the holders of the Capital Securities to tender the Capital Securities for purchase by GTECH S.p.A. for cash. In January 2015, after the close of calendar 2014, holders of the Capital Securities tendered €704.5 million of the Capital Securities for purchase by GTECH S.p.A. We expect to redeem the remaining €45.495 million of the Capital Securities at par on March 31, 2016. For additional information see Note 20 “Debt” to our GTECH Consolidated Financial Statements included in this report.
(2)
Amounts presented relate to the principal amount of Long-term debt and exclude the related interest expense that will be paid when due, fair value adjustments, discounts, premiums and loan origination fees. The table above does not include short term debt obligations. See the table below for a reconciliation of the information to Note 20 to our GTECH Consolidated Financial Statements included in this report.
(3)
Amounts include interest payments based on contractual terms and current interest rates on our long-term debt. Interest rates based on variable rates included above were determined using the current interest rates in effect at December 31, 2014. For purposes of this table, interest related to the Capital Securities (due 2066) is assumed through March 31, 2016, at which time we expect to redeem the securities.
(4)
Operating lease obligations principally relate to leases for facilities and equipment used in our business. The amounts reported above include the minimum rental and payment commitments due under such leases. For additional information see Note 38 “Commitments and contingencies” to our GTECH Consolidated Financial Statements included in this report.
(5)
Finance leases consist principally of our World Headquarters facility in Providence, Rhode Island and communications equipment and point of sale equipment used in our business. The amounts presented include the interest component of the payments to the counterparties. For additional information see Note 38 “Commitments and contingencies” to our GTECH Consolidated Financial Statements included in this report.
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Table of Contents
The long-term debt obligations reflected in the table above can be reconciled to the amount in the December 31, 2014 Consolidated Statement of Financial Position as follows:
|
(€ thousands)
|
|
Amount
|
|
|
Debt (as per Note 20)
|
|
2,521,511
|
|
|
Accrued Interest
|
|
(86,295
|
)
|
|
Short-term borrowings
|
|
(8,895
|
)
|
|
Accrued fees
|
|
(805
|
)
|
|
Unamortized debt issuance costs
|
|
64,998
|
|
|
Principal portion of Long-term debt
|
|
2,490,514
|
|
G.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This annual report includes forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning IGT PLC and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the management of IGT PLC as well as assumptions made by, and information currently available to, such management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “plan,” “could,” “would,” “should,” “shall”, “continue,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project” or the negative or other variations of them. These forward-looking statements speak only as of the date on which such statements are made and are subject to various risks and uncertainties, many of which are outside IGT PLC’s control. Should one or more of these risks or uncertainties materialize, or should any of the underlying assumptions prove incorrect, actual results may differ materially from those predicted in the forward-looking statements and from past results, performance or achievements. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include (but are not limited to) risks that the businesses of International Game Technology and GTECH will not be integrated successfully, following the recent completion of their business combination, or that the combined companies will not realize estimated cost savings, value of certain tax assets, synergies, growth or other anticipated benefits or that such benefits may take longer to realize than expected; risks relating to unanticipated costs of integration of the two companies; reductions in customer spending; a slowdown in customer payments and changes in customer demand for products and services; unanticipated changes relating to competitive factors in the industries in which the Company operates; ability to hire and retain key personnel; the potential impact of the consummation of the business combination on relationships with third parties, including customers, employees and competitors; ability to attract new customers and retain existing customers in the manner anticipated; reliance on and integration of information technology systems; changes in legislation or governmental regulations affecting the Company; international, national or local economic, social or political conditions that could adversely affect the Company or its customers; conditions in the credit markets; risks associated with assumptions the Company makes in connection with its critical accounting estimates and legal proceedings; and the Company’s international operations, which are subject to the risks of currency fluctuations and foreign exchange controls.
The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the Company’s business, including those described in section “Item 3. Key Information—D. Risk Factors” and other documents filed from time to time with the Securities and Exchange Commission (the “SEC”). Except as required under applicable law, the Company does not assume any obligation to update these forward-looking statements. Nothing in this annual report is intended, or is to be construed, as a profit forecast or to be interpreted to mean that earnings per IGT PLC share for the current or any future financial years will necessarily match or exceed the historical published earnings per IGT PLC share, as applicable. All forward-looking statements contained in this annual report are qualified in their entirety by this cautionary statement. All subsequent written or oral forward-looking statements attributable to IGT PLC, or persons acting on its behalf, are expressly qualified in its entirety by the cautionary statements contained throughout this annual report.
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Table of Contents
Item 6.
Directors, Senior Management and Employees
H.
Directors and Senior Management
GTECH S.p.A.
The table below sets forth the board of directors of GTECH as of December 31, 2014. Except for Mr. Patel, who resigned effective from March 27, 2015, each of the other GTECH director’s term expired on April 7, 2015 in connection with the merger of GTECH into IGT PLC.
|
Name
|
|
Position with GTECH
|
|
Lorenzo Pellicioli
|
|
Chairman(1)
|
|
Marco Sala
|
|
CEO(2)
|
|
Donatella Busso
|
|
Director
|
|
Paolo Ceretti
|
|
Director
|
|
Alberto Dessy
|
|
Director
|
|
Marco Drago
|
|
Director
|
|
Jaymin B. Patel
|
|
Director
|
|
Anna Gatti
|
|
Director
|
|
Antonio Mastrapasqua
|
|
Director
|
|
Elena Vasco
|
|
Director
|
(1)
As enacted by the shareholders at a meeting held on May 8, 2014.
(2)
As enacted by the board of directors at a meeting held on May 8, 2014, subsequent to the shareholders’ meeting held on the same date.
|
Name
|
|
Age
|
|
Biography
|
|
Lorenzo Pellicioli
|
|
64
|
|
See the description below in “—IGT PLC—Directors”
|
|
|
|
|
|
|
|
Marco Sala
|
|
56
|
|
See the description below in “—IGT PLC—Directors”
|
|
|
|
|
|
|
|
Alberto Dessy
|
|
62
|
|
See the description below in “—IGT PLC—Directors”
|
|
|
|
|
|
|
|
Paolo Ceretti
|
|
60
|
|
See the description below in “—IGT PLC—Directors”
|
|
|
|
|
|
|
|
Donatella Busso
|
|
42
|
|
Ms. Busso graduated in 1996 with honors in Economics and Business at the University of Turin. Following college, she joined the Department of Management—University of Turin as Assistant Lecturer. Ms. Busso obtained a permanent position as a researcher in 2000, and in 2006, she earned the title of Associate Professor of Economics and Business Administration. Currently, Ms. Busso teaches finance and accounting classes at the University of Turin and she is Vice Dean in charge of teaching activities in the Department of Management.
Ms. Busso advises Italian-listed and foreign-listed companies and is a speaker in numerous training programs about financial accounting, IAS/IFRS and consolidated financial statement for Italian-listed companies and other primary institutions. Ms. Busso is a (non-practicing) Certified Public Accountant (
Dottore Commercialista
), and from 2009 to 2013 she was a statutory auditor of Tyco Electronics Italia Holding S.r.l. Currently, Ms. Busso is a member of the board of directors and the audit committee of Prime Industrie S.p.A.
|
112
Table of Contents
|
Name
|
|
Age
|
|
Biography
|
|
Marco Drago
|
|
69
|
|
See the description below in “—IGT PLC—Directors”
|
|
|
|
|
|
|
|
Jaymin B. Patel
|
|
48
|
|
Mr. Patel was the President and CEO of GTECH Corporation, responsible for overseeing the strategic direction of GTECH Corporation, until he resigned effective from March 27, 2015. He worked directly with GTECH’s management teams to execute GTECH’s vision in the continuous effort to deliver value to its customers, shareholders, and employees. In May 2007, Mr. Patel was named President and Chief Operating Officer of GTECH Holdings Corporation, and was appointed a member of the GTECH board of directors in November 2007. Mr. Patel joined GTECH in July of 1994, after approximately five years with PricewaterhouseCoopers in London.
From January 2000 to April 2007, Mr. Patel served as Senior Vice President and Chief Financial Officer of GTECH Corporation, and from August 2006 to April 2007, he also served as Chief Financial Officer of GTECH. Since July 2013, Mr. Patel has also served as a director of the Willis Group, where he is a member of the board’s compensation committee.
During his seven years as Chief Financial Officer of GTECH Holdings Corporation, Mr. Patel was instrumental in driving growth across the business, leading several mergers and acquisitions, cost optimization initiatives, and substantially improving the capital efficiency of GTECH Holdings Corporation. Mr. Patel’s tenure as Chief Financial Officer culminated in his leading the cross-border financing for the Lottomatica acquisition of GTECH Holdings Corporation. Mr. Patel holds a B.A. (honors) degree from Birmingham Polytechnic (U.K.), and he is qualified as a Chartered Accountant.
|
|
|
|
|
|
|
|
Anna Gatti
|
|
43
|
|
In June 2014, Ms. Gatti was appointed CEO of Almawave USA Inc., the American subsidiary of the technological-innovation firm within the AlmavivA Group. Ms. Gatti has served as the CEO and co-founder of Soshoma Inc., a San Francisco-based start-up in artificial intelligence applied to big data since June 2012. Ms. Gatti has served as an independent director and member of the compensation and audit committees of Piquadro S.p.A. (Italy, PQ:IM Borsaitaliana) since July 2013 and she is a member of the board of directors of Rai Way S.p.A. (Italy, RWAY:IM Borsaitaliana and Banzai S.p.A.).
From March 2011 to April 2012, Ms. Gatti served as the Director of Advertising and New Monetization of Skype and prior to Skype, Ms. Gatti was the Head of International Online Sales and Operations at Google from April 2007 to February 2011. Ms. Gatti was partner of MyQube Venture Capital Fund where she was responsible for the U.S. operations from 2004 to 2007. Prior to her venture capital experience, Ms. Gatti was a senior economist at the World Health Organization in Geneva (2002-2004).
Ms. Gatti earned a degree
cum laude
in Business Administration from Bocconi University. She also holds a PhD in Business Administration from Bocconi University and a PhD in Criminology from University of Trento, and completed a post-doctoral program in Organizational Behavior at Stanford University.
|
113
Table of Contents
|
Name
|
|
Age
|
|
Biography
|
|
Antonio Mastrapasqua
|
|
56
|
|
Mr. Mastrapasqua has served as General Manager of Hospital Israelitico since 2001. He also serves as Regular Auditor of Autostrade per l’Italia SpA. Mr. Mastrapasqua has held a number of Chairmanships, including at IDeA Fimit SGR (2012 to 2014), Istituto Nazionale Previdenza Sociale (Inps) (2008 to 2014) and Equitalia S.p.A., where he also served as Executive Vice President from 2005 to 2014. He has been an independent director of GTECH since 2014 and served as a director of Inps—National Social Security Institute from 2008 to 2014.
He is a Member of the Order of Chartered Accountants of Rome, Enrolled in the Register of Auditors and Member of the National Association of Journalists Publicists. Mr. Mastrapasqua holds a degree in Business Economics from Università degli studi di Roma “La Sapienza,” Roma.
In the course of his professional career, Mr. Mastrapasqua’s duties have included audit work, accounting and tax consultancy, tax and corporate law, with respect to industrial/service companies and public and private entities. Mr. Mastrapasqua has also participated as a guest speaker in various conferences on economic and social matters, including Aspen Italia and Forum Ambrosetti.
|
|
|
|
|
|
|
|
Elena Vasco
|
|
51
|
|
Born in West Hartford, Connecticut on December 31, 1964, Ms. Vasco has been in charge of administration, finance and properties and she is the Vice Secretary of the Chamber of Commerce of Milan since June 2009. She is also a member of the board of directors of Banca Carige, Isagro S.p.A. and Orizzonte SGR. Ms. Vasco graduated
cum laude
in Economy and Commerce with the University of Naples. Ms. Vasco later achieved a Master’s of Science in Economics at Northeastern University in Boston.
From 1992 to 1997, Ms. Vasco worked for Mediobanca Servizio Partecipazioni e Affari Speciali (stockholdings service and special affairs), with a particular focus on corporate consultancy, M&A and corporate finance. In 1997, she joined HdP (now RCS Mediagroup) as director of strategic planning and financial control. Ms. Vasco has served as the Chief Executive Officer of RCS Broadcast, as well as a member of the boards of directors of a number of companies including RCS Editori S.p.A., Valentino S.p.A., GFT Net S.p.A., RCS Libri S.p.A., RCS Pubblicità S.p.A., Unedisa-Unidad Editorial and RAI Sat. In 2006, Ms. Vasco became Chief Financial Officer of Milano Serravalle Milano Tangenziali and also served as Chairman of Sabrom (a highway concessionaire).
|
Below are the other offices held as of December 31, 2014 by the members of the board of directors in other companies listed on regulated markets (including foreign markets) as well as in financial companies, banks, insurance companies, or companies of considerably larger size.
|
Lorenzo Pellicioli
|
|
Director and CEO of De Agostini S.p.A.
|
|
|
|
General Partner of B&D di Marco Drago e C. S.a.p.a.
|
|
|
|
Director of Assicurazioni Generali S.p.A.
|
|
|
|
Director and Executive Committee Member of De Agostini Editore S.p.A.
|
|
|
|
Director of Editions Atlas (France) S.A.S.
|
|
|
|
Chairman of DeA Capital S.p.A.
|
|
|
|
Chairman of Zodiak Media S.A.
|
|
|
|
General Manager of DeA Partecipazioni S.p.A.
|
|
|
|
|
|
Marco Sala
|
|
Director of Banca ITB S.p.A.
|
|
|
|
Chairman of Lottomatica Holding S.r.l.
|
|
|
|
Chairman of Lottomatica S.p.A.
|
114
Table of Contents
|
Donatella Busso
|
|
Director and Audit Committee Member of Prime Industrie S.p.A.
|
|
|
|
|
|
Paolo Ceretti
|
|
General Manager of De Agostini S.p.A.
|
|
|
|
CEO of DeA Capital S.p.A.
|
|
|
|
Director of IDeA Fimit sgr S.p.A
|
|
|
|
CEO of De Agostini Editore S.p.A.
|
|
|
|
CEO of DeA Partecipazioni S.p.A.
|
|
|
|
CEO of DeA Capital Real Estate S.p.A.
|
|
|
|
Director of Lottomatica Holding S.r.l.
|
|
|
|
Director of Zodiak Media Group S.A.
|
|
|
|
Director of DeA Communications S.A.
|
|
|
|
Director of De Agostini Libri S.p.A.
|
|
|
|
Director of De Agostini Publishing S.p.A.
|
|
|
|
Director of IDeA Capital Funds Sgr S.p.A.
|
|
|
|
Director and General Manager of Atlasformen sas
|
|
|
|
Vice Chairman and General Manager of Editions Atlas (France) S.A.
|
|
|
|
|
|
Marco Drago
|
|
Chairman and Director of De Agostini S.p.A.
|
|
|
|
Chairman and General Manager of B&D di Marco Drago e C. S.a.p.a.
|
|
|
|
Director of DeA Capital S.p.A.
|
|
|
|
Director of De Agostini Editore S.p.A.
|
|
|
|
Director of Atresmedia
|
|
|
|
Member of the Supervisory Board and Board of Directors of San Faustin N.V.
|
|
|
|
Vice Chairman of Grupo Planeta De Agostini S.L. (Spain)
|
|
|
|
Member of the Board of Directors of ASSONIME
|
|
|
|
Director of DeA Communications S.A.
|
|
|
|
Director of Zodiak Media S.A.
|
|
|
|
|
|
Jaymin B. Patel
|
|
CEO of GTECH Holdings Corporation
|
|
|
|
Director, Chairman and CEO of GTECH Corporation
|
|
|
|
Director of Willis Group
|
|
|
|
Director of Cam Galaxy Group Limited
|
|
|
|
Director of Europrint (Games) Limited
|
|
|
|
Director of Europrint Holdings Limited
|
|
|
|
Director of Europrint Promotions Limited
|
|
|
|
Chairman of the Board of Managers of Northstar Lottery Group, LLC
|
|
|
|
Director of Southern Africa (Proprietary) Limited
|
|
|
|
Director of GTECH Sweden AB
|
|
|
|
Director of GTECH U.K. Limited
|
|
|
|
Director of Invest Games S.A.
|
|
|
|
Director of Interactive Games International Limited
|
|
|
|
Director of ISJ Limited
|
|
|
|
|
|
Anna Gatti
|
|
Director of Piquadro S.p.A.
|
|
|
|
Director of Rai Way S.p.A.
|
|
|
|
Director of Banzai S.p.A.
|
|
|
|
|
|
Antonio Mastrapasqua
|
|
General Manager of Hospital Israelitico
|
|
|
|
Director of Lottomatica S.p.A.
|
115
Table of Contents
|
Elena Vasco
|
|
Vice Secretary of the Chamber of Commerce of Milan, Italy
|
|
|
|
Director of Banca Carige, Isagro S.p.A.
|
|
|
|
Director of Orizzonte SGR
|
IGT PLC
The board of directors as of December 31, 2014 consisted of Mr. Declan James Harkin and Mr. Alberto Fornaro, who also held the positions of Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Director.
Following the Mergers, as of the date of this document, the board of directors of the Company consists of thirteen directors, each of whom was elected upon effectiveness of the Mergers on April 7, 2015. Eight of the current directors were determined by the board to be independent as required by the listing standards and rules of the NYSE. For a director to be independent under the listing standards of the NYSE, the board of directors must affirmatively determine that the director has no material relationship with IGT PLC (either directly or as a partner, stockholder or officer of an organization that has a relationship with IGT PLC). Our board of directors has made an affirmative determination that the members of the board so designated in the table below, constituting a majority of our directors, meet the standards for “independence” set forth in our Corporate Governance Guidelines and applicable NYSE rules.
As of the date of this document, our directors and certain senior managers are as set forth below:
|
Name
|
|
Position with IGT PLC
|
|
Philip G. Satre
|
|
Chairman of the Board; Director (Independent)
|
|
Patti S. Hart
|
|
Vice-Chairman of the Board; Director
|
|
Lorenzo Pellicioli
|
|
Vice-Chairman of the Board; Director
|
|
Paget L. Alves
|
|
Director (Independent)
|
|
Paolo Ceretti
|
|
Director
|
|
Alberto Dessy
|
|
Director (Independent)
|
|
Marco Drago
|
|
Director
|
|
Sir Jeremy Hanley
|
|
Director (Independent)
|
|
James F. McCann
|
|
Director (Independent)
|
|
Vincent L. Sadusky
|
|
Director (Independent)
|
|
Marco Sala
|
|
Director
|
|
Gianmario Tondato da Ruos
|
|
Director (Independent)
|
|
Tracey D. Weber
|
|
Director (Independent)
|
|
Renato Ascoli
|
|
Chief Executive Officer, North America Gaming/Interactive (DoubleDown Casino)
|
|
Walter Bugno
|
|
Chief Executive Officer, International
|
|
Fabio Cairoli
|
|
Chief Executive Officer, Italy
|
|
Michael Chambrello
|
|
Chief Executive Officer, North America Lottery
|
|
Alberto Fornaro
|
|
Executive Vice President and Chief Financial Officer
|
|
Donald R. Sweitzer
|
|
Chairman, IGT Corporation (North America) and Senior Public Affairs Advisor
|
|
Robert Vincent
|
|
Senior Vice President, Human Resources and Corporate Communications
|
116
Table of Contents
Directors
|
Name
|
|
Age
|
|
Biography
|
|
Philip G. Satre
|
|
66
|
|
Prior to the effective time of the Mergers, Mr. Satre served on the IGT board of directors since January 2009, and as independent Chairman since December 2009. Mr. Satre has been a private investor since 2005. Mr. Satre has extensive gaming industry experience having served on the board of directors of Harrah’s Entertainment, Inc. (now Caesars Entertainment Corporation), a provider of branded casino entertainment (“Harrah’s”), from 1988 to 2005 and as Chairman from 1997 to 2005. Between 1980 and 2002, Mr. Satre held various executive management positions at Harrah’s, including Chief Executive Officer, President and Chief Executive Officer of Harrah’s gaming division and Vice President, General Counsel and Secretary. Mr. Satre currently serves on the board of directors of Nordstrom, Inc., National Center for Responsible Gaming and the National World War II Museum. Mr. Satre previously served on the board of directors of the Stanford University Board of Trustees (2005-2010), Rite Aid Corporation (2005-2011) and NV Energy, Inc. (2005-2013), where he served as Chairman from 2008 to 2013.
Mr. Satre holds a Bachelor of Arts degree in Psychology from Stanford University and a Juris Doctor degree from the University of California at Davis.
|
|
|
|
|
|
|
|
Patti S. Hart
|
|
59
|
|
Prior to the effective time of the Mergers, Ms. Hart served as Chief Executive Officer of IGT since April 2009 and on the IGT board of directors since June 2006. Ms. Hart also served as President of IGT from April 2009 until July 2011. Prior to joining IGT, Ms. Hart served as the Chairman and Chief Executive Officer of each of Pinnacle Systems Inc. from 2004 to 2005, Excite@Home Inc. from 2001 to 2002, and Telocity Inc. from 1999 to 2001. Ms. Hart also held various positions at Sprint Corporation, including President and Chief Operating Officer, Long Distance Division. Ms. Hart has served on numerous public company boards, including Yahoo! Inc. (2010-2012), LIN TV Corp. (2006-2009), Spansion Inc. (2005-2008), and Korn/Ferry International Inc. (2000-2009). She currently serves on the board of the American Gaming Association.
Ms. Hart earned a Bachelor of Science degree in Business Administration with an emphasis in Marketing and Economics from Illinois State University.
|
|
|
|
|
|
|
|
Lorenzo Pellicioli
|
|
64
|
|
Prior to the effective time of the Mergers, Mr. Pellicioli served on the GTECH S.p.A. (formerly Lottomatica Group) board of directors as Chairman from August 2006 to April 2015. Mr. Pellicioli has served as Chief Executive Officer of De Agostini S.p.A. since November 2005. Previously, he served as the first President and Chief Executive Officer of Costa Cruise Lines in Miami, a division of the Costa Crociere Group that operates in North America. He was then promoted to Worldwide General Manager of Costa Crociere S.p.A.
|
117
Table of Contents
|
Name
|
|
Age
|
|
Biography
|
|
|
|
|
|
Mr. Pellicioli was also appointed President and Chief Executive Officer of the Compagnie Française de Croisières (Costa-Paquet), a subsidiary of Costa Crociere. He took part in the privatization of SEAT Pagine Gialle and, after the acquisition, he was appointed Chief Executive Officer. Following the sale of SEAT, Pellicioli worked for the Telecom Italia Group as head of the Internet Business Unit. Earlier in his career, he served as General Manager of Advertising Sales and Vice General Manager of Mondadori Periodici (magazines) for the Gruppo Mondadori Espresso, the first Italian publishing group. He was promoted to President and Chief Executive Officer of Manzoni & C. S.p.A, an advertising division of the Group. He has also held various positions in the private sector of Italian television for Manzoni Pubblicità, Publikompass and he was appointed president of Bergamo TV Programmes after starting his career as a journalist for the newspaper
Giornale Di Bergamo
. Since 2006, he has been a member of the Clinton Global Initiative. He is also member of the advisory boards of Investitori Associati IV, Wisequity II e Macchine Italia and Palamon Capital Partners. Mr. Pellicioli serves as Chairman of the board of directors of DeA Capital, Chairman of Zodiak Media, Deputy Chairman of the Supervisory Board of Générale de Santé, and he is a member of the executive committee and the board of directors of Assicurazioni Generali S.p.A.
|
|
|
|
|
|
|
|
Paget L. Alves
|
|
61
|
|
Mr. Alves served as Director of International Game Technology from January 2010 until the effective time of the Mergers. He served as Chief Sales Officer of Sprint Corporation, a wireless and wireline communications services provider (“Sprint”), from January 2012 to September 2013 after serving as President of the Business Markets Group since 2009. From 2003 to 2009, Mr. Alves held various positions at Sprint, including President, Sales and Distribution from 2008 to 2009; President, South Region, from 2006 to 2008; Senior Vice President, Enterprise Markets, from 2005 to 2006; and President, Strategic Markets from 2003 to 2005. Between 2000 and 2003, Mr. Alves served as President and Chief Executive Officer of PointOne Telecommunications Inc., and President and Chief Operating Officer of Centennial Communications. Mr. Alves previously served on the board of directors of GTECH Holdings Corporation (2005-2006), and Herman Miller, Inc. (2008-2010).
Mr. Alves earned a Bachelor of Science degree in Industrial and Labor Relations and a Juris Doctor degree from Cornell University.
|
|
|
|
|
|
|
|
Paolo Ceretti
|
|
60
|
|
Prior to the effective time of the Mergers, Mr. Ceretti served on the GTECH S.p.A. (formerly Lottomatica Group) board of directors since 2004. Mr. Ceretti has been General Manager of De Agostini since 2004.
He is also Chief Executive Officer of DeA Capital (De Agostini’s arm in private equity investments and alternative asset management, listed at the Milan Stock Exchange) and De Agostini Editore (Publishing). Mr. Ceretti gained most of his professional experience at Fiat Group, where he held positions of increasing importance at the corporate level (Internal Auditing, Finance) and then in the Financial Services Sector. He then became the Head of Strategic Planning and Development of IFIL (currently EXOR, listed holding company of the Italian Agnelli Group). After assuming responsibility for the Internet B2C sector of Fiat/IFIL in 1999, Mr. Ceretti was appointed Chief Executive Officer of Global Value S.p.A., a Fiat/IBM joint venture in the Information Technology sector. He is currently a member of the board of directors of Zodiak Media (TV content production) and IDeA Fimit (real estate asset management), among other companies.
|
118
Table of Contents
|
Name
|
|
Age
|
|
Biography
|
|
Alberto Dessy
|
|
62
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Prior to the effective time of the Mergers, Mr. Dessy served on the GTECH S.p.A. (formerly Lottomatica Group) board of directors since 2011. He is currently a Professor at Bocconi University. Mr. Dessy is a Chartered Accountant specialized in corporate finance, particularly the evaluation of companies, trademarks, equity and investments, financial structure, channels and loan instruments, funding for development and in acquisitions and disposals of companies. He has been an expert witness for parties to lawsuits and as an independent expert appointed by the court in various legal disputes. He is currently on the board of directors of Chiorino S.p.A. and has been on the boards of many companies, both listed and unlisted, including Redaelli Tecna S.p.A., Laika Caravans S.p.A., Premuda S.p.A., I.M.A., Milano Centro S.p.A., and DeA Capital S.p.A.
Mr. Dessy graduated from Bocconi University.
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Marco Drago
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69
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|
Prior to the effective time of the Mergers, Mr. Drago served on the GTECH S.p.A. (formerly Lottomatica Group) board of directors since 2002. Since 1997, Mr. Drago has been the Chairman of De Agostini, one of Italy’s largest family-run groups, which he led through an extraordinary phase of development and diversification in new activities, so that nowadays De Agostini Group is operating worldwide, with revenues over €5 billion, an EBITDA of €1.2 billion, and about 12.000 employees in different sectors: lotteries, gaming and services (IGT); media and communications (Atresmedia, Planeta, Zodiak Media Group); Finance (DeA Capital); Real Estate Asset Management (IDeA FIMIT); and insurance (Assicurazioni Generali). Since October 2006, he has also been Chairman of the Board of Partners of B&D, a family limited partnership created to ensure cohesion in share ownership, consistency of intent and continuity in decision-making over the long term. Mr. Drago is Vice President of De Agostini Planeta Group and director of Atresmedia, DeA Capital, De Agostini Editore, Zodiak Media and S. Faustin (Techint Group) and a member of the Assonime’s board of governors.
Mr. Drago graduated in Economics and Business from Bocconi University and achieved important awards such as “Bocconiano dell’anno” in 2001 and appointed “Cavaliere del Lavoro” in 2003.
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Sir Jeremy Hanley
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70
|
|
Prior to the effective time of the Mergers, Sir Hanley served on the GTECH Holdings Corporation board from 2001 to 2006. He is a Privy Counsellor and Knight Commander of the Order of St. Michael and St. George. He is also a Chartered Accountant. He has served as a director of London Asia Capital since 2012; Willis Ltd. since March 2008; Parkstone Capital Limited (f/k/a Langbar International Ltd.) since April 2006; and Willis Group Holdings Inc. since April 2006 as a member of the audit committee. Sir Hanley also served as a director and audit committee member of Lottomatica Group S.p.A. from April 2008 to April 2011, and served as a member of the advisory board of Blue Hackle Ltd. from February 2006 to January 2011. In addition, he has served on the boards of the Arab-British Chamber of Commerce (1999-2011, chairman of the audit committee); Mountfield Group plc (2008-2009); Onslow Suffolk Ltd (2007-2008, chairman); CSS Stellar plc (2007-2008); ITE Group plc (1998-2008); MTF Ltd (2008-2009); Nymex Europe Ltd. (2008-2009, chairman of audit committee 2005-2007, member of remuneration committee 2005-2007); International Trade & Investment Missions Ltd (1997-2005, chairman); Caylon (f/k/a Credit Lyonnais) (2000-2005); Brain Games Network Ltd (2000-2002, chairman); AdVal Group plc (2000-2003); Christchurch group Ltd. (1997-1998); Brass Tacks Publishing Company (1997-2000); Fields Aircraft Spares, Inc. (1998-1999); and Talal Abu Ghazaleh International (2004-2005).
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Name
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Age
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|
Biography
|
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Sir Hanley was a Member of Parliament for Richmond and Barnes from 1983 to 1997, and held a number of ministerial positions in the U.K. government, including Under Secretary of State for Northern Ireland, Minister of State for the Armed Forces, Cabinet Minister without Portfolio at the same time as being Chairman of the Conservative Party, and Minister of State for Foreign & Commonwealth Affairs. He retired from politics in 1998.
Sir Hanley was educated at the Rugby School and began his accounting career with Peat Marwick Mitchell & Company (KPMG) as an articled clerk in 1963. He qualified as a Chartered Accountant in 1969 and joined The Financial Training Company, and in 1980 qualified as a Certified Accountant and Chartered Secretary and Administrator.
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James F. McCann
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|
64
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|
Mr. McCann joined the IGT PLC board of directors in April 2015. He is the Chairman and Chief Executive Officer of 1-800-Flowers.com, Inc., a position he has held since 1976. McCann serves as a director (since 2004) and non-executive Chairman (since July 2013) of Willis Group Holdings PLC (“Willis Group”). Prior to serving as the non-executive Chairman of the board of Willis Group, he served as the company’s presiding independent director. McCann also serves as a director for Scott’s Miracle-Gro. He previously served as a director and compensation committee member of Lottomatica S.p.A. (from August 2006 to April 2011), and as a director of Gateway, Inc. and The Boyds Collection, Ltd.
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Vincent L. Sadusky
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50
|
|
Prior to the effective time of the Mergers, Mr. Sadusky served on the IGT board of directors since July 2010. He has served as President and Chief Executive Officer of Media General, Inc., one of the nation’s largest multimedia companies, since December 2014, following the company’s merger with LIN Media LLC. Prior to the effective time of the Mergers, Mr. Sadusky served as President and Chief Executive Officer of LIN Media LLC from 2006 to 2014 and was Chief Financial Officer from 2004 to 2006. Prior to joining LIN Media LLC, he held several management positions, including Chief Financial Officer and Treasurer, at Telemundo Communications, Inc. from 1994 to 2004, and from 1987 to 1994, he performed attestation and consulting services with Ernst & Young, LLP. Mr. Sadusky currently serves on the board of directors of LIN Media LLC, Hemisphere Media Group, Inc. and NBC Affiliates, to which he was elected Treasurer in 2012. Previously, he served on the Open Mobile Video Coalition, to which he served as President from 2011 until its integration into the National Association of Broadcasters in January 2013. He formerly served on the board of directors of JVB Financial Group, LLC (2001-2011) and Maximum Service Television, Inc. (2006-2011).
Mr. Sadusky earned a Bachelor of Science degree in Accounting from Pennsylvania State University where he was a University Scholar. He earned a Master of Business Administration degree from the New York Institute of Technology.
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Marco Sala
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56
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Mr. Sala is the Chief Executive Officer of IGT PLC. Prior to the effective time of the Mergers, Mr. Sala served as Chief Executive Officer of GTECH S.p.A. (formerly Lottomatica Group) since April 2009. Since joining GTECH S.p.A. as Co-General Manager in 2003, Mr. Sala has been a member of the board of directors. In August 2006, he was appointed Managing Director with responsibility for the Company’s Italian Operations and other European activities. He was named Chief Executive Officer of GTECH S.p.A. in April 2009 with responsibility for overseeing all of the Company’s segments, including the Americas, International, Italy, and Products and Services.
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Name
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Age
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Biography
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Before joining the Company, he served as Chief Executive Officer of Buffetti, Italy’s leading office equipment and supply retail chain. Prior to Buffetti, Mr. Sala served as Head of the Italian Business Directories Division for SEAT Pagine Gialle. He was later promoted to Head of Business Directories with responsibility for a number of international companies, such as Thomson (Great Britain), Euredit (France), and Kompass (Italy). Earlier in his career, he worked as Head of the Spare Parts Divisions at Magneti Marelli (a Fiat Group company) and soon after he became Head of the Lubricants Divisions. Additionally, he held various marketing positions at Kraft Foods. Mr. Sala graduated from Bocconi University in Milan, majoring in Business and Economics.
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Gianmario Tondato da Ruos
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55
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|
Prior to the effective time of the Mergers, Mr. Tondato da Ruos served as a Lead Independent Director of GTECH S.p.A. (formerly Lottomatica Group) from 2006 to April 2014. Mr. Tondato da Ruos has served as the Chief Executive Officer of Autogrill S.p.A. since April 2003. He joined Autogrill Group in 2000, and moved to the United States to manage the integration of the North American subsidiary HMSHost and successfully implemented a strategic refocusing on concessions and diversification into new business sectors, distribution channels and geographies.
Mr. Tondato da Ruos is Chairman of HMSHost Corporation, Chairman of World Duty Free S.p.A., and director of World Duty Free Group S.A.U. He has been a director of Autogrill since March 2003, and sits on the advisory board of Rabo Bank (Hollande).
Mr. Tondato da Ruos graduated with a degree in economics from Ca’Foscari University of Venice.
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Tracey D. Weber
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48
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|
Prior to the effective time of the Mergers, Ms. Weber was a member of the IGT board of directors from July 2013 to April 2015. She currently serves as President of Gilt and previously served as the Chief Operating Officer of Gilt. Ms. Weber previously served as Managing Director, North America Internet and Mobile and Global Product at Citibank NA from 2010 to 2013. Prior to this, she served as Executive Vice President, Textbooks and Digital Education at Barnes & Noble, Inc. in 2010 and held several management positions at Travelocity.com from 2002 to 2010, including President, North America.
Ms. Weber earned a Bachelor of Arts degree in Economics from Harvard University and a Master of Business Administration degree from the Wharton School of Business, University of Pennsylvania.
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In relation to the Mergers, IGT PLC’s controlling shareholders, De Agostini S.p.A. and DeA Partecipazioni S.p.A. (collectively, “De Agostini”) have entered into a voting agreement with IGT PLC pursuant to which De Agostini has agreed to vote, for a period of three years following the effectiveness of the Mergers, all of the IGT PLC ordinary shares then owned in favor of any proposal or action so as to effect and preserve the board and executive officer composition of IGT PLC in place immediately following the Mergers. For more information, see Item 10.C Material Contracts—
Voting Agreement
”.
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Senior Management
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Name
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|
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|
Biography
|
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Renato Ascoli
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53
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|
Mr. Ascoli, as the Chief Executive Officer of North America Gaming/Interactive (DoubleDown Casino) of IGT PLC, is responsible for product development, manufacturing, marketing, and delivery of all of the Company’s gaming offerings. This includes interactive and sports betting, as well as oversight of the DoubleDown Casino online social gaming business.
Prior to the effective time of the Mergers, Mr. Ascoli served as General Manager of GTECH S.p.A. (formerly known as Lottomatica Group) and President of GTECH Products and Services, where he was responsible for overseeing the design, development, and delivery of state-of-the-art platforms, products, and services. He supported all stages of the sales process, and provided marketing and technology leadership to optimize investment decisions.
Prior to this role, Mr. Ascoli served as Head of Italian Operations. In this position, he was responsible for the strategic direction and operations of the Company’s Italian businesses. He joined GTECH S.p.A. in 2006 as Director of the Gaming division.
From 1992 to 2005, Mr. Ascoli worked for the national railway system Ferrovie dello Stato/Trenitalia, where he held roles of increasing responsibility including head of Administration, Budget, and Control of the Local Transport Division; head of Strategies, Planning, and Control of the Transport Area; and head of the Passengers Commercial Unit. In 2000, he was appointed Marketing Director of the Passengers Division, and later served as Director of Operations and Passengers Division. He also was head of International Development for Trenitalia.
Earlier in his career, he led international marketing efforts for Fincentro Group - Armando Curcio Editore, where he was responsible for commercial development of the publishing assets of Fincentro Group. He was also responsible for defining the strategic and management assets of the many companies comprising Fincentro Group.
Mr. Ascoli also served as a consultant to Ambrosetti Group, supporting the internationalization process (Spain, England, and U.S.A.). He graduated from Bocconi University in Milan, majoring in Economics and Social Studies.
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Walter Bugno
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55
|
|
As Chief Executive Officer of IGT PLC International, Mr. Bugno is responsible for the management and strategic development of the International region. He works directly with IGT PLC’s management teams to implement the Company’s vision through the ongoing delivery of value to customers, shareholders, and employees.
Mr. Bugno leads the Company’s lottery, gaming, and interactive businesses throughout Europe (except Italy), as well as in the Middle East, Latin America and the Caribbean, Africa, and the Asia-Pacific region. He also oversees private manager agreement opportunities across these regions.
He joined GTECH S.p.A. (formerly known as Lottomatica Group) in July 2010 as President and CEO of SPIELO International (now integrated into GTECH). He led the business by capitalizing on the many growth opportunities in the gaming industry, and overseeing the Company’s long-term strategic direction. In 2012, Mr. Bugno’s portfolio expanded to include the Company’s interactive business. Under his leadership, SPIELO experienced substantial growth and became a major contributor to the Company’s total earnings.
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Name
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Biography
|
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From 2006 to 2009, Mr. Bugno was the CEO of Casinos for Tabcorp Holdings Limited, Australia’s premier gambling and entertainment group. During his tenure with Tabcorp, Mr. Bugno transformed the business from being product-driven to customer-driven by revitalizing the customer casino experience with new loyalty programs, products, and customer service. Some of his successes included a new 12-year exclusive casino license with the New South Wales government, expansion of gaming products, and increases in market share.
Prior to Tabcorp, Mr. Bugno was President of Campbell Soup Company in Asia Pacific from 2002 to 2006. He was responsible for Campbell’s food products, manufacturing, and distribution. He was previously Managing Director of Lion Nathan Australia, a division of Lion, one of Australasia’s leading beverage and food companies.
Mr. Bugno grew up in Australia and Italy, and has Bachelor of Commerce and Master of Commerce degrees from the University of New South Wales, Australia.
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Fabio Cairoli
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49
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As Chief Executive Officer of IGT PLC Italy, Mr. Cairoli is responsible for managing all business lines, marketing services, and sales for the Company’s Italian operations. Through his leadership of the largest lottery operator in the world, Mr. Cairoli shares insights and best practices with other organizations in the Company.
Mr. Cairoli joined the Company in 2012 as Senior Vice President of Business. He has more than 20 years of experience in consumer goods for multinational organizations, with both local and international expertise. He served as Group General Manager and Board Member of Bialetti Industrie, a world-renowned Italian manufacturer and retailer of stovetop coffee (espresso) makers and small household electrical appliances. During his tenure at Bialetti, he was responsible for turning around the business by refocusing strategy, streamlining costs, and optimizing the product portfolio and retail presence.
Prior to Bialetti, Mr. Cairoli served as General Manager of Star Alimentare, a major Italian food company, and successfully relaunched an historical brand. Additionally, he spent part of his career with Julius Meinl Italia and with Motorola Mobile Devices Italy. He also spent 10 years with Kraft Foods in Italy and the U.K. in various capacities.
Mr. Cairoli holds a bachelor’s degree in Economics from the Catholic University in Milan.
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Michael Chambrello
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57
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As the Chief Executive Officer of North America Lottery for IGT PLC, Mr. Chambrello is responsible for the development and delivery of all lottery technology solutions globally for the Company, as well as the strategic development and management of the lottery business in the U.S. and Canada. In addition, he is also responsible for the global instant ticket printing business.
A seasoned lottery industry expert, Mr. Chambrello most recently served as CEO of Scientific Games Corporation, where he had overall responsibility for managing Scientific Games’ day-to-day worldwide activities. Prior to that, he was Scientific Games’ President and Chief Operating Officer. He left Scientific Games in 2013.
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Name
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Biography
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For a 17-year span, Mr. Chambrello held various roles of increasing responsibility at GTECH until he left the Company in 1998. From 1996 to 1998, he was President of GTECH Corporation and Executive Vice President of GTECH Holdings Corporation. Mr. Chambrello has also served as President and CEO of Environmental Systems Products Holdings (ESP), and as CEO of Transmedia Asia Pacific, Inc. and Transmedia Europe Inc.
Mr. Chambrello has served on the board of directors of various public and private companies, most recently as chairman of the board of directors for Meridian Lightweight Technologies in Detroit, the world’s leading provider of magnesium die casting components for the automobile industry. He has served on the board of numerous not-for-profit organizations, and currently sits on the executive committees of the Petit Family Foundation and the Southern Connecticut State University Foundation.
Mr. Chambrello earned a Bachelor of Science degree in Economics from Southern Connecticut State University, and attended graduate school at the American University Kogod College of Business in Washington, D.C.
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Alberto Fornaro
|
|
50
|
|
As the Executive Vice President and Chief Financial Officer for IGT PLC, Mr. Fornaro is responsible for managing and developing the financial strategy for the Company. He oversees the Finance, Accounting, and Control Organization, which includes making tactical decisions and improving financial strategies to maximize shareholder value and cash flow; providing high-quality financial and management reporting; and ensuring compliance of all fiscal and statutory reporting, and legal matters.
He brings more than 20 years of strong financial expertise to IGT PLC and has an extensive record of significant international exposure.
Prior to the effective time of the Mergers, Mr. Fornaro served as Executive Vice President and Chief Financial Officer for GTECH S.p.A. He was previously Group CFO and President of the EMEA (Europe, Middle East, and Africa) division at Doosan Infracore Construction Equipment (DICE), a world leader in the construction equipment industry formed by Bobcat and Doosan Infracore. During his tenure at DICE, he led numerous integration programs and several cost-saving initiatives, helping DICE to weather the recent economic downturn and emerge as an even stronger player in a highly competitive industry.
Mr. Fornaro also served as General Manager and CFO of Technogym, the second-largest worldwide manufacturer of fitness equipment. Additionally, he spent 12 years in finance at Case New Holland (CNH) Global/Fiat Group in Italy and the U.S. At CNH, he served in many different financial capacities at the vice president level.
He holds a bachelor’s degree in Economics and Banking from the University of Siena, Italy; a master’s degree in Banking and Finance from the University of Siena’s Post Graduate School, Italy; and was a Visiting Scholar at the Ph.D. Program in Economics at Columbia University, New York. Mr. Fornaro is licensed as a Certified Public Accountant in Illinois.
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Donald R. Sweitzer
|
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67
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|
As Chairman of IGT Corporation (North America) and Senior Public Affairs Advisor, Mr. Sweitzer is an ambassador for the Company when interacting with global customers, current and potential partners, and government officials. Additionally, Mr. Sweitzer advises IGT PLC’s CEO on government affairs and general business matters.
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Name
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Biography
|
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Prior to becoming Chairman, Mr. Sweitzer served as Senior Vice President of Global Business Development and Public Affairs of GTECH, and was responsible for leading the Company’s efforts to identify and develop new business opportunities in targeted markets, support the expansion of GTECH’s products and services in existing jurisdictions, and continually enhance the Company’s communications and services to its worldwide government and commercial clients.
When Mr. Sweitzer joined GTECH in 1998, he brought more than 20 years of experience in government and public affairs. A recognized authority on national politics and public affairs, Mr. Sweitzer has advised numerous national, statewide, and congressional candidates throughout his career, and has worked at every level of government.
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Robert Vincent
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|
61
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As the Senior Vice President of Human Resources and Corporate Communications for IGT PLC, Mr. Vincent is responsible for global organizational development and people management, as well as internal and external corporate communications. He is also involved in selected business development projects, as well as support activities in compliance, investor relations, marketing communications, and government relations. Additionally, he leads the Company’s corporate social responsibility efforts.
Prior to the effective time of the Mergers, Mr. Vincent had been affiliated with GTECH S.p.A. for more than 20 years, having served as an external consultant; as Vice President of Business Development for Dreamport, GTECH’s former gaming and entertainment subsidiary; and as Senior Vice President of Corporate Affairs for GTECH Corporation.
Before joining the Company, he was a senior partner at RDW Group, a regional advertising and public relations company in Rhode Island. He also held senior policy and administrative positions with Rhode Island-based governments, including the Governor’s Office, Secretary of State’s Office, and the Providence Mayor’s Office. In addition, he has led community and government affairs efforts at Brown University in Providence.
Mr. Vincent received his bachelor’s degree in Political Science from the University of Rhode Island.
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There are no familial relationships among any of our Directors or senior managers set forth above.
I.
Compensation
IGT PLC
Prior to the effectiveness of the Mergers on April 7, 2015, IGT PLC did not conduct any material activities other than those incident to its formation and the matters contemplated by the Merger Agreement, and its directors, prior to the effectiveness of the Mergers, did not receive any compensation for their services as directors of IGT PLC.
GTECH S.p.A.
The following table summarizes remuneration paid or accrued to GTECH’s directors for the year ended December 31, 2014.
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Non-Employee Director Compensation
During 2014, members of GTECH’s board of directors and Marco Sala, the Chief Executive Officer, were paid an annual retainer of €50,000 and an attendance fee calculated on the basis of either physical (€5,000) or telephone attendance (€2,500) of meetings, up to the maximum overall amount determined by the GTECH shareholders’ meeting in accordance with Italian law (€2.3 million).
Base Director Compensation
|
|
|
Annual
|
|
Attendance Fees
|
|
|
Role
|
|
Retainer
(€)
|
|
Physical
(€)
|
|
Remote
(€)
|
|
|
Director
|
|
50,000
|
|
5,000
|
|
2,500
|
|
Members of the GTECH board of directors who served on committees were also paid certain additional fixed amounts and attendance fees, as set forth below.
Additional Director Compensation
|
|
|
Annual
|
|
Attendance Fees
|
|
|
Role
|
|
Retainer
(€)
|
|
Physical
(€)
|
|
Remote
(€)
|
|
|
Chairman of the Board of Directors
|
|
350,000
|
|
—
|
|
—
|
|
|
Chairman of the Compensation and Nomination Committee
|
|
30,000
|
|
2,500
|
|
1,250
|
|
|
Compensation and Nomination Committee Membership
|
|
25,000
|
|
2,500
|
|
1,250
|
|
|
Chairman of the Control, Risk and Related Parties’ Committee(1)
|
|
45,000
|
|
2,500
|
|
1,250
|
|
|
Control, Risk and Related Parties’ Committee Membership
|
|
25,000
|
|
2,500
|
|
1,250
|
|
|
Chairman of the Independent Directors’ Committee
|
|
15,000
|
|
2,500
|
|
1,250
|
|
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Independent Directors’ Committee Membership(2)
|
|
10,000
|
|
2,500
|
|
1,250
|
|
|
Surveillance Body Membership
|
|
25,000
|
|
—
|
|
—
|
|
(1)
Established on May 8, 2014; previously known as Control and Risk Committee.
(2)
Established until May 8, 2014; after which date this committee’s functions were allocated to the Control, Risk and Related Parties’ Committee.
The following table sets forth the approximate compensation paid to GTECH’s non-employee directors during 2014:
Non-Employee Director Compensation
|
Name
|
|
Annual
Director Fees
(€)
|
|
Committee
Fees
(€)
|
|
Total
(€)
|
|
|
Lorenzo Pellicioli, Chairman
|
|
460,000
|
|
—
|
|
460,000
|
|
|
Pietro Boroli, Director(1)
|
|
32,535
|
|
—
|
|
32,535
|
|
|
Donatella Busso, Director
|
|
105,000
|
|
36,007
|
(2)
|
141,007
|
|
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Paolo Ceretti, Director
|
|
110,000
|
|
43,768
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(3)
|
153,768
|
|
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Alberto Dessy, Director
|
|
100,000
|
|
114,757
|
(4)
|
214,757
|
|
|
Marco Drago, Director
|
|
100,000
|
|
—
|
|
100,000
|
|
|
Anna Gatti, Director
|
|
75,105
|
|
21,300
|
(5)
|
96,405
|
|
|
Antonio Mastrapasqua, Director
|
|
75,105
|
|
23,313
|
(6)
|
98,418
|
|
|
Gianmario Tondato da Ruos, Director
|
|
30,035
|
|
18,280
|
(7)
|
48,315
|
|
|
Elena Vasco, Director
|
|
85,105
|
|
21,300
|
(8)
|
106,405
|
|
(1)
Mr. Boroli served as a director from January 1, 2014 until May 8, 2014.
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(2)
Ms. Busso served as a member of the Control and Risk Committee until May 8, 2014, as a member of the Control, Risk and Related Parties’ Committee from May 8, 2014 until December 31, 2014, and as a member of the Independent Directors’ Committee during 2014.
(3)
Mr. Ceretti served as a member of the Compensation and Nomination Committee during 2014 and as a member of the Control and Risk Committee until May 8, 2014.
(4)
Mr. Dessy served as a member of the Compensation and Nomination Committee and the Independent Directors’ Committee, and as Chairman of the Surveillance Body during 2014. He also served as Chairman of the Control and Risk Committee until May 8, 2014, and as Chairman of the Control, Risk and Related Parties’ Committee from May 8, 2014 until December 31, 2014.
(5)
Ms. Gatti served as a member of the Compensation and Nomination Committee during 2014. She served as independent director of the board of GTECH S.p.A. from May 8, 2014, and as Lead Independent Director from May 23, 2014 until December 31, 2014.
(6)
Mr. Mastrapasqua served as Chairman of the Compensation and Nomination Committee and as independent director of the board of GTECH S.p.A. from May 8, 2014 until December 31, 2014.
(7)
Mr. Tondato da Ruos served as an independant director, as the Chairman of the Compensation and Nomination Committee, and as the Chairman of the Independent Directors’ Committee from January 1, 2014 until May 8, 2014.
(8)
Ms. Vasco served as independent director of the board of GTECH S.p.A. and as a member of the Control, Risk and Related Parties’ Committee from May 8, 2014 until December 31, 2014.
The table above does not include compensation paid to Marco Sala, the Chief Executive Officer of GTECH, or Jaymin B. Patel, the President and Chief Executive Officer of GTECH Americas. Amounts paid to both of these individuals in their capacity as directors are included in “—Officer Compensation” below.
Officer Compensation
Total Compensation
The following table sets forth the approximate compensation paid to GTECH’s officers during 2014, including Messrs. Sala and Patel, Renato Ascoli, President of Products & Services of GTECH, Fabio Cairoli, General Manager (Italy Region) of GTECH, Walter Bugno, President and Chief Executive Officer of GTECH International, and Alberto Fornaro, Chief Financial Officer of GTECH. The compensation paid to Messrs. Bugno and Fornaro is presented on an aggregate basis in the rows labeled “Other Officers” in the tables below.
Officer Compensation
|
Name
|
|
Salary
(€)(1)
|
|
Bonus
(€)
|
|
Equity
Awards
(€)(2)
|
|
Other
(€)(3)
|
|
Total
(€)
|
|
|
Marco Sala,
Chief Executive Officer
|
|
892,557
|
(4)
|
1,450,212
|
(5)
|
2,887,789
|
|
79,610
|
|
5,310,168
|
|
|
Jaymin B. Patel,
President and Chief Executive Officer, GTECH Corp., Americas Region
|
|
748,846
|
|
999,077
|
|
1,156,360
|
|
185,304
|
|
3,089,587
|
|
|
Renato Ascoli,
President of Products & Services
|
|
450,000
|
|
897,803
|
|
873,107
|
|
316,075
|
|
2,536,985
|
|
|
Fabio Cairoli,
General Manager (Italy Region)
|
|
352,308
|
|
455,085
|
|
—
|
|
26,528
|
|
833,921
|
|
|
Other Officers
|
|
853,846
|
|
1,476,236
|
|
898,980
|
|
325,528
|
|
3,554,590
|
|
(1)
For Messrs. Sala and Patel, also includes amounts paid in respect of service on GTECH’s board of directors.
(2)
Represents the IFRS grant date fair value of equity compensation vested during fiscal year 2014.
(3)
Represents the value of health and welfare benefits received by the officers during 2014 (including medical, dental, disability, life insurance, retirement, relocation, tax preparation and retirement benefits). For Mr. Patel, this amount also includes a housing allowance of €71,954 and perquisites of €53,846. For Mr. Ascoli, this amount also includes €211,489 received in respect of housing allowances. For the other top executives, this amount also includes aggregate housing and car allowances and perquisites of €193,334.
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(4)
Includes €15,000 earned by Mr. Sala in respect of service as a Director of IT Bank S.p.A., a company affiliated with GTECH, and €19,200 earned by Mr. Sala in respect of service as a Director of OPAP (
i.e.
, the Greek operator of lotteries and sports betting).
(5)
In addition, Mr. Sala received a discretionary award of €75,500 in 2014 that was related to his 2013 performance and is not included in the compensation disclosed above.
Equity Compensation
The table below sets forth the stock options relating to GTECH shares granted to officers of GTECH during 2014.
Grants of Stock Options
|
Name
|
|
No. of
Options (#)(1)
|
|
Exercise
Price
(€)
|
|
Exercise
Period
|
|
Grant Date
|
|
|
Marco Sala
|
|
420,673
|
|
18.71
|
|
2017 - 2020
|
|
07/31/2014
|
|
|
Jaymin Patel
|
|
198,557
|
|
18.71
|
|
2017 - 2020
|
|
07/31/2014
|
|
|
Renato Ascoli
|
|
158,653
|
|
18.71
|
|
2017 - 2020
|
|
07/31/2014
|
|
|
Fabio Cairoli
|
|
98,824
|
|
18.71
|
|
2017 - 2020
|
|
07/31/2014
|
|
|
Other Officers
|
|
224,465
|
|
18.71
|
|
2017 - 2020
|
|
07/31/2014
|
|
(1)
Options vest subject to the achievement of performance targets in respect of cumulative consolidated EBITDA and net financial position measured over a three-year period. See “—Long-Term Incentive Compensation Plans” below.
The table below sets forth the shares granted pursuant to compensation plans, other than stock options, to officers of GTECH during 2014.
Grants of Shares
|
Name
|
|
No. of
Shares
(#)
|
|
Fair Value at
Date of
Allocation
(€)(1)
|
|
Vesting
Period
|
|
Allocation
Date
|
|
Share’s
Market Price
upon
Allocation
|
|
|
Marco Sala
|
|
86,882
|
|
17.62
|
|
2014 - 2016
|
|
07/31/2014
|
|
18.00
|
|
|
Jaymin Patel
|
|
41,008
|
|
17.62
|
|
2014 - 2016
|
|
07/31/2014
|
|
18.00
|
|
|
Renato Ascoli
|
|
32,766
|
|
17.62
|
|
2014 - 2016
|
|
07/31/2014
|
|
18.00
|
|
|
Fabio Cairoli
|
|
20,410
|
|
17.62
|
|
2014 - 2016
|
|
07/31/2014
|
|
18.00
|
|
|
Other Officers
|
|
46,358
|
|
17.62
|
|
2014 - 2016
|
|
07/31/2014
|
|
18.00
|
|
(1)
Fair value is not indicated for those plans with effects in future financial years.
Short-Term Incentive Compensation Plans
GTECH short-term incentive compensation (“STI”) plans during 2014 were performance-based and designed to encourage employees to achieve both short-term financial results and longer term strategic objectives. GTECH’s officers participated in the same STI plans as other employees during 2014. The primary focus of STI plans was to motivate GTECH’s employees and reward employees for the achievement of annual objectives. STI plans were designed to recognize growth achievement with an opportunity to earn a bonus on the upside, as well as to limit the downside potential. Payments under the STI plans were based on group and/or business unit as well as individual performance.
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For purposes of the STI plans, financial performance was measured based on operating income (OI) at the GTECH level and/or operating income for a particular group or segment in which the individual was employed. The table below sets forth the minimum, target, and maximum performance thresholds for OI under the STI plans.
Operating Income and Performance
|
Percent of OI Achieved
(%)
|
|
GTECH OI
(€ millions)
|
|
|
90
|
|
493.8
|
|
|
100
|
|
548.7
|
|
|
110.5
|
|
606.5
|
|
Some officers also had a goal to improve GTECH’s net financial position, and others had cash flow as a metric. Financial goals based on operating income were measured on a curve on which, in general, the minimum threshold payment was made for 90% achievement, 100% for target performance, and 110-115% for maximum achievement.
All financial objectives were established at the start of the year by the Chairman of the GTECH board of directors for the CEO, and by the CEO jointly with the Chairman of the GTECH board of directors for the other officers, in each case, following prior approval by the Compensation and Nomination Committee.
All STI objectives had an appropriate mix of financial and individual metrics. The STI component of compensation was subject to a maximum award limit equal to 200% of the target STI award of the plan participant and was paid upon achievement of 110%-115% financial performance. STI payouts could be adjusted for windfalls outside of the control of the officers.
Long-Term Incentive Compensation Plans
GTECH’s long-term incentive compensation (“LTI”) plans provided for stock option grants and restricted stock awards. Awards under GTECH’s LTI plans were generally split between stock options and restricted stock, with approximately 50% of the value of the award allocated to stock options and the balance to restricted stock.
The principal purpose of granting LTI awards was to assist GTECH and its subsidiaries in attracting and retaining award recipients, to provide a market competitive total compensation package and to motivate award recipients to increase shareholder value by enabling them to participate in the value that was created, thus aligning their interests with those of GTECH’s shareholders. The LTI plans were based upon two performance metrics: Three-Year Cumulative Consolidated EBITDA (profitability measure) and Net Financial Position (use of cash). Financial objectives were established by the GTECH board of directors based upon a proposal by the Compensation and Nomination Committee, consistent with the authorization provided by GTECH’s shareholders. Company-related LTI targets throughout individual LTI plans were based on economic consolidated performance as follows:
·
a total consolidated EBITDA of at least 90% of the targeted total consolidated EBITDA; and
·
a ratio calculated between the consolidated net financial position and consolidated EBITDA.
GTECH officers are required to retain at least 20% of the shares they receive upon vesting of the restricted stock awards and a portion of the shares received upon exercise of vested stock options for three years following the vesting or exercise date, as applicable.
The LTI plans permit GTECH to clawback or to make other, similar adjustments to the plans following vesting of the applicable awards in the event of erroneous financial statements or incorrect data contained therein.
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Amounts accrued for pensions and similar benefits
As of December 31, 2014, the total amount accrued by GTECH and its subsidiaries to provide pension, retirement or similar benefits was €11,475,000.
IGT 2015 Equity Incentive Plan
The Company has adopted the International Game Technology PLC 2015 Equity Incentive Plan (the “IGT 2015 Plan”). The principal purposes of this plan are to focus directors, officers and other employees and consultants on business performance that creates shareholder value, to encourage innovative approaches to the business of the Company, and to encourage ownership of our ordinary shares by directors and other employees.
The IGT 2015 Plan provides for a variety of awards, including nonqualified share options, share appreciation rights (“SARs”), restricted shares, restricted share units, performance units, other share-based awards, or any combination of those awards. The IGT 2015 Plan provides that awards may be made under the plan for ten years. We reserved 11,500,000 ordinary shares for issuance under the IGT 2015 Plan, subject to adjustment in certain circumstances to prevent dilution or enlargement.
Administration
The IGT 2015 Plan is administered by our compensation committee. The compensation committee may delegate administration to one or more members of our board of directors. The compensation committee has the power to interpret the IGT 2015 Plan and to adopt such rules for the administration, interpretation, and application of the IGT 2015 Plan according to its terms. The compensation committee shall determine the number of our ordinary shares that will be subject to each award granted under the IGT 2015 Plan and may take into account the recommendations of our senior management in determining the award recipients and the terms and conditions of such awards. Subject to certain exceptions, our board of directors may at any time and from time to time exercise any and all rights and duties of the compensation committee under the IGT 2015 Plan.
Eligibility
Certain directors and employees will be eligible to be granted awards under the IGT 2015 Plan. Our compensation committee will determine:
·
which directors and employees are to be granted awards;
·
the type of award that is granted;
·
the number of our ordinary shares subject to the awards;
·
and the terms and conditions of such awards, consistent with the IGT 2015 Plan.
Our compensation committee will have the discretion, subject to the limitations of the IGT 2015 Plan and applicable laws, to grant awards under the IGT 2015 Plan.
Share Options
Subject to the terms and provisions of the IGT 2015 Plan, share options to purchase our ordinary shares may be granted to eligible individuals at any time and from time to time as determined by our compensation committee. Share options may only be granted as nonqualified share options, which do not qualify for favorable tax treatment under U.S. federal tax law. Subject to the limits provided in the IGT 2015 Plan, our compensation committee will determine the number of share options granted to each recipient. Each share option grant will be evidenced by an award agreement that specifies the share option exercise price, the duration of the share options, the number of shares to which the share options pertain, and such additional limitations, terms, and conditions as our compensation committee may determine.
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Our compensation committee will determine the exercise price for each share option granted, except that the share option exercise price may not be less than 100 percent of the fair market value of an ordinary share on the date of grant. All share options granted under the IGT 2015 Plan will expire no later than ten years from the date of grant. Share options are nontransferable except by will or by the laws of descent and distribution or, in the case of nonqualified share options, as otherwise expressly permitted by our compensation committee. The granting of a share option does not accord the recipient the rights of a shareholder, and such rights accrue only after the exercise of a share option and the registration of ordinary shares in the recipient’s name.
Share Appreciation Rights
Our compensation committee in its discretion may grant SARs under the IGT 2015 Plan. SARs may be “tandem SARs,” which are granted in conjunction with a share option, or “free-standing SARs,” which are not granted in conjunction with a share option. A SAR entitles the holder to receive from us upon exercise an amount equal to the excess, if any, of the aggregate fair market value of a specified number of our ordinary shares to which such SAR pertains over the aggregate exercise price for the underlying shares. The exercise price of a free-standing SAR will not be less than 100% of the fair market value of an ordinary share on the date of grant.
A tandem SAR may be granted at the grant date of the related share option. A tandem SAR will be exercisable only at such time or times and to the extent that the related share option is exercisable and will have the same exercise price as the related share option. A tandem SAR will terminate or be forfeited upon the exercise or forfeiture of the related share option, and the related share option will terminate or be forfeited upon the exercise or forfeiture of the tandem SAR.
Each SAR will be evidenced by an award agreement that specifies the exercise price, the number of ordinary shares to which the SAR pertains, and such additional limitations, terms, and conditions as our compensation committee may determine. We may make payment of the amount to which the participant exercising the SARs is entitled by delivering ordinary shares, cash, or a combination of shares and cash as set forth in the award agreement relating to the SARs. SARs are not transferable except by will or the laws of descent and distribution or, with respect to SARs that are not granted in “tandem” with a share option, as expressly permitted by our compensation committee.
Restricted Shares
The IGT 2015 Plan provides for the award of ordinary shares that are subject to forfeiture and restrictions on transferability to the extent permitted by applicable law and as set forth in the IGT 2015 Plan, the applicable award agreement, and as may be otherwise determined by our compensation committee. Except for these restrictions and any others imposed by our compensation committee, upon the grant of restricted shares, the recipient will have rights of a shareholder with respect to the restricted shares, including the right to vote the restricted shares and to receive all dividends and other distributions paid or made with respect to the restricted shares on such terms as will be set forth in the applicable award agreement. During the restriction period set by our compensation committee, the recipient will be prohibited from selling, transferring, pledging, exchanging, or otherwise encumbering the restricted shares.
Restricted Share Units
The IGT 2015 Plan authorizes our compensation committee to grant restricted share units. Restricted share units are not ordinary shares and do not entitle the recipients to the rights of a shareholder, although the award agreement may provide for rights with respect to dividend equivalents. The recipient may not sell, transfer, pledge, or otherwise encumber restricted share units granted under the IGT 2015 Plan prior to their vesting. Restricted share units will be settled in cash, ordinary shares, or a combination thereof as provided in the applicable award agreement, in an amount based on the fair market value of an ordinary share on the settlement date.
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Performance Units
The IGT 2015 Plan provides for the award of performance units that are valued by reference to a designated amount of cash or other property other than ordinary shares. The payment of the value of a performance unit is conditioned upon the achievement of performance goals set by our compensation committee in granting the performance unit and may be paid in cash, ordinary shares, other property, or a combination thereof.
Other Share-Based Awards
The IGT 2015 Plan also provides for the award of ordinary shares and other awards that are valued by reference to our ordinary shares, including unrestricted shares, dividend equivalents, and convertible debentures.
Performance Goals
The IGT 2015 Plan provides that performance goals may be established by our compensation committee in connection with the grant of any award under the IGT 2015 Plan.
Change in Control
Unless provided otherwise in the applicable award agreement:
·
in the event of a “change in control” of the Company (as defined in the IGT 2015 Plan), if equivalent replacement awards are substituted for awards granted and outstanding under the IGT 2015 Plan at the time of such change in control, such awards will not vest upon the change in control but will vest in full (in the case of any awards that are subject to performance goals, at the greater of target level and the applicable level of achievement through the change in control) upon a termination of service other than for “cause” (as defined in the IGT 2015 Plan) within 24 months following such change in control; and
·
notwithstanding any other provision of the IGT 2015 Plan to the contrary, upon the termination of service of a participant during the 24-month period following a change in control for any reason other than for cause, any share option or SAR held by the participant as of the date of the change in control that remains outstanding as of the date of such termination of service may thereafter be exercised until the last date on which such share option or SAR would otherwise be exercisable.
An award qualifies as a “replacement award” under the IGT 2015 Plan if the following conditions are met in the sole discretion of the compensation committee: (a) it is of the same type as the award being replaced; (b) it has a value equal to the value of the award being replaced as of the date of the change in control; (c) if the underlying award being replaced was an equity-based award, it relates to publicly traded equity securities of the Company or the entity surviving the Company following the change in control; (d) it contains terms relating to vesting (including with respect to a termination of service) that are substantially identical to those of the award being replaced; and (e) its other terms and conditions are not less favorable to the participant than the terms and conditions of the award being replaced (including the provisions that would apply in the event of a subsequent change in control) as of the date of the change in control.
If equivalent replacement awards are not substituted for awards granted and outstanding under the IGT 2015 Plan at the time of such change in control, all then-outstanding share options and SARs will become fully vested and exercisable, and all full-value awards will vest in full, be free of restrictions, and be deemed to be earned and payable in an amount equal to the full value of such award (in the case of any awards that are subject to performance goals, at the greater of target level and the applicable level of achievement through the change in control).
Amendment
Our board of directors or our compensation committee may amend, alter, or discontinue the IGT 2015 Plan, but no amendment, alteration, or discontinuation will be made that would materially impair the rights of the participant with respect to a previously granted award without such participant’s consent, except such an amendment made to comply with applicable law, including, without limitation, Section 409A of the Code, stock exchange rules, or accounting rules. In addition, no such amendment will be made without the approval of the Company’s shareholders to the extent such approval is required by applicable law or the listing standards of the applicable stock exchange.
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Severance Arrangements
Each GTECH officer is entitled to severance payments and benefits if such officer’s employment is terminated other than for cause under either individual employment agreements or provisions of national collective agreements for executives of the industry.
The employment agreements with United States-based officers—
i.e.
, Messrs. Patel and Fornaro—generally provide for the following benefits upon a termination other than for “cause”:
·
18 to 24 months of base salary, bonus (based upon a three-year average), and perquisites;
·
18 to 24 months tax preparation;
·
any accrued but unpaid bonus earned for the prior fiscal year;
·
a prorated bonus for the current fiscal year;
·
18 to 24 months of health and welfare benefit continuation; and
·
18 to 24 months following termination of employment to exercise vested stock options.
In addition, upon the United States officer’s death or disability, the officer will be entitled to the following benefits under the employment agreements:
·
18 months of base salary;
·
0 to 18 months of bonus (based upon a three-year average) and perquisites;
·
18 months of tax preparation;
·
any accrued but unpaid bonus earned for the prior fiscal year;
·
a prorated bonus for the current fiscal year;
·
24 to 36 months of health and welfare benefit continuation; and
·
18 months following termination of employment to exercise vested stock options.
Upon an officer’s retirement from GTECH, these employment agreements also provide for accelerated vesting of a portion of an officer’s outstanding performance share awards and an ability to exercise vested options until the expiration date.
Pursuant to the terms of the Italian national collective agreement for executives of the industry (
Contratto Collettivo Nazionale di Lavoro per i Dirigenti di Aziende Industriali
), Messrs. Sala, Ascoli, and Cairoli are generally entitled to the following severance payments and benefits upon a termination of employment by GTECH other than for “cause,” a resignation for “good reason,” or due to the officer’s death or disability:
·
severance pay determined under the collective agreement;
·
any accrued but unpaid bonus for the prior fiscal year; and
·
a notice indemnity equal to a minimum of eight and a maximum of twelve months of total base salary and STI compensation.
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Upon an officer’s death, he (or his estate) will also be entitled to full payment of a life insurance policy valued at €220,000.
C.
Board Practices
Pursuant to our Articles of Association, unless and until otherwise decided by the board (where, for the period of three years from the date of adoption of the Articles, not less than three-quarters of the directors present shall have voted in favor of such decision), the number of directors will be 13. The current directors were elected upon effectiveness of the Mergers. See “Item 6A. Directors, Senior Management and Employees” above. The term of office of the current board of directors will expire three years from the date of the Mergers, after which period the directors will be elected anually. Each director may be re-elected at any subsequent general meeting of shareholders. None of our directors have service contracts with the Company (or any subsidiary) providing for benefits upon termination of employment as a director.
The directors are responsible for the management of the Company’s business, for which purpose they may exercise all of the powers of the Company whether relating to the management of the business or not. As described above in section “Item 6A. Directors, Senior Management and Employees”, the board of directors comprises five non-independent directors including IGT PLC’s CEO, Marco Sala, the former CEO of International Game Technology, Patti S. Hart, three directors appointed by IGT PLC’s controlling shareholder, De Agostini S.p.A. and eight independent directors.
On April 7, 2015, the board of directors of the Company appointed the following internal committees: (1) an Audit Committee, (2) a Nominating and Corporate Governance Committee, and (3) a Compensation Committee. The board of directors also appointed Mr. Philip G. Satre as Non-Executive Chairman of the board.
The Audit Committee
IGT PLC’s Audit Committee is responsible for assisting the board of directors’ oversight of: (a) the integrity of the Company’s financial statements, (b) the Company’s compliance with legal and regulatory requirements, (c) the independent registered public accounting firm’s qualifications and independence, (d) the performance of the Company’s internal audit function and independent registered public accounting firm, and (e) such other duties as may be directed by the board.
The Audit Committee currently consists of Messrs. Sadusky (Chairman), Hanley and Alves. Under the Audit Committee Charter, the Audit Committee is elected by the board of directors, and comprises at least three members, each of whom must be an independent director. All members of the Audit Committee must be directors who meet (1) the financial literacy requirement, as such qualification is interpreted by the board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Audit Committee and (2) the independence requirements of the New York Stock Exchange, the SEC (including Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and other applicable law. The members of the Committee are appointed by and serve at the discretion of the board until such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal. At least one member of the Committee must have accounting or related financial management expertise, as the board interprets such qualification in its business judgment. The Chairperson of the Audit Committee is also appointed by the board. See “Item 16A. Audit Committee Financial Expert” of this annual report on Form 20-F for additional information regarding Audit Committee financial expert.
The Charter for the Audit Committee is available on our website (www.igt.com). The information contained on our website is not included in, or incorporated by reference into, this annual report on Form 20-F.
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The Compensation Committee
The purpose of the Compensation Committee is to discharge the responsibilities of the board relating to compensation of the Company’s executives and to take such other actions within the scope of its Charter as the Committee deems necessary or appropriate. IGT PLC’s Compensation Committee is responsible for, among other things: (1) ensuring that provisions regarding disclosure of information, including pensions, as set out in the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, are fulfilled and produce a report of the Company’s remuneration policy and practices to be included in the Company’s annual report and ensure that it is approved by the board and put to shareholders for approval at the annual general meeting in accordance with the Companies Act 2006; (2) reviewing management recommendations and advising management on broad compensation policies such as salary ranges, deferred compensation, incentive programs, pension and executive stock plans; (3) reviewing and approving goals and objectives relevant to the CEO’s compensation, evaluating the CEO’s performance in light of those goals and objectives, and setting the CEO’s compensation level (including, but not limited to, salary, long- and short-term incentive plans, retirement plans, deferred compensation plans, equity award plans, change in control or other severance plans, as the Committee deems appropriate) based on this evaluation: (4) monitoring issues associated with CEO succession and management development, and regularly reporting to the board of directors on them; (5) making recommendations to the board of directors with respect to the Company’s non-CEO executive officer compensation, incentive compensation plans and equity-based plans that are subject to board approval, reviewing and recommending to the board the form and amount of compensation paid to directors for board and committee service and for serving as Chairperson of a committee or Chairperson of the board of directors; (6) publishing the Charter as required by the rules and regulations of applicable law and as otherwise deemed advisable by the Committee; (7) evaluating the Committee’s performance and reviewing with the board of directors at least annually; (8) taking such other actions as may be requested or required by the board of directors from time to time; and (9) making recommendations and report to the board of directors and other board committees with respect to compensation policy of the Company or any of the foregoing matters.
The Compensation Committee currently consists of Messrs. Tondato da Ruos (Chairman), Dessy and Alves. The membership of the Committee comprises not less than three independent members, as determined by the board, and meets the independence and eligibility requirements of the NYSE and applicable law. The members are appointed by and serve at the discretion of the board until such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal. The Chairperson of the Committee is appointed by the board of directors.
The Charter for the Compensation Committee is available on our website (www.igt.com). The information contained on our website is not included in, or incorporated by reference into, this annual report on Form 20-F.
The Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for, among other things: (1) recommending to the board, consistent with criteria approved by the board (as set forth in the Company’s corporate governance guidelines) and consistent with policies, processes and criteria approved by the committee the number of directors comprising the board, the names of qualified persons to be nominated for election or re-election as directors and the membership and chairman of each board committee; (2) reviewing directorships in other public companies held by or offered to directors and senior officers of the Company; (3) evaluating Company policies relating to the recruitment of directors, including D&O insurance and indemnification bylaws, and making recommendations to the board, or any appropriate board committees, regarding such matters, reviewing periodically with the Company’s General Counsel and Chief Compliance Officer, in the light of changing conditions, new legislation, regulations and other developments, the Company’s Code of Business Conduct, making recommendations to the board of directors for any changes, amendments and modifications to the Code that the Committee shall deem desirable and promptly disclosing any waivers for directors or executive officers, as required by applicable law; (4) monitoring and reassessing from time to time the Corporate Governance Guidelines of the Company and recommending any changes to the board; (5) determining, at least annually, the independence of each director under the independence requirements of the NYSE and any other regulatory requirements and report such findings to the board, overseeing, at least annually, the evaluation of the performance of the board and each board committee; (6) evaluating the Committee’s performance at least annually and report such evaluation to the board; (7) assisting the Company in making the periodic disclosures related to the Committee and required by rules issued
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or enforced by the SEC, publish its Charter as required by the rules and regulations of applicable law and as otherwise deemed advisable by the Committee; (8) taking such other actions as may be requested or required by the board from time to time; and (9) making recommendations and report to the board and other board committees with respect to any of the foregoing matters.
The Nominating and Corporate Governance Committee currently consists of Mr. McCann (Chairman), Ms. Weber and Mr. Satre. The membership of the Committee comprises not less than three independent members, as determined by the board, and meets the independence and eligibility requirements of the NYSE and applicable law. The members are appointed by and serve at the discretion of the board until each such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal. The Chairperson of the Committee is appointed by the board of directors.
The Charter for the Nominating and Corporate Governance Committee is available on our website (www.igt.com). The information contained on our website is not included in, or incorporated by reference into, this annual report on Form 20-F.
Indemnification of Members of the Board of Directors
IGT PLC has committed, to the fullest extent permitted under applicable law, to indemnify and hold harmless (and advance any expenses incurred, provided that the person receiving such advancement undertakes to repay such advances if it is ultimately determined such person was not entitled to indemnification), each of IGT PLC’s and International Game Technology’s and their subsidiaries’ present and former directors, officers and employees against all costs and expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and settlement amounts paid in connection with any claim, action, suit, proceeding or investigation arising out of or related to such person’s service as a director, officer or employee of IGT PLC or International Game Technology or any of their subsidiaries at or prior to the completion of the Mergers.
IGT PLC’s articles of association and International Game Technology’s certificate of incorporation and bylaws will provide, and will continue to provide for the six years following the completion of the Mergers, for the exculpation and indemnification of, and advancement of expenses to, IGT PLC and International Game Technology directors, officers and employees.
D.
Employees
As of December 31, 2014, IGT PLC conducted business in approximately 100 countries worldwide on six continents and had 8,811 employees. Relations with IGT PLC’s mid-level employees and production workers are subject to Italy’s national collective bargaining agreement for the metalwork’s industry. On December 1, 2000, IGT PLC entered into an agreement with its mid-level employees and production workers supplementing the terms of the relevant national collective bargaining agreement. Relations with IGT PLC’s executives are subject to the national collective bargaining agreement for executives in the metalwork’s industry. Most of IGT PLC’s employees are not represented by any labor union. IGT PLC believes that its relationship with its employees is generally satisfactory. During the last three years, IGT PLC has not experienced any strike that significantly influenced its business activities.
Compared to the preceding fiscal year, IGT PLC’s headcount increase as of December 31, 2014 was minimal. Hiring of new employees outside of replacing employees who left IGT PLC has been focused on hiring employees to either support new business or to support growth areas of IGT PLC, such as Lottery Management Agreements (LMAs) in the United States. Workforce reductions over the past year have been mostly focused on optimizing IGT PLC’s Interactive business in Europe.
In January 2013, IGT PLC announced a plan to further integrate its businesses on a global basis. These changes were aimed at supporting growth, improving efficiency and enhancing profitability across operations, stepping up the pace of internationalization of IGT PLC to better capture its potential. As of December 31, 2014, IGT PLC is operated under a new unified, customer-facing organization structure aligned around three global geographic regions—Americas, International and Italy—and supported by a central products and services structure. These changes resulted in a number of changes in roles and responsibilities, as well as reporting relationships for many employees globally.
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IGT PLC encourages the commitment, loyalty and devotion of its employees, in part by linking part of their remuneration to performance. In July 2014, IGT PLC’s board of directors implemented the 2014-2020 Stock Option Plan and the 2014-2018 Stock Allocation Plan, which were both approved by GTECH’s shareholders in May 2014 and assumed by IGT PLC in the Mergers. The board of directors approved the terms and conditions of such plans, awarded options and shares thereunder and resolved, in accordance with the authorization granted by IGT PLC’s shareholders on April 28, 2011, to increase GTECH’s stock capital up to an amount of €2,073,157 serving the 2014-2020 Stock Option Plan, with an exercise price of the options set at €18.71.
On March 13, 2015, IGT PLC’s shareholder approved the 2015 Equity Incentive Plan, which was adopted by the board of directors of IGT PLC on April 2, 2015.
Employees by Segment
|
|
|
(as of December 31)
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
Italy
|
|
961
|
|
836
|
|
818
|
|
|
Americas
|
|
3,557
|
|
3,450
|
|
3,330
|
|
|
International
|
|
647
|
|
680
|
|
787
|
|
|
Products & Services and Corporate Support
|
|
3,470
|
|
3,502
|
|
3,507
|
|
|
Total
|
|
8,635
|
|
8,468
|
|
8,442
|
|
IGT PLC had an average of 6,777 salaried employees in 2014 (2013: 6,608; 2012: 6,567) and an average of 8,661 full-time equivalent employees in 2014 (2013: 8,386; 2012: 8,392). As of December 31, 2014, the proportion of women among permanent employees was 30.9%; 16% of senior executives were female.
Of the average number of employees during the year 2014, 1,650 were classified as Managing Directors, (2013: 1,628; 2012: 1,577), 125 as senior executives (2013: 116; 2012: 104) and 7,043 as employees (2013: 6,743; 2012: 6,806).
982 employees left IGT PLC in the course of 2014. Staff turnover rate was 11.1%, compared to 12% in 2013 and 8.2% in 2012.
E.
Share Ownership
The following table sets forth information, as of the date of this document, regarding the beneficial ownership of IGT PLC ordinary shares, including:
·
each member of the IGT PLC board of directors;
·
each executive officer of IGT PLC; and
·
all members of the IGT PLC board of directors and executive officers, taken together.
Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, IGT PLC believes that each shareholder identified in the table possesses sole voting and investment power over all IGT PLC ordinary shares shown as beneficially owned by that shareholder. Percentage of beneficial ownership is based on the approximately 198,595,887 million IGT PLC ordinary shares outstanding as of the date of this document.
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|
Name of Beneficial Owner
|
|
Number of
Ordinary Shares
|
|
Percentage
|
|
|
Directors:
|
|
|
|
|
|
|
Philip G. Satre
|
|
22,207
|
(1)
|
0.011
|
|
|
Paget L. Alves
|
|
5,341
|
|
0.003
|
|
|
Paolo Ceretti
|
|
3,060
|
|
0.002
|
|
|
Alberto Dessy
|
|
—
|
|
—
|
|
|
Marco Drago
|
|
—
|
|
—
|
|
|
Sir Jeremy Hanley
|
|
—
|
|
—
|
|
|
Patti S. Hart
|
|
197,889
|
|
0.100
|
|
|
James F. McCann
|
|
—
|
|
—
|
|
|
Lorenzo Pellicioli
|
|
71,400
|
|
0.036
|
|
|
Vincent L. Sadusky
|
|
7,107
|
|
0.004
|
|
|
Marco Sala
|
|
492,845
|
|
0.248
|
|
|
Gianmario Tondato da Ruos
|
|
—
|
|
—
|
|
|
Tracey D. Weber
|
|
878
|
|
0.000
|
|
|
Non-Director Officers:
|
|
|
|
|
|
|
Renato Ascoli
|
|
84,944
|
|
0.043
|
|
|
Walter Bugno
|
|
26,706
|
|
0.013
|
|
|
Fabio Cairoli
|
|
—
|
|
—
|
|
|
Michael Chambrello
|
|
—
|
|
—
|
|
|
Alberto Fornaro
|
|
17,567
|
|
0.009
|
|
|
Donald R. Sweitzer
|
|
58,715
|
|
0.030
|
|
|
Robert Vincent
|
|
6,332
|
|
0.003
|
|
|
Other officers
|
|
—
|
|
—
|
|
|
All members of IGT PLC board of directors and executive officers as a group
|
|
994,991
|
|
0.501
|
|
(1)
5,018 shares are held directly, while 17,189 shares are held by the Philip G. Satre and Jennifer A. Satre Family Revocable Trust (of which Mr. Satre is a trustee and beneficiary).
In addition, the following table sets forth information, as of December 31, 2014, regarding the beneficial ownership of GTECH ordinary shares, including:
·
each member of the GTECH board of directors as of December 31, 2014;
·
each executive officer of GTECH as of December 31, 2014; and
·
all members of the GTECH board of directors and executive officers as of December 31, 2014, taken together.
Except in cases where community property laws apply or as indicated in the footnotes to this table, IGT PLC believes that each shareholder identified in the table possessed sole voting and investment power over all GTECH ordinary shares shown as beneficially owned by that shareholder. Percentage of beneficial ownership was based on the 174,976,029 GTECH ordinary shares outstanding as of December 31, 2014.
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Table of Contents
|
Name of Beneficial Owner
|
|
Number of
Ordinary Shares
|
|
Percentage
|
|
|
Directors:
|
|
|
|
|
|
|
Marco Sala
|
|
492,845
|
|
0.282
|
|
|
Lorenzo Pellicioli
|
|
71,400
|
|
0.041
|
|
|
Donatella Busso
|
|
—
|
|
—
|
|
|
Paolo Ceretti
|
|
3,060
|
|
0.002
|
|
|
Alberto Dessy
|
|
—
|
|
—
|
|
|
Marco Drago
|
|
—
|
|
—
|
|
|
Jaymin B. Patel
|
|
193,070
|
|
0.110
|
|
|
Anna Gatti
|
|
—
|
|
—
|
|
|
Antonio Mastrapasqua
|
|
—
|
|
—
|
|
|
Elena Vasco
|
|
—
|
|
—
|
|
|
Non-Director Officers:
|
|
|
|
|
|
|
Renato Ascoli
|
|
84,944
|
|
0.049
|
|
|
Fabio Cairoli
|
|
—
|
|
—
|
|
|
Other officers
|
|
44,273
|
|
0.025
|
|
|
All members of GTECH board of directors and executive officers as a group
|
|
889,592
|
|
0.508
|
|
Item 7.
Major Shareholders and Related Party Transactions
A.
Major Shareholders
As of the date of this document, our outstanding capital stock consisted of 198,595,887 ordinary shares having a nominal value of $0.10 per share.
The following table sets forth information with respect to beneficial ownership of our ordinary shares by persons known by us to beneficially own 5% or more of voting power as a result of their ownership of ordinary shares as of the date of this document.
|
Name of Beneficial Owner
|
|
Number of Ordinary
Shares Owned
|
|
Percent of Common
Shares Owned
|
|
Percent of Combined
Voting Power
|
|
|
De Agostini S.p.A.(*)
|
|
103,422,324
|
|
47
|
%
|
52.1
|
%
|
|
DeA Partecipazioni S.p.A.
|
|
10,073,006
|
|
5.1
|
%
|
5.1
|
%
|
(*)
Includes the ordinary shares held in the Company by DeA Partecipazioni S.p.A., a wholly owned subsidiary of De Agostini S.p.A.
Immediately prior to effectiveness of the Mergers on April 7, 2015, De Agostini S.p.A. held 93,349,318 ordinary shares of GTECH, equal to approximately 53.30% of GTECH’s then-outstanding ordinary share capital, and DeA Partecipazioni S.p.A. held 10,073,006 ordinary shares of GTECH, equal to approximately 5.75% of GTECH’s then-outstanding ordinary share capital. Because DeA Partecipazioni is a wholly owned subsidiary of De Agostini, we refer to both entities collectively as “De Agostini” unless the context otherwise requires. During the past three years prior to April 7, 2015, there have been no significant changes in the percentage ownerships held by De Agostini in the Company.
De Agostini does not have different voting rights from our other shareholders. However, through its voting power, De Agostini has the ability to significantly influence the decisions submitted to a vote of our shareholders, including approval of annual dividends, the election and removal of directors, mergers or other business combinations, the acquisition or disposition of assets and issuances of equity and the incurrence of indebtedness.
Our ordinary shares are listed and can be traded on the NYSE in U.S. dollars. Our special voting shares, when issued, will not be listed on the NYSE, not be tradable and will be transferable only in very limited circumstances.
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Table of Contents
Our ordinary shares may be held in the following two ways:
·
Beneficial interests in our ordinary shares that are traded on the NYSE are held through the book-entry system provided by The Depository Trust Company (“DTC”) and are registered in the register of shareholders in the name of Cede & Co., as DTC’s nominee.
·
In certificated form.
As of April 30, 2015, 100% of our ordinary shares were held in the U.S. by three record holders. There currently are 198,574,328 special voting shares of the Company outstanding, which are all held by Computershare Company Nominees Limited in its capacity as the nominee appointed by the Company to hold the special voting shares under the terms of the Company’s loyalty share plan.
As of the date of this document, B&D di Marco Drago e C. S.a.p.a. owns 68.2% of De Agostini. As described above, De Agostini controls IGT PLC.
B.
Related Party Transactions
In the last three years, transactions with related parties were performed on an arm’s-length basis. IGT PLC has internal procedures aimed at ensuring transparency and substantial and formal fairness of all transactions with related parties performed by IGT PLC or its subsidiaries.
The following tables set forth IGT PLC’s transactions with related parties as of December 31, 2014, 2013 and 2012 and for the years ended December 31, 2014, 2013 and 2012.
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
De Agostini Group
|
|
39,120
|
|
23,783
|
|
30,957
|
|
|
Ringmaster S.r.l.
|
|
69
|
|
247
|
|
81
|
|
|
|
|
39,189
|
|
24,030
|
|
31,038
|
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
De Agostini Group
|
|
125,088
|
|
89,781
|
|
96,530
|
|
|
Ringmaster S.r.l.
|
|
1,243
|
|
2,399
|
|
3,644
|
|
|
|
|
126,331
|
|
92,180
|
|
100,174
|
|
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Service revenue and product sales
|
|
|
|
|
|
|
|
|
Ringmaster S.r.l.
|
|
405
|
|
247
|
|
297
|
|
|
De Agostini Group
|
|
288
|
|
71
|
|
159
|
|
|
CLS-GTECH Company Limited
|
|
—
|
|
—
|
|
263
|
|
|
|
|
693
|
|
318
|
|
719
|
|
|
Raw materials, services and other costs
|
|
|
|
|
|
|
|
|
Ringmaster S.r.l.
|
|
11,209
|
|
6,861
|
|
435
|
|
|
De Agostini Group
|
|
958
|
|
5,544
|
|
4,901
|
|
|
Assicurazioni Generali S.p.A.
|
|
2,756
|
|
2,566
|
|
2,684
|
|
|
|
|
14,923
|
|
14,971
|
|
8,020
|
|
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Table of Contents
De Agostini Group
IGT PLC is majority owned by De Agostini S.p.A. Amounts receivable from De Agostini S.p.A. and subsidiaries of De Agostini S.p.A. (“De Agostini Group”) are non-interest bearing.
On May 8, 2013, the board of directors of IGT PLC entered into a framework agreement with De Agostini, pursuant to which De Agostini S.p.A may make short-term loans to IGT PLC and IGT PLC may deposit cash with De Agostini S.p.A. on a short-term basis. The framework agreement provides that any such transactions will be in compliance with existing third party loan covenants and concluded on an arm’s-length basis. As of the date of this document, no transactions under such framework agreements have been executed. The facility details are as follows:
|
|
|
As of the date of this document
|
|
|
(thousands of Euros)
|
|
Amounts
Outstanding
|
|
Maximum
Outstanding
Allowed
|
|
|
Loans
|
|
—
|
|
134,118
|
|
|
Deposits
|
|
—
|
|
23,000
|
|
The maximum amount of loans that can be outstanding under the framework is equal to 5% of the lesser of consolidated net equity and current market capitalization of GTECH S.p.A.
Ringmaster S.r.l.
IGT PLC has a 50% interest in Ringmaster S.r.l., an Italian joint venture which is accounted for using the equity method of accounting. Ringmaster S.r.l. provides software development services for the Company’s interactive gaming business pursuant a supply agreement dated December 7, 2011. In addition to the amounts expensed to the income statement above, in 2014, Ringmaster S.r.l. provided software development services to the Company totaling €3.0 million (nil for 2013) which were capitalized to intangible assets in our consolidated statement of financial position.
Assicurazioni Generali S.p.A.
Assicurazioni Generali S.p.A. (“Generali”) owns approximately 3% of the Company’s outstanding shares at December 31, 2014. Generali is a related party of the Company as the Chairman of the Company’s board of directorsalso serves on Generali’s Board of Directors. In 2012, the Company entered into a lease agreement to lease the Company’s headquarters facility in Rome, Italy from a wholly-owned subsidiary of Generali.
CLS-GTECH Company Limited
The Company has a 50% interest in CLS-GTECH Company Limited (“CLS-GTECH”), a company affiliated with the Company, which is accounted for using the equity method of accounting. CLS-GTECH is a joint venture that was formed to provide a nationwide KENO system for Welfare lotteries throughout China.
Yeonama Holdings Co. Limited
The Company has a 30% interest in Yeonama Holdings Co. Limited (“Yeonama”), a company affiliated with the Company, which is accounted for at fair value. Yeonama is a shareholder in Emma Delta Limited, the fund that holds a 33% interest in OPAP S.A., the Greek gaming and football betting operator.
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Table of Contents
Connect Venture CLP
In November 2011, the Company jointly with De Agostini S.p.A. and other of its subsidiaries, signed a letter of intent concerning an investment in Connect Ventures CLP, a venture capital fund which targets “early stage” investment operations, with the legal status of limited partnership under English law. The fund has an initial duration of seven years, subject to an additional two year extension.
The fund is considered a related party due to the control exercised over the fund by De Agostini S.p.A., as a result of the size of its investment and because at least one key figure in the fund’s management is related to a number of leading representatives of De Agostini S.p.A., as well as directors of the Company.
2BCOM and ALL-IN ADV
Since the beginning of 2013, the Company, through its subsidiary Lottomatica Scommesse S.r.l., has been party to an agreement with 2BCOM S.r.l. and ALL-IN ADV S.r.l. regarding the launch of a TV channel dedicated generally to gambling. 2BCOM and ALL-IN ADV are both subsidiaries of De Agostini S.p.A. and are therefore considered related parties of the Company. The venture is not considered significant to the Company’s business.
C.
Interests of Experts and Counsel
Not Applicable.
Item 8.
Financial Information
A.
Consolidated Statements and Other Financial Information
See “Item 18. Financial Statements” for our
GTECH
Consolidated Financial Statements and reports of our independent registered accounting firms. The Company has not yet implemented a formal policy on dividend distributions.
B.
Significant Changes
On April 7, 2015, GTECH merged with and into IGT PLC, and International Game Technology merged with and into Sub, with International Game Technology surviving the merger as a wholly owned subsidiary of IGT PLC, all pursuant to the conditions set forth in the Merger Agreement. See “Item 4. Information on the Company—A. History and Development of the Company—Acquisition of International Game Technology.”
Item 9.
The Offer and Listing
A.
Offer and Listing Details
GTECH
The GTECH shares were listed on the Borsa Italiana under the symbol “GTK.” Such shares were delisted in connection with the Mergers as from April 7, 2015. The following table sets forth, for the periods indicated, the high and low daily closing prices per GTECH ordinary share in Euro as reported on the Borsa Italiana.
|
|
|
GTECH Borsa Italiana
|
|
|
Reference Date
|
|
High
|
|
Low
|
|
|
Year
|
|
|
|
|
|
|
2014
|
|
€
|
23.98
|
|
€
|
15.43
|
|
|
2013
|
|
€
|
23.23
|
|
€
|
17.59
|
|
|
2012
|
|
€
|
17.94
|
|
€
|
11.28
|
|
|
2011
|
|
€
|
15.14
|
|
€
|
8.75
|
|
|
2010
|
|
€
|
14.50
|
|
€
|
8.99
|
|
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Table of Contents
|
|
|
GTECH Borsa Italiana
|
|
|
Reference Date
|
|
High
|
|
Low
|
|
|
Quarter
|
|
|
|
|
|
|
First Quarter 2015
|
|
€
|
19.95
|
|
€
|
16.53
|
|
|
Fourth Quarter 2014
|
|
€
|
18.89
|
|
€
|
17.17
|
|
|
Third Quarter 2014
|
|
€
|
19.21
|
|
€
|
15.43
|
|
|
Second Quarter 2014
|
|
€
|
22.46
|
|
€
|
17.85
|
|
|
First Quarter 2014
|
|
€
|
23.98
|
|
€
|
22.01
|
|
|
Fourth Quarter 2013
|
|
€
|
23.23
|
|
€
|
20.74
|
|
|
Third Quarter 2013
|
|
€
|
22.80
|
|
€
|
19.00
|
|
|
Second Quarter 2013
|
|
€
|
21.64
|
|
€
|
18.09
|
|
|
First Quarter 2013
|
|
€
|
19.24
|
|
€
|
17.59
|
|
|
|
|
GTECH Borsa Italiana
|
|
|
Reference Date
|
|
High
|
|
Low
|
|
|
Month
|
|
|
|
|
|
|
April 2015
|
|
€
|
19.21
|
|
€
|
17.65
|
|
|
March 2015
|
|
€
|
19.95
|
|
€
|
18.45
|
|
|
February 2015
|
|
€
|
18.51
|
|
€
|
16.90
|
|
|
January 2015
|
|
€
|
18.59
|
|
€
|
16.53
|
|
|
December 2014
|
|
€
|
18.50
|
|
€
|
17.17
|
|
|
November 2014
|
|
€
|
18.89
|
|
€
|
17.78
|
|
On April 2, 2015, the last reported sales price of GTECH’s ordinary shares as reported was €18.53 per share on the Borsa Italiana.
IGT PLC
On April 7, 2015, our ordinary shares began trading on the NYSE under the symbol “IGT.” The following table provides the high and low daily closing prices of our ordinary shares as reported on the NYSE for the period running from April 7, 2015 to May 14, 2015 (the “Initial Trading Period”):
Ordinary Share Price
|
|
|
NYSE
|
|
|
|
|
High
|
|
Low
|
|
|
|
|
(USD)
|
|
|
Most recent period:
|
|
|
|
|
|
|
Initial Trading Period
|
|
$
|
21.18
|
|
$
|
18.28
|
|
|
|
|
|
|
|
|
|
|
On May 14, 2015, the last reported daily closing price of our ordinary shares as reported was $18.28 per share on the NYSE.
B.
Plan of Distribution
Not applicable.
C.
Markets
Our outstanding ordinary shares are listed on the NYSE under the symbol “IGT.”
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Table of Contents
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
Item 10.
Additional Information
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
IGT PLC is a public limited company registered in England and Wales under company number 09127533. Its objects are unrestricted, in line with the default position under the Companies Act 2006 (“CA 2006”). The following is a summary of certain provisions of IGT PLC’s articles of association (the “Articles”) and of the applicable laws of England. This document is a summary and, therefore, does not contain full details of the Articles, which are attached as Exhibit 1.1 to this document.
Board of directors (the “Board”)
Directors’ interests
Except as otherwise provided in the Articles, a director may not vote on or be counted in the quorum in relation to a resolution of the directors or committee of the directors concerning a matter in which he has a direct or indirect interest which is, to his knowledge, a material interest (otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through IGT PLC), but this prohibition does not apply to any interest arising only because a resolution concerns any of the following matters:
·
the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of or for the benefit of IGT PLC or any of its subsidiary undertakings;
·
the giving of a guarantee, security or indemnity in respect of a debt or obligation of IGT PLC or any of its subsidiary undertakings for which the director has assumed responsibility in whole or in part, either alone or jointly with others, under a guarantee or indemnity or by the giving of security;
·
a transaction or arrangement concerning an offer of shares, debentures or other securities of IGT PLC or any of its subsidiary undertakings for subscription or purchase, in which offer he is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;
·
a transaction or arrangement to which IGT PLC is or is to be a party concerning another company (including a subsidiary undertaking of IGT PLC) in which he or any person connected with him is interested (directly or indirectly) whether as an officer, shareholder, creditor or otherwise (a “relevant company”), if he and any persons connected with him do not to his knowledge hold an interest in shares (as that term is used in sections 820 to 825 of the CA 2006) representing 1% or more of either any class of the equity share capital (excluding any share of that class held as treasury shares) in the relevant company or of the voting rights available to members of the relevant company;
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·
a transaction or arrangement for the benefit of the employees of IGT PLC or any of its subsidiary undertakings (including any pension fund or retirement, death or disability scheme) which does not award him a privilege or benefit not generally awarded to the employees to whom it relates; or
·
a transaction or arrangement concerning the purchase or maintenance of any insurance policy for the benefit of directors or for the benefit of persons including directors.
Directors’ borrowing powers
The directors may exercise all the powers of IGT PLC to borrow money and to mortgage or charge all or part of the undertaking, property and assets (present or future) and uncalled capital of IGT PLC and, subject to the CA 2006, to issue debentures and other securities, whether outright or as collateral security for a debt, liability or obligation of IGT PLC or of a third party.
Directors’ shareholding requirements
A director need not hold shares in IGT PLC.
Age limit
There is no age limit applicable to directors in the Articles.
Classes of shares
The
Company has four classes of shares in issue. This includes ordinary shares of U.S. $0.10 each; Special Voting Shares of U.S. $0.000001 each (the “Special Voting Shares”); sterling non-voting shares of £1.00 each (the “Sterling Non-Voting Shares”); and one bonus share of U.S. $1.00 (the “Bonus Share”).
Dividends and distributions
Subject to the CA 2006, the IGT PLC shareholders may declare a dividend on IGT PLC ordinary shares by ordinary resolution, and the Board may decide to pay an interim dividend to holders of IGT PLC ordinary shares in accordance with their respective rights and interests in IGT PLC, and may fix the time for payment of such dividend. Under English law, dividends may only be paid out of distributable reserves, defined as accumulated realized profits not previously utilized by distribution or capitalization less accumulated realised losses to the extent not previously written off in a reduction or reorganization of capital duly made, and not out of share capital, which includes the share premium account.
The Special Voting Shares, Sterling Non-Voting Shares and the Bonus Share do not entitle their holders to dividends.
If 12 years have passed from the date on which a dividend or other sum from IGT PLC became due for payment and the distribution recipient has not claimed it, the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by IGT PLC.
The Articles also permit a scrip dividend scheme under which the directors may, with the prior authority of an ordinary resolution of IGT PLC, allot to those holders of a particular class of shares who have elected to receive them further shares of that class or ordinary shares in either case credited as fully paid instead of cash in respect of all or part of a dividend or dividends specified by the resolution.
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Voting rights
Subject to any rights or restrictions as to voting attached to any class of shares and subject to disenfranchisement in the event of non-payment of any call or other sum due and payable in respect of any shares not fully paid, the voting rights of shareholders of IGT PLC in a general meeting are as follows:
1.
On a show of hands,
a.
the IGT PLC shareholder who (being an individual) is present in person or (being a corporation) is present by a duly authorized corporate representative at a general meeting of IGT PLC will have one vote; and
b.
every person present who has been appointed by a shareholder as a proxy will have one vote, except where:
(i)
that proxy has been appointed by more than one shareholder entitled to vote on the resolution; and
(ii)
the proxy has been instructed:
A.
by one or more of those shareholders to vote for the resolution and by one or more of those shareholders to vote against the resolution; or
B.
by one or more of those shareholders to vote in the same way on the resolution (whether for or against) and one or more of those shareholders has permitted the proxy discretion as to how to vote, in which case, the proxy has one vote for and one vote against the resolution; and
2.
on a poll taken at a meeting, every qualifying shareholder present and entitled to vote on the resolution has one vote for every IGT PLC ordinary share of which he, she or it is the holder, and 0.9995 votes for every Special Voting Share for which he, she or it is entitled under the terms of IGT PLC’s loyalty voting structure to direct the exercise of the vote.
Under the Articles, a poll on a resolution may be demanded by the chairman, the directors, five or more people having the right to vote on the resolution or a shareholder or shareholders (or their duly appointed prox(ies)) having not less than 10% of either the total voting rights or the total paid up share capital. Such persons may demand the poll both in advance of, and during, a general meeting, either before or after a show of hands on a resolution.
In the case of joint holders, the vote of the senior holder who votes (or any proxy duly appointed by him) may be counted by IGT PLC.
The necessary quorum for a general shareholder meeting is the shareholders who together represent at least a majority of the voting rights of all the shareholders entitled to vote at the meeting, present in person or by proxy, save that if IGT PLC only has one shareholder entitled to attend and vote at the general meeting, one shareholder present in person or by proxy at the meeting and entitled to vote is a quorum. If a meeting is adjourned for lack of quorum, the quorum of the adjourned meeting will be one shareholder present in person or by proxy.
The Sterling Non-Voting Shares carry no voting rights (save where required by law).
The Bonus Share carries no voting rights except where consent or approval of the holder of the Bonus Share is sought by IGT PLC in relation to a proposal.
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Winding up
On a return of capital of IGT PLC on a winding up or otherwise, the holders of IGT PLC ordinary shares (and any other shares outstanding at the relevant time which rank equally with such shares) will share equally, on a share for share basis, in IGT PLC’s assets available for distribution, save that:
·
the holders of the Special Voting Shares will be entitled to receive out of the assets of IGT PLC available for distribution to its shareholders the sum of, in aggregate, U.S. $1.00;
·
the holders of the Sterling Non-Voting Shares will be entitled to receive out of the assets of IGT PLC available for distribution to its shareholders the sum of, in aggregate, £1.00; and
·
the holder of the Bonus Share is entitled to receive out of the assets of IGT PLC available for distribution to its shareholders the sum of, in aggregate, U.S. $0.01,
but in no case will any of such holders be entitled to any further participation in the assets of IGT PLC.
Redemption provisions
The IGT PLC ordinary shares are not redeemable.
The Special Voting Shares may be redeemed by IGT PLC for nil consideration in certain circumstances (as set out in the Articles).
The Sterling Non-Voting Shares and the Bonus Share may be redeemed by IGT PLC for nil consideration at any time.
Sinking fund provisions
None of the shares in IGT PLC is subject to any sinking fund provision under the Articles or as a matter of English law.
Liability to further calls
No holder of any share in IGT PLC is liable to make additional contributions of capital in respect of its shares.
Discriminating provisions
There are no provisions discriminating against a shareholder because of his or her ownership of a particular number of shares.
Variation of class rights
Any special rights attached to any shares in the capital of IGT PLC may (unless otherwise provided by the terms of issue of the shares of that class) be varied or abrogated, either while IGT PLC is a going concern or during or in contemplation of a winding up, with the consent in writing of those entitled to attend and vote at general meetings of IGT PLC representing 75% of the voting rights attaching to the IGT PLC ordinary shares and the Special Voting Shares, in aggregate, which may be exercised at such meetings, or with the sanction of 75% of those votes attaching to IGT PLC ordinary shares and the Special Voting Shares, in aggregate, cast on a special resolution proposed at a separate general meeting of all those entitled to attend and vote at general meetings of IGT PLC, but not otherwise. The CA 2006 allows an English company to have flexibility in its articles of association with respect to variation of class rights, but the foregoing is typical and it broadly matches the default position under the CA 2006.
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A resolution to vary any class rights relating to the giving, variation, revocation or renewal of any authority of the directors to allot shares or relating to a reduction of IGT PLC’s capital may only be varied or abrogated in accordance with the CA 2006 but not otherwise.
The rights attached to a class of shares are not, unless otherwise expressly provided for in the rights attaching to those shares, deemed to be varied by the creation, allotment or issue of further shares ranking
pari passu
with or subsequent to them or by the purchase or redemption by IGT PLC of its own shares in accordance with the CA 2006.
General meetings and notices
The Board has the power to call a general meeting of shareholders at any time. In addition, the Board must convene such a meeting if it has received requests to do so from shareholders representing at least 5% of the paid up share capital of the company as carries voting rights at general meetings in accordance with section 303 of the CA 2006.
An annual general meeting must be called by not less than 21 clear days’ notice (
i.e.
, excluding the date of receipt or deemed receipt of the notice and the date of the meeting itself). All other general meetings will be called by not less than 14 clear days’ notice. A general meeting may be called by shorter notice if it is agreed to by a majority in number of the shareholders having the right to attend and vote at the meeting, being a majority who together hold not less than 95% in nominal value of the shares giving that right. At least seven clear days’ notice is required for any meeting adjourned for 28 days or more or for an indefinite period.
The notice of a general meeting will be given to the shareholders (other than any who, under the provisions of IGT PLC’s Articles or the terms of allotment or issue of shares, are not entitled to receive notice), to the Board, to the beneficial owners nominated to enjoy information rights under the CA 2006, and to the auditors. The shareholders entitled to receive notice of a general meeting are those on the register at the close of business on a day determined by the directors. Under English law, IGT PLC is required to hold an annual general meeting within six months from the day following the end of its fiscal year and, subject to the foregoing, the meeting may be held at a time and place determined by the Board whether within or outside of the U.K.
The notice of general meeting must specify a time (which must not be more than 48 hours, excluding any part of a day that is not a working day, before the time fixed for the meeting) which a person must be entered on the share register in order to have the right to attend or vote at the meeting. Only such persons or their duly appointed proxies have the right to attend and vote at the meeting of shareholders.
Limitations on rights to own shares
There are no limitations imposed by the Articles or the applicable laws of England on the rights to own shares, including the right of non-residents or foreign persons to hold or vote the shares of IGT PLC, other than limitations that would generally apply to all shareholders.
Change of control
There is no specific provision in the Articles that would have an effect of delaying, deferring or preventing a change in control of IGT PLC and that would operate only with respect to a merger, acquisition or corporate restructuring
involving
IGT PLC or any of its subsidiaries.
Disclosure of ownership interests in shares
Under
article
60 of the Articles, shareholders must comply with the notification obligations to the company contained in Chapter 5 (
Vote Holder and Issuer Notification Rules
) of the Disclosure and Transparency Rules (“
DTR”
) (including, without limitation, the provisions of DTR 5.1.2) as if IGT PLC were an issuer whose home member state is in the U.K., save that the obligation arises if the percentage of voting rights reaches, exceeds or falls below 1% and each one percent threshold thereafter (up or down) up to 100%. In effect, this means that a shareholder must notify IGT PLC if the percentage of voting rights in IGT PLC it holds reaches 1% and crosses any one percent threshold thereafter (up or down).
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Section 793 of the CA 2006 gives IGT PLC the power to require persons whom it knows have, or whom it has reasonable cause to believe have, or within the previous three years have had, any ownership interest in any IGT PLC shares to disclose specified information regarding those shares. Failure to provide the information requested within the prescribed period (or knowingly or recklessly providing false information) after the date the notice is sent can result in criminal or civil sanctions being imposed against the person in default.
Under the Articles, if any shareholder, or any other person appearing to be interested in IGT PLC shares held by such shareholder, fails to give IGT PLC the information required by a section 793 notice, then the Board may withdraw voting and certain other rights, place restrictions on the rights to receive dividends and transfer such shares (including any shares allotted or issued after the date of the Section 793 notice in respect of those shares).
Changes in share capital
The Articles authorize the directors, for a period of up to five years from the date of the shareholder resolution granting them authority (which resolution was passed on March 13, 2015), to purchase its own shares of any class, on the terms of any buyback contract approved by the shareholders (or otherwise as may be permitted by the CA 2006), provided that:
1.
the maximum aggregate number of IGT PLC ordinary shares authorized to be purchased equals 20% of the total issued ordinary shares of the relevant class on April 7, 2015 (subject to adjustments for consolidation or division);
2.
the maximum price that may be paid to purchase an IGT PLC ordinary share is 105% of the average market value of an ordinary share for the five business days prior to the day the purchase is made (subject to any further price restrictions contained in any buyback contract);
3.
the maximum aggregate number of Special Voting Shares authorized to be purchased will equal 20% of the total issued Special Voting Shares of the relevant class on April 7, 2015 (subject to adjustments for consolidation or division); and
4.
the maximum price that may be paid to purchase a Special Voting Share is its nominal value.
These provisions are more restrictive than required under English law; and English company is not required to set limits in its Articles on the maximum aggregate number or price paid for the repurchase of its shares.
The Articles authorize the directors, for a period of up to five years from the date of the shareholder resolution granting them authority (which resolution was passed on March 13, 2015), to allot shares in IGT PLC, or to grant rights to subscribe for or to convert or exchange any security into shares in IGT PLC, up to an aggregate nominal amount (
i.e.
, par value) of U.S. $185,000,000.
The Articles authorize the directors, for a period of up to five years from the date of the shareholder resolution granting them authority (which resolution was passed on March 13, 2015), to exclude pre-emption rights in respect of such issuances up to an aggregate nominal amount (
i.e.
, par value) of U.S. $185,000,000.
These provisions are more restrictive than required under English law; and English company is not required to set limits in its Articles on the maximum amounts for allotment of shares or exclusion of pre-emption rights.
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Loyalty Plan
Scope
IGT PLC has implemented a loyalty plan connected with its Special Voting Shares (the “Loyalty Plan”), the purpose of which is to reward long-term ownership of IGT PLC ordinary shares and promote stability of the IGT PLC shareholder base by granting long-term IGT PLC shareholders with the equivalent of 1.9995 votes for each IGT PLC ordinary share that they hold. A copy of the Loyalty Plan Terms and Conditions is available on the GTECH website, together with some Frequently Asked Questions.
Characteristics of Special Voting Shares
Each Special Voting Share carries 0.9995 votes. The Special Voting Shares and IGT PLC ordinary shares will be treated as if they are a single class of shares and not divided into separate classes for voting purposes (save upon a resolution in respect of any proposed termination of the Loyalty Plan).
The Special Voting Shares have only minimal economic entitlements. Such economic entitlements are designed to comply with English law but are immaterial for investors.
Issue
The number of Special Voting Shares on issue equals the number of IGT PLC ordinary shares on issue. A nominee appointed by IGT PLC (the “Nominee”), which is currently Computershare Company Nominees Limited, holds the Special Voting Shares on behalf of the shareholders of IGT PLC as a whole, and will exercise the voting rights attached to those shares in accordance with the Articles.
Participation in the Loyalty Plan
In order to become entitled to elect to participate in the Loyalty Plan, a person must maintain ownership (legally and beneficially, or otherwise as determined by the Board, in accordance with the terms and conditions of the Loyalty Plan from time to time, to have been held (or deemed to have been held) beneficially by a person (a “relevant interest”)) of one or more IGT PLC ordinary shares for a continuous period of three years or more (an “Eligible Person”). This means that no person, other than the Nominee, will be entitled to exercise any rights in Special Voting Shares until after the third anniversary of completion of the mergers of GTECH and IGT (at the earliest).
After a person has maintained such ownership of one or more IGT PLC ordinary shares for a continuous period of three years or more, they may elect to participate in the Loyalty Plan by submitting a validly completed and signed election form (the “Election Form”) and, if applicable, the requisite custodial documentation, to IGT PLC’s designated agent (the “Agent”).
The Election Form is available on the website of IGT PLC. Upon receipt of a valid Election Form and, if applicable, custodial documentation, the Agent will register the relevant IGT PLC ordinary shares in a separate register—the “Loyalty Register.”
For so long as an Eligible Person’s IGT PLC ordinary shares remain in the Loyalty Register, they may not be sold, disposed of, transferred, pledged or subjected to any lien, fixed or floating charge or other encumbrance, except in very limited circumstances.
Voting arrangements
The Nominee will exercise the votes attaching to the Special Voting Shares held by it from time to time at a general meeting or a class meeting: (a) in respect of any Special Voting Shares associated with IGT PLC ordinary shares registered in the Loyalty Register, in the same manner as the Eligible Person exercises the votes attaching to those IGT PLC ordinary shares; and (b) in respect of all other Special Voting Shares, in the same percentage as the outcome of the vote of any general meeting (taking into account any votes exercised pursuant to (a) above).
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The proxy or voting instruction form in respect of an Eligible Person’s Ordinary Shares entered in the Loyalty Register will contain an instruction and authorization in favour of the Nominee to exercise the votes attaching to the Special Voting Shares associated with those Ordinary Shares in the same manner as that Eligible Person exercises the votes attaching to those Ordinary Shares.
Transfer or withdrawal
If, at any time, one or more IGT PLC ordinary shares are de-registered from the Loyalty Register for any reason, or any IGT PLC ordinary shares in the Loyalty Register are sold, disposed of, transferred, pledged or subjected to any lien, fixed or floating charge or other encumbrance, the Special Voting Shares associated with those IGT PLC ordinary shares will cease to confer on the Eligible Person any voting rights (or any other rights) in connection with those Special Voting Shares and such person will cease to be an Eligible Person in respect of those Special Voting Shares.
A shareholder may request the de-registration of their IGT PLC ordinary shares from the Loyalty Register at any time by submitting a validly completed Withdrawal Form to the Agent. The Agent will release the IGT PLC ordinary shares from the Loyalty Register within three business days thereafter. Upon de-registration from the Loyalty Register, such shares will be freely transferable and tradable. From the date on the Withdrawal Form is processed by the Agent, the relevant shareholder will be considered to have waived off rights in respect of the relevant Special Voting Shares.
Termination of the Plan
The Loyalty Plan may be terminated at any time with immediate effect by a resolution passed on a poll taken at a general meeting with the approval of members representing 75% or more of the total voting rights attaching to the IGT PLC ordinary shares of members who, being entitled to vote on that resolution, do so in person or by proxy. For the avoidance of doubt, the votes attaching to the Special Voting Shares will not be exercisable upon such resolution.
Transfer
The Special Voting Shares may not be transferred, except in exceptional circumstances,
e.g
., for transfers between Loyalty Plan nominees.
Repurchase or redemption
Special Voting Shares may only be purchased or redeemed by IGT PLC in limited circumstances, including to reduce the number of Special Voting Shares held by the Nominee in order to align the aggregate number of IGT PLC ordinary shares and Special Voting Shares in issue from time to time, upon termination of the Loyalty Plan or pursuant to an off-market purchase arrangement. Special Voting Shares may be redeemed for nil consideration and repurchased for (depending on the circumstances) nil consideration or their nominal value.
C.
Material Contracts
Agreements related to the Acquisition of International Game Technology
For a discussion of the Mergers, please see “Item 4. Information on the Company—A. History and Development of the Company—Acquisition of International Game Technology.”
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Support Agreement
In connection with the execution of the Merger Agreement, on July 15, 2014, International Game Technology entered into a support agreement (the “Support Agreement”) with De Agostini. The Support Agreement required that, at any meeting of the GTECH shareholders at which the approval of the Merger Agreement, the Mergers or any other transaction contemplated by the Merger Agreement is to be voted upon, De Agostini vote all of the GTECH
ordinary shares
owned in favor of such matters and any other actions that are necessary or desirable in furtherance of the Mergers or any other transactions contemplated by the Merger Agreement and against any competing GTECH acquisition proposal or any amendment to the bylaws or articles of association of GTECH or any other proposal or transaction that would impede, frustrate, prevent or nullify any provision of the Merger Agreement or any of the transactions contemplated thereby, or change in any manner the voting rights of the GTECH ordinary shares. The Support Agreement also prohibited De Agostini from transferring any of the covered GTECH ordinary shares prior to April 7, 2015 or acquiring any GTECH ordinary shares for which existing GTECH shareholders exercise their rescission rights in connection with the Holdco Merger. The Support Agreement also required De Agostini and its representatives to cease and refrain from any solicitations, discussions, or negotiations regarding a competing GTECH acquisition proposal.
De Agostini’s obligations under the Support Agreement terminated pursuant to its terms upon completion of the Mergers on April 7, 2015.
Voting Agreement
In addition to the Support Agreement, in connection with the Merger Agreement, on July 15, 2014, IGT PLC and International Game Technology entered into a voting agreement (the “Voting Agreement”) with De Agostini. The Voting Agreement requires that, from and after April 7, 2015 until the three-year anniversary of April 7, 2015, De Agostini will vote all of the IGT PLC ordinary shares then owned in favor of any proposal or action so as to effect and preserve the board and executive officer composition of IGT PLC in place immediately following the Mergers. Pursuant to the Voting Agreement, De Agostini is restricted from transferring any covered IGT PLC ordinary shares (1) to any affiliate prior to the three-year anniversary of April 7, 2015, unless the affiliate agrees to be bound by the Voting Agreement, or (2) to any other person prior to the two-month anniversary of April 7, 2015.
The Voting Agreement will terminate three years after April 7, 2015. All determinations regarding any dispute between IGT PLC, International Game Technology and De Agostini following the effective times of the Mergers will be made by a committee of independent directors of IGT PLC who are not directors, officers or employees of De Agostini.
Illinois Contract Termination Agreement
For a complete discussion of IGT PLC’s lottery management services contract with the State of Illinois, please see “Item 4. Information on the Company—B. Business Overview—Business Segments—Americas—Lottery—Lottery Management Services Contracts.”
In December 2014, the Illinois Contract was terminated pursuant to a termination agreement between Northstar, GTECH Corporation, Scientific Games International, Inc. (“SGI”), and the State of Illinois. Pursuant to the terms of the termination agreement, Northstar will continue to provide disentanglement services in Illinois for a transitional period. Disentanglement services constitute all services that Northstar currently provides to the State of Illinois under the Illinois Contract, and Northstar will continue providing those services until the earlier of (1) a transition of Northstar’s responsibilities to the State of Illinois or to another private manager, or (2) 12 months from the termination notice date, unless otherwise extended by the State of Illinois, which may extend the provision of disentanglement services under the termination agreement for up to three six-month periods. GTECH Corporation will retain its separate facilities management contract through June 30, 2021.
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As part of the termination agreement, the State of Illinois and Northstar have agreed to cease a dispute resolution process intended to adjudicate all outstanding litigation and other disputes between the parties. The amounts guaranteed and therefore owed by Northstar as shortfall payments under the Illinois Contract were in dispute. The shortfall payments Northstar is required to make in relation to its obligation to guarantee minimum profit levels under the Illinois Contract for the fiscal years 2012, 2013 and 2014, have been agreed upon and settled as part of the termination agreement for $21.8 million, $38.6 million and $37.1 million, respectively. No further cash impact will result from this shortfall payments final determination. Northstar will not be responsible for the payment of any other shortfall payment, nor will it be entitled to receive any incentive compensation, for all or any portion of fiscal year 2015, or any subsequent fiscal year.
Over one month after its execution by the Governor of the State of Illinois, the Illinois Attorney General notified the State of Illinois that it “disapproves” of the “proposed” termination agreement. Relying on the Attorney General’s “disapproval,” the Governor’s Office informed Northstar that it believed the termination agreement was invalid and unenforceable and therefore, the Illinois Contract remained in effect. Both Northstar and IGT PLC believe that the termination agreement is valid and binding on the parties.
Related Party Agreements
For a discussion of our related party transactions, please see “Item 7. Major Shareholders and Related Party
Transactions
—B. Related Party Transactions.”
Equity Compensation Plans
For a description of our historical equity compensation plans, please see section “Item 6—B. Compensation—GTECH S.p.A.—Officer Compensation—Equity Compensation” and “—2015 Equity Incentive Plan”.
Financing
For a description of our outstanding financing agreements, please see section “Item 3—B. Liquidity and Capital Resources—Credit Facilities and Indebtedness” and “—Credit Facilities and Indebtedness Developments After Calendar Year 2014”.
D.
Exchange Controls
Other than applicable anti-money laundering and counter-terrorist financing regulations and certain economic sanctions which may be in force from time to time, there are currently no U.K. laws, decrees or regulations, or any legal provision arising under IGT PLC’s articles of association which would affect the transfer of capital or remittance of dividends, interest and other payments to holders of IGT PLC’s securities who are not residents of the U.K. on a general basis.
E.
Taxation
Material United States Federal Income Tax Considerations
This section summarizes the material U.S. federal income tax consequences of the ownership and disposition of IGT PLC ordinary shares by a U.S. holder (as defined below). This summary is based on and subject to the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations promulgated thereunder, administrative rulings and court decisions in effect on the date hereof, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. The discussion assumes that IGT PLC shareholders will hold their IGT PLC ordinary shares, as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion further assumes that all items or transactions identified as debt will be respected as such for U.S. federal income tax purposes. The discussion does not constitute tax advice and does not address all aspects of U.S. federal income taxation that may be relevant to particular IGT PLC shareholders in light of their personal circumstances, including any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, or to such shareholders subject to special treatment under the Code, such as:
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·
banks, thrifts, mutual funds and other financial institutions;
·
regulated investment companies;
·
traders in securities who elect to apply a mark-to-market method of accounting;
·
broker-dealers;
·
tax-exempt organizations and pension funds;
·
insurance companies;
·
dealers or brokers in securities or foreign currency;
·
individual retirement and other deferred accounts;
·
U.S. holders whose functional currency is not the U.S. dollar;
·
U.S. expatriates;
·
“passive foreign investment companies” or “controlled foreign corporations”;
·
persons liable for the alternative minimum tax;
·
shareholders who hold their shares as part of a straddle, hedging, conversion constructive sale or other risk reduction transaction;
·
partnerships or other pass-through entities; and
·
shareholders who received their shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan.
This discussion does not address any non-income tax considerations or any non-U.S., state or local tax consequences. For purposes of this discussion, a U.S. holder means a beneficial owner of IGT PLC ordinary shares who is:
·
an individual who is a citizen or resident of the United States;
·
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any subdivision thereof;
·
an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
·
a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes.
For purposes of this discussion, a non-U.S. holder means a beneficial owner of IGT PLC ordinary shares that is neither a U.S. holder nor a partnership (or an entity treated as a partnership for U.S. federal income tax purposes).
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This discussion does not purport to be a comprehensive analysis or description of all potential U.S. federal income tax consequences. Each shareholder is urged to consult with such shareholder’s tax advisor with respect to the particular tax consequences to such shareholder.
If a partnership, including for this purpose any entity that is treated as a partnership for U.S. federal income tax purposes, holds IGT PLC ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A holder that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the ownership and disposition of their IGT PLC ordinary shares.
Ownership of IGT PLC Ordinary Shares
The following discusses the material U.S. federal income tax consequences of the ownership and disposition of IGT PLC ordinary shares and assumes that IGT PLC will be a resident exclusively of the U.K. for tax purposes.
U.S. Holders
Taxation of Dividends
Dividends will generally be taxed as ordinary income to U.S. holders to the extent that they are paid out of IGT PLC’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. As such and subject to the following discussion of special rules applicable to Passive Foreign Investment Companies (“PFICs”), the gross amount of the dividends paid by IGT PLC to U.S. holders may be eligible to be taxed at reduced rates applicable to “qualified dividend income.” Recipients of dividends from foreign corporations will be taxed at this rate, provided that certain holding period requirements are satisfied and certain other requirements are met, if the dividends are received from certain “qualified foreign corporations,” which generally include corporations eligible for the benefits of an income tax treaty with the United States that the U.S. Secretary of the Treasury determines is satisfactory and includes an information exchange program. Dividends paid with respect to stock of a foreign corporation which is readily tradable on an established securities market in the United States will also be treated as having been received from a “qualified foreign corporation.” The U.S. Department of the Treasury and the IRS have determined that the U.K.-U.S. Income Tax Treaty is satisfactory for this purpose and IGT PLC believes that it is eligible for benefits under such Income Tax Treaty. In addition, the U.S. Department of the Treasury and the IRS have determined that common stock is considered readily tradable on an established securities market if it is listed on an established securities market in the United States, such as the NYSE. Dividends paid by IGT PLC will not qualify for the dividends received deduction otherwise available to corporate shareholders.
To the extent that the amount of any dividend exceeds IGT PLC’s current and accumulated earnings and profits for a taxable year, the excess will first be treated as a tax-free return of capital, causing a reduction in the U.S. holder’s adjusted basis in IGT PLC ordinary shares. The balance of the excess, if any, will be taxed as capital gain, which would be long-term capital gain if the holder has held the IGT PLC ordinary shares for more than one year at the time the dividend is received as described below under “—Sale, Exchange or Other Taxable Disposition.”
The amount of any dividend paid in foreign currency will be the U.S. dollar value of the foreign currency distributed by IGT PLC, calculated by reference to the exchange rate in effect on the date the dividend is includible in the U.S. holder’s income, regardless of whether the payment is in fact converted into U.S. dollars on the date of receipt. Generally, a U.S. holder should not recognize any foreign currency gain or loss if the foreign currency is converted into U.S. dollars on the date the payment is received. However, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. holder includes the dividend payment in income to the date such U.S. holder actually converts the payment into U.S. dollars will be treated as ordinary income or loss.
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Sale, Exchange or Other Taxable Disposition
Subject to the special rules applicable to PFICs, a U.S. holder will generally recognize taxable gain or loss on the sale, exchange or other taxable disposition of IGT PLC ordinary shares in an amount equal to the difference, if any, between the amount realized on the sale, exchange or other taxable disposition and the holder’s tax basis in the IGT PLC ordinary shares.
Gain or loss realized on the sale, exchange or other taxable disposition of IGT PLC ordinary shares generally will be capital gain or loss and will be long-term capital gain or loss if the IGT PLC ordinary shares have been held for more than one year. Long-term capital gain of certain non-corporate U.S. holders, including individuals, is generally taxed at reduced rates. The deduction of capital losses is subject to limitations.
Passive Foreign Investment Company Considerations
A PFIC is any foreign corporation if, after the application of certain “look-through” rules, (a) at least 75% of its gross income is “passive income” as that term is defined in the relevant provisions of the Code, or (b) at least 50% of the average value of its assets produces “passive income” or is held for the production of “passive income.” The determination as to PFIC status is made annually. If a U.S. holder is treated as owning PFIC stock, the U.S. holder will be subject to special rules generally intended to reduce or eliminate the benefit of the deferral of U.S. federal income tax that results from investing in a foreign corporation that does not distribute all of its earnings on a current basis. These rules may adversely affect the tax treatment to a U.S. holder of dividends paid by IGT PLC and of sales, exchanges and other dispositions of IGT PLC ordinary shares, and may result in other adverse U.S. federal income tax consequences.
IGT PLC believes that IGT PLC ordinary shares should not be treated as shares of a PFIC in the taxable year in which the Mergers are completed, and IGT PLC does not expect that IGT PLC will become a PFIC in the future. However, there can be no assurance that the IRS will not successfully challenge this position or that IGT PLC will not become a PFIC at some future time as a result of changes in IGT PLC’s assets, income or business operations.
Non-U.S. Holders
In general, a non-U.S. holder of IGT PLC ordinary shares will not be subject to U.S. federal income tax or, subject to the discussion below under “—Information Reporting and Backup Withholding,” U.S. federal withholding tax on any dividends received on IGT PLC ordinary shares or any gain recognized on a sale or other disposition of IGT PLC ordinary shares (including any distribution to the extent it exceeds the adjusted basis in the non-U.S. holder’s IGT PLC ordinary shares) unless:
·
the dividend or gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and if required by an applicable tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States; or
·
in the case of gain only, the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the sale or disposition, and certain other requirements are met.
A non-U.S. holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable tax treaty) on the repatriation from the United States of its effectively connected earnings and profits for the taxable year, as adjusted for certain items.
Information Reporting and Backup Withholding
Dividends paid by IGT PLC to a U.S. holder may be subject to U.S. information reporting requirements and may be subject to backup withholding unless the U.S. holder provides an accurate taxpayer identification number on a properly completed IRS Form W-9 and certifies that no loss of exemption from backup withholding has occurred.
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A non-U.S. holder may be required to comply with certification and identification procedures to establish an exemption from information reporting and backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit on a holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
Special Voting Shares
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE RECEIPT, OWNERSHIP OR LOSS OF ENTITLEMENT TO INSTRUCT THE NOMINEE ON HOW TO VOTE IN RESPECT OF SPECIAL VOTING SHARES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES AND AS A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES ARE UNCERTAIN. ACCORDINGLY, WE URGE U.S. SHAREHOLDERS TO CONSULT THEIR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE RECEIPT, OWNERSHIP AND LOSS OF ENTITLEMENT TO INSTRUCT THE NOMINEE ON HOW TO VOTE IN RESPECT OF SPECIAL VOTING SHARES.
While the tax consequences of the receipt of special voting shares upon request from the Nominee are unclear, such receipt is not expected to constitute a separate transaction for U.S. federal income tax purposes. As such, the receipt of the special voting shares should generally not give rise to a taxable event for U.S. federal income tax purposes.
THE U.S. FEDERAL INCOME TAX TREATMENT OF THE SPECIAL VOTING SHARES IS UNCLEAR AND U.S. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS IN RESPECT OF THE CONSEQUENCES OF ACQUIRING, OWNING, AND LOSING THE ENTITLEMENT TO INSTRUCT THE NOMINEE ON HOW TO VOTE IN RESPECT OF SPECIAL VOTING SHARES.
Material U.K. Tax Considerations
The following summary is intended to apply only as a general guide to certain United Kingdom (“U.K.”) tax considerations, and is based on current U.K. tax law and current published practice of HM Revenue and Customs (“HMRC”), both of which are subject to change at any time, possibly with retrospective effect. They relate only to certain limited aspects of the U.K. taxation treatment of investors who are resident and, in the case of individuals, domiciled in (and only in) the U.K. for U.K. tax purposes (except to the extent that the position of non-U.K. resident shareholders is expressly referred to), who will hold the IGT PLC ordinary shares as investments (other than under an individual savings account or a self-invested personal pension) and who are the beneficial owners of the IGT PLC ordinary shares. The statements may not apply to certain classes of investors such as (but not limited to) persons acquiring their IGT PLC ordinary shares in connection with an office or employment, dealers in securities, insurance companies and collective investment schemes.
The 2015 U.K. general election will be held on May 7, 2015. Depending on the results of such election, the tax position outlined below may change, possibly retrospectively. Shareholders should note in particular that certain of the political parties involved in the general election have announced that they may seek to introduce changes to the U.K. tax system (in particular increases in tax rates) which would significantly affect the summary set out below.
Any shareholder or potential investor should obtain advice from his or her own investment or taxation advisor.
Dividends
IGT PLC will not be required to withhold tax at the source from dividend payments it makes.
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U.K. resident individual shareholders
An individual shareholder who is resident in the U.K. for tax purposes and who receives a dividend from IGT PLC will be entitled to a tax credit which may be set off against such individual shareholder’s total income tax liability on the dividend. Such an individual shareholder’s liability to income tax is calculated on the aggregate of the dividend and the tax credit (the “gross dividend”) which will be regarded as the top slice of the individual’s income. The tax credit is equal to 10% of the gross dividend (
i.e.
, one-ninth of the amount of the cash dividend received).
A U.K. resident individual shareholder who is not liable to income tax in respect of the gross dividend will not be entitled to reclaim any part of the tax credit. A U.K. resident individual shareholder who is liable to income tax at the basic rate will be subject to income tax on the dividend at the rate of 10% of the gross dividend so that the tax credit will satisfy in full such shareholder’s liability to income tax on the dividend. A U.K. resident individual shareholder liable to income tax at the higher rate will be subject to income tax on the gross dividend at 32.5% but will be able to set the tax credit off against part of this liability. A U.K. resident individual shareholder liable to income tax at the additional rate will be subject to income tax on the gross dividend at 37.5% but will be able to set the tax credit off against part of this liability.
The effect of the tax credit is that a basic rate taxpayer will not have to account for any additional tax to HMRC, a higher rate taxpayer will have to account for additional tax equal to 22.5% of the gross dividend (which equals 25% of the cash dividend received) and an additional rate taxpayer will have to account for additional tax equal to 27.5% of the gross dividend (which is approximately 30.56% of the cash dividend received).
U.K. resident corporate shareholders
A corporate shareholder resident in the U.K. for tax purposes which is a “small company” for the purposes of Chapter 2 of Part 9A of the Corporation Tax Act 2009 will not be subject to U.K. corporation tax on any dividend received from IGT PLC provided that certain conditions are met (including an anti-avoidance condition).
Other corporate shareholders resident in the U.K. for tax purposes will not be subject to U.K. corporation tax on any dividend received from IGT PLC so long as the dividends fall within an exempt class and certain conditions are met. For example, (1) dividends paid on shares that are not redeemable and do not carry any present or future preferential rights to dividends or to a company’s assets on its winding up, and (2) dividends paid to a person holding less than a 10% interest in IGT PLC, should generally fall within an exempt class. However, the exemptions mentioned above are not comprehensive and are subject to anti-avoidance rules.
If the conditions for exemption are not met or cease to be satisfied, or such a corporate shareholder elects an otherwise exempt dividend to be taxable, the shareholder will be subject to U.K. corporation tax on dividends received from IGT PLC, at the rate of corporation tax applicable to that corporate shareholder (currently 20%).
U.K. resident exempt shareholders
U.K. resident shareholders who are not liable to U.K. taxation on dividends, including pension funds and charities, will not be entitled to reclaim the tax credit attaching to any dividend paid by IGT PLC.
Non-U.K. resident shareholders
A shareholder resident outside the U.K. for tax purposes and who holds the IGT PLC ordinary shares as investments will not generally be liable to tax in the U.K. on any dividend received from IGT PLC, but would also not be able to claim payment from HMRC of any part of the tax credit attaching to a dividend received from IGT PLC, although this will depend on the existence and terms of any double taxation convention between the U.K. and the country in which such shareholder is resident.
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A non-U.K. resident shareholder may also be subject to taxation on dividend income under local law. A shareholder who is not solely resident in the U.K. for tax purposes should consult his or her own tax advisers concerning his or her tax liabilities (in the U.K. and any other country) on dividends received from IGT PLC, whether he or she is entitled to claim any part of the tax credit and, if so, the procedure for doing so, and whether any double taxation relief is due in any country in which he or she is subject to tax.
Taxation of Capital Gains
Disposal of IGT PLC Ordinary Shares
A disposal or deemed disposal of IGT PLC ordinary shares by a shareholder who is resident in the U.K. for tax purposes may, depending upon the shareholder’s circumstances and subject to any available exemptions and reliefs (such as the annual exempt amount for individuals and indexation allowance for corporate shareholders), give rise to a chargeable gain or an allowable loss for the purposes of U.K. taxation of capital gains.
If an individual shareholder who is subject to income tax at either the higher or the additional rate becomes liable to U.K. capital gains tax on the disposal of IGT PLC ordinary shares, the applicable rate will be 28%. For an individual shareholder who is subject to income tax at the basic rate and liable to U.K. capital gains tax on such disposal, the applicable rate would be 18%.
A shareholder who is not resident in the U.K. for tax purposes should not normally be liable to U.K. taxation on chargeable gains on a disposal of IGT PLC ordinary shares. However, an individual shareholder who has ceased to be resident in the U.K. for tax purposes for a period of less than five years and who disposes of IGT PLC ordinary shares during that period may be liable on his return to the U.K. to U.K. taxation on any capital gain realized (subject to any available exemption or relief).
Inheritance Tax
The IGT PLC ordinary shares will be assets situated in the U.K. for the purposes of U.K. inheritance tax. A gift or settlement of such assets by, or on the death of, an individual holder of such assets may (subject to certain exemptions and reliefs and depending upon the shareholder’s circumstances) give rise to a liability to U.K. inheritance tax even if the holder is not a resident of or domiciled in the U.K. for tax purposes. For inheritance tax purposes, a transfer of assets at less than market value may be treated as a gift and particular rules apply to gifts where the donor reserves or retains some benefit.
A charge to inheritance tax may arise in certain circumstances where IGT PLC ordinary shares are held by close companies and by trustees of settlements. Shareholders should consult an appropriate tax adviser as to any inheritance tax implications if they intend to make a gift or transfer at less than market value or intend to hold IGT PLC ordinary shares through a close company or trust arrangement.
Shareholders and/or potential investors who are in any doubt as to their tax position, or who are subject to tax in any jurisdiction other than the U.K., should consult a suitable professional adviser.
Material Italian Tax Considerations
This section describes the material Italian tax consequences of the ownership and transfer of IGT PLC ordinary shares. The following description does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to own or dispose of the shares (such as Italian inheritance and gift tax considerations, and transfer tax considerations) and, in particular does not discuss the treatment of shares that are held in connection with a permanent establishment or a fixed base through which a non-Italian resident shareholder carries on business or performs personal services in Italy.
For the purposes of this discussion, an “Italian Shareholder” is a beneficial owner of IGT PLC ordinary shares that is:
·
an Italian resident individual; or
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·
an Italian resident corporation.
This section does not apply to shareholders subject to special rules, including:
·
non-profit organizations, foundations and associations that are not subject to tax;
·
Italian commercial partnerships and assimilated entities (
società in nome collettivo, in accomandita semplice
);
·
Italian noncommercial partnerships (
società semplice
);
·
Individuals holding the shares in connection with the exercise of a business activity; and
·
Italian real estate investment funds (
fondi comuni di investimento immobiliare
) and Italian real estate SICAF (
società di investimento a capitale fisso
).
In addition, where specified, this section also applies to Italian pension funds, Italian investment funds (
fondi comuni di investimento mobiliare
) and
Società di Investimento Collettivo A Capitale Variabile
(“SICAVs”).
For the purposes of this discussion, a Non-Italian Shareholder means a beneficial owner of IGT PLC ordinary shares that is neither an Italian Shareholder nor a permanent establishment or a fixed base through which a non-Italian resident shareholder carries on business or performs personal services in Italy nor a partnership.
This discussion is limited to Italian Shareholders and Non-Italian Shareholders that hold their shares directly and whose shares represent, and have represented in any 12-month period preceding each disposal: (i) a percentage of voting rights in the ordinary shareholders’ meeting not greater than 2% for listed shares, or (ii) a participation in the share capital not greater than 5% for listed shares.
This section is based upon tax laws and applicable tax treaties and what is understood to be the current practice in Italy in effect on the date of this proxy statement/prospectus which may be subject to changes in the future, even on a retroactive basis. Italian Shareholders and Non-Italian Shareholders should consult their own advisors as to the Italian tax consequences of the ownership and disposal of IGT PLC ordinary shares in their particular circumstances.
Ownership of IGT PLC Ordinary Shares
Italian Shareholders
Taxation of Dividends
The tax treatment applicable to dividend distributions depends upon the nature of the dividend recipient, as summarized below.
Italian resident individual shareholders
Dividends paid by a non-Italian resident company, such as IGT PLC, to Italian resident individual shareholders are subject to a 26% tax. Such tax (i) may be applied by the taxpayer in its tax assessment or (ii) if an Italian withholding agent intervenes in the collection of the dividends, may be withheld by such withholding agent.
In the event that a taxpayer elects to be taxed under the “Regime del Risparmio Gestito” (discussed below in the paragraph entitled “—Taxation of Capital Gains—Italian resident individual shareholders”), dividends are not subject to the 26% tax, but are subject to taxation under such “Regime del Risparmio Gestito.”
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Pursuant to Law Decree No. 167 dated June 28, 1990, as amended, Italian resident individual shareholders who hold (or are beneficial owners of) foreign financial activities not being deposited or otherwise held or traded through Italian resident financial intermediaries must, in certain circumstances, disclose the aforesaid to the Italian tax authorities in their income tax return.
Italian resident corporations
Subject to the paragraph below, Italian Shareholders subject to Italian corporate income tax (“IRES”) should benefit from a 95% exemption on dividends if certain conditions are met. The remaining 5% of dividends are treated as part of the taxable business income of such Italian resident corporations, subject to tax in Italy under the IRES.
Dividends, however, are fully subject to tax in the following circumstances: (i) dividends paid to taxpayers using IAS/IFRS in relation to shares accounted for as “held for trading” on the balance sheet of their statutory accounts; (ii) dividends which are considered as “deriving from” profits accumulated by companies or entities resident for tax purposes in States or Territories with a preferential tax system; or (iii) dividends paid in relation to shares acquired through repurchase transactions, stock lending and similar transactions, unless the beneficial owner of such dividends would have benefited from the 95% exemption described in the above paragraph. In the case of (ii), 100% of the dividends is subject to taxation, unless a special ruling request is filed with the Italian tax authorities in order to prove that the shareholding has not been used to enable taxable income to build up in the said States or Territories.
For certain companies operating in the financial field and subject to certain conditions, dividends are also included in the tax base for the regional tax on productive activities (
Imposta regionale sulle attività produttive
—“IRAP”).
Italian pension funds
Dividends paid to Italian pension funds (subject to the regime provided for by article 17 of Italian legislative decree No. 252 dated December 5, 2005) are not subject to any withholding tax, but must be included in the result of the relevant portfolio accrued at the end of the tax period, which is subject to substitute tax at the rate of 20% from fiscal year 2015. Under certain conditions provided for by art. 1(92) of the Law dated December 23, 2014, n. 190 (published in the Official Gazette dated December 29, 2014), pensions funds may be granted a tax credit equal to 9% of the result accrued at the end of the tax period and subject to the substitute tax.
Italian investment funds (fondi comuni di investimento mobiliare) and SICAVs
Dividends paid to Italian investment funds and SICAVs are neither subject to any withholding tax nor to any taxation at the level of the fund or SICAV. A withholding tax may apply in certain circumstances at the rate of up to 26% on distributions made by the investment fund or SICAV.
Taxation of Capital Gains
Italian resident individual shareholders
Capital gains realized upon disposal of shares or rights by an Italian resident individual shareholder are subject to Italian final substitute tax (
imposta sostitutiva
) at a 26% rate.
Capital gains and capital losses realized in the relevant tax year have to be declared in the annual income tax return (
Regime di Tassazione in Sede di Dichiarazione dei Redditi
). Losses in excess of gains may be carried forward against capital gains realized in the four subsequent tax years. While losses generated as of July 1, 2014 can be carried forward for their entire amount, losses realized until December 31, 2011 can be carried forward for 48.08% of their amount only and losses realized between January 1, 2012 and June 30, 2014 for 76.92% of their amount.
As an alternative to the
Regime di Tassazione in Sede di Dichiarazione dei Redditi
described in the above paragraph, Italian resident individual shareholders may elect to be taxed under one of the two following regimes:
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(i)
Regime del Risparmio Amministrato:
Under this regime, separate taxation of capital gains is allowed subject to (i) the shares and rights in respect of the shares being deposited with Italian banks,
società di intermediazione mobiliare
or certain authorized financial intermediaries resident in Italy for tax purposes and (ii) an express election for the
Regime del Risparmio Amministrato
being timely made in writing by the relevant shareholder. Under the
Regime del Risparmio Amministrato
, the financial intermediary is responsible for accounting for the substitute tax in respect of capital gains realized on each sale of the shares or rights on the shares, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the shareholder. Under the
Regime del Risparmio Amministrato
, where a sale of the shares or rights on the shares results in a capital loss, such loss may be deducted (up to 48.08% for capital losses realized until December 31, 2011 and up to 76.92% for capital losses realized between January 1, 2012 and June 30, 2014) from capital gains of the same kind subsequently realized under the same relationship of deposit in the same tax year or in the four subsequent tax years. Under the
Regime del Risparmio Amministrato
, the shareholder is not required to declare the capital gains in its annual tax declaration;
(ii)
Regime del Risparmio Gestito:
Under this regime, any capital gains accrued to Italian resident individual shareholders, that have entrusted the management of their financial assets, including the shares and rights in respect of the shares, to an authorized Italian-based intermediary and have elected for the
Regime del Risparmio Gestito,
are included in the computation of the annual increase in value of the managed assets accrued, even if not realized, at year-end, subject to the 26% substitute tax to be applied on behalf of the taxpayer by the managing authorized Italian-based intermediary. Under the
Regime del Risparmio Gestito
, any decline in value of the managed assets accrued at year-end may be carried forward (up to 48.08% if accrued until December 31, 2011 and up to 76.92% if accrued between January 1, 2012 and June 30, 2014) and set against increases in value of the managed assets which accrue in any of the four subsequent tax years. Under the
Regime del Risparmio Gestito
, the shareholder is not required to report capital gains realized in its annual tax declaration.
Italian resident corporations
Capital gains realized through the disposal of IGT PLC ordinary shares by Italian Shareholders which are companies subject to IRES benefit from a 95% exemption (referred to as the “Participation Exemption Regime”), if the following conditions are met:
(i)
the shares have been held continuously from the first day of the 12th month preceding the disposal; and
(ii)
the shares were accounted for as a long-term investment in the first balance sheet closed after the acquisition of the shares (for companies adopting IAS/IFRS, shares are considered to be a long-term investment if they are different from those accounted for as “held for trading”).
Based on the assumption that IGT PLC ordinary is a resident of the U.K. for tax purposes, that its ordinary shares are listed on a regulated market, that its value will be predominantly composed of shareholdings in companies carrying on a business activity and not resident in a State with a preferential tax system, the two additional conditions set forth by Article 87 of the CTA in order to enjoy the Participation Exemption Regime (
i.e.
, the company is not resident in a State with a preferential tax system and carries on a business activity) are both met.
The remaining 5% of the amount of such capital gain is included in the aggregate taxable income of the Italian resident corporate shareholders and subject to taxation according to ordinary IRES rules and rates.
If the conditions for the Participation Exemption Regime are met, capital losses from the disposal of shareholdings realized by Italian resident corporate shareholders are not deductible from the taxable income of the company.
Capital gains and capital losses realized through the disposal of shareholdings which do not meet at least one of the aforementioned conditions for the Participation Exemption Regime are, respectively, fully included in the aggregate taxable income and fully deductible from the same aggregate taxable income, subject to taxation according to ordinary rules and rates. However, if such capital gains are realized upon disposal of shares which have been accounted for as a long-term investment on the last three balance sheets, then if the taxpayer so chooses the gains can be taxed in equal parts in the year of realization and the four following tax years.
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The ability to use capital losses to offset income is subject to significant limitations, including provisions against “dividend washing.” In addition, Italian resident corporations that recognize capital losses exceeding €50,000 are subject to tax reporting requirements in their annual income tax return (also in case such capital losses are realized as a consequence of a number of transactions). Furthermore, for capital losses of more than €5,000,000, deriving from transactions on shares booked as fixed financial assets, the taxpayer must report the relevant information in its annual income tax return (also in case such capital losses are realized as a consequence of a number of transactions). Such an obligation does not apply to parties who prepare their financial statements in accordance with IAS/IFRS international accounting standards. Italian resident corporations that recognize capital losses should consult their tax advisors as to the tax consequences of such losses.
For certain types of companies operating in the financial field and subject to certain conditions, the capital gains are also included in the IRAP taxable base.
Italian pension funds
Capital gains realized by Italian pension funds are not subject to any withholding or substitute tax. Capital gains and capital losses must be included in the result of the relevant portfolio accrued at the end of the tax period, which is subject to a 20% substitute tax from fiscal year 2015. Under certain conditions provided for by art. 1(92) of the Law dated December 23, 2014, n. 190 (published in the Official Gazette dated December 29, 2014) pension funds may be granted a tax credit equal to 9% of the result accrued at the end of the tax period and subject to the substitute tax.
Italian investment funds (fondi comuni di investimento mobiliare) SICAVs
Capital gains realized by Italian investment funds and SICAVs are not subject to any withholding or substitute tax. Capital gains and capital losses must be included in the investment fund’s or SICAV’s annual results, which is not subject to tax. A withholding tax may apply in certain circumstances at the rate of up to 26% on distributions made by the fund or SICAV.
IVAFE-Imposta sul Valore delle Attività Finanziarie detenute all’Estero
According to Article 19 of the Decree of December 6, 2011, No. 201 (“Decree No. 201/2011”), implemented by the Law dated December 22, 2011, No. 214, Italian resident individuals holding financial assets—including shares—outside the Italian territory are required to pay a special tax (IVAFE) at the rate of 0.20%. The tax applies on the market value at the end of the relevant year of such financial assets held outside the Italian territory.
Taxpayers may deduct from the tax a tax credit equal to any wealth taxes paid in the State where the financial assets are held (up to the amount of the Italian tax due).
Non-Italian Shareholders
Taxation of Dividends
According to Italian tax laws, the distribution of dividends by IGT PLC will not trigger any taxable event for Italian income tax purposes for Non-Italian Shareholders.
Taxation of Capital Gains
According to Italian tax laws, capital gains on IGT PLC ordinary shares will not trigger any taxable event for Italian income tax purposes for Non-Italian Shareholders.
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Loyalty Voting Structure
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY HAS PROVIDED PUBLISHED GUIDANCE ON THE ITALIAN TAX CONSEQUENCES OF THE RECEIPT, OWNERSHIP OR LOSS OF THE ENTITLEMENT TO INSTRUCT THE NOMINEE ON HOW TO VOTE IN RESPECT OF SPECIAL VOTING SHARES AND AS A RESULT, SUCH TAX CONSEQUENCES ARE UNCERTAIN. ACCORDINGLY, WE URGE ITALIAN SHAREHOLDERS TO CONSULT THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE RECEIPT, OWNERSHIP AND LOSS OF THE ENTITLEMENT TO INSTRUCT THE NOMINEE ON HOW TO VOTE IN RESPECT OF SPECIAL VOTING SHARES.
Receipt of the entitlement to instruct the Nominee on how to vote in respect of special voting shares
An Italian Shareholder that receives the entitlement to instruct the Nominee on how to vote in respect of special voting shares issued by IGT PLC should in principle not recognize any taxable income upon the receipt of such entitlement. Under a possible interpretation, the issue of special voting shares can be treated as the issue of bonus shares free of charge to the shareholders out of existing available reserves of IGT PLC. Such issue should not have any material effect on the allocation of the tax basis of an Italian Shareholder between its IGT PLC ordinary shares and the corresponding IGT PLC special voting shares. Because the special voting shares are not transferable and their very limited economic rights (equal to a fraction of the aggregate sum of $1) can be enjoyed only at the time of a return of capital of the company of a winding up or otherwise IGT PLC believes and intends to take the position that the tax basis and the fair market value of the special voting shares is minimal. However, because the determination of the tax basis and fair market value of the special voting shares is not governed by any guidance that directly addresses such a situation and is unclear, the Italian tax authorities could assert that the tax basis and fair market value of the special voting shares as determined by IGT PLC is incorrect.
Loss of the entitlement to instruct the Nominee on how to vote in respect of special voting shares
The tax treatment of an Italian Shareholder that loses its entitlement to instruct the Nominee on how to vote in respect of special voting shares for no consideration is uncertain. It is possible that an Italian Shareholder should recognize a loss to the extent of the Italian Shareholder’s tax basis (if any). The deductibility of such loss depends on individual circumstances and conditions required by Italian law. It is also possible that an Italian Shareholder would not be allowed to recognize a loss upon losing its entitlement to instruct the Nominee on how to vote in respect of special voting shares and instead should increase its basis in its IGT PLC ordinary shares by an amount equal to the tax basis (if any) in such IGT PLC special voting shares.
Stamp Duty (Imposta di bollo)
According to Article 19 of Decree No. 201/2011, a proportional stamp duty applies on a yearly basis on the market value of any financial product or financial instruments. The stamp duty applies at the rate of 0.20% and, in respect of Italian shareholders or Non-Italian Shareholders other than individuals, it cannot exceed €14,000. The stamp duty applies with respect to any Italian Shareholders or Non-Italian Shareholders (other than banks, insurance companies, investments and pension funds and certain other financial intermediaries) to the extent that the shares are held through an Italian-based banking or financial intermediary or insurance company.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement of Experts
Not applicable.
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H.
Documents on Display
We file reports, including annual reports on Form 20-F, furnish periodic reports on Form 6-K and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. These may be read without charge and copied, upon payment of prescribed rates, at the public reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. To obtain information on the operation of the public reference facility, the telephone number is 1-800-SEC-0330. Any SEC filings may also be accessed by visiting the SEC’s website at www.sec.gov.
I.
Subsidiary Information
Not applicable.
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
Our activities expose us to a variety of risks including interest rate risk, foreign currency exchange rate risk, liquidity risk and credit risk. Our overall risk management strategy focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our performance through ongoing operational and finance activities. We monitor and manage our exposure to such risks both centrally and at the local level, as appropriate, as part of our overall risk management program with the objective of seeking to reduce the potential adverse effects of such risks on our results of operations and financial position.
Depending upon the risk assessment, we use selected derivative hedging instruments, including principally interest rate swaps and forward currency contracts for the purposes of managing interest rate risk and currency risks arising from our operations and sources of financing. Our policy is not to enter into such contracts for speculative purposes.
The following section provides qualitative and quantitative disclosures on the effects that these risks may have. The quantitative data reported below does not have any predictive value and does not reflect the complexity of the markets or reactions which may result from any changes that are assumed to have taken place.
Interest Rate Risk
Interest Rate Market Risk
Our exposure to changes in market interest rates relates primarily to our cash and financial liabilities which bear floating interest rates. Until 2014 we were exposed to floating rates of interest particularly relating to the Facilities (which were repaid in 2014). In addition, we had entered into interest rate swaps to swap a portion of the 2009 Notes (due 2016) into floating rate interest. During 2014, the 2009 Notes (due 2016) and the Facilities were repaid. In 2014, our exposure to floating rates of interest primarily related to the Revolving Credit Facilities which we entered into in November 2014. Our policy is to manage interest cost using a mix of fixed and variable rate debt. We have historically used various techniques to mitigate the risks associated with future changes in interest rates, including entering into interest rate swap and treasury rate lock agreements.
As of December 31, 2014, there were no interest rate swaps outstanding and approximately 29% of our net debt was exposed to interest rate fluctuations. As of December 31, 2013, there were €150 million (notional value) in interest rate swaps and approximately 15% of our net debt portfolio was exposed to interest rate fluctuations.
A hypothetical 10 basis points increase in interest rates for the year ended December 31, 2014, with all other variables held constant, would have resulted in a decrease in our income before income tax of approximately €0.7 million (€0.4 million for the year ended December 31, 2013).
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Foreign Currency Exchange Rate Risk
We operate on an international basis across a number of geographical locations. We are exposed to (i) transactional foreign exchange risk when an entity enters into transactions in a currency other than its functional currency, and (ii) translation foreign exchange risk which arises when we translate the financial statements of our foreign entities into Euro for the preparation of the consolidated financial statements.
Transactional Risk
Our subsidiaries generally execute their operating activities in their respective functional currencies. In circumstances where we enter into transactions in a currency other than the functional currency of the relevant entity, we seek to minimize our exposure by (i) sharing risk with our customers (for example, in limited circumstances, but whenever possible, we negotiate clauses into our contracts that allow for price adjustments should a material change in foreign exchange rates occur), (ii) creating a natural hedge by netting receipts and payments, (iii) utilizing foreign currency borrowings, and (iv) where applicable, by entering into foreign currency forward and option contracts.
The principal foreign currencies to which we are exposed are the U.S. $ and the British pound.
From time to time, we enter into foreign currency forward and option contracts to reduce the exposure associated with certain firm commitments, variable service revenues, and certain assets and liabilities denominated in foreign currencies. These contracts generally have average maturities of 12 months or less and are regularly renewed to provide continuing coverage throughout the year. It is our policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness.
As of December 31, 2014, we had forward contracts for the sale of approximately U.S. $513.1 million (€442.6 million) of foreign currency (primarily Euro, U.S. $ and British pounds) and the purchase of approximately U.S. $445.6 million (€367.0 million) of foreign currency (primarily Euro and Swedish krona).
As of December 31, 2013, we had forward contracts for the sale of approximately U.S. $352 million of foreign currency (primarily Euro, British pounds, and Swedish krona) and the purchase of approximately U.S. $501.4 million of foreign currency (primarily Euro and Swedish krona). We also had foreign currency option contracts for the sale of approximately U.S. $8.5 million and the purchase of approximately U.S. $8.8 million.
Translation Risk
Certain of our subsidiaries are located in countries which are outside of the Eurozone, in particular the United States. As our reporting currency is the Euro, the income statements of those entities are converted into Euro using the average exchange rate for the period, and while revenues and costs are unchanged in local currency, changes in exchange rates may lead to effects on the converted balances of revenues, costs and the result in Euro. The monetary assets and liabilities of consolidated entities that have a reporting currency other than the Euro are translated into Euro at the period-end foreign exchange rate. The effects of these changes in foreign exchange rates are recognized directly in the consolidated statement of changes in equity within other reserves.
At December 31, 2013 we held SEK 22.5 million, or €25.1 million, of foreign currency contracts designated as a hedge against the net investment in our wholly owned subsidiary Boss Media AB. There were no hedges of net investment at December 31, 2014.
Our foreign currency exposure primarily arises from changes between the Euro and U.S. $ and the Euro and British pound sterling. A hypothetical 10% decrease in the Euro to U.S. dollar exchange rate, with all other variables held constant, would have reduced our income before income tax by €1.1 million for 2014 (€2.5 million for 2013) and equity by €266.9 million for 2014 (€240.0 million for 2013).
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Liquidity Risk
Liquidity risk is the risk of not being able to fulfill present or future obligations if we do not have sufficient funds available to meet such obligations. Liquidity risk arises mostly in relation to cash flows generated and used in working capital and from financing activities, particularly by servicing our debt, in terms of both interest and capital, and our payment obligations relating to our ordinary business activities. We believe that the cash which we generate from our operating activities, together with our committed borrowing capacity, will be sufficient to meet out financial obligations and operating requirements in the foreseeable future. Therefore, we do not believe that we are exposed to a significant concentration of liquidity risk.
Credit Risk
Our credit risk primarily arises from cash and trade receivables. We have established risk management policies whereby we hold our cash deposits with major, financially sound counterparties with high credit ratings and by limiting exposure to any one credit party.
We enter into commercial transactions only with recognized, creditworthy third parties. A significant portion of our trade receivables are from government lottery entities which we therefore consider to pose insignificant credit risk. Additionally, we do not have significant credit risk to any one customer. Geographically, credit risk is concentrated in Italy. At December 31, 2014 and 2013, approximately 65% and 71%, respectively, of total trade and other receivables, net are associated with the Italy segment and approximately 62% and 69%, respectively of these receivables relate to our lottery instant ticket business. We recorded bad debt expense of €11.1 million and €12.3 million, or less than 1% of total revenues for each of the years ended December 31, 2014 and 2013, respectively.
Commodity Price Risk
Our exposure to commodity price changes is not considered material and is managed through our procurement and sales practices.
Item 12.
Description of Securities Other than Equity Securities
A.
Debt Securities
Not Applicable.
B.
Warranties and Rights
Not Applicable.
C.
Other Securities
Not Applicable.
D.
American Depositary Shares
Not Applicable.
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PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
None.
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
See the discussion of the Mergers in “Item 4. Information on the Company—A. History and Development of the Company—Acquisition of International Game Technology” and the description of the loyalty scheme in “Item 10. Additional Information—B. Memorandum and Articles of Association—Loyalty Plan.”
Item 15.
Controls and Procedures
A.
Disclosure Controls and Procedures
Under the supervision, and with the participation, of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2014 pursuant to Exchange Act Rule 13a-15(b).
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
B.
Management’s Report on Internal Control over Financial Reporting
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
C.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
D.
Changes in Internal Control
Not Applicable.
Item 16A.
Audit Committee Financial Expert
Our Board of Directors has determined that members of the audit committee, namely, Sir Jeremy Hanley and Vincent L. Sadusky, are each audit committee financial experts. Both are independent directors under the NYSE standards.
Item 16B.
Code of Ethics
We have adopted a Code of Ethics for Principal Executive Officer and Senior Financial Officers which is applicable to our principal executive officer, principal financial officer, the principal accounting officer and controller, and any persons performing similar functions. This code of ethics is posted on our website, www.igt.com, and may be found as follows: from our main page, first click on “Investors” and then on “Management and Governance” and then on “Documents.”
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Item 16C.
Principal Accountant Fees and Services
Beginning with the financial year ended December 31, 2014, PricewaterhouseCoopers S.p.A. (“PwC”) is serving as GTECH’s independent auditor. Reconta Ernst & Young S.p.A. (“EY”) acted in this role (from the year ended December 31, 2002 to the year ended December 31, 2013).
“PwC Entities” means PricewaterhouseCoopers S.p.A., the auditor of GTECH, as well as all of the Italian and foreign entities belonging to the PwC network.
“EY Entities” means Reconta Ernst & Young S.p.A., the previous auditor of GTECH, as well as all of the Italian and foreign entities belonging to the EY Global Network.
The following table sets forth the aggregate fees for professional services and other services rendered by PwC Entities in 2014 and by EY Entities in 2013.
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For the Years Ended December 31,
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(€ thousands)
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2014
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2013
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Audit Fees(1)
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5,162
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3,145
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Audited-related Fees(2)
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232
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927
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Tax Fees(3)
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37
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264
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All other Fees(4)
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395
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390
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Total
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5,825
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4,726
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(1)
Audit fees consist of fees billed for professional services in connection with GTECH’s annual financial statements, reviews of interim financial statements as well as comfort letters issued in relation to capital market transactions and included those required for some transactions by regulations in Italy and abroad.
(2)
“Audit-Related Fees” are fees charged for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements, agreed upon procedures for certain financial statement areas and are not reported under “Audit Fees.”
(3)
“Tax Fees” consist of fees billed for professional services for tax compliance.
(4)
“All other Fees” consists of fees billed for services other than those reported under (1) to (3) and mainly comprise services in relation to the Mergers.
Audit Committee’s Pre-Approval Policies and Procedures
Our Audit Committee nominates and engages our independent registered public accounting firm to audit our consolidated financial statements. Our Audit Committee has a policy requiring management to obtain the Audit Committee’s approval before engaging our independent registered public accounting firm to provide any other audit or permitted non-audit services to us or our subsidiaries. Pursuant to this policy, which is designed to ensure that such engagements do not impair the independence of our independent registered public accounting firm, the Audit Committee reviews and pre-approves (if appropriate) specific audit and non-audit services in the categories Audit Services, Audit-Related Services, Tax Services, and any other services that may be performed by our independent registered public accounting firm.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
None.
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Item 16E.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We currently have neither purchased any ordinary shares of the company nor announced any share buyback plans.
Item 16F.
Change in Registrant’s Certifying Accountant
At the Shareholders’ Meeting held on May 8, 2014, it was resolved to appoint PwC as GTECH’s independent statutory auditors for the nine-year period 2014 to 2022. The change in statutory auditors was made pursuant to Italian regulation which limits the duration of statutory audit engagements. Because of the limitations of this Italian regulation, GTECH did not seek to renew the EY contract when it expired and EY declined to stand for re-election.
In connection with the U.S. SEC registration process and the appointment of GTECH’s independent registered public accounting firm for an audit period commencing from January 1, 2014, PwC completed an independence assessment to evaluate the services and relationships with GTECH and its affiliates that may bear on PwC’s independence under the SEC and the Public Company Accounting Oversight Board (United States) (“PCAOB”) independence rules for an audit period commencing January 1, 2014. Services identified that are inconsistent with the auditor independence rules provided in Rule 2-01 of Regulation S-X include (1) the provision of payroll services to GTECH and certain of its subsidiaries, which included control of client’s assets and (2) secondment and legal services to sister companies under common control with GTECH.
PwC communicated these matters to GTECH’s Board of Statutory Auditors. The Board of Statutory Auditors and PwC individually considered the impact that these relationships have on PwC’s independence with respect to GTECH and concluded that there are no indications that PwC’s ability to exercise objective and impartial judgment on issues encompassed within the audit of GTECH’s Consolidated Financial Statements have been impaired.
In making this determination, the Board of Statutory Auditors and PwC considered, among other things, that:
·
SEC independence rules were never contemplated at the time the services were entered into.
·
None of the services provided violate the local Italian independence rules (Article 17 of Italian Legislative Decree 39/2010).
·
The services were performed by teams entirely separate from the team responsible for the audit of the GTECH financial statements.
·
GTECH’s management retained responsibility for and exercised all decision making.
·
The fees relating to the non-audit services described above are not material to PwC or to GTECH.
Accordingly, and for the reasons enumerated above, PwC and the Board of Statutory Auditors concluded that the services identified do not affect PwC’s ability to render an objective audit for GTECH for the year ended December 31, 2014. Therefore, effective from November 12, 2014, the Board of Directors appointed PwC also as GTECH’s independent registered public accounting firm under rules and regulations of the SEC for audit periods commencing January 1, 2014.
On August 29, 2014, solely in relation to the preparation of the Form F-4 and upon the approval of GTECH’s Board of Statutory Auditors, EY was re-appointed as GTECH’s independent registered public accounting firm in order for EY to perform audits in accordance with the standards of the PCAOB of the Consolidated Financial Statements of GTECH as of December 31, 2013 and 2012, and for each of the three years in the period ended December 31, 2013, on which EY originally reported under auditing standards recommended by CONSOB (the Italian Stock Exchange Regulatory Agency). The re-appointment of EY terminated on November 12, 2014 upon the appointment of PwC.
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The report of EY on GTECH’s Consolidated Financial Statements for the years ended December 31, 2013 and 2012 did not contain any adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits of GTECH’s Consolidated Financial Statements for the two fiscal years ended December 31, 2013 and in the subsequent interim period through October 1, 2014, (1) there were no disagreements with EY on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of EY, would have caused EY to make reference to the matter in their report; and (2) there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K. The Company has requested EY to furnish it a letter addressed to the SEC stating whether it agrees with the above statement. A copy of that letter, dated May 15, 2015 is filed as Exhibit 15.3 to this Form 20-F.
Item 16G.
Corporate Governance
IGT PLC is a company organized under the laws of England and Wales and qualifies as a foreign private issuer under the rules and regulations of the SEC and the listing standards of the NYSE. In accordance with the NYSE listing rules related to corporate governance, listed companies that are foreign private issuers are permitted to follow home-country practice in some circumstances in lieu of the provisions of the corporate governance rules contained in Section 303A of the NYSE Listed Company Manual that are otherwise applicable to listed companies. However, IGT PLC has agreed to comply voluntarily with the corporate governance standards of the NYSE.
Item 16H.
Mine Safety Disclosure
Not applicable.
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PART III
Item 17.
Financial Statements
We have responded to Item 18 in lieu of responding to this item.
Item 18.
Financial Statements
The audited consolidated financial statements as required under Item 18 are attached hereto starting on page F-1 of this document.
Item 19.
Exhibits
A list of exhibits included as part of this annual report on Form 20-F is set forth in the Index to Exhibits that immediately follows the signature page of this annual report on Form 20-F.
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SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf.
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INTERNATIONAL GAME TECHNOLOGY PLC
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/s/ Alberto Fornaro
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Alberto Fornaro
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Chief Financial Officer
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Dated: May 15, 2015
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INDEX TO EXHIBITS
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Exhibit
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Description
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1.1
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Articles of Association of International Game Technology PLC, dated April 7, 2015.
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There have not been filed as exhibits to this Form 20-F certain long-term debt instruments, none of which relates to indebtedness that exceeds 10% of the consolidated assets of International Game Technology PLC. International Game Technology PLC agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of International Game Technology PLC and its consolidated subsidiaries.
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4.1
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Agreement and Plan of Merger, dated as of July 15, 2014, by and among GTECH S.p.A., a joint stock company organized under the laws of Italy, solely with respect to Section 5.02(a) and Article VIII, GTECH Corporation, a Delaware corporation, International Game Technology PLC (f/k/a Georgia Worldwide Limited), a public limited company organized under the laws of England and Wales, Georgia Worldwide Corporation, a Nevada corporation, and International Game Technology, a Nevada corporation (incorporated herein by reference to Annex A to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.2
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Amendment No. 1 to the Agreement and Plan of Merger, dated as of July 15, 2014, by and among GTECH S.p.A., a joint stock company organized under the laws of Italy, solely with respect to Section 5.02(a) and Article VIII, GTECH Corporation, a Delaware corporation, International Game Technology PLC (f/k/a Georgia Worldwide Limited), a public limited company organized under the laws of England and Wales, Georgia Worldwide Corporation, a Nevada corporation, and International Game Technology, a Nevada corporation (incorporated herein by reference to Annex B to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.3
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Voting Agreement, dated as of July 15, 2014, among International Game Technology, International Game Technology PLC (formerly known as Georgia Worldwide Limited), De Agostini S.p.A. and DeA Partecipazioni S.p.A. (incorporated herein by reference to Annex D to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.4
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Support Agreement, dated as of July 15, 2014, among International Game Technology, De Agostini S.p.A. and DeA Partecipazioni S.p.A. (incorporated herein by reference to Annex C to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.5
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Trust Deed dated May 17, 2006 between GTECH S.p.A. (f/k/a Lottomatica S.p.A.) as Issuer and BNY Mellon Corporate Trustee Services Limited (successor to J.P. Morgan Corporate Trustee Services Limited), as Trustee, with respect to €750,000,000 Subordinated Interest-Deferrable Capital Securities due March 31, 2066 (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.6
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First Supplemental Trust Deed dated April 3, 2015 relating to the Trust Deed dated May 17, 2006 in respect of €750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066 between GTECH S.p.A., as Issuer; and BNY Mellon Corporate Trustee Services Limited, as Trustee.
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Exhibit
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Description
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4.7
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Trust Deed dated December 3, 2009 among GTECH S.p.A. (f/k/a Lottomatica Group S.p.A.) as Issuer; certain subsidiaries of GTECH S.p.A., as Guarantors; and BNY Mellon Corporate Trustee Services Limited (f/k/a BNY Corporate Trustee Services Limited), as Trustee, with respect to €750,000,000 5.375% Guaranteed Notes due December 5, 2016 (incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.8
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Trust Deed dated December 2, 2010 among GTECH S.p.A. (f/k/a Lottomatica Group S.p.A.) as Issuer; certain subsidiaries of GTECH S.p.A., as Guarantors; and BNY Mellon Corporate Trustee Services Limited (f/k/a BNY Corporate Trustee Services Limited), as Trustee, with respect to €500,000,000 5.375% Guaranteed Notes due February 2, 2018 (incorporated herein by reference to Exhibit 10.3 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.9
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First Supplemental Trust Deed dated April 7, 2015, relating to the Trust Deed dated December 2, 2010 in respect of €500,000,000 5.375% Guaranteed Notes due February 2, 2018 among International Game Technology PLC, as Issuer; certain subsidiaries of International Game Technology PLC, as Initial Guarantors; certain subsidiaries of International Game Technology PLC, as Additional Guarantors; and BNY Mellon Corporate Trustee Services Limited, as Trustee (incorporated herein by reference to Exhibit 4.5 to the Current Report on Form 8-K filed by International Game Technology on April 10, 2015).
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4.10
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Trust Deed dated December 5, 2012 among GTECH S.p.A. (f/k/a Lottomatica Group S.p.A.) as Issuer; certain subsidiaries of GTECH S.p.A., as Guarantors; and BNY Mellon Corporate Trustee Services Limited, as Trustee, with respect to €500,000,000 3.500% Guaranteed Notes due March 5, 2020 (incorporated herein by reference to Exhibit 10.4 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.11
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First Supplemental Trust Deed dated April 7, 2015 relating to the Trust Deed dated December 5, 2012 in respect of €500,000,000 3.500% Guaranteed Notes due March 5, 2020 among International Game Technology PLC, as Issuer; certain subsidiaries of International Game Technology PLC, as Initial Guarantors; certain subsidiaries of International Game Technology PLC, as Additional Guarantors; and BNY Mellon Corporate Trustee Services Limited, as Trustee (incorporated herein by reference to Exhibit 4.7 to the Current Report on Form 8-K filed by International Game Technology on April 10, 2015).
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4.12
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Commitment Letter dated July 15, 2014, as amended, among Credit Suisse Securities (USA) LLC, Credit Suisse AG (acting through its Cayman Islands Branch), Barclays Bank PLC, Citigroup Global Markets Limited and Citibank N.A., London Branch, and GTECH S.p.A. with respect to approximately US$10,700,000,000 bridge facilities (incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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4.13
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Senior Facilities Agreement dated November 4, 2014 for the US$1,500,000,000 and €850,000,000 multicurrency revolving credit facilities among GTECH S.p.A., as GTECH and a Borrower; GTECH Corporation, as a Borrower; J.P. Morgan Limited and Mediobanca—Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners and Mandated Lead Arrangers; the entities listed in Part III of Schedule I thereto, as the Bookrunners and Mandated Lead Arrangers, the entities listed in Part IV of Schedule I thereto, as the Mandated Lead Arrangers; the entities listed in Part V of Schedule I thereto, as the Arrangers, the financial institutions listed in Part II of Schedule I thereto, as the Original Lenders; The Royal Bank of Scotland plc, as the Agent; The Royal Bank of Scotland plc, as the Issuing Agent; and the other parties thereto (incorporated herein by reference to Exhibit 10.6 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
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Exhibit
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Description
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4.14
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Letter agreement dated April 2, 2015 between GTECH S.p.A., as Parent, and The Royal Bank of Scotland plc, as Agent, regarding amendments to the Senior Facilities Agreement dated November 4, 2014 for the US$1,500,000,000 and €850,000,000 multicurrency revolving credit facilities (including amendments increasing the amounts of the multicurrency revolving credit facilities to US$1,800,000,000 and €1,050,000,000).
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4.15
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Senior Facilities Agreement dated January 29, 2015 for the €800,000,000 term loan facilities among
GTECH S.p.A.,
as Original Borrower and Parent; GTECH Corporation, as Original Guarantor; Banca IMI S.p.A., BNP Paribas, Italian Branch, Mediobanca—Banca di Credito Finanziario S.p.A. and UniCredit Bank AG, Milan Branch, as Mandated Lead Arrangers; BNP Paribas, Italian Branch and UniCredit Bank AG, Milan Branch, as the Original International Lenders; Intesa Sanpaolo S.p.A. and Mediobanca—Banca di Credito Finanziario S.p.A., as Original Italian Lenders; and Mediobanca — Banca di Credito Finanziario S.p.A., as Agent.
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4.16
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Indenture dated as of April 7, 2015 among International Game Technology PLC, as Issuer; certain subsidiaries of International Game Technology PLC, as Initial Guarantors; BNY Mellon Corporate Trustee Services Limited, as Trustee; The Royal Bank of Scotland plc, as Security Agent; The Bank of New York Mellon, London Branch, as Euro Paying Agent and Transfer Agent; The Bank of New York Mellon, as Dollar Paying Agent and Dollar Registrar; and The Bank of New York Mellon (Luxembourg) S.A., as Euro Registrar, with respect to $600,000,000 5.625% Senior Secured Notes due February 15, 2020, $1,500,000,000 6.250% Senior Secured Notes due February 15, 2022, $1,100,000,000 6.500% Senior Secured Notes due February 15, 2025, €700,000,000 4.125% Senior Secured Notes due February 15, 2020 and €850,000,000 4.750% Senior Secured Notes due February 15, 2023 (incorporated herein by reference to Exhibit 4.8 to the Current Report on Form 8-K filed by International Game Technology on April 10, 2015).
|
|
|
|
|
|
4.17
|
|
Indenture dated as of June 15, 2009 between International Game Technology, as Company, and Wells Fargo Bank, National Association, as Trustee (Senior Debt Securities) (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by International Game Technology on June 15, 2009).
|
|
|
|
|
|
4.18
|
|
First Supplemental Indenture dated as of June 15, 2009 between International Game Technology, as Company, and Wells Fargo Bank, National Association, as Trustee (Creating a Series of Securities Designated 7.50% Notes due 2019) (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by International Game Technology on June 15, 2009).
|
|
|
|
|
|
4.19
|
|
Second Supplemental Indenture dated as of June 8, 2010 between International Game Technology, as Company, and Wells Fargo Bank, National Association, as Trustee (Creating a Series of Securities Designated 5.500% Notes due 2020) (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by International Game Technology on June 8, 2010).
|
|
|
|
|
|
4.20
|
|
Third Supplemental Indenture dated as of September 19, 2013 between International Game Technology, as Company, and Wells Fargo Bank, National Association, as Trustee (Creating a Series of Securities Designated 5.350% Notes due 2023) (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by International Game Technology on September 19, 2013).
|
|
|
|
|
|
4.21
|
|
Amendment No. 1 dated as of October 20, 2014 between International Game Technology, as Company; and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of June 15, 2009, as supplemented by the First Supplemental Indenture dated as of June 15, 2009 (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by International Game Technology on October 22, 2014).
|
176
Table of Contents
|
Exhibit
|
|
Description
|
|
|
|
|
|
4.22
|
|
Amendment No. 2 dated as of April 7, 2015 among International Game Technology, as Company; Wells Fargo Bank, National Association, as Trustee; and The Royal Bank of Scotland plc, as Security Agent, to the Indenture dated as of June 15, 2009, as supplemented by the First Supplemental Indenture dated as of June 15, 2009 (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by International Game Technology on April 10, 2015).
|
|
|
|
|
|
4.23
|
|
Amendment No. 1 dated as of April 7, 2015 among International Game Technology, as Company; Wells Fargo Bank, National Association, as Trustee; and The Royal Bank of Scotland plc, as Security Agent, to the Indenture dated as of June 15, 2009, as supplemented by the Second Supplemental Indenture dated as of June 8, 2010 (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by International Game Technology on April 10, 2015).
|
|
|
|
|
|
4.24
|
|
Amendment No. 1 dated as of April 7, 2015 among International Game Technology, as Company; Wells Fargo Bank, National Association, as Trustee; and The Royal Bank of Scotland plc, as Security Agent, to the Indenture dated as of June 15, 2009, as supplemented by the Third Supplemental Indenture dated as of September 19, 2023 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by International Game Technology on April 10, 2015).
|
|
|
|
|
|
4.25
|
|
Amendment No. 3 dated as of April 22, 2015 among International Game Technology, as Company; International Game Technology PLC and certain subsidiaries of International Game Technology PLC, as Guarantors; and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of June 15, 2009, as supplemented by the First Supplemental Indenture dated as of June 15, 2009.
|
|
|
|
|
|
4.26
|
|
Amendment No. 2 dated as of April 22, 2015 among International Game Technology, as Company; International Game Technology PLC and certain subsidiaries of International Game Technology PLC, as Guarantors; and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of June 15, 2009, as supplemented by the Second Supplemental Indenture dated as of June 8, 2010.
|
|
|
|
|
|
4.27
|
|
Amendment No. 2 dated as of April 22, 2015 among International Game Technology, as Company; International Game Technology PLC and certain subsidiaries of International Game Technology PLC, as Guarantors; and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of June 15, 2009, as supplemented by the Third Supplemental Indenture dated as of September 19, 2023.
|
|
|
|
|
|
4.28
|
|
Amendment No. 3 dated as of April 23, 2015 between International Game Technology, as Company; and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of June 15, 2009, as supplemented by the Second Supplemental Indenture dated as of June 8, 2010.
|
|
|
|
|
|
4.29
|
|
Amendment No. 3 dated as of April 23, 2015 between International Game Technology, as Company; and Wells Fargo Bank, National Association, as Trustee, to the Indenture dated as of June 15, 2009, as supplemented by the Third Supplemental Indenture dated as of September 19, 2023.
|
|
|
|
|
|
4.30
|
|
The Lotto Concession for the activation and operation of the network for the national lotto game between the Ministry of Finance and Lottomatica S.c.p.A, issued March 17, 1993, expiring June 8, 2016 (incorporated herein by reference to Exhibit 10.7 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
|
177
Table of Contents
|
Exhibit
|
|
Description
|
|
|
|
|
|
4.31
|
|
Instant Ticket Concession for the operation of the national instant ticket lottery games between the
Amministrazione Autonoma dei Monopoli di Stato
(now known as
Agenzia delle Dogane e dei Monopoli
) and Lotterie Nazionali S.r.l., issued and effective from October 1, 2010, expiring September 30, 2019 (incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
|
|
|
|
|
|
4.32
|
|
Video Lottery Concession for the activation and operation of the network for managing legalized gaming machines—including amusement with prize machines “AWP” and (video lottery terminals) “VLT” between
Amministrazione Autonoma dei Monopoli di Stato
(now known as
Agenzia delle Dogane e dei Monopoli
) and Lottomatica Videolot Rete S.p.A. issued March 20, 2013 expiring March 19, 2022 (incorporated herein by reference to Exhibit 10.9 to the Registration Statement on Form F-4 filed by International Game Technology PLC (f/k/a Georgia Worldwide PLC) on January 2, 2015).
|
|
|
|
|
|
4.33
|
|
Lottomatica Group 2009-2015 Stock Option Plan (incorporated herein by reference to Exhibit 99.1 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.34
|
|
Lottomatica Group 2010-2016 Stock Option Plan (incorporated herein by reference to Exhibit 99.2 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.35
|
|
Lottomatica Group 2011-2017 Stock Option Plan (incorporated herein by reference to Exhibit 99.3 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.36
|
|
Lottomatica Group 2012-2018 Stock Option Plan (incorporated herein by reference to Exhibit 99.4 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.37
|
|
GTECH 2013-2019 Stock Option Plan (incorporated herein by reference to Exhibit 99.5 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.38
|
|
GTECH 2014-2020 Stock Option Plan (incorporated herein by reference to Exhibit 99.6 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.39
|
|
Lottomatica Group 2011-2015 Share Allocation Plan (incorporated herein by reference to Exhibit 99.7 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.40
|
|
Lottomatica Group 2012-2016 Share Allocation Plan (incorporated herein by reference to Exhibit 99.8 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.41
|
|
GTECH 2013-2017 Share Allocation Plan (incorporated herein by reference to Exhibit 99.9 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
4.42
|
|
GTECH 2014-2018 Share Allocation Plan (incorporated herein by reference to Exhibit 99.10 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
178
Table of Contents
|
Exhibit
|
|
Description
|
|
|
|
|
|
4.43
|
|
International Game Technology 2002 Stock Incentive Plan (incorporated herein by reference to International Game Technology’s Proxy Statement (Commission File No. 001-10684), filed on January 18, 2011).
|
|
|
|
|
|
4.44
|
|
International Game Technology PLC 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.12 to the Post-Effective Amendment No. 1 on Form S-8 to to Form F-4 filed by International Game Technology PLC on April 6, 2015).
|
|
|
|
|
|
8.1
|
|
List of subsidiaries of the registrant.
|
|
|
|
|
|
12.1
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|
|
|
|
|
|
12.2
|
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|
|
|
|
|
|
13.1
|
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
13.2
|
|
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
15.1
|
|
Consent of PricewaterhouseCoopers SpA (Filed herewith)
|
|
|
|
|
|
15.2
|
|
Consent of Reconta Ernst & Young SpA (Filed herewith)
|
|
|
|
|
|
15.3
|
|
Confirmatory Letter of Reconta Ernst & Young SpA (Filed herewith)
|
179
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GTECH S.p.A. AND SUBSIDIARIES
|
Reports of Independent Registered Public Accounting Firms
|
F-1
|
|
|
|
|
Consolidated statements of financial position as of December 31, 2014 and 2013
|
F-3
|
|
|
|
|
Consolidated income statements for the years ended December 31, 2014, 2013, and 2012
|
F-4
|
|
|
|
|
Consolidated statements of comprehensive income for the years ended December 31, 2014, 2013, and 2012
|
F-5
|
|
|
|
|
Consolidated statements of cash flows for the years ended December 31, 2014, 2013, and 2012
|
F-6
|
|
|
|
|
Consolidated statements of changes in equity for the years ended December 31, 2014, 2013, and 2012
|
F-7
|
|
|
|
|
Notes to consolidated financial statements
|
F-10
|
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and the Shareholders of
International Game Technology Plc (successor of GTECH SpA)
In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of income, comprehensive income, cash flows and changes in equity present fairly, in all material respects, the financial position of GTECH SpA and its subsidiaries at December 31, 2014, and the results of their operations and their cash flows for the year then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers SpA
Rome, Italy
May 15, 2015
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
GTECH S.p.A.
We have audited the accompanying consolidated statement of financial position of GTECH S.p.A. and subsidiaries as of December 31, 2013 and the related consolidated statements of income, comprehensive income, cash flows and changes in equity for each of the two years in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GTECH S.p.A. and subsidiaries at December 31, 2013, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2013, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Reconta Ernst & Young S.p.A.
Rome, Italy
October 1, 2014
F-2
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
Notes
|
|
2014
|
|
2013
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Systems, equipment and other assets related to contracts, net
|
|
7
|
|
910,095
|
|
899,536
|
|
|
Property, plant and equipment, net
|
|
8
|
|
77,394
|
|
76,382
|
|
|
Goodwill
|
|
9
|
|
3,402,201
|
|
3,095,466
|
|
|
Intangible assets, net
|
|
10
|
|
1,151,472
|
|
1,257,297
|
|
|
Investments in associates and joint ventures
|
|
12
|
|
24,474
|
|
26,894
|
|
|
Other non-current assets
|
|
13
|
|
75,495
|
|
48,777
|
|
|
Non-current financial assets
|
|
14
|
|
21,557
|
|
28,886
|
|
|
Deferred income taxes
|
|
15
|
|
22,026
|
|
14,000
|
|
|
Total non-current assets
|
|
|
|
5,684,714
|
|
5,447,238
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Inventories
|
|
16
|
|
152,042
|
|
146,406
|
|
|
Trade and other receivables, net
|
|
17
|
|
757,444
|
|
904,248
|
|
|
Other current assets
|
|
13
|
|
255,288
|
|
190,517
|
|
|
Current financial assets
|
|
14
|
|
10,386
|
|
12,273
|
|
|
Income taxes receivable
|
|
|
|
5,459
|
|
3,574
|
|
|
Cash and cash equivalents
|
|
|
|
261,184
|
|
419,118
|
|
|
Total current assets
|
|
|
|
1,441,803
|
|
1,676,136
|
|
|
TOTAL ASSETS
|
|
|
|
7,126,517
|
|
7,123,374
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
|
|
|
|
Equity attributable to owners of the parent
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
|
174,976
|
|
173,992
|
|
|
Share premium
|
|
|
|
1,651,498
|
|
1,717,261
|
|
|
Treasury shares
|
|
18
|
|
(40,211
|
)
|
—
|
|
|
Retained earnings
|
|
|
|
171,065
|
|
292,847
|
|
|
Other reserves
|
|
18
|
|
378,947
|
|
15,812
|
|
|
|
|
|
|
2,336,275
|
|
2,199,912
|
|
|
Non-controlling interests
|
|
|
|
281,814
|
|
403,620
|
|
|
Total equity
|
|
|
|
2,618,089
|
|
2,603,532
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
20
|
|
1,725,738
|
|
2,641,260
|
|
|
Deferred income taxes
|
|
15
|
|
177,296
|
|
134,278
|
|
|
Long-term provisions
|
|
21
|
|
13,038
|
|
17,499
|
|
|
Other non-current liabilities
|
|
22
|
|
57,728
|
|
62,098
|
|
|
Non-current financial liabilities
|
|
14
|
|
60,518
|
|
60,600
|
|
|
Total non-current liabilities
|
|
|
|
2,034,318
|
|
2,915,735
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
1,022,194
|
|
978,598
|
|
|
Short-term borrowings
|
|
20
|
|
8,895
|
|
851
|
|
|
Other current liabilities
|
|
22
|
|
356,414
|
|
361,740
|
|
|
Current financial liabilities
|
|
14
|
|
275,019
|
|
21,503
|
|
|
Current portion of long-term debt
|
|
20
|
|
786,878
|
|
214,496
|
|
|
Short-term provisions
|
|
21
|
|
991
|
|
1,185
|
|
|
Income taxes payable
|
|
|
|
23,719
|
|
25,734
|
|
|
Total current liabilities
|
|
|
|
2,474,110
|
|
1,604,107
|
|
|
TOTAL EQUITY AND LIABILITIES
|
|
|
|
7,126,517
|
|
7,123,374
|
|
F-3
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
|
|
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
Notes
|
|
2014
|
|
2013
|
|
2012
|
|
|
Service revenue
|
|
|
|
2,815,410
|
|
2,783,727
|
|
2,822,279
|
|
|
Product sales
|
|
|
|
254,243
|
|
279,107
|
|
253,406
|
|
|
Total revenue
|
|
6
|
|
3,069,653
|
|
3,062,834
|
|
3,075,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials, services and other costs
|
|
23
|
|
1,548,934
|
|
1,585,303
|
|
1,611,173
|
|
|
Personnel
|
|
24
|
|
571,618
|
|
568,266
|
|
539,346
|
|
|
Depreciation
|
|
25
|
|
249,477
|
|
254,599
|
|
249,921
|
|
|
Amortization
|
|
26
|
|
206,336
|
|
189,684
|
|
185,909
|
|
|
Impairment loss (recovery), net
|
|
27
|
|
(2,195
|
)
|
6,058
|
|
6,227
|
|
|
Capitalization of internal construction costs - labor and overhead
|
|
|
|
(100,788
|
)
|
(100,208
|
)
|
(100,038
|
)
|
|
Unusual expense, net
|
|
28
|
|
29,242
|
|
—
|
|
—
|
|
|
|
|
|
|
2,502,624
|
|
2,503,702
|
|
2,492,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
6
|
|
567,029
|
|
559,132
|
|
583,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
3,658
|
|
3,334
|
|
2,462
|
|
|
Equity loss, net
|
|
|
|
(1,514
|
)
|
(965
|
)
|
1,015
|
|
|
Other income
|
|
|
|
4,007
|
|
1,131
|
|
3,686
|
|
|
Other expense
|
|
29
|
|
(79,977
|
)
|
(11,177
|
)
|
(9,729
|
)
|
|
Foreign exchange loss, net
|
|
|
|
(1,413
|
)
|
(2,309
|
)
|
(1,214
|
)
|
|
Interest expense
|
|
30
|
|
(204,211
|
)
|
(163,074
|
)
|
(155,364
|
)
|
|
|
|
|
|
(279,450
|
)
|
(173,060
|
)
|
(159,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
|
287,579
|
|
386,072
|
|
424,003
|
|
|
Income tax expense
|
|
15
|
|
189,970
|
|
180,837
|
|
158,778
|
|
|
Net income
|
|
|
|
97,609
|
|
205,235
|
|
265,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
83,309
|
|
175,434
|
|
233,136
|
|
|
Non-controlling interests
|
|
|
|
14,300
|
|
29,801
|
|
32,089
|
|
|
|
|
|
|
97,609
|
|
205,235
|
|
265,225
|
|
|
Earnings per share/ADRs
|
|
|
|
|
|
|
|
|
|
|
Basic — net income attributable to owners of the parent
|
|
31
|
|
€
|
0.48
|
|
€
|
1.01
|
|
€
|
1.35
|
|
|
Diluted — net income attributable to owners of the parent
|
|
31
|
|
€
|
0.48
|
|
€
|
1.01
|
|
€
|
1.35
|
|
F-4
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
Notes
|
|
2014
|
|
2013
|
|
2012
|
|
|
Net income
|
|
|
|
97,609
|
|
205,235
|
|
265,225
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on translation of foreign operations
|
|
|
|
368,586
|
|
(151,847
|
)
|
(48,402
|
)
|
|
Income tax benefit (expense)
|
|
|
|
(14,231
|
)
|
4,719
|
|
1,697
|
|
|
|
|
|
|
354,355
|
|
(147,128
|
)
|
(46,705
|
)
|
|
Net gain (loss) on cash flow hedges
|
|
32
|
|
3,508
|
|
(1,493
|
)
|
(3,955
|
)
|
|
Income tax benefit (expense)
|
|
|
|
(1,203
|
)
|
483
|
|
365
|
|
|
|
|
|
|
2,305
|
|
(1,010
|
)
|
(3,590
|
)
|
|
Net gain on hedge of net investment in foreign operation
|
|
|
|
1,383
|
|
466
|
|
(446
|
)
|
|
Income tax expense
|
|
|
|
(601
|
)
|
(137
|
)
|
174
|
|
|
|
|
|
|
782
|
|
329
|
|
(272
|
)
|
|
Net gain on available-for-sale financial investments
|
|
|
|
2,003
|
|
2,957
|
|
9
|
|
|
Income tax expense
|
|
|
|
(574
|
)
|
(830
|
)
|
—
|
|
|
|
|
|
|
1,429
|
|
2,127
|
|
9
|
|
|
Share of other comprehensive loss of associate
|
|
|
|
(550
|
)
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss) that may be reclassified subsequently to profit or loss
|
|
|
|
358,321
|
|
(145,682
|
)
|
(50,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Remeasurement loss on defined benefit plans
|
|
|
|
(1,700
|
)
|
(1,022
|
)
|
—
|
|
|
Income tax benefit
|
|
|
|
392
|
|
197
|
|
—
|
|
|
Net other comprehensive loss that will not be reclassified subsequently to profit or loss
|
|
|
|
(1,308
|
)
|
(825
|
)
|
—
|
|
|
Other comprehensive income (loss) for the year, net of tax
|
|
|
|
357,013
|
|
(146,507
|
)
|
(50,558
|
)
|
|
Total comprehensive income for the year, net of tax
|
|
|
|
454,622
|
|
58,728
|
|
214,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Owners of the parent
|
|
|
|
439,617
|
|
29,092
|
|
183,577
|
|
|
Non-controlling interests
|
|
|
|
15,005
|
|
29,636
|
|
31,090
|
|
|
|
|
|
|
454,622
|
|
58,728
|
|
214,667
|
|
F-5
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
For the year ended
December 31,
|
|
|
(€ thousands)
|
|
Notes
|
|
2014
|
|
2013
|
|
2012
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
|
287,579
|
|
386,072
|
|
424,003
|
|
|
Adjustments for:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
25
|
|
249,477
|
|
254,599
|
|
249,921
|
|
|
Intangibles amortization
|
|
26
|
|
206,427
|
|
189,774
|
|
186,001
|
|
|
Interest expense
|
|
30
|
|
204,211
|
|
163,074
|
|
155,364
|
|
|
Make-whole paid in connection with the early extinguishment of debt
|
|
29
|
|
72,999
|
|
—
|
|
—
|
|
|
Share-based payment expense
|
|
34
|
|
7,768
|
|
8,611
|
|
12,349
|
|
|
Disposal of goodwill
|
|
9
|
|
7,752
|
|
—
|
|
—
|
|
|
Provisions
|
|
|
|
(655
|
)
|
(5,304
|
)
|
9,141
|
|
|
Impairment loss (recovery), net
|
|
27
|
|
(2,195
|
)
|
6,058
|
|
6,227
|
|
|
Non-cash foreign exchange (gain) loss, net
|
|
|
|
(3,081
|
)
|
938
|
|
1,159
|
|
|
Interest income
|
|
|
|
(3,658
|
)
|
(3,334
|
)
|
(2,462
|
)
|
|
Other non-cash items
|
|
|
|
14,288
|
|
12,197
|
|
7,376
|
|
|
Cash foreign exchange loss, net
|
|
|
|
4,494
|
|
1,372
|
|
55
|
|
|
Income tax paid
|
|
|
|
(161,508
|
)
|
(170,943
|
)
|
(193,442
|
)
|
|
Cash flows before changes in operating assets and liabilities
|
|
|
|
883,898
|
|
843,114
|
|
855,692
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
3,312
|
|
14,423
|
|
(19,974
|
)
|
|
Trade and other receivables
|
|
|
|
127,234
|
|
(108,594
|
)
|
(143,678
|
)
|
|
Accounts payable
|
|
|
|
(396
|
)
|
(45,220
|
)
|
114,899
|
|
|
Other assets and liabilities
|
|
40
|
|
(33,437
|
)
|
(7,474
|
)
|
(43,610
|
)
|
|
Net cash flows from operating activities
|
|
|
|
980,611
|
|
696,249
|
|
763,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Purchases of systems, equipment and other assets related to contracts
|
|
|
|
(191,895
|
)
|
(183,878
|
)
|
(211,833
|
)
|
|
Acquisitions, net of cash acquired
|
|
|
|
(26,230
|
)
|
(7,345
|
)
|
—
|
|
|
Purchases of intangible assets
|
|
10
|
|
(24,689
|
)
|
(134,919
|
)
|
(30,336
|
)
|
|
Purchases of property, plant and equipment
|
|
8
|
|
(7,892
|
)
|
(10,370
|
)
|
(10,193
|
)
|
|
Interest received
|
|
|
|
3,791
|
|
7,307
|
|
5,101
|
|
|
Investment in associate
|
|
|
|
—
|
|
(19,800
|
)
|
—
|
|
|
Other
|
|
|
|
8,609
|
|
7,434
|
|
(4,036
|
)
|
|
Net cash flows used in investing activities
|
|
|
|
(238,306
|
)
|
(341,571
|
)
|
(251,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt
|
|
|
|
(1,058,420
|
)
|
(102,810
|
)
|
(320,423
|
)
|
|
Interest paid
|
|
|
|
(158,577
|
)
|
(143,390
|
)
|
(184,479
|
)
|
|
Dividends paid
|
|
|
|
(130,525
|
)
|
(125,920
|
)
|
(122,220
|
)
|
|
Make-whole paid in connection with the early extinguishment of debt
|
|
29
|
|
(72,999
|
)
|
—
|
|
—
|
|
|
Acquisition of non-controlling interest
|
|
18
|
|
(72,328
|
)
|
—
|
|
—
|
|
|
Return of capital — non-controlling interest
|
|
18
|
|
(55,163
|
)
|
(40,087
|
)
|
(42,562
|
)
|
|
Payments on bridge facility
|
|
|
|
(52,713
|
)
|
—
|
|
—
|
|
|
Treasury shares purchased
|
|
18
|
|
(40,211
|
)
|
—
|
|
—
|
|
|
Dividends paid — non-controlling interest
|
|
18
|
|
(33,079
|
)
|
(34,062
|
)
|
(32,116
|
)
|
|
Capital increase — non-controlling interest
|
|
18
|
|
6,188
|
|
71,973
|
|
—
|
|
|
Net proceeds from (repayments of) short-term borrowings
|
|
|
|
8,079
|
|
(170
|
)
|
(15,218
|
)
|
|
Proceeds from financial liabilities
|
|
14
|
|
47,823
|
|
—
|
|
—
|
|
|
Proceeds from issuance of long-term debt
|
|
|
|
737,788
|
|
—
|
|
501,618
|
|
|
Other
|
|
|
|
(26,034
|
)
|
(3,987
|
)
|
(28,136
|
)
|
|
Net cash flows used in financing activities
|
|
|
|
(900,171
|
)
|
(378,453
|
)
|
(243,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
(157,866
|
)
|
(23,775
|
)
|
268,496
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
(68
|
)
|
(12,869
|
)
|
(2,838
|
)
|
|
Cash and cash equivalents at the beginning of the year
|
|
|
|
419,118
|
|
455,762
|
|
190,104
|
|
|
Cash and cash equivalents at the end of the year
|
|
|
|
261,184
|
|
419,118
|
|
455,762
|
|
F-6
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended December 31, 2014
|
|
|
Attributable to owners of the parent
|
|
|
|
|
|
|
(€ thousands)
|
|
Issued
Capital
(Note 18)
|
|
Share
Premium
|
|
Treasury
Shares
(Note 18)
|
|
Retained
Earnings
|
|
Other
Reserves
(Note 18)
|
|
Total
|
|
Non-
Controlling
Interests
(Note 19)
|
|
Total
Equity
|
|
|
Balance at January 1, 2014
|
|
173,992
|
|
1,717,261
|
|
—
|
|
292,847
|
|
15,812
|
|
2,199,912
|
|
403,620
|
|
2,603,532
|
|
|
Net income
|
|
—
|
|
—
|
|
—
|
|
83,309
|
|
—
|
|
83,309
|
|
14,300
|
|
97,609
|
|
|
Other comprehensive income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
356,308
|
|
356,308
|
|
705
|
|
357,013
|
|
|
Total comprehensive income
|
|
—
|
|
—
|
|
—
|
|
83,309
|
|
356,308
|
|
439,617
|
|
15,005
|
|
454,622
|
|
|
Dividends paid (€0.75 per share)
|
|
—
|
|
(69,296
|
)
|
—
|
|
(61,229
|
)
|
—
|
|
(130,525
|
)
|
—
|
|
(130,525
|
)
|
|
Dividends declared
|
|
—
|
|
—
|
|
—
|
|
(129,594
|
)
|
—
|
|
(129,594
|
)
|
—
|
|
(129,594
|
)
|
|
Treasury shares purchased (2,183,503 shares)
|
|
—
|
|
—
|
|
(40,211
|
)
|
—
|
|
—
|
|
(40,211
|
)
|
—
|
|
(40,211
|
)
|
|
Share-based payment (Note 34)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,768
|
|
7,768
|
|
—
|
|
7,768
|
|
|
Shares issued upon exercise of stock options
|
|
305
|
|
3,533
|
|
—
|
|
—
|
|
—
|
|
3,838
|
|
—
|
|
3,838
|
|
|
Return of capital (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(55,163
|
)
|
(55,163
|
)
|
|
Dividend distribution (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(33,079
|
)
|
(33,079
|
)
|
|
Capital increase (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
17,457
|
|
17,457
|
|
|
Acquisition of non-controlling interest (Note 18)
|
|
—
|
|
—
|
|
—
|
|
(9,057
|
)
|
—
|
|
(9,057
|
)
|
(63,751
|
)
|
(72,808
|
)
|
|
Capital reallocation (Note 18)
|
|
—
|
|
—
|
|
—
|
|
2,275
|
|
—
|
|
2,275
|
|
(2,275
|
)
|
—
|
|
|
Shares issued under stock award plans
|
|
679
|
|
—
|
|
—
|
|
—
|
|
(679
|
)
|
—
|
|
—
|
|
—
|
|
|
Appropriation of 2013 income in accordance with Italian law
|
|
—
|
|
—
|
|
—
|
|
(308
|
)
|
308
|
|
—
|
|
—
|
|
—
|
|
|
Other movements in equity
|
|
—
|
|
—
|
|
—
|
|
(7,178
|
)
|
(570
|
)
|
(7,748
|
)
|
—
|
|
(7,748
|
)
|
|
Balance at December 31, 2014
|
|
174,976
|
|
1,651,498
|
|
(40,211
|
)
|
171,065
|
|
378,947
|
|
2,336,275
|
|
281,814
|
|
2,618,089
|
|
F-7
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended December 31, 2013
|
|
|
Attributable to owners of the parent
|
|
Non-Controlling
|
|
|
|
|
(€ thousands)
|
|
Issued Capital
(Note 18)
|
|
Share Premium
|
|
Retained
Earnings
|
|
Other Reserves
(Note 18)
|
|
Total
|
|
Interests
(Note 19)
|
|
Total Equity
|
|
|
Balance at January 1, 2013
|
|
172,455
|
|
1,703,923
|
|
235,858
|
|
155,565
|
|
2,267,801
|
|
374,464
|
|
2,642,265
|
|
|
Net income
|
|
—
|
|
—
|
|
175,434
|
|
—
|
|
175,434
|
|
29,801
|
|
205,235
|
|
|
Other comprehensive income (loss)
|
|
—
|
|
—
|
|
1,176
|
|
(147,518
|
)
|
(146,342
|
)
|
(165
|
)
|
(146,507
|
)
|
|
Total comprehensive income (loss)
|
|
—
|
|
—
|
|
176,610
|
|
(147,518
|
)
|
29,092
|
|
29,636
|
|
58,728
|
|
|
Dividends paid (€0.73 per share)
|
|
—
|
|
—
|
|
(125,920
|
)
|
—
|
|
(125,920
|
)
|
—
|
|
(125,920
|
)
|
|
Return of capital (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(40,087
|
)
|
(40,087
|
)
|
|
Dividend distribution (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(34,062
|
)
|
(34,062
|
)
|
|
Capital increase (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
75,009
|
|
75,009
|
|
|
Shares issued upon exercise of stock options
|
|
1,198
|
|
13,338
|
|
—
|
|
—
|
|
14,536
|
|
—
|
|
14,536
|
|
|
Share-based payment (Note 34)
|
|
—
|
|
—
|
|
—
|
|
8,611
|
|
8,611
|
|
—
|
|
8,611
|
|
|
Capital reallocation (Note 18)
|
|
—
|
|
—
|
|
1,740
|
|
—
|
|
1,740
|
|
(1,740
|
)
|
—
|
|
|
Shares issued under stock award plans
|
|
339
|
|
—
|
|
—
|
|
(339
|
)
|
—
|
|
—
|
|
—
|
|
|
Appropriation of 2012 income in accordance with Italian law
|
|
—
|
|
—
|
|
(63
|
)
|
63
|
|
—
|
|
—
|
|
—
|
|
|
Other movements in equity
|
|
—
|
|
—
|
|
4,622
|
|
(570
|
)
|
4,052
|
|
400
|
|
4,452
|
|
|
Balance at December 31, 2013
|
|
173,992
|
|
1,717,261
|
|
292,847
|
|
15,812
|
|
2,199,912
|
|
403,620
|
|
2,603,532
|
|
F-8
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended December 31, 2012
|
|
|
Attributable to owners of the parent
|
|
Non-
|
|
|
|
|
(€ thousands)
|
|
Issued
Capital
(Note 18)
|
|
Share
Premium
|
|
Retained
Earnings
|
|
Other
Reserves
(Note 18)
|
|
Total
|
|
Controlling
Interests
(Note 19)
|
|
Total
Equity
|
|
|
Balance at January 1, 2012
|
|
172,141
|
|
1,702,688
|
|
118,726
|
|
193,531
|
|
2,187,086
|
|
422,069
|
|
2,609,155
|
|
|
Net income
|
|
—
|
|
—
|
|
233,136
|
|
—
|
|
233,136
|
|
32,089
|
|
265,225
|
|
|
Other comprehensive loss
|
|
—
|
|
—
|
|
—
|
|
(49,559
|
)
|
(49,559
|
)
|
(999
|
)
|
(50,558
|
)
|
|
Total comprehensive income (loss)
|
|
—
|
|
—
|
|
233,136
|
|
(49,559
|
)
|
183,577
|
|
31,090
|
|
214,667
|
|
|
Dividend distribution (€0.71 per share)
|
|
—
|
|
—
|
|
(122,220
|
)
|
—
|
|
(122,220
|
)
|
—
|
|
(122,220
|
)
|
|
Return of capital (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(42,562
|
)
|
(42,562
|
)
|
|
Dividend distribution (Note 18)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(32,116
|
)
|
(32,116
|
)
|
|
Share-based payment (Note 34)
|
|
—
|
|
—
|
|
—
|
|
12,349
|
|
12,349
|
|
—
|
|
12,349
|
|
|
Shares issued upon exercise of stock options
|
|
95
|
|
1,235
|
|
—
|
|
—
|
|
1,330
|
|
—
|
|
1,330
|
|
|
Capital reallocation - Northstar Lottery Group, LLC (Note 18)
|
|
—
|
|
—
|
|
4,032
|
|
—
|
|
4,032
|
|
(4,032
|
)
|
—
|
|
|
Shares issued under stock award plans
|
|
219
|
|
—
|
|
—
|
|
(219
|
)
|
—
|
|
—
|
|
—
|
|
|
Appropriation of 2011 income in accordance with Italian law
|
|
—
|
|
—
|
|
(25
|
)
|
25
|
|
—
|
|
—
|
|
—
|
|
|
Other movements in equity
|
|
—
|
|
—
|
|
2,209
|
|
(562
|
)
|
1,647
|
|
15
|
|
1,662
|
|
|
Balance at December 31, 2012
|
|
172,455
|
|
1,703,923
|
|
235,858
|
|
155,565
|
|
2,267,801
|
|
374,464
|
|
2,642,265
|
|
F-9
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Corporate information
GTECH S.p.A. is a leading commercial operator and provider of technology in the regulated worldwide gaming markets. When used in these notes, unless otherwise specified or the context otherwise indicates, all references to the terms “GTECH,” “we,” “us,” “our,” and the “Company” refer to GTECH S.p.A., the parent entity, and all entities included in our consolidated financial statements.
We operate and provide a full range of services and leading-edge technology products across all gaming markets, including lotteries, machine gaming, sports betting, and interactive gaming. We also provide high-volume processing of commercial transactions. Our state-of-the-art information technology platforms and software enable distribution through land-based systems, Internet and mobile devices. Our principal activities are described in Note 6.
GTECH is a joint stock company incorporated and domiciled in the Republic of Italy, and its registered office is located at Viale del Campo Boario, Rome, Italy. GTECH is majority owned by De Agostini S.p.A., a century-old publishing, media, and financial services company and has been listed on the Italian Stock Exchange managed by Borsa Italiana S.p.A. under the trading symbol “GTK” until April 2, 2015. GTECH has a Sponsored Level 1 American Depository Receipt (ADR) program listed on the United States over the counter market under the trading symbol “GTKYY”.
The consolidated financial statements for the year ended December 31, 2014 were approved for issuance in accordance with a resolution of the Board of Directors on May 12, 2015.
2.
Adoption of new and revised International Financial Reporting Standards
The Company’s accounting policies adopted in the preparation of the 2014 consolidated financial statements are consistent with those of the previous financial year except for:
·
The adoption of new amendments and interpretation effective as of January 1, 2014 as described below; and
·
Starting from the preparation of the unaudited interim condensed consolidated income statement for the three months ended September 30, 2014, the Company has presented “Unusual expense, net” as a separate line item on the consolidated income statement. Unusual items recorded within this line item include transaction costs on significant business combinations and significant gains and losses incurred on disposals of group entities or businesses. Such items are classified as unusual as they are only incidentally related to GTECH’s ordinary activities, are not expected to occur frequently, and hinder comparability of GTECH’s period over period performance. Due to the significance and magnitude of these items, the Company believes that separate identification of this line item allows the users of the consolidated financial statements to take them into appropriate consideration when analyzing GTECH’s performance and assists them in understanding GTECH’s financial performance year over year. In the preparation of the unaudited interim condensed consolidated income statement for the nine months ended September 30, 2014, certain transaction costs related to the acquisition of IGT were reclassified into this line item compared to those previously disclosed in the unaudited interim condensed consolidated income statement for the six months ended June 30, 2014. Transaction costs from October 1, 2014 forward were recorded directly to “Unusual expense, net” in our consolidated income statement.
Adoption of new amendments and interpretation
The nature and the impact of each new amendment and interpretation are described below.
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. These amendments have no impact on the Company, since none of the entities in the Company qualifies to be an investment entity under IFRS 10.
F-10
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32
These amendments clarify the meaning of “currently has a legally enforceable right of set-off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments have no impact on the Company.
Recoverable Amount Disclosures for Non-Financial Assets — Amendments to IAS 36
These amendments require disclosure of the recoverable amounts for the assets or cash-generating units for which an impairment loss has been recognized or reversed during the period. These amendments affect disclosures only and have no impact on the Company.
Novation of Derivatives and Continuation of Hedge Accounting — Amendments to IAS 39
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The amendments have no impact on the Company.
IFRIC Interpretation 21 Levies
IFRIC Interpretation 21 is applicable to all levies imposed by governments under legislation, other than outflows that are within the scope of other standards and fines or other penalties for breaches of legislation. The interpretation clarifies that an entity recognizes a liability for a levy no earlier than when the activity that triggers payment, as identified by the relevant legislation, occurs (except if lower than a specified minimum threshold). The interpretation has no impact on the Company.
IFRS 13 Fair Value Measurement
— This amendment, issued as part of the annual improvements to IFRSs issued in December 2013, clarifies that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment has no impact on the Company.
3.
Significant accounting policies
3.1
Statement of compliance
The consolidated financial statements of the Company have been prepared in accordance with IFRS as adopted by the International Accounting Standards Board (IASB).
3.2
Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for financial assets at fair value through profit or loss, derivative financial instruments and available-for-sale financial investments that have been measured at fair value. The carrying values of recognized assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortized cost are adjusted to record changes in the fair values attributable to the risks that are being hedged in effective hedge relationships. The consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (€000) (except share and per share data) unless otherwise indicated.
Format of the consolidated financial statements
The Company presents assets and liabilities in its statement of financial position based on a current/non-current classification. An asset is current when it is:
·
Expected to be realized or intended to be sold or consumed in a normal operating cycle;
·
Held primarily for the purpose of trading;
·
Expected to be realized within twelve months after the reporting period, or;
·
Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
F-11
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A liability is current when:
·
It is expected to be settled in the normal operating cycle;
·
It is held primarily for the purpose of trading;
·
It is due to be settled within twelve months after the reporting period, or;
·
There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The consolidated income statements are presented using a classification based on the nature of expenses, rather than based on their function of expense, as management believes this presentation provides information that is more relevant.
The consolidated statements of changes in equity include only details of transactions with owners, with non-owner changes in equity presented separately. Comprehensive income is presented in two statements; a separate consolidated income statement and consolidated statement of comprehensive income.
The consolidated statements of cash flows are presented using the indirect method.
The consolidated financial statements provide comparative information in respect of the previous period. In addition, the Company presents an additional statement of financial position at the beginning of the earliest period presented when there is a material retrospective application of an accounting policy, a material retrospective restatement, or a material reclassification of items in its financial statements.
The Company’s principal accounting policies are described below.
3.3
Basis of consolidation
The consolidated financial statements include the financial statements of GTECH and its subsidiaries as of December 31, 2014. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has:
·
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
·
Exposure, or rights, to variable returns from its involvement with the investee, and;
·
The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
·
The contractual arrangement with the other vote holders of the investee
·
Rights arising from other contractual arrangements
·
The Company’s voting rights and potential voting rights
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.
F-12
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Company’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Company are eliminated in consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resulting gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
3.4
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Company elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in unusual expense, net in our consolidated income statement.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognized in profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39
Financial Instruments: Recognition and Measurement
, is measured at fair value with changes in fair value recognized either in profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.
3.5
Systems, equipment and other assets related to contracts, net and property, plant and equipment, net
The Company has two principle types of fixed assets (collectively, “Fixed Assets”):
·
Systems, equipment and other assets relating to contracts
·
Property, plant and equipment
Systems, equipment and other assets relating to contracts are assets that primarily support our Operating Contracts and Facilities Management Contracts.
Property, plant and equipment are assets used internally by the Company primarily in manufacturing, selling, general and administration, research and development and commercial service applications not associated with contracts.
Fixed Assets are stated at cost, net of accumulated depreciation and accumulated impairment loss, if any. The cost, excluding land, is depreciated over the estimated useful life of the assets using the straight-line method.
The estimated useful lives for systems, equipment and other assets related to contracts depends on the type of cost which is comprised of two categories:
F-13
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
Hard costs (for example: terminals, mainframe computers, communications equipment) and;
·
Soft costs (for example: software development).
Hard costs are depreciated over the base term of the contract plus extension years as defined in the contract but generally not to exceed 10 years. Soft costs are depreciated over the base term of the contract, but generally not to exceed 10 years.
The estimated useful lives for property plant and equipment are generally 40 years for buildings and five to 10 years for furniture and equipment.
Repair and maintenance costs are recognized in the income statement as incurred.
The Fixed Assets carrying values are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
Fixed Assets are derecognized upon disposal or when no future economic benefits are expected from the assets’ use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized. The residual values, useful lives and methods of depreciation are reviewed, at a minimum, at each financial year end and adjusted prospectively if appropriate.
3.6
Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in this circumstance is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
3.7
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment loss, if any. Internally generated intangible assets, which do not meet the criteria for capitalization, are recognized in the income statement in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least annually, during the fourth quarter ending on December 31. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. Amortization expense on intangible assets with finite lives is recorded in our consolidated income statement.
F-14
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, as of December 31, either individually or at the cash generating unit level, as appropriate, and when circumstances indicate that the carrying amount may be impaired. The assessment of indefinite life is reviewed annually to determine whether the indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the income statement when the asset is derecognized.
3.8
Investments in associates and joint ventures
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
The Company’s investments in its associates and joint ventures are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Company’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.
The income statement reflects the Company’s share of the results of operations of the associate or joint venture. Any change in other comprehensive income of those investees is presented as part of the Company’s other comprehensive income. Where there has been a change recognized directly in the equity of the associate or joint venture, the Company recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Company and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.
The Company’s share of profit or loss of an associate and a joint venture is included in equity income (loss) in the income statement and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture is prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.
After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its associate or joint venture. At each reporting date, the Company determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the loss in the income statement.
Upon loss of significant influence over the associate or joint control over the joint venture, the Company measures and recognizes any remaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the remaining investment and proceeds from disposal is recognized in the income statement.
F-15
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.9
Interests in joint operations
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
When a company entity undertakes its activities under joint operations, the Company as a joint operator recognizes in relation to its interest in a joint operation its:
·
Assets, including its share of any assets held jointly
·
Liabilities, including its share of any liabilities incurred jointly
·
Revenue from the sale of its share of the output arising from the joint operation
·
Share of the revenue from the sale of the output by the joint operation
·
Expense, including its share of any expenses incurred jointly
The Company accounts for the assets, liabilities, revenues and expense relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.
3.10
Inventories
Inventories are valued at the lower of cost (under the first in, first out method or specific cost basis as considered necessary in the specific circumstances) or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Inventories include amounts related to product sales contracts, including product sales under long-term contracts.
3.11
Trade and other receivables
Trade accounts receivable are reported net of allowances for doubtful accounts and liquidated damages (penalties incurred due to a failure to meet specified deadlines or performance standards). Allowances for doubtful accounts are generally recorded when there is objective evidence that we may not be able to collect the related receivables. Uncollectible receivables are written off when all reasonable collection efforts have been exhausted and it is determined that there is minimal chance of any kind of recovery. Allowances for liquidated damages are generally recorded when they are probable and estimable. Short-term receivables are not discounted because the effect of discounting cash flows is not material.
3.12
Cash and cash equivalents
Cash and cash equivalents in the consolidated statement of financial position are comprised of cash at banks and on hand and short-term, highly liquid investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
3.13
Non-current assets held for distribution to equity holders of the parent and discontinued operations
The Company classifies non-current assets and disposal groups as held for distribution to equity holders of the parent if their carrying amounts will be recovered principally through a distribution rather than through continuing use. Non-current assets and disposal groups classified as held for distribution are measured at the lower of their carrying amount and fair value less costs to sell or to distribute. Costs to distribute are the incremental costs directly attributable to the distribution, excluding the finance costs and income tax expense.
The criteria for held for distribution classification is regarded as met only when the distribution is highly probable and the asset or disposal group is available for immediate distribution in its present condition. Actions required to complete the distribution should indicate that it is unlikely that significant changes to the distribution will be made or that the distribution will be withdrawn. Management must be committed to the distribution expected within one year from the date of classification.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for distribution.
Assets and liabilities classified as held for distribution are presented separately as current items in the statement of financial position.
3.14
Leases
The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement at the inception date and whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
A lease is classified at the inception date as a finance lease or an operating lease.
Finance leases
A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in the income statement.
Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating leases
Operating lease payments are recognized as an expense in the consolidated income statement on a straight line basis over the lease term.
3.15
Financial instruments — initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
a)
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
The Company’s financial assets include cash and cash equivalents, trade and other receivables, loans and other receivables, available-for-sale financial investments, and derivative financial instruments.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognized on the trade date, which is the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
·
Financial assets at fair value through profit or loss;
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
Loans and receivables;
·
Held-to-maturity investments; and
·
Available-for-sale financial investments.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by IAS 39. Financial assets at fair value through profit and loss are carried in the statement of financial position at fair value with net changes in fair value recognized in the income statement.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest method. The effective interest method amortization and losses arising from impairment are recognized in the consolidated income statement.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Company has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest method. The effective interest method amortization and losses arising from impairment are recognized in the consolidated income statement. The Company did not have any held-to-maturity investments during the years ended December 31, 2014 and 2013.
Available-for-sale financial investments
Available-for-sale financial investments include equity investments and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income in the net unrealized gain/(loss) reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in the income statement, or determined to be impaired, at which time the cumulative loss is recognized in the income statement and removed from the net unrealized gain/(loss) reserve. Interest earned while holding available-for-sale financial investments is reported as interest income using the effective interest method.
The Company evaluates whether the ability and intention to sell its available-for-sale financial investments in the near term is still appropriate. When, in rare circumstances, the Company is unable to trade these financial assets due to inactive markets, the Company may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity.
For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortized cost and any previous gain or loss on the asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the effective interest method. Any difference between the new amortized cost and the maturity amount is also amortized over the remaining life of the asset using the effective interest method. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (that is, removed from the Company’s consolidated statement of financial position) when:
·
The rights to receive cash flows from the asset have expired; or
·
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass through” arrangement; and either
(a)
the Company has transferred substantially all the risks and rewards of the asset; or
(b)
the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of the Company’s continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to pay.
b)
Impairment of financial assets
The Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred “loss event”), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortized cost
For financial assets carried at amortized cost, the Company first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognized, are not included in a collective assessment of impairment.
The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is recorded in the income statement.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Available-for-sale financial investments
For available-for-sale financial investments, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.
In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement, is removed from other comprehensive income and recognized in the income statement. Impairment loss on equity investments is not reversed through the income statement; increases in their fair value after impairment are recognized in other comprehensive income.
The determination of what is “significant” or “prolonged” requires judgment. In making this judgment, the Company evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement.
Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recognized in the income statement. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement.
c)
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
Financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include accounts and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts, finance lease obligations, loan guarantees, and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
·
Financial liabilities at fair value through profit or loss; or
·
Loans and borrowings
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the income statement.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial liabilities designated upon initial recognition at fair value through profit and loss are designated at the initial date of recognition, and only if the criteria of IAS 39 are satisfied. The Company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated income statement when the liabilities are derecognized as well as through the effective interest method amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest method. The effective interest method amortization is included in interest expense in the consolidated income statement.
Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognized less cumulative amortization.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the income statement.
d)
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
e)
Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Company uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow hedges and hedges of a net investment in a foreign operation, which are recognized in other comprehensive income and later reclassified to profit or loss when the hedge item affects profit or loss.
For the purpose of hedge accounting, derivatives are classified as:
·
Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (except for foreign currency risk); or
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment; or
·
Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
Fair value hedges
The change in the fair value of a hedging derivative is recognized in the income statement. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognized in the income statement.
For fair value hedges relating to items carried at amortized cost, any adjustment to the carrying value is amortized through the income statement over the remaining term of the hedge using the effective interest method. Effective interest rate amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
If the hedge item is derecognized, the unamortized fair value is recognized immediately in the income statement.
When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the income statement.
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income in the net unrealized gain/(loss) reserve, while any ineffective portion is recognized immediately in the income statement.
Amounts recognized as other comprehensive income are transferred to the income statement when the hedged transaction affects income or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognized as other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in other comprehensive income remains separately in equity until the forecast transaction occurs or the foreign currency firm commitment is met.
Hedges of a net investment in a foreign operation
Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized as other comprehensive income while any gains or losses relating to the ineffective portion are recognized in the income statement. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the income statement.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.16
Fair value measurement
The Company measures financial assets at fair value through profit or loss, derivative financial instruments, and available-for-sale financial investments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
·
In the principal market for the asset or liability, or
·
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
·
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
·
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
·
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
3.17
Treasury shares
GTECH’s equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in the income statement on the purchase, sale, issue or cancellation of the Company’s own equity instruments. If reissued, any difference between the carrying amount and the consideration is recognized in other reserves.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.18
Provisions
General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the consolidated income statement net of any reimbursement.
Warranty provisions
Provisions for warranty-related costs are recognized when the product is sold or service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.
Contingent liabilities recognized in a business combination
A contingent liability recognized in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognized in accordance with the requirements for provisions above or the amount initially recognized less, when appropriate, cumulative amortization recognized in accordance with the requirements for revenue recognition.
3.19
Revenue recognition
Revenue is recognized to the extent that it is probable the economic benefits associated with the transaction will flow to the Company and the amount of revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts. Specific recognition criteria must also be met before revenue is recognized as discussed below.
We generally conduct our business under three types of contractual arrangements: Operating Contracts, Facilities Management Contracts and Product Sale Contracts.
Operating contracts
Certain of our revenue, primarily revenue from our Italy segment, are derived from operating contracts. Under operating contracts, we manage all the activities along the lottery value chain including collecting wagers, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials for the game. We also provide sports pools and sports betting services. Under sports pools arrangements, we manage the sports pool whereby the sports pool prizes are divided among those players who select the correct outcome. There are no odds involved in sports pools and each winner’s payoff depends on the number of players and the size of the pool. We also set odds and assume risks under fixed odds sports betting contracts.
Fees earned under operating contracts are recognized as revenue in the period earned and are classified as service revenue in our consolidated income statement when all of the following criteria are met:
·
The amount of revenue can be measured reliably
·
It is probable that the economic benefits associated with the transaction will flow to the Company
·
The stage of completion of the transaction at the end of the reporting period can be measured reliably
·
The costs incurred for the transaction and the costs to complete the transaction can be measured reliably
Under sports pools arrangements, we collect the wagers, pay prizes, pay a percentage fee to retailers, withhold our fee, and remit the balance to the respective regulatory agency. We assume no risk associated with sports pool wagering. We record revenue net of prize payouts, taxes, retailer commissions and remittances to state authorities, because we are acting as an agent to the authorities.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In sports betting contracts, we establish and assume the risks related to the odds. Under fixed odds betting, the potential payout is fixed at the time bets are placed and we bear the risk of odds setting. We are responsible for collecting the wagers, paying prizes, and paying fees to retailers. We retain the remaining cash as profits. Under these arrangements, we record revenue net, calculated as total wagers less the estimated payout for prizes, because the betting contract is considered a derivative and is required to be recorded at fair value. Taxes and retailer commissions are shown as expenses.
Facilities management contracts
Under facilities management contracts, we construct, install, operate and retain ownership of the online system. These contracts generally provide for a variable amount of monthly or weekly service fees paid to us directly from our customer based on a percentage of sales or net machine income.
Fees earned under facilities management contracts are recognized as revenue in the period earned, throughout the service period, and are classified as service revenue in our consolidated income statement when all of the following criteria are met:
·
The amount of revenue can be measured reliably
·
It is probable that the economic benefits associated with the transaction will flow to the Company
·
The stage of completion of the transaction at the end of the reporting period can be measured reliably
·
The costs incurred for the transaction and the costs to complete the transaction can be measured reliably
Product sale contracts
Under multiple element product sales contracts, we generally construct, sell, deliver and install a turnkey system or deliver equipment, and license the computer software for a fixed price, and our customer subsequently operates the system. Product sale contracts generally include customer acceptance provisions and general customer rights to terminate the contract if we are in breach of the contract.
Because product sales contracts include significant customization, modification and other services prior to customer acceptance that are considered essential to the functionality of the software inherent in our systems, revenue is recognized using contract accounting upon customer acceptance as long as the cost to deliver remaining obligations or elements to the customer can be reasonably estimated. Upon revenue recognition, sufficient revenue is deferred associated with estimated costs to deliver any remaining elements to the customer. Multiple elements are generally recorded as a single unit of accounting at an overall blended margin. Customer acceptance milestones typically coincide with phases of delivery resulting in a percentage of completion recognition of product sales revenues. Amounts due to us and costs incurred by us in constructing the system prior to customer acceptance are deferred. We recognize losses, if any, on contracts when the amount of the loss is probable and determinable. Revenue attributable to the system is classified as product sales in our consolidated income statement and is recognized upon customer acceptance as long as there are no substantial doubts regarding collectibility.
In transactions subject to contract accounting, revenues attributable to any ongoing services (such as post contract support) provided subsequent to customer acceptance are classified as service revenue in our consolidated income statement in the period earned.
In certain product sale contracts (primarily the stand alone sale of lottery or video lottery terminals and software deliverables that do not involve significant customization of software) where we are not responsible for installation, we recognize revenue when all of the following criteria are met:
·
The Company has transferred to the buyer the significant risks and rewards of ownership of the goods
·
The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold
·
The amount of revenue can be measured reliably
·
It is probable that the economic benefits associated with the transaction will flow to the Company
·
The costs incurred or to be incurred in respect of the transaction can be measured reliably
In instances where customer acceptance of the product is required, revenue is deferred until any acceptance criteria have been met.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Our typical payment terms under product sale contracts include customer progress payments based on specific contract milestones with final payment due on or shortly after customer acceptance. In those cases where we provide extended payment terms to our customer, we consider the standard business environment of the customer and industry to determine if extended payment terms are a common practice. While extended payment terms are not our typical profile, terms that extend substantially beyond the date the product is delivered, may result in the necessity to defer revenue. In such cases, we conclude that it is not probable that the economic benefits associated with the transaction will flow to the Company. In other cases where it is an industry practice to provide extended payment terms, we consider the impact of the extended payment terms on the ability to reliably measure revenue and costs due to the time value of money, credit risk associated with the extended payment terms, the potential for fee reductions, and the risk of future concessions. Depending on these considerations, revenue recognition for transactions with extended payment terms may be permitted whereby the revenue is recorded at a discount to take into consideration the time value of money.
Non-lottery commercial transaction processing services
We offer high-volume transaction processing services outside of our core market of providing online lottery services that consist of the acquiring, processing and transmission of commercial non-lottery transactions. Such transactions include bill payments, electronic tax payments, utility payments, prepaid cellular telephone recharges and retail-based programs.
We earn a fee for processing commercial non-lottery transactions that is transaction-based (a fixed fee per transaction or a fee based on a percentage of monetary volume processed). We recognize these fees as service revenue at the time a transaction is processed based on the net amount retained.
Deferred revenue and liquidated damage assessments
Amounts received from customers in advance of revenue recognition are recorded in other current liabilities in our consolidated statements of financial position. We generally record liquidated damage assessments, which are penalties incurred due to a failure to meet specified deadlines or performance standards, as a reduction of revenue in the period they become probable and estimable.
Interest income
Revenue is recognized as interest accrues using the effective interest rate.
3.20
Foreign currency translation
The Company’s consolidated financial statements are presented in euros, which is the Company’s functional and presentation currency. Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized by the Company entities at their respective functional currency rates prevailing at the date of the transaction. At the end of each reporting period, foreign currency monetary items are retranslated at the functional currency spot exchange rate in effect at the reporting date. The resulting foreign currency exchange differences are recorded in our consolidated income statement with the exception of differences that arise on monetary items that provide an effective hedge for a net investment in a foreign operation (such as intragroup loans where settlement is neither planned nor likely to occur in the foreseeable future). These are recognized in other comprehensive income until the disposal of the net investment, at which time they are recognized in the income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as of the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.
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Foreign operations
The assets and liabilities of foreign operations are translated into euros at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in the income statement.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.
3.21
Income taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated income statement. Management periodically evaluates positions taken in the income tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred income tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable income will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilized except:
·
When the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting income nor taxable income or loss; and
·
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable income will be available against which the temporary differences can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable income will allow the deferred income tax asset to be recovered.
Deferred income tax liabilities are recognized for all taxable temporary differences, except:
·
When the deferred income tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting income nor taxable income or loss; and
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred income tax relating to items recognized outside income or loss is recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognized subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognized in the income statement.
3.22
Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
For goodwill and indefinite lived intangible assets, the Company bases its impairment calculation on detailed budgets and forecasts that are prepared separately for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecasts generally cover a period of five years (the “base period”). For periods beyond the base period, a long- term growth rate is applied to project future cash flows.
For assets excluding goodwill and indefinite lived intangible assets, an assessment is made at each reporting date to determine whether there is an indication that a previously recognized impairment loss no longer exists or has decreased. If such indication exists, the Company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
Impairment loss is recorded in the consolidated income statement.
The following criteria are also applied in assessing impairment of goodwill and indefinite lived intangible assets:
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
Goodwill is tested for impairment annually, as of December 31, and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment loss relating to goodwill cannot be reversed in future periods.
Intangible assets
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, as of December 31, either individually or at the cash generating unit level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
3.23
Share-based payments
Employees of the Company may receive remuneration in the form of share-based payments, whereby employees render services in consideration for equity instruments (equity-settled transactions). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using a binomial model.
The cost of equity-settled transactions is recognized, together with a corresponding increase in the share-based payment reserve in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as of the beginning and end of that period and is recognized in personnel expense in the consolidated income statement.
No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
3.24
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
3.25
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an asset when the Company can demonstrate:
·
The technical feasibility of completing the asset so that it will be available for use or sale;
·
Its intention to complete and its ability to use or sell the asset;
·
How the asset will generate future economic benefits;
·
The availability of resources to complete the asset;
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
The ability to measure reliably the expenditure during the development; and
·
The ability to use the intangible asset generated.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment loss. Amortization of the asset begins when development is complete and the asset is available for use and is amortized over the period of expected future benefit. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more frequently when an indication of impairment arises during the year.
3.26
Post employment benefits
The Company has a defined benefit plan (staff severance fund) to provide certain post employment benefits to Italian employees following termination from the Company. Italian employees may choose to participate in an unfunded plan within the Company or transfer their plan balance to independent external funds. These benefits are funded only to the extent paid to the external funds. The cost of providing benefits under the plan, for those employees that participate in the unfunded plan within the Company, is determined using the projected unit credit actuarial valuation method. The cost of providing benefits for those employees that choose to transfer their plan to independent external funds are considered as defined contributions and are accrued as the employees render the related service.
Remeasurements, comprised of actuarial gains and losses, are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
·
The date of the plan amendment or curtailment, and
·
The date that the Company recognizes restructuring-related costs.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation in personnel costs in the consolidated statement of income:
·
Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
·
Net interest expense or income.
3.27
Cash dividend and non-cash distribution to equity holders of the parent
The Company recognizes a liability to make cash or non-cash distributions to equity holders of the parent when the distribution is authorized and the distribution is no longer at the discretion of the Company. A distribution is authorized when it is approved by the Board of Directors. A corresponding amount is recognized directly in equity.
Non-cash distributions are measured at the fair value of the assets to be distributed with fair value re-measurement recognized directly in equity.
Upon distribution of non-cash assets, any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognized in the income statement.
4.
Significant accounting judgments, estimates and assumptions
The preparation of the Company’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Judgments
In the process of applying the Company’s accounting policies, management has made the following judgment that has the most significant effect on the amounts recognized in the consolidated financial statements.
Finance and operating lease commitments
The Company leases the GTECH Corporation world headquarters facility (land and building) in Providence, Rhode Island, USA. The Company determined that the present value of the future minimum lease payments for the building amounted to substantially all of the fair value relating to the Company’s portion of the building and therefore accounts for its portion of the building as a finance lease. The Company also determined that since title to the land will never transfer to the Company, the land is accounted for as an operating lease.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Impairment of Systems, Equipment and Other Assets Related to Contracts
The carrying values of systems, equipment and other assets related to contracts are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. This requires management to make an estimate of the expected future cash flows from the assets and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of systems, equipment and other assets related to contracts at December 31, 2014 and December 31, 2013 was €910.1 million and €899.5 million, respectively. We recorded impairments of systems, equipment and other assets related to contracts of €0.7 million and €6.3 million in 2014 and 2013, respectively. Further details are provided in Note 7.
Impairment of Goodwill
The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the “fair value less costs of disposal” of the cash-generating units to which the goodwill is allocated. Goodwill is tested at the level at which management monitors goodwill. Estimating a fair value less costs of disposal amount requires management to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at December 31, 2014 and December 31, 2013 was €3.4 billion and €3.1 billion, respectively. There were no goodwill impairment charges recorded in 2014 or 2013. Further details are provided in Note 9.
Impairment of Intangible Assets
The Company determines whether intangible assets with definite or indefinite useful lives are impaired at least on an annual basis. This requires management to make an estimate of the expected future cash flows from the assets and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of intangible assets at December 31, 2014 and December 31, 2013 was €1.2 billion and €1.3 billion, respectively. We recorded an impairment recovery of €2.4 million and an impairment charge of €2.6 million, in 2014 and 2013, respectively. Further details are provided in Note 10.
Litigation provisions
Due to the nature of its business, the Company is involved in a number of legal, regulatory and arbitration proceedings regarding, among other matters, claims by and against it as well as injunctions by third parties arising out of the ordinary course of its business and is subject to investigations and compliance inquiries related to its ongoing operations. The outcome of these proceedings and similar future proceedings cannot be predicted with certainty. It is difficult to accurately estimate the outcome of any proceeding. As such, the amounts of the Company’s provision for litigation risk, which has been accrued on the basis of assessments made by external counsel, could vary significantly from the amounts the Company would ultimately pay in any such proceeding. In addition, unfavorable resolution of or significant delay in adjudicating such proceedings could require the Company to pay substantial monetary damages or penalties and/or incur costs which may exceed any provision for litigation
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
risks or, under certain circumstances, cause the termination or revocation of the relevant concession, license or authorization and thereby have a material adverse effect on the Company’s results of operations, business, financial condition or prospects. At December 31, 2014 and December 31, 2013, provisions for litigation matters amounted to €5.6 million and €8.5 million, respectively. Further details are provided in Note 41.
Share-based payments
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments on the date they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant, and incorporates assumptions to the valuation model inputs, including the expected life of the option, volatility, dividend yield and risk-free interest rate. We recorded share-based payment expense of €7.8 million, €8.6 million and
€12.3 million
in 2014, 2013 and 2012, respectively. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 34.
Minimum profit level guarantees
We have three contracts where we have provided customers with minimum profit level guarantees as summarized below. Our estimates of liabilities for minimum profit level guarantees take into consideration contract terms and financial information provided by our customers, the availability and timing of which could significantly impact our estimates. At the inception of the contract, we estimate whether we expect to incur an obligation for the minimum profit level guarantee during the term of the contract. In the event a liability for the obligation is required, we record a liability based on our estimate with an offsetting asset as we consider it to be a cost incurred directly related to the future benefits of the contract. We amortize the asset over the contract term as a reduction of service revenue. In situations where the Company and the customer have not agreed to the methodology for calculating the minimum profit level guarantee, the Company continues to adjust the estimated liability with an offset to the asset until the Company and the customer reach a mutual understanding on the methodology. Any difference between the liability recorded and the actual amount owed to the customer is recorded as an adjustment to service revenue in the period when such difference becomes probable.
Northstar
In January 2011, Northstar Lottery Group, LLC (“Northstar”), a consortium in which GTECH Corporation holds an 80% controlling interest, entered into a ten-year lottery management services contract (the “Illinois Contract”), subject to early termination provisions, with the State of Illinois, acting through the Department of the Lottery (as the statutory successor to the Department of Revenue, Lottery Division) (the “State of Illinois”). Under the Illinois Contract, Northstar, subject to the State of Illinois’s oversight, manages the day-to-day operations of the lottery and its core functions. Northstar guaranteed the State of Illinois a minimum profit level for each fiscal year of the Illinois contract, commencing with the State of Illinois’s fiscal year ended June 30, 2012. The amounts guaranteed and therefore owed by Northstar as shortfall payments under the Illinois Contract were in dispute.
In August 2014, the Illinois Governor’s Office directed the State of Illinois to end its relationship with Northstar, and in December 2014, the Illinois Contract was terminated pursuant to a termination agreement between Northstar, GTECH Corporation, Scientific Games International, Inc. (“SGI”), and the State of Illinois. Northstar will continue to provide lottery management services in Illinois for a transitional period, as outlined in the termination agreement. GTECH Corporation will retain its separate facilities management contract through June 30, 2021. Over one month after its execution by the Governor of Illinois and the State of Illinois, the Illinois Attorney General notified the State of Illinois that it “disapproves” of the “proposed” termination agreement. Relying on the Attorney General’s “disapproval,” the Governor’s Office informed Northstar that it believed the termination agreement was invalid and unenforceable and therefore the Illinois Contract remained in effect. Both Northstar and GTECH Corporation believe that the termination agreement is valid and binding on the parties.
As part of the December 2014 global settlement of disputes in the termination agreement between Northstar, GTECH Corporation, SGI, and the State of Illinois, the shortfall payments Northstar is required to make in relation to its obligation to guarantee minimum profit levels under the Illinois Contract for the fiscal years 2012, 2013 and 2014 have been agreed upon and settled for $21.8 million, $38.6 million and $37.1 million, respectively. No further cash impact will result from this shortfall payments final determination. Northstar will not be responsible for the payment of any other shortfall payment, nor will it be entitled to receive any incentive compensation, for all or any portion of fiscal year 2015, or any subsequent fiscal year.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Included in non-current assets on our consolidated statement of financial position at December 31, 2014 is €56.1 million related to the minimum revenue guarantee which we are amortizing against service revenue over its estimated useful life.
GTECH Indiana
In October 2012, GTECH Indiana, LLC (“GTECH Indiana”), a wholly-owned subsidiary of GTECH Corporation, entered into a 15-year contract with the State Lottery Commission of Indiana (the “State of Indiana”) whereby GTECH Indiana manages the day-to-day operations of the lottery and its core functions, subject to the State of Indiana’s control over all significant business decisions. GTECH Indiana guaranteed the State of Indiana a minimum profit level in each year of the contract, commencing with the contract year ending June 30, 2014. We recorded $17.6 million (€13.9 million) as a reduction of service revenue related to the minimum profit level guarantee in 2014 for the State of Indiana’s fiscal years ending June 30, 2014 and June 30, 2015, of which $1.6 million was settled and related to the State of Indiana’s fiscal year ending June 30, 2014.
Northstar New Jersey
In June 2013, Northstar New Jersey Lottery Group, LLC (“Northstar NJ”), a consolidated joint venture in which GTECH Corporation indirectly holds an approximate 41% interest, entered into a contract with the State of New Jersey (the “State of New Jersey”), Department of the Treasury, Division of Purchase and Property and Division of Lottery (the “New Jersey Lottery”) whereby Northstar NJ manages a wide range of the New Jersey Lottery’s marketing, sales, and related functions, which is subject to the New Jersey Lottery’s continuing control and oversight over the conduct of lottery operations. Northstar NJ guaranteed the State of New Jersey a minimum profit level in each year of the contract, commencing with the contract year ending June 30, 2014. At December 31, 2014, our best estimate, based on unaudited results, is that the impact of a Net Income Shortfall will result in the use of $14.2 million (€11.7 million at the December 31, 2014 exchange rate) of Northstar NJ’s $20 million credit for the State’s fiscal year ended June 30, 2014 and therefore we have not recorded any amounts in our consolidated financial statements related to the minimum profit level guarantee. Based on information available to date, the Company currently believes that the impact of any Net Income Shortfalls for the remaining term of the arrangement with the State of New Jersey will not exceed the remaining balance of $5.9 million of Northstar NJ’s $20 million credit.
Further details of these guarantees, which require management to make estimates and assumptions concerning profit levels, are provided in Note 38.
Income taxes
Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the Company’s wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to taxable income and income tax expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of our companies.
Deferred tax assets are recognized for unused tax losses and tax credits to the extent that it is probable that taxable income will be available against which the losses and tax credits can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable income together with future tax planning strategies.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Based upon the consideration of these factors, the value of deferred tax assets related to operating losses and tax assets related to tax credits are as follows:
|
|
|
December 31,
|
|
|
(€ millions)
|
|
2014
|
|
2013
|
|
|
Recognized deferred tax assets related to operating losses
|
|
90.9
|
|
96.1
|
|
|
Unrecognized deferred tax assets related to operating losses
|
|
63.4
|
|
53.6
|
|
|
Recognized deferred tax assets related to tax credits
|
|
2.5
|
|
1.8
|
|
|
Unrecognized deferred tax assets related to tax credits
|
|
21.2
|
|
18.7
|
|
Further details on income taxes are disclosed in Note 15.
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. Further details are provided in Note 14.
Fair value measurement of contingent consideration
Contingent consideration resulting from business combinations is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor. Further details are provided in Note 38.
5.
Merger agreement with International Game Technology
On July 15, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”), which was subsequently amended, with International Game Technology (“IGT”), a global leader in casino and social gaming entertainment, headquartered in Las Vegas, Nevada.
Under the terms of the Merger Agreement, GTECH and IGT are combined under a newly formed holding company organized and with corporate headquarters in the United Kingdom (“IGT PLC” or “Holdco”), with operating headquarters in each of Las Vegas, Providence and Rome. The Merger Agreement provides for (i) the merger of GTECH with and into Holdco (“Holdco Merger”) pursuant to which each issued and outstanding ordinary share of GTECH is converted into the right to receive one ordinary share of Holdco (“Holdco Shares”), and immediately thereafter, (ii) the merger of a U.S. subsidiary of Holdco (“Sub”) with and into IGT with IGT surviving as a wholly owned subsidiary of Holdco (“Subsidiary Merger”, together with the Holdco Merger the “Mergers” or “IGT Acquisition”).
On November 4, 2014, the extraordinary general shareholders’ meeting of GTECH approved the Holdco Merger, and on February 10, 2015, the special shareholders’ meeting of IGT approved the Subsidiary Merger. On April 7, 2015, GTECH merged with and into IGT PLC, a wholly owned subsidiary of GTECH, and IGT merged with and into Sub, with IGT as the surviving entity. The objective of the Mergers was to combine GTECH and IGT businesses and to relocate the headquarters of GTECH to the United Kingdom.
In connection with the Holdco Merger, GTECH shareholders received one newly issued ordinary share in IGT PLC for each ordinary share held in GTECH. In connection with the Subsidiary Merger, each IGT common share was converted into the right to receive (1) $14.3396 in cash without interest and (2) 0.1819 ordinary shares, nominal value $0.10 per share, of IGT PLC (the “Exchange Ratio”). The total share merger consideration payable to IGT shareholders amounted to €3.3 billion ($3.6 billion) and 45 million IGT PLC shares.
In connection with the closing of the Mergers, IGT PLC issued 198,526,804 ordinary shares to GTECH and IGT shareholders on the basis of the established exchange ratios described above. On April 7, 2015, IGT PLC ordinary shares began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “IGT”.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of the Merger Agreement, the Holdco board of directors will have 13 members, including, for a period of three years after the closing: (i) the chief executive officer of GTECH, (ii) five directors designated by IGT, including IGT’s current chairman and its current chief executive officer, (iii) six directors designated by GTECH’s principal shareholders and (iv) one director mutually agreed to by IGT and GTECH. In addition, for a period of three years following the transactions, IGT’s chairman will be chairman of the Holdco board of directors, IGT’s chief executive officer will be a vice-chairman and one of the directors designated by GTECH’s principal shareholders would also be a vice-chairman. Holdco’s articles of association will include a loyalty share program, under which shareholders that hold Holdco Shares continuously for at least three years will have the right to receive 0.9995 (non-transferable) special voting shares per Holdco Share.
In connection with the Merger Agreement, IGT entered into a Support Agreement and a Voting Agreement with GTECH’s principal shareholders, who held approximately 59% of the outstanding shares of GTECH as of March 14, 2014. Under the terms of the Support Agreement, GTECH’s principal shareholders have agreed to vote their shares in favor of the transactions contemplated by the Merger Agreement and against any competing transaction. Under the Voting Agreement, such shareholders have agreed to vote their shares in accordance with the post-closing governance provisions set forth in the Merger Agreement and described above for a period of three years after the closing of the Mergers.
Due to the fact that the initial accounting for the IGT Acquisition is incomplete at the time these financial statements are authorized for issue, quantitative disclosure relating to the total consideration transferred, the acquisition date fair value of each major class of consideration, contingent consideration, book value and preliminary fair value of assets acquired and liabilities assumed, any resulting goodwill and the total amount of acquisition-related costs is not available.
Settlement of Cash Exit Rights
Under Italian law, GTECH shareholders who did not approve the Holdco Merger were entitled to exercise their statutory right of withdrawal. On April 2, 2015, the 19,796,852 GTECH shares for which entitled GTECH shareholders exercised cash exit rights in relation to the Holdco Merger were settled at the cash exit price of €19.174 per share. Holders of the 62,607 GTECH cash exit shares that had been purchased in a preemptive offer pursuant to Italian law, received ordinary shares of IGT PLC on the basis of the Exchange Ratio, and an interim dividend equal to €0.75. The residual 19,734,245 cash exit shares were purchased by GTECH pursuant to Italian law for a total cash consideration of €378.4 million and cancelled in the Holdco Merger, together with the 2,183,503 treasury shares held at that time by GTECH.
Financing Transactions
In July 2014, GTECH entered into a commitment letter with Credit Suisse AG, Barclays Bank PLC and Citigroup Global Markets Limited (and certain affiliates thereof) which provides a commitment to fund a 364 day senior bridge term loan credit facility (the “Bridge Facility”) in an aggregate principal amount of approximately $10.7 billion (at an exchange rate of $1 per €0.735). By January 26, 2015, the Bridge Facility commitment was reduced to approximately $4.9 billion (at an exchange rate of $1 per €0.735) reflecting GTECH’s financing needs related to the IGT Acquisition.
In November 2014, GTECH S.p.A. and GTECH Corporation entered into a $2.6 billion (at an exchange rate of $1 to €0.795) five year senior facilities agreement. The agreement for the senior facilities provides for a $1.4 billion multicurrency revolving credit facility for GTECH Corporation and an €850 million multicurrency revolving credit
F-35
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
facility for GTECH S.p.A. Upon completion of the IGT Acquisition, the U.S. dollar multicurrency revolving credit facility was also used to repay any outstanding amounts under IGT’s revolving credit facility, which was cancelled, and we are able to borrow under both the U.S. dollar multicurrency revolving credit facility and the euro multicurrency revolving credit facility and IGT is able to borrow under the U.S. dollar multicurrency revolving credit facility, which increased to $1.5 billion.
Developments After Calendar Year 2014
In January 2015, after the close of calendar 2014, GTECH entered into a €800 million four-year senior facilities agreement with BNP Paribas, Intesa San Paolo, Mediobanca and UniCredit (the “Term Loan Agreement”). The Term Loan Agreement provided for two €400 million term loan facilities to GTECH, which may be used for general corporate purposes, including repayment of existing indebtedness. Upon the merger of GTECH with and into Holdco, Holdco became the borrower under one of the term loan facilities and a principal Italian operating subsidiary became the borrower under the other term loan facility.
In February 2015, after the close of calendar 2014, GTECH announced the closing of an approximately $5 billion senior secured notes offering, and in connection therewith, the termination of GTECH’s Bridge Facility. GTECH used proceeds from the offering to pay part of the cash component of the merger consideration for the acquisition of IGT and acquisition-related costs, and to refinance certain existing indebtedness of GTECH and IGT.
6.
Operating segment information
The structure of the Company’s internal organization is aligned around three global geographic regions. Consequently, for management purposes, the Company’s operating segments are organized geographically into three reportable operating segments based on those regions — Americas, International and Italy.
Each of these segments operate and provide a full range of gaming services including lottery management services, online and instant lotteries, sports betting, machine gaming and interactive gaming. They also provide high-volume processing of commercial transactions.
No operating segments have been aggregated to form the above reportable operating segments.
Management monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating income.
Revenue and operating income for the Company’s reportable operating segments are as follows:
|
|
|
Third-party revenue
|
|
Operating income
|
|
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
2014
|
|
2013
|
|
2012
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Italy
|
|
1,745,180
|
|
1,737,090
|
|
1,815,931
|
|
543,467
|
|
499,661
|
|
541,552
|
|
|
Americas
|
|
988,703
|
|
994,085
|
|
872,429
|
|
88,599
|
|
122,164
|
|
88,684
|
|
|
International
|
|
335,222
|
|
331,117
|
|
386,969
|
|
73,756
|
|
50,655
|
|
55,578
|
|
|
|
|
3,069,105
|
|
3,062,292
|
|
3,075,329
|
|
705,822
|
|
672,480
|
|
685,814
|
|
|
Corporate support
|
|
—
|
|
—
|
|
—
|
|
(83,170
|
)
|
(56,065
|
)
|
(41,184
|
)
|
|
Purchase accounting
|
|
548
|
|
542
|
|
356
|
|
(55,623
|
)
|
(57,283
|
)
|
(61,483
|
)
|
|
|
|
3,069,653
|
|
3,062,834
|
|
3,075,685
|
|
567,029
|
|
559,132
|
|
583,147
|
|
Purchase accounting principally represents the depreciation and amortization of acquired tangible and intangible assets in connection with acquired companies including the August 2006 acquisition of GTECH Holdings Corporation by GTECH S.p.A.
F-36
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Corporate support expenses are principally comprised of general and administrative expenses and other expenses that are managed at the corporate level, including Restructuring, Corporate Headquarters and Board of Directors expenses. The increase in costs related to corporate support during 2014 primarily relates to professional fees and expenses associated with the acquisition of IGT.
Depreciation, amortization, and impairment information for the Company’s reportable operating segments are as follows:
|
|
|
Depreciation
|
|
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
Italy
|
|
74,280
|
|
75,395
|
|
71,714
|
|
|
Americas
|
|
135,730
|
|
136,566
|
|
133,980
|
|
|
International
|
|
19,507
|
|
18,885
|
|
19,988
|
|
|
|
|
229,517
|
|
230,846
|
|
225,682
|
|
|
Corporate support
|
|
14,940
|
|
16,321
|
|
15,314
|
|
|
Purchase accounting
|
|
5,020
|
|
7,432
|
|
8,925
|
|
|
|
|
249,477
|
|
254,599
|
|
249,921
|
|
|
|
|
Amortization
|
|
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
Italy
|
|
145,639
|
|
139,977
|
|
132,288
|
|
|
Americas
|
|
6,136
|
|
1,452
|
|
—
|
|
|
International
|
|
154
|
|
3
|
|
822
|
|
|
|
|
151,929
|
|
141,432
|
|
133,110
|
|
|
Corporate support
|
|
832
|
|
406
|
|
944
|
|
|
Purchase accounting
|
|
53,575
|
|
47,846
|
|
51,855
|
|
|
|
|
206,336
|
|
189,684
|
|
185,909
|
|
|
|
|
Impairment loss (recovery), net
|
|
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Operating Segments
|
|
|
|
|
|
|
|
|
Italy
|
|
—
|
|
—
|
|
—
|
|
|
Americas
|
|
—
|
|
—
|
|
—
|
|
|
International
|
|
229
|
|
3,445
|
|
5,145
|
|
|
|
|
229
|
|
3,445
|
|
5,145
|
|
|
Corporate support
|
|
—
|
|
—
|
|
—
|
|
|
Purchase accounting
|
|
(2,424
|
)
|
2,613
|
|
1,082
|
|
|
|
|
(2,195
|
)
|
6,058
|
|
6,227
|
|
Geographic information
The following table presents revenue information by geography regarding the Company’s reportable operating segments. Revenue from external customers is based on the geographical location of the Company’s customers. Prior period amounts have been reclassified to conform to the current year presentation.
F-37
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Total Revenue
|
|
|
|
|
|
|
|
|
Italy
|
|
1,753,422
|
|
1,752,545
|
|
1,839,384
|
|
|
United States
|
|
800,396
|
|
719,918
|
|
667,172
|
|
|
United Kingdom
|
|
77,732
|
|
72,843
|
|
87,837
|
|
|
Colombia
|
|
41,054
|
|
42,062
|
|
47,387
|
|
|
Canada
|
|
33,352
|
|
117,860
|
|
52,585
|
|
|
Other
|
|
363,697
|
|
357,606
|
|
381,320
|
|
|
|
|
3,069,653
|
|
3,062,834
|
|
3,075,685
|
|
The following table presents non-current asset information by geography regarding the Company’s reportable operating segments. Non-current assets are based on the geographical location of the Company’s assets or, in the case of goodwill and intangible assets, net, location of the entity acquired.
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
United States
|
|
3,668,770
|
|
3,298,051
|
|
|
Italy
|
|
1,622,020
|
|
1,784,834
|
|
|
United Kingdom
|
|
94,960
|
|
60,177
|
|
|
Sweden
|
|
71,651
|
|
80,533
|
|
|
Other
|
|
159,256
|
|
153,863
|
|
|
|
|
5,616,657
|
|
5,377,458
|
|
Non-current assets consist of the following items in the consolidated statements of financial position:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Non-Current Assets
|
|
|
|
|
|
|
Systems, equipment and other assets related to contracts, net
|
|
910,095
|
|
899,536
|
|
|
Property, plant and equipment, net
|
|
77,394
|
|
76,382
|
|
|
Goodwill
|
|
3,402,201
|
|
3,095,466
|
|
|
Intangible assets, net
|
|
1,151,472
|
|
1,257,297
|
|
|
Other non-current assets
|
|
75,495
|
|
48,777
|
|
|
|
|
5,616,657
|
|
5,377,458
|
|
F-38
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
Systems, equipment and other assets related to contracts, net
|
(€ thousands)
|
|
Land
|
|
Buildings
|
|
Terminals
and
Systems
|
|
Furniture
and
Equipment
|
|
Contracts
in Progress
|
|
Total
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2013
|
|
556
|
|
18,132
|
|
809,434
|
|
60,751
|
|
57,382
|
|
946,255
|
|
|
Additions
|
|
—
|
|
6,592
|
|
87,517
|
|
7,985
|
|
123,296
|
|
225,390
|
|
|
Acquisitions
|
|
—
|
|
9,103
|
|
1,569
|
|
1,035
|
|
—
|
|
11,707
|
|
|
Depreciation (Note 25)
|
|
—
|
|
(6,191
|
)
|
(218,882
|
)
|
(16,184
|
)
|
—
|
|
(241,257
|
)
|
|
Impairment loss (Note 27)
|
|
—
|
|
—
|
|
(5,774
|
)
|
(539
|
)
|
—
|
|
(6,313
|
)
|
|
Disposals
|
|
—
|
|
(2
|
)
|
(4,495
|
)
|
(84
|
)
|
(4
|
)
|
(4,585
|
)
|
|
Foreign currency translation
|
|
(5
|
)
|
(6
|
)
|
(29,172
|
)
|
(1,377
|
)
|
(867
|
)
|
(31,427
|
)
|
|
Transfers
|
|
—
|
|
9,181
|
|
119,074
|
|
6,707
|
|
(134,730
|
)
|
232
|
|
|
Other
|
|
—
|
|
—
|
|
(466
|
)
|
—
|
|
—
|
|
(466
|
)
|
|
Balance at December 31, 2013
|
|
551
|
|
36,809
|
|
758,805
|
|
58,294
|
|
45,077
|
|
899,536
|
|
|
Additions
|
|
13
|
|
4,448
|
|
59,262
|
|
6,709
|
|
112,970
|
|
183,402
|
|
|
Acquisitions
|
|
—
|
|
—
|
|
—
|
|
327
|
|
—
|
|
327
|
|
|
Depreciation (Note 25)
|
|
—
|
|
(9,953
|
)
|
(208,902
|
)
|
(16,936
|
)
|
—
|
|
(235,791
|
)
|
|
Impairment loss (Note 27)
|
|
—
|
|
—
|
|
(378
|
)
|
(277
|
)
|
—
|
|
(655
|
)
|
|
Disposals
|
|
—
|
|
(9
|
)
|
(5,220
|
)
|
(363
|
)
|
(139
|
)
|
(5,731
|
)
|
|
Foreign currency translation
|
|
—
|
|
28
|
|
54,346
|
|
2,788
|
|
4,902
|
|
62,054
|
|
|
Transfers
|
|
—
|
|
7,375
|
|
89,238
|
|
5,571
|
|
(101,837
|
)
|
347
|
|
|
Other
|
|
—
|
|
3,465
|
|
1,463
|
|
(268
|
)
|
1,946
|
|
6,606
|
|
|
Balance at December 31, 2014
|
|
564
|
|
42,163
|
|
748,614
|
|
55,835
|
|
62,919
|
|
910,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
551
|
|
82,423
|
|
2,012,831
|
|
140,747
|
|
45,077
|
|
2,281,629
|
|
|
Accumulated depreciation
|
|
—
|
|
(45,614
|
)
|
(1,254,026
|
)
|
(82,453
|
)
|
—
|
|
(1,382,093
|
)
|
|
Net book value
|
|
551
|
|
36,809
|
|
758,805
|
|
58,294
|
|
45,077
|
|
899,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
564
|
|
97,359
|
|
2,132,817
|
|
155,109
|
|
62,919
|
|
2,448,768
|
|
|
Accumulated depreciation
|
|
—
|
|
(55,196
|
)
|
(1,384,203
|
)
|
(99,274
|
)
|
—
|
|
(1,538,673
|
)
|
|
Net book value
|
|
564
|
|
42,163
|
|
748,614
|
|
55,835
|
|
62,919
|
|
910,095
|
|
The Company capitalized €0.3 million of borrowing costs in 2014. The rate used to determine the amount of borrowing costs eligible for capitalization was approximately 6%, which was the effective interest rate of all borrowings.
8.
Property, plant and equipment, net
|
(€ thousands)
|
|
Land
|
|
Buildings
|
|
Furniture and
Equipment
|
|
Construction
in Progress
|
|
Total
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2013
|
|
1,953
|
|
25,472
|
|
56,414
|
|
910
|
|
84,749
|
|
|
Additions
|
|
—
|
|
27
|
|
8,598
|
|
753
|
|
9,378
|
|
|
Depreciation (Note 25)
|
|
—
|
|
(1,664
|
)
|
(11,678
|
)
|
—
|
|
(13,342
|
)
|
|
Disposals
|
|
—
|
|
(72
|
)
|
(357
|
)
|
—
|
|
(429
|
)
|
|
Foreign currency translation
|
|
(75
|
)
|
(1,206
|
)
|
(2,449
|
)
|
(12
|
)
|
(3,742
|
)
|
|
Transfers
|
|
—
|
|
—
|
|
210
|
|
(442
|
)
|
(232
|
)
|
|
Balance at December 31, 2013
|
|
1,878
|
|
22,557
|
|
50,738
|
|
1,209
|
|
76,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
—
|
|
12
|
|
6,652
|
|
1,228
|
|
7,892
|
|
|
Depreciation (Note 25)
|
|
—
|
|
(1,673
|
)
|
(12,013
|
)
|
—
|
|
(13,686
|
)
|
|
Disposals
|
|
—
|
|
(75
|
)
|
(960
|
)
|
—
|
|
(1,035
|
)
|
|
Foreign currency translation
|
|
155
|
|
2,434
|
|
5,441
|
|
158
|
|
8,188
|
|
|
Transfers
|
|
—
|
|
—
|
|
344
|
|
(691
|
)
|
(347
|
)
|
|
Balance at December 31, 2014
|
|
2,033
|
|
23,255
|
|
50,202
|
|
1,904
|
|
77,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
1,878
|
|
35,005
|
|
120,765
|
|
1,209
|
|
158,857
|
|
|
Accumulated depreciation
|
|
—
|
|
(12,448
|
)
|
(70,027
|
)
|
—
|
|
(82,475
|
)
|
|
Net book value
|
|
1,878
|
|
22,557
|
|
50,738
|
|
1,209
|
|
76,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
2,033
|
|
38,991
|
|
138,129
|
|
1,904
|
|
181,057
|
|
|
Accumulated depreciation
|
|
—
|
|
(15,736
|
)
|
(87,927
|
)
|
—
|
|
(103,663
|
)
|
|
Net book value
|
|
2,033
|
|
23,255
|
|
50,202
|
|
1,904
|
|
77,394
|
|
F-39
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
Goodwill
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Balance at beginning of year
|
|
3,095,466
|
|
3,188,753
|
|
|
Acquisitions
|
|
13,606
|
|
10,674
|
|
|
Disposal
|
|
(7,752
|
)
|
—
|
|
|
Foreign currency translation
|
|
300,881
|
|
(103,961
|
)
|
|
Balance at end of year
|
|
3,402,201
|
|
3,095,466
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
Cost
|
|
3,209,232
|
|
3,304,615
|
|
|
Accumulated impairment loss
|
|
(113,766
|
)
|
(115,862
|
)
|
|
|
|
3,095,466
|
|
3,188,753
|
|
|
Balance at end of year
|
|
|
|
|
|
|
Cost
|
|
3,516,221
|
|
3,209,232
|
|
|
Accumulated impairment loss
|
|
(114,020
|
)
|
(113,766
|
)
|
|
|
|
3,402,201
|
|
3,095,466
|
|
On May 2, 2014, we acquired 100% of the shares of Probability Plc (“Probability”) a mobile gaming solutions company that provides GTECH with immediate access to a mobile solution in slots and table games, as well as enhances player acquisition and retention experience. The cash purchase price was approximately £18 million (€19.7 million net of cash acquired). Acquired goodwill of €13.6 million in 2014 includes €10.2 million associated with the Probability acquisition.
Acquired goodwill of €10.7 million in 2013 resulted from the April 2013 acquisition of Big Easy S.r.l., an Italian entity that is engaged in the Machine Gaming market.
In July 2014, we sold our sports and events ticketing business (“LisTicket”) to the international operator TicketOne, CTS Eventim Group for €13.9 million. Goodwill associated with this business of €7.8 million was included in the carrying amount when determining the €5.7 million gain on the sale. See Note 28 for additional information.
The Company reviews goodwill for impairment annually, during its fourth quarter ending on December 31, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
F-40
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10.
Intangible assets, net
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Balance at beginning of year
|
|
1,257,297
|
|
1,333,948
|
|
|
Intangible assets acquired during the year:
|
|
|
|
|
|
|
Purchase business combination related:
|
|
|
|
|
|
|
Customer contracts
|
|
6,446
|
|
—
|
|
|
Software
|
|
5,927
|
|
—
|
|
|
|
|
12,373
|
|
—
|
|
|
All other intangible assets acquired during the year:
|
|
|
|
|
|
|
Software
|
|
15,554
|
|
17,151
|
|
|
Concessions and licenses
|
|
4,574
|
|
106,078
|
|
|
Sports betting rights
|
|
2,049
|
|
8,898
|
|
|
Customer contracts
|
|
1,804
|
|
2,090
|
|
|
Networks
|
|
708
|
|
1,324
|
|
|
Other
|
|
—
|
|
3,815
|
|
|
|
|
24,689
|
|
139,356
|
|
|
Total intangible assets acquired
|
|
37,062
|
|
139,356
|
|
|
Amortization (Note 26)
|
|
(206,427
|
)
|
(189,774
|
)
|
|
Foreign currency translation
|
|
61,310
|
|
(23,351
|
)
|
|
Impairment recovery (loss) (Note 27)
|
|
2,423
|
|
(2,613
|
)
|
|
Write-off and other
|
|
(193
|
)
|
(269
|
)
|
|
Balance at end of year
|
|
1,151,472
|
|
1,257,297
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
|
|
|
|
|
Cost
|
|
2,198,735
|
|
2,120,883
|
|
|
Accumulated amortization
|
|
(941,438
|
)
|
(786,935
|
)
|
|
|
|
1,257,297
|
|
1,333,948
|
|
|
Balance at end of year
|
|
|
|
|
|
|
Cost
|
|
2,341,353
|
|
2,198,735
|
|
|
Accumulated amortization
|
|
(1,189,881
|
)
|
(941,438
|
)
|
|
|
|
1,151,472
|
|
1,257,297
|
|
F-41
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets acquired during 2013 of €139.4 million principally related to a $120 million (€91.7 million at the June 2013 acquisition date) upfront payment required under the Services Agreement Northstar New Jersey Lottery Group, LLC signed with the State of New Jersey, Department of the Treasury, Division of Purchase and Property and Division of Lottery in June 2013 to manage a wide range of the lottery’s marketing, sales, and related functions. See Note 38 for additional information.
Intangible assets that are subject to amortization are being amortized ratably over their estimated useful lives, with no estimated residual values. Certain trademarks were determined to have indefinite lives and are not subject to amortization. The Company expects to make use of the trademarks on existing and future business, and no economic, legal or contractual limitation of their useful lives is anticipated. The following tables present detailed information for intangible assets.
|
|
|
As of December 31, 2014
|
|
|
(€ thousands)
|
|
Weighted
Average
Amortization
Period (Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
|
Subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Concessions and licenses
|
|
9.9
|
|
1,120,575
|
|
478,019
|
|
642,556
|
|
|
Customer contracts
|
|
14.8
|
|
703,951
|
|
409,630
|
|
294,321
|
|
|
Capitalized computer software
|
|
6.2
|
|
257,947
|
|
184,000
|
|
73,947
|
|
|
Sports and horse racing betting rights
|
|
6.5
|
|
109,465
|
|
85,233
|
|
24,232
|
|
|
Proprietary hardware
|
|
13.9
|
|
22,603
|
|
13,559
|
|
9,044
|
|
|
Networks
|
|
3.0
|
|
11,912
|
|
8,153
|
|
3,759
|
|
|
Trademarks
|
|
4.0
|
|
6,026
|
|
3,945
|
|
2,081
|
|
|
Patents
|
|
3.5
|
|
4,478
|
|
4,478
|
|
—
|
|
|
Other
|
|
15.0
|
|
7,978
|
|
2,864
|
|
5,114
|
|
|
|
|
|
|
2,244,935
|
|
1,189,881
|
|
1,055,054
|
|
|
Not subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
96,418
|
|
—
|
|
96,418
|
|
|
|
|
|
|
2,341,353
|
|
1,189,881
|
|
1,151,472
|
|
F-42
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
As of December 31, 2013
|
|
|
(€ thousands)
|
|
Weighted
Average
Amortization
Period (Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
|
Subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Concessions and licenses
|
|
9.9
|
|
1,104,316
|
|
360,181
|
|
744,135
|
|
|
Customer contracts
|
|
14.9
|
|
619,974
|
|
319,361
|
|
300,613
|
|
|
Capitalized computer software
|
|
6.2
|
|
228,483
|
|
158,812
|
|
69,671
|
|
|
Sports and horse racing betting rights
|
|
6.5
|
|
107,426
|
|
72,188
|
|
35,238
|
|
|
Proprietary hardware
|
|
13.9
|
|
19,923
|
|
10,521
|
|
9,402
|
|
|
Networks
|
|
3.0
|
|
11,209
|
|
7,263
|
|
3,946
|
|
|
Trademarks
|
|
4.1
|
|
6,297
|
|
3,416
|
|
2,881
|
|
|
Patents
|
|
3.5
|
|
3,966
|
|
3,966
|
|
—
|
|
|
Other
|
|
11.9
|
|
10,835
|
|
5,730
|
|
5,105
|
|
|
|
|
|
|
2,112,429
|
|
941,438
|
|
1,170,991
|
|
|
Not subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
|
86,306
|
|
—
|
|
86,306
|
|
|
|
|
|
|
2,198,735
|
|
941,438
|
|
1,257,297
|
|
The net carrying amount of concessions and licenses includes €422 million and €511 million for the Italian Scratch & Win license renewal at December 31, 2014 and 2013, respectively. The gross carrying value of €800 million is being amortized over nine years beginning October 2010.
F-43
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
Impairment testing of goodwill and intangibles with indefinite lives
Goodwill and other intangible assets with indefinite lives have been allocated to the cash generating units for impairment testing as described below. The Company has six cash generating units comprised of four cash generating units in Italy and Americas and International each being a single cash generating unit. A portion of the carrying amount of goodwill and intangible assets with indefinite lives could not be allocated to the individual cash generating units in Italy on a non-arbitrary basis and was therefore allocated (as permitted by IAS 36) to the group of four cash generating units in Italy (Italy region). This represents the lowest level within the Company at which this portion of the carrying amount of goodwill and intangible assets with indefinite lives is monitored for internal management purposes. A separate impairment test of the carrying amount of goodwill and intangible assets with indefinite lives is performed at the Italy region level in addition to the impairment test carried out for the six cash generating units identified at the date of the reorganization.
The carrying amount of goodwill and trademarks are as follows:
|
|
|
Goodwill
|
|
Trademarks
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
(thousands of euros)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
Italy:
|
|
|
|
|
|
|
|
|
|
|
Italy region
|
|
624,556
|
|
548,588
|
|
42,679
|
|
38,214
|
|
|
Lottery
|
|
445,175
|
|
445,175
|
|
—
|
|
—
|
|
|
Commercial Services
|
|
210,514
|
|
218,266
|
|
—
|
|
—
|
|
|
Sports Betting
|
|
63,216
|
|
63,216
|
|
—
|
|
—
|
|
|
Machine Gaming
|
|
48,209
|
|
44,605
|
|
—
|
|
—
|
|
|
|
|
1,391,670
|
|
1,319,850
|
|
42,679
|
|
38,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
1,335,115
|
|
1,175,377
|
|
37,937
|
|
33,968
|
|
|
International
|
|
675,416
|
|
600,239
|
|
15,802
|
|
14,124
|
|
|
|
|
3,402,201
|
|
3,095,466
|
|
96,418
|
|
86,306
|
|
Italy
The recoverable amounts for the Italy cash generating units and group of cash generating units (Italy region) have been determined based on fair value less costs to sell using the discounted cash flow method of the income approach to value. Under this method we utilized cash flow projections based on financial forecasts covering a period of five years that were approved by senior management, and are believed to be consistent with the assumptions that market participants would make. Cash flows beyond the base periods assume no annual growth rates.
Americas and International
The recoverable amounts for the Americas and International cash generating units have been determined based on fair value less costs to sell using the discounted cash flow method of the income approach to value. Under this method we utilized cash flow projections based on financial forecasts covering a period of five years that were approved by senior management, and are believed to be consistent with the assumptions that market participants would make. Cash flows beyond the five year period were extrapolated using an annual growth rate of 3.0%, which reflects the estimated sustainable long-term growth rate of the Americas and International cash generating units.
F-44
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Key assumptions used in the fair value less costs to sell calculations
After-tax discount rate
Discount rates were calculated based on the estimated cost of equity capital and debt capital considering data and factors relevant to the economy, the industry, and the cash generating units. The estimated cost of equity capital and debt capital were weighted in terms of a typical industry capital structure to arrive at a weighted average cost of capital. The after-tax discount rates applied to the cash flow projections for the cash generating units and group of cash generating units in Italy (Italy region) were as follows:
|
Italy:
|
|
|
|
|
Italy region
|
|
9.00
|
%
|
|
Lottery
|
|
8.85
|
%
|
|
Commercial Services
|
|
7.45
|
%
|
|
Sports Betting
|
|
7.20
|
%
|
|
Machine Gaming
|
|
10.10
|
%
|
|
|
|
|
|
|
Americas
|
|
7.30
|
%
|
|
International
|
|
8.60
|
%
|
Annual growth rate after 2019
Growth rates after 2019 used to extrapolate cash flows beyond the base forecast period are based on market data, input from management and considerations relevant to each of the cash generating units and group of cash generating units including their contracts.
Service revenue and related profit
Projected cash flows from service revenue assumes the continuation of recent historical trends adjusted for expected new contract wins, anticipated contract renewal pricing pressures, and the expected impact of sales and marketing initiatives that are being developed or expected to be developed.
Product sales and related profit
Projected cash flows from product sales assumes renewal orders from existing customers in connection with known upcoming procurements, along with orders from new or developing customers and markets at selling prices generally in line with historical experiences adjusted for expected competitive pressures.
The recoverable amounts and carrying amounts of the Company’s cash generating units are summarized as follows:
|
(thousands of euros)
|
|
Recoverable
Amount
|
|
Carrying
Amount
|
|
Excess
|
|
|
Italy region
|
|
2,560,000
|
|
2,137,626
|
|
422,374
|
|
|
Italy:
|
|
|
|
|
|
|
|
|
Lottery
|
|
2,070,000
|
|
970,771
|
|
1,099,229
|
|
|
Commercial Services
|
|
190,000
|
|
180,168
|
|
9,832
|
|
|
Sports Betting
|
|
300,000
|
|
103,835
|
|
196,165
|
|
|
Machine Gaming
|
|
700,000
|
|
382,175
|
|
317,825
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
2,726,299
|
|
2,346,951
|
|
379,348
|
|
|
International
|
|
1,531,999
|
|
950,940
|
|
581,059
|
|
F-45
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The after-tax discount rates and annual growth rates needed to render the recoverable amounts equal to the carrying amounts are as follows:
|
|
|
After-tax
discount rate
|
|
Annual growth
rate after
2019
|
|
|
Italy region
|
|
10.45
|
%
|
-1.96
|
%
|
|
Italy:
|
|
|
|
|
|
|
Lottery
|
|
16.65
|
%
|
-13.86
|
%
|
|
Commercial Services
|
|
7.79
|
%
|
-0.35
|
%
|
|
Sports Betting
|
|
19.05
|
%
|
-17.32
|
%
|
|
Machine Gaming
|
|
19.97
|
%
|
-27.32
|
%
|
|
|
|
|
|
|
|
|
Americas
|
|
8.00
|
%
|
2.18
|
%
|
|
International
|
|
12.28
|
%
|
-2.23
|
%
|
F-46
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12.
Investments in associates and joint ventures
The Company’s investments in associates and joint ventures are as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Yeonama Holdings Co. Limited
|
|
19,229
|
|
19,800
|
|
|
Subtotal associate
|
|
19,229
|
|
19,800
|
|
|
CLS-GTECH Company Limited
|
|
3,107
|
|
6,435
|
|
|
LB Participacoes e Loterias LTDA
|
|
1,209
|
|
—
|
|
|
Ringmaster S.r.l.
|
|
896
|
|
632
|
|
|
Technology and Security Printing S.r.l.
|
|
33
|
|
3
|
|
|
L-Gaming S.A.
|
|
—
|
|
24
|
|
|
Subtotal joint ventures
|
|
5,245
|
|
7,094
|
|
|
|
|
24,474
|
|
26,894
|
|
Yeonama Holdings Co. Limited
The Company has a 30% interest in Yeonama Holdings Co. Limited (“Yeonama”), a shareholder in Emma Delta Limited, the fund that holds a 33% interest in OPAP S.A., the Greek gaming and football betting operator. During 2014, the Company ceased to have significant influence over Yeonama and the investment is accounted for at fair value at December 31, 2014. The Company believes that the investment in Yeonama is recoverable.
CLS-GTECH Company Limited
The Company has a 50% interest in CLS-GTECH Company Limited (“CLS-GTECH”), which is accounted for using the equity method of accounting. CLS-GTECH is a joint venture that was formed to provide a nationwide KENO system for Welfare lotteries throughout China.
F-47
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13.
Other assets (non-current and current)
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Other non-current assets
|
|
|
|
|
|
|
Minimum revenue guarantee
|
|
56,148
|
|
28,430
|
|
|
Deferred costs
|
|
6,244
|
|
4,731
|
|
|
Customer receivables
|
|
3,915
|
|
5,781
|
|
|
Prepaid expenses
|
|
3,700
|
|
4,535
|
|
|
Deposits
|
|
3,209
|
|
2,705
|
|
|
Sales-type lease receivables
|
|
1,779
|
|
1,399
|
|
|
Other
|
|
500
|
|
1,196
|
|
|
|
|
75,495
|
|
48,777
|
|
We recorded non-current assets related to the minimum revenue guarantee in the State of Illinois as follows:
|
(in thousands)
|
|
€
|
|
$
|
|
|
Balance at January 1, 2013
|
|
—
|
|
—
|
|
|
Additions
|
|
32,110
|
|
42,000
|
|
|
Service revenue amortization
|
|
(2,067
|
)
|
(2,792
|
)
|
|
Foreign currency translation
|
|
(1,613
|
)
|
—
|
|
|
Balance at December 31, 2013
|
|
28,430
|
|
39,208
|
|
|
Additions
|
|
29,287
|
|
40,000
|
|
|
Impairment (contra service revenue)
|
|
(2,059
|
)
|
(2,500
|
)
|
|
Service revenue amortization
|
|
(6,562
|
)
|
(8,539
|
)
|
|
Foreign currency translation
|
|
7,052
|
|
—
|
|
|
Balance at December 31, 2014
|
|
56,148
|
|
68,169
|
|
The asset is being amortized over the remaining term of the ten-year agreement with the State of Illinois (ending January 17, 2021), as a reduction of service revenue in the consolidated income statements. See Note 38 for additional information.
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Other current assets
|
|
|
|
|
|
|
Restricted cash
|
|
89,050
|
|
88,553
|
|
|
Bridge facility fees
|
|
57,906
|
|
—
|
|
|
Concession fees receivable
|
|
50,847
|
|
52,921
|
|
|
Prepaid expenses
|
|
17,166
|
|
14,948
|
|
|
Other receivables
|
|
17,506
|
|
8,300
|
|
|
Value-added tax receivable
|
|
7,616
|
|
11,262
|
|
|
Other tax receivables
|
|
6,689
|
|
8,356
|
|
|
Other
|
|
8,508
|
|
6,177
|
|
|
|
|
255,288
|
|
190,517
|
|
The Company classifies cash that is not available to finance the Company’s day-to-day operations (principally funds that are legally restricted in the Company’s Commercial Services business) as restricted cash.
Bridge facility fees in 2014 are comprised of fees of €91.4 million, net of accumulated amortization. See Notes 20 and 30 for further information.
F-48
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.
Financial assets and financial liabilities
Fair values
Set out below is a comparison by class of the carrying amounts and fair values of our financial assets and financial liabilities:
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
|
Loans and receivables
|
|
|
|
|
|
|
|
|
|
|
Other loans and receivables
|
|
6,733
|
|
6,733
|
|
10,528
|
|
10,528
|
|
|
|
|
6,733
|
|
6,733
|
|
10,528
|
|
10,528
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
Swap receivable
|
|
—
|
|
—
|
|
6,498
|
|
6,498
|
|
|
|
|
—
|
|
—
|
|
6,498
|
|
6,498
|
|
|
Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
Call option
|
|
—
|
|
—
|
|
480
|
|
480
|
|
|
|
|
—
|
|
—
|
|
480
|
|
480
|
|
|
Available-for-sale financial investments
|
|
|
|
|
|
|
|
|
|
|
Other available-for-sale financial investments
|
|
14,824
|
|
14,824
|
|
11,380
|
|
11,380
|
|
|
|
|
14,824
|
|
14,824
|
|
11,380
|
|
11,380
|
|
|
Non-current financial assets
|
|
21,557
|
|
21,557
|
|
28,886
|
|
28,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
1,646
|
|
1,646
|
|
859
|
|
859
|
|
|
Swap receivable
|
|
—
|
|
—
|
|
4,070
|
|
4,070
|
|
|
Fuel cost hedge
|
|
—
|
|
—
|
|
34
|
|
34
|
|
|
|
|
1,646
|
|
1,646
|
|
4,963
|
|
4,963
|
|
|
Loans and receivables
|
|
|
|
|
|
|
|
|
|
|
Other loans and receivables
|
|
8,740
|
|
8,740
|
|
7,310
|
|
7,310
|
|
|
|
|
8,740
|
|
8,740
|
|
7,310
|
|
7,310
|
|
|
Current financial assets
|
|
10,386
|
|
10,386
|
|
12,273
|
|
12,273
|
|
F-49
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
|
Revolving Credit Facilities
|
|
721,938
|
|
738,914
|
|
—
|
|
—
|
|
|
2010 Notes (due 2018)
|
|
484,837
|
|
528,717
|
|
496,128
|
|
535,979
|
|
|
2012 Notes (due 2020)
|
|
472,229
|
|
536,904
|
|
492,851
|
|
504,161
|
|
|
Capital Securities
|
|
45,280
|
|
46,580
|
|
743,803
|
|
767,726
|
|
|
2009 Notes (due 2016)
|
|
—
|
|
—
|
|
756,558
|
|
824,960
|
|
|
Facilities
|
|
—
|
|
—
|
|
150,446
|
|
152,273
|
|
|
Other
|
|
1,454
|
|
1,454
|
|
1,474
|
|
1,474
|
|
|
Loans and borrowings (Note 20)
|
|
1,725,738
|
|
1,852,569
|
|
2,641,260
|
|
2,786,573
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
Finance leases
|
|
55,795
|
|
57,602
|
|
58,925
|
|
61,001
|
|
|
Other financial liabilities
|
|
4,723
|
|
4,723
|
|
1,675
|
|
1,675
|
|
|
Non-current financial liabilities
|
|
60,518
|
|
62,325
|
|
60,600
|
|
62,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Securities
|
|
747,585
|
|
769,045
|
|
46,406
|
|
47,899
|
|
|
2010 Notes (due 2018)
|
|
24,549
|
|
26,771
|
|
24,549
|
|
26,521
|
|
|
2012 Notes (due 2020)
|
|
14,408
|
|
16,381
|
|
14,408
|
|
14,739
|
|
|
Short-term borrowings
|
|
8,895
|
|
8,895
|
|
851
|
|
851
|
|
|
Revolving Credit Facilities
|
|
189
|
|
189
|
|
—
|
|
—
|
|
|
Facilities
|
|
—
|
|
—
|
|
125,901
|
|
127,424
|
|
|
2009 Notes (due 2016)
|
|
—
|
|
—
|
|
2,926
|
|
3,190
|
|
|
Other
|
|
147
|
|
147
|
|
306
|
|
306
|
|
|
Loans and borrowings (Note 20)
|
|
795,773
|
|
821,428
|
|
215,347
|
|
220,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
3,786
|
|
3,786
|
|
4,055
|
|
4,055
|
|
|
Net investment hedge
|
|
—
|
|
—
|
|
240
|
|
240
|
|
|
|
|
3,786
|
|
3,786
|
|
4,295
|
|
4,295
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
|
Dividends payable
|
|
129,594
|
|
129,594
|
|
—
|
|
—
|
|
|
Factoring liability
|
|
47,823
|
|
47,823
|
|
—
|
|
—
|
|
|
Bridge facility fees
|
|
44,673
|
|
44,673
|
|
—
|
|
—
|
|
|
Note consent fees
|
|
28,627
|
|
28,627
|
|
—
|
|
—
|
|
|
Finance leases
|
|
13,983
|
|
14,748
|
|
12,977
|
|
13,665
|
|
|
Other financial liabilities
|
|
6,533
|
|
6,533
|
|
4,231
|
|
4,231
|
|
|
|
|
271,233
|
|
271,998
|
|
17,208
|
|
17,896
|
|
|
Current financial liabilities
|
|
275,019
|
|
275,784
|
|
21,503
|
|
22,191
|
|
F-50
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Management assessed that the fair values of cash and cash equivalents, trade and other receivables, other current assets, accounts payable, and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments.
The fair values of our material financial assets and financial liabilities were determined using the following methods and assumptions:
·
Loans and receivables were stated at cost due to their short-term nature, which approximates fair value
·
Swap receivable was determined by comparing the present value of expected cash flows using current variable interest rates and the present value of expected cash flows using fixed interest rates
·
Available-for-sale financial investments are based on current market prices when available or derived from valuation techniques that include inputs for the asset that are not based on observable market data
·
Foreign currency forward contracts were calculated by reference to current forward exchange rates for contracts with similar maturity profiles
·
2009 Notes (due 2016), Capital Securities, 2010 Notes (due 2018) and 2012 Notes (due 2020) were calculated by independent investment bankers by discounting future cash flows using current market prices and market interest rates
·
Revolving Credit Facilities and Facilities with variable interest rates approximate carrying amounts, excluding the effect of debt issuance costs
·
Finance leases were principally determined using the present value of the lease payments based on current market interest rates
·
Dividends payable, factoring liability, bridge facility fees, note consent fees and other financial liabilities were stated at amortized cost, which approximates fair value due to their short-term nature
Fair value hierarchy
Financial assets and financial liabilities for which fair value is either measured or disclosed are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
·
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
·
Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly;
·
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.
For financial assets and financial liabilities that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
F-51
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following tables provide the fair value measurement hierarchy of the Company’s financial assets and financial liabilities:
|
|
|
December 31, 2014
|
|
|
(€ thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Assets measured at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale financial investments
|
|
5,826
|
|
—
|
|
8,998
|
|
14,824
|
|
|
Non-current financial assets
|
|
5,826
|
|
—
|
|
8,998
|
|
14,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
—
|
|
1,646
|
|
—
|
|
1,646
|
|
|
Current financial assets
|
|
—
|
|
1,646
|
|
—
|
|
1,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
—
|
|
3,786
|
|
—
|
|
3,786
|
|
|
Current financial liabilities
|
|
—
|
|
3,786
|
|
—
|
|
3,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets for which fair value is disclosed
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
—
|
|
6,733
|
|
—
|
|
6,733
|
|
|
Non-current financial assets
|
|
—
|
|
6,733
|
|
—
|
|
6,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
—
|
|
8,451
|
|
289
|
|
8,740
|
|
|
Current financial assets
|
|
—
|
|
8,451
|
|
289
|
|
8,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities for which fair value is disclosed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings
|
|
—
|
|
1,852,569
|
|
—
|
|
1,852,569
|
|
|
Other financial liabilities
|
|
—
|
|
4,723
|
|
—
|
|
4,723
|
|
|
Non-current financial liabilities
|
|
—
|
|
1,857,292
|
|
—
|
|
1,857,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings
|
|
—
|
|
821,428
|
|
—
|
|
821,428
|
|
|
Dividends payable
|
|
—
|
|
129,594
|
|
—
|
|
129,594
|
|
|
Factoring liability
|
|
47,823
|
|
—
|
|
—
|
|
47,823
|
|
|
Bridge financing fees
|
|
—
|
|
44,673
|
|
—
|
|
44,673
|
|
|
Bond consent fees
|
|
—
|
|
28,627
|
|
—
|
|
28,627
|
|
|
Other financial liabilities
|
|
—
|
|
6,533
|
|
—
|
|
6,533
|
|
|
Current financial liabilities
|
|
47,823
|
|
1,030,855
|
|
—
|
|
1,078,678
|
|
F-52
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Assets measured at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit or loss
|
|
—
|
|
—
|
|
480
|
|
480
|
|
|
Derivatives
|
|
—
|
|
6,498
|
|
—
|
|
6,498
|
|
|
Available-for-sale financial investments
|
|
3,811
|
|
—
|
|
7,569
|
|
11,380
|
|
|
Non-current financial assets
|
|
3,811
|
|
6,498
|
|
8,049
|
|
18,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
—
|
|
4,963
|
|
—
|
|
4,963
|
|
|
Current financial assets
|
|
—
|
|
4,963
|
|
—
|
|
4,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
—
|
|
4,295
|
|
—
|
|
4,295
|
|
|
Current financial liabilities
|
|
—
|
|
4,295
|
|
—
|
|
4,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets for which fair value is disclosed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
—
|
|
10,528
|
|
—
|
|
10,528
|
|
|
Non-current financial assets
|
|
—
|
|
10,528
|
|
—
|
|
10,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
—
|
|
6,990
|
|
320
|
|
7,310
|
|
|
Current financial assets
|
|
—
|
|
6,990
|
|
320
|
|
7,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities for which fair value is disclosed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings
|
|
—
|
|
2,786,573
|
|
—
|
|
2,786,573
|
|
|
Other financial liabilities
|
|
—
|
|
1,675
|
|
—
|
|
1,675
|
|
|
Non-current financial liabilities
|
|
—
|
|
2,788,248
|
|
—
|
|
2,788,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and borrowings
|
|
—
|
|
220,930
|
|
—
|
|
220,930
|
|
|
Other financial liabilities
|
|
—
|
|
3,731
|
|
500
|
|
4,231
|
|
|
Current financial liabilities
|
|
—
|
|
224,661
|
|
500
|
|
225,161
|
|
Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities
|
(€ thousands)
|
|
Financial assets
at fair value
through
profit or loss
|
|
Available-for-sale
financial
investments
|
|
|
Balance at January 1, 2013
|
|
480
|
|
4,633
|
|
|
Purchases
|
|
—
|
|
2,941
|
|
|
Total losses recognized in other comprehensive income
|
|
—
|
|
(5
|
)
|
|
Balance at December 31, 2013
|
|
480
|
|
7,569
|
|
|
Purchases
|
|
—
|
|
1,409
|
|
|
Settlements
|
|
(480
|
)
|
—
|
|
|
Total gains recognized in other comprehensive income
|
|
—
|
|
20
|
|
|
Balance at December 31, 2014
|
|
—
|
|
8,998
|
|
F-53
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.
Income tax
Income before income tax expense consists of the following:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Italy
|
|
308,199
|
|
339,867
|
|
384,330
|
|
|
Foreign
|
|
(20,620
|
)
|
46,205
|
|
39,673
|
|
|
|
|
287,579
|
|
386,072
|
|
424,003
|
|
The significant components of income tax expense are as follows:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Current
|
|
|
|
|
|
|
|
|
Italy
|
|
156,081
|
|
132,646
|
|
125,903
|
|
|
Foreign
|
|
33,440
|
|
43,394
|
|
31,897
|
|
|
Total Current
|
|
189,521
|
|
176,040
|
|
157,800
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Italy
|
|
8,096
|
|
18,391
|
|
8,098
|
|
|
Foreign
|
|
(7,647
|
)
|
(13,594
|
)
|
(7,120
|
)
|
|
Total Deferred
|
|
449
|
|
4,797
|
|
978
|
|
|
Income tax expense
|
|
189,970
|
|
180,837
|
|
158,778
|
|
F-54
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities consist of the following:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
Provisions not currently deductible for tax purposes
|
|
99,637
|
|
114,351
|
|
|
Net operating loss carryforward
|
|
90,945
|
|
88,409
|
|
|
Depreciation and amortization
|
|
26,107
|
|
24,024
|
|
|
Cash collected in excess of revenue recognized
|
|
6,675
|
|
1,453
|
|
|
Share based compensation
|
|
5,331
|
|
11,062
|
|
|
Tax credit carryforward
|
|
2,542
|
|
1,831
|
|
|
Inventory reserves
|
|
765
|
|
738
|
|
|
Foreign currency translation
|
|
—
|
|
11,508
|
|
|
Other
|
|
5,305
|
|
2,189
|
|
|
|
|
237,307
|
|
255,565
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
Acquired intangible assets
|
|
266,801
|
|
258,728
|
|
|
Depreciation and amortization
|
|
111,055
|
|
111,011
|
|
|
Foreign currency translation
|
|
12,467
|
|
—
|
|
|
Other
|
|
2,254
|
|
6,104
|
|
|
|
|
392,577
|
|
375,843
|
|
|
Net deferred tax liabilities
|
|
(155,270
|
)
|
(120,278
|
)
|
|
Reconciliation to the statement of financial position
|
|
|
|
|
|
|
Deferred income tax assets
|
|
22,026
|
|
14,000
|
|
|
Deferred income tax liabilities
|
|
(177,296
|
)
|
(134,278
|
)
|
|
|
|
(155,270
|
)
|
(120,278
|
)
|
|
Reconciliation of net deferred tax liabilities
|
|
|
|
|
|
|
Net deferred tax liabilities at December 31, 2014
|
|
(155,270
|
)
|
|
|
|
Net deferred tax liabilities at December 31, 2013
|
|
(120,278
|
)
|
|
|
|
Net change on the statement of financial position
|
|
(34,992
|
)
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense recorded to the income statement
|
|
(449
|
)
|
|
|
|
Other deferred tax expense recorded to equity
|
|
(34,543
|
)
|
|
|
|
|
|
(34,992
|
)
|
|
|
F-55
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The effective income tax rate on income before income tax expense differed from the Italian statutory tax rate for the following reasons:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Income before income tax expense
|
|
287,579
|
|
386,072
|
|
424,003
|
|
|
Italian statutory tax rate
|
|
27.50
|
%
|
27.50
|
%
|
27.50
|
%
|
|
Theoretical provision for income taxes
|
|
79,084
|
|
106,170
|
|
116,601
|
|
Reconciliation of the theoretical and effective provision for income taxes:
|
Permanent differences
|
|
|
|
|
|
|
|
|
Italian local tax (IRAP)
|
|
32,131
|
|
33,105
|
|
32,939
|
|
|
Italian reorganization tax
|
|
27,242
|
|
—
|
|
—
|
|
|
Tax settlement
|
|
15,090
|
|
28,829
|
|
—
|
|
|
Foreign tax rate differential
|
|
31,396
|
|
16,963
|
|
13,797
|
|
|
Substitutive tax basis benefit
|
|
(1,068
|
)
|
(1,884
|
)
|
(1,855
|
)
|
|
Nondeductible expense
|
|
6,095
|
|
(2,406
|
)
|
(2,906
|
)
|
|
Other
|
|
—
|
|
60
|
|
202
|
|
|
Total tax provision
|
|
189,970
|
|
180,837
|
|
158,778
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
66.1
|
%
|
46.8
|
%
|
37.4
|
%
|
At December 31, 2014, a €199.0 million deficit existed in undistributed earnings of foreign subsidiaries. Accordingly, no undistributed earnings existed that would have required the consideration of a deferred tax liability if such earnings were forecasted to be distributed in the foreseeable future. If undistributed earnings had existed at December 31, 2014, an associated deferred tax liability would not have been required because there is no intention by the Company to remit foreign earnings in the foreseeable future.
At December 31, 2014, the Company has recognized deferred tax assets related to operating losses of €90.9 million (United States, foreign, and Italian net operating losses) and recognized deferred tax assets related to tax credits of €2.5 million. The recognition of these assets is based on expectations that sufficient taxable income will be generated in future years to utilize the tax loss carry forwards. The Company also has €63.4 million of unrecognized deferred tax assets related to net operating losses and €21.2 million of unrecognized deferred tax assets related to tax credits. These deferred tax assets were not recorded because realization of these assets is uncertain.
At December 31, 2014, the Company also has United States (“US”) federal net operating loss carry forwards of €216.5 million that expire at various dates through 2031. The Company also has Italian net operating loss carry forwards of €6.2 million which have no expiration date.
At December 31, 2014, the Company had US state net operating losses that will expire at various dates through 2034. The Company has recorded a deferred tax asset of €11.6 million for these state net operating losses.
At December 31, 2014, the Company had unrecognized foreign net operating losses of €155.3 million that expire at various dates through 2034. The Company also had unrecognized US tax credit carry forwards of €21.6 million that expire in 2017.
At December 31, 2014 and 2013, the Company recorded no income tax expense related to unresolved disputes with taxation authorities.
F-56
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In December 2013, the Company reached an agreement with the Italian Tax Agency for the settlement of certain tax matters. In particular, the tax matters related to the corporate reorganization and subsequent restructuring of certain intercompany financing transactions related to the acquisition of GTECH Holdings Corporation in 2006; a proceeding regarding the Bingo game in Italy during 2002-2004; and the acquisitions in the gaming machine sector during 2007-2008. The agreement involved total charges of €34.7 million in 2013, while €6.3 million were previously provisioned by the Company. The matters settled were of an interpretative nature, and the Company agreed to the settlement taking into account the lengthy legal process involved in resolving such controversies, the related costs that further disputes would create, and the uncertainty of their outcomes.
In December 2014, the Company reached agreement with the Italian Tax Agency for the settlement of certain tax matters. The settlement payment was €15.1 million which includes €13.0 million of tax and €2.0 million of interest and €0.1 million of penalties.
In December 2014, the Company has implemented part of the intended reorganization resulting in the realization of capital gains with related taxes of €27.2 million. Before the cross border merger with and into Georgia Worldwide Plc was completed, the Company has carried out, subject to any required authorizations, a reorganization of its Italian business, in order to separate operating activities from holding activities, to allow the continuity of Italian activities and to rationalize its participations through a new Italian Holding company.
16. Inventories
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Raw materials
|
|
25,349
|
|
20,386
|
|
|
Work in progress
|
|
44,408
|
|
35,916
|
|
|
Finished goods
|
|
82,285
|
|
90,104
|
|
|
|
|
152,042
|
|
146,406
|
|
F-57
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.
Trade and other receivables, net
|
|
|
December 31, 2014
|
|
|
(€ thousands)
|
|
Trade and other
receivables
(Gross)
|
|
Allowance for
doubtful
accounts
|
|
Trade and other
receivables
(Net)
|
|
|
Trade receivables
|
|
793,205
|
|
(75,628
|
)
|
717,577
|
|
|
Related party receivables (Note 37)
|
|
39,189
|
|
—
|
|
39,189
|
|
|
Sales-type lease receivables
|
|
678
|
|
—
|
|
678
|
|
|
|
|
833,072
|
|
(75,628
|
)
|
757,444
|
|
|
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Trade and other
receivables
(Gross)
|
|
Allowance for
doubtful
accounts
|
|
Trade and other
receivables
(Net)
|
|
|
Trade receivables
|
|
951,745
|
|
(72,263
|
)
|
879,482
|
|
|
Related party receivables (Note 37)
|
|
24,030
|
|
—
|
|
24,030
|
|
|
Sales-type lease receivables
|
|
736
|
|
—
|
|
736
|
|
|
|
|
976,511
|
|
(72,263
|
)
|
904,248
|
|
Trade receivables include receivables from intermediaries, which represent amounts due from point of sale facilities where the Company provides third-party processing services related to its commercial services networks. Trade receivables and receivables from intermediaries are non-interest bearing.
We have two agreements with major European financial institutions to sell certain accounts receivable on a non-recourse basis, from our Italy segment’s Scratch & Win and Commercial Services concessions. Such accounts receivable are derecognized upon cash receipt at a discount which is recorded within other expense in our consolidated income statements. The aggregate amount of outstanding accounts receivables is limited to a maximum amount of €300 million and €150 million for the Scratch & Win and Commercial Services concessions, respectively.
The amount of receivables derecognized at December 31, 2014 and 2013 are as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Scratch & Win concession
|
|
116,022
|
|
—
|
|
|
Commercial Services concession
|
|
41,598
|
|
82,132
|
|
|
|
|
157,620
|
|
82,132
|
|
F-58
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18.
Issued capital, treasury shares, reserves and non-controlling interests
Issued capital
|
|
|
December 31,
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
Authorized shares
|
|
|
|
|
|
|
|
|
Ordinary shares of €1 par value per share
|
|
190,502,053
|
|
187,535,665
|
|
185,431,467
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
Ordinary shares outstanding, issued and fully paid
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
173,992,168
|
|
172,454,507
|
|
172,140,797
|
|
|
Shares issued upon exercise of stock options
|
|
304,619
|
|
1,198,191
|
|
94,786
|
|
|
Shares issued under stock award plans
|
|
679,242
|
|
339,470
|
|
218,924
|
|
|
Treasury shares purchased
|
|
(2,183,503
|
)
|
—
|
|
—
|
|
|
Balance at end of year
|
|
172,792,526
|
|
173,992,168
|
|
172,454,507
|
|
At December 31, 2014 and 2013, approximately 0.3 million and 0.6 million ordinary shares, respectively, were reserved to satisfy rights in respect of our various share-based payment plans.
Treasury Shares
In June 2014 and October 2014, the Board of Directors approved the launch of share repurchase programs authorized by the Shareholders’ Meeting of May 8, 2014 for a maximum of 1,782,426 shares, or approximately 1% of the Company’s share capital (the “June Program”) and 16,676,505 shares, or approximately 9.5% of the Company’s share capital (the “October Program”), respectively.
The June Program was launched to fulfill management stock incentive plans currently outstanding and the October Program was designed to ensure the regular trading of the Company’s shares in the event that anomalous movements occur due to excess volatility or lack of liquidity, pending the acquisition of IGT.
As of December 31, 2014, the amount of shares acquired on the regulated market under the programs was as follows:
|
|
|
Maximum
Shares
Authorized for
Purchase
|
|
Shares
Acquired
|
|
Purchase Price
(€ thousands)
|
|
Average
Price Per Share
|
|
|
June Program
|
|
1,782,426
|
|
1,782,426
|
|
32,893
|
|
18.45
|
|
|
October Program
|
|
16,676,505
|
|
401,077
|
|
7,318
|
|
18.25
|
|
|
|
|
18,458,931
|
|
2,183,503
|
|
40,211
|
|
18.42
|
|
F-59
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Other Reserves
|
(€ thousands)
|
|
Legal
Reserve
|
|
Stock
Option
and
Restricted
Stock
Reserve
|
|
Share-
Based
Payment
Reserve
|
|
Ex Art
2349
Reserve
|
|
Net
Unrealized
Gain/
(Loss)
Reserve
|
|
Translation
Reserve
|
|
Other
Reserve
|
|
Total
|
|
|
Balance at January 1, 2014
|
|
34,491
|
|
74,414
|
|
18,394
|
|
1,150
|
|
(2,845
|
)
|
(106,722
|
)
|
(3,070
|
)
|
15,812
|
|
|
Unrecognized net gain on cash flow hedges
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,587
|
|
—
|
|
—
|
|
1,587
|
|
|
Unrecognized net gain on hedge of net investment in foreign operation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
782
|
|
—
|
|
—
|
|
782
|
|
|
Unrecognized net loss on defined benefit plans
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,295
|
)
|
—
|
|
—
|
|
(1,295
|
)
|
|
Unrecognized net gain on available-for-sale investment
|
|
—
|
|
—
|
|
—
|
|
—
|
|
879
|
|
—
|
|
—
|
|
879
|
|
|
Foreign currency translation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
354,355
|
|
—
|
|
354,355
|
|
|
Other comprehensive income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,953
|
|
354,355
|
|
—
|
|
356,308
|
|
|
Share-based payment
|
|
—
|
|
—
|
|
7,768
|
|
—
|
|
—
|
|
—
|
|
—
|
|
7,768
|
|
|
Shares issued under stock award plans
|
|
—
|
|
9,181
|
|
(9,181
|
)
|
(679
|
)
|
—
|
|
—
|
|
—
|
|
(679
|
)
|
|
Appropriation of 2013 income in accordance with Italian law
|
|
308
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
308
|
|
|
Other movements in equity
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(570
|
)
|
—
|
|
—
|
|
(570
|
)
|
|
Balance at December 31, 2014
|
|
34,799
|
|
83,595
|
|
16,981
|
|
471
|
|
(1,462
|
)
|
247,633
|
|
(3,070
|
)
|
378,947
|
|
F-60
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
(€ thousands)
|
|
Legal
Reserve
|
|
Stock
Option
and
Restricted
Stock
Reserve
|
|
Share-
Based
Payment
Reserve
|
|
Ex Art
2349
Reserve
|
|
Net
Unrealized
Gain/
(Loss)
Reserve
|
|
Translation
Reserve
|
|
Other
Reserve
|
|
Total
|
|
|
Balance at January 1, 2013
|
|
34,428
|
|
69,181
|
|
15,016
|
|
1,489
|
|
(1,885
|
)
|
40,406
|
|
(3,070
|
)
|
155,565
|
|
|
Unrecognized net gain on cash flow hedges
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(845
|
)
|
—
|
|
—
|
|
(845
|
)
|
|
Unrecognized net gain on hedge of net investment in foreign operation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
329
|
|
—
|
|
—
|
|
329
|
|
|
Unrecognized net loss on defined benefit plans
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,001
|
)
|
—
|
|
—
|
|
(2,001
|
)
|
|
Unrecognized net gain on available-for-sale investment
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,127
|
|
—
|
|
—
|
|
2,127
|
|
|
Foreign currency translation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(147,128
|
)
|
—
|
|
(147,128
|
)
|
|
Other comprehensive income
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(390
|
)
|
(147,128
|
)
|
—
|
|
(147,518
|
)
|
|
Share-based payment
|
|
—
|
|
—
|
|
8,611
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,611
|
|
|
Shares issued under stock award plans
|
|
—
|
|
5,233
|
|
(5,233
|
)
|
(339
|
)
|
—
|
|
—
|
|
—
|
|
(339
|
)
|
|
Appropriation of 2012 income in accordance with Italian law
|
|
63
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
63
|
|
|
Other movements in equity
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(570
|
)
|
—
|
|
—
|
|
(570
|
)
|
|
Balance at December 31, 2013
|
|
34,491
|
|
74,414
|
|
18,394
|
|
1,150
|
|
(2,845
|
)
|
(106,722
|
)
|
(3,070
|
)
|
15,812
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
Share-
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
Based
|
|
Ex Art
|
|
Gain/
|
|
|
|
|
|
|
|
|
|
|
Legal
|
|
Stock
|
|
Payment
|
|
2349
|
|
(Loss)
|
|
Translation
|
|
Other
|
|
|
|
|
(thousands of euros)
|
|
Reserve
|
|
Reserve
|
|
Reserve
|
|
Reserve
|
|
Reserve
|
|
Reserve
|
|
Reserve
|
|
Total
|
|
|
Balance at January 1, 2012
|
|
34,403
|
|
64,016
|
|
7,832
|
|
1,708
|
|
1,539
|
|
87,111
|
|
(3,078
|
)
|
193,531
|
|
|
Unrecognized net loss on derivative instruments
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,863
|
)
|
—
|
|
—
|
|
(2,863
|
)
|
|
Unrecognized net gain on available-for-sale investment
|
|
—
|
|
—
|
|
—
|
|
—
|
|
9
|
|
—
|
|
—
|
|
9
|
|
|
Foreign currency translation
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(46,705
|
)
|
—
|
|
(46,705
|
)
|
|
Other comprehensive loss
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,854
|
)
|
(46,705
|
)
|
—
|
|
(49,559
|
)
|
|
Share-based payment
|
|
—
|
|
—
|
|
12,349
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,349
|
|
|
Shares issued under stock award plans
|
|
—
|
|
5,165
|
|
(5,165
|
)
|
(219
|
)
|
—
|
|
—
|
|
—
|
|
(219
|
)
|
|
Appropriation of 2011 income in accordance with Italian law
|
|
25
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
25
|
|
|
Other movements in equity
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(570
|
)
|
—
|
|
8
|
|
(562
|
)
|
|
Balance at December 31, 2012
|
|
34,428
|
|
69,181
|
|
15,016
|
|
1,489
|
|
(1,885
|
)
|
40,406
|
|
(3,070
|
)
|
155,565
|
|
F-61
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nature and purpose of other reserves
Legal reserve
The legal reserve is required by Italian law and must be increased by a minimum of 5% of net income for the year until the balance represents 20% of share capital.
Stock option and restricted stock reserve
The stock option and restricted stock reserve is used to record the fair value of stock options granted to employees that have been exercised and stock awards that vested during the year.
Share-based payment reserve
The share-based payment reserve represents the cumulative amount recorded for equity-settled share-based payment transactions that have not yet vested. Increases relate to the charge for goods or services that are received in equity-settled share-based payment transactions. Decreases relate to the fair value of stock awards that vested during the year.
Ex Art 2349 reserve
The ex art 2349 reserve was established by shareholders’ resolution in accordance with GTECH’s by-laws, as appropriated from income of the Company, to serve share-based payment plans.
Net unrealized gain/(loss) reserve
The net unrealized gain/(loss) reserve is used to record:
·
the fair value of interest rate swaps assessed to be highly effective;
·
the unrecognized net gain or loss on other derivative instruments assessed as being highly effective and available-for-sale investments;
·
actuarial gains and losses arising from defined benefit plans; and
·
the deferred gain, net of amortization, related to our agreement to lock in interest rates to hedge €750 million of capital securities.
Translation reserve
The translation reserve is used to record:
·
exchange differences that arise from the translation of the financial statements of foreign subsidiaries, joint ventures and joint operations; and
·
exchange differences that arise on monetary items that, in substance, form part of the net investment in foreign operations (such as intragroup loans where settlement is neither planned nor likely to occur in the foreseeable future).
Other reserve
Other reserve is used to record the purchase of a non-controlling interest and other equity transactions not included in a category above.
F-62
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Non-controlling interests
Activity with non-controlling interests during 2014 and 2013 was recorded in the consolidated statement of changes in equity as follows (€ thousands):
For the year ended December 31, 2014
|
|
|
Non-controlling interest
|
|
|
Name of subsidiary
|
|
Return of
capital
|
|
Dividend
distribution
|
|
Capital
contributions
|
|
|
Lotterie Nazionali S.r.l.
|
|
(42,267
|
)
|
(24,142
|
)
|
—
|
|
|
SW Holding S.p.A.
|
|
(12,878
|
)
|
(7,589
|
)
|
—
|
|
|
Consorzio Lotterie Nazionali
|
|
(10
|
)
|
—
|
|
—
|
|
|
Lottomatica International Greece S.r.l.
|
|
(8
|
)
|
—
|
|
—
|
|
|
GTECH Latin America Corporation
|
|
—
|
|
(1,348
|
)
|
—
|
|
|
Northstar Lottery Group, LLC
|
|
—
|
|
—
|
|
11,586
|
|
|
Northstar New Jersey Lottery Group, LLC
|
|
—
|
|
—
|
|
3,029
|
|
|
Big Easy S.r.l.
|
|
—
|
|
—
|
|
2,842
|
|
|
|
|
(55,163
|
)
|
(33,079
|
)
|
17,457
|
|
For the year ended December 31, 2013
|
|
|
Non-controlling interest
|
|
Name of subsidiary
|
|
Return of
capital
|
|
Dividend
distribution
|
|
Capital
contributions
|
|
|
Lotterie Nazionali S.r.l.
|
|
(22,203
|
)
|
(24,729
|
)
|
—
|
|
|
SW Holding S.p.A.
|
|
(14,739
|
)
|
(8,417
|
)
|
—
|
|
|
Consorzio Lotterie Nazionali
|
|
(3,145
|
)
|
(455
|
)
|
—
|
|
|
GTECH Latin America Corporation
|
|
—
|
|
(461
|
)
|
37
|
|
|
Northstar New Jersey Lottery Group, LLC
|
|
—
|
|
—
|
|
64,966
|
|
|
Northstar Lottery Group, LLC
|
|
—
|
|
—
|
|
10,006
|
|
|
|
|
(40,087
|
)
|
(34,062
|
)
|
75,009
|
|
Return of capital
The return of capital paid to the non-controlling interests of Lotterie Nazionali S.r.l. and SW Holding S.p.A. during the twelve months ended December 31, 2014 and 2013 arose from the agreement made on the formation of these companies that capital reductions would be made in future periods. These capital reductions are performed in proportion to shareholdings and therefore do not impact the share ownership structure.
Capital contributions
Capital contributions relate to contributions made during the periods by both GTECH and the relevant non-controlling interest. Capital contributions are made in proportion to the relevant shareholdings and therefore do not result in a change in the proportionate shareholding of the relevant parties. Capital contributions include non-cash and cash inflows as follows (€ thousands):
|
|
|
For the year ended December 31,
|
|
|
|
|
2014
|
|
2013
|
|
|
Non-cash
|
|
11,269
|
|
3,036
|
|
|
Cash
|
|
6,188
|
|
71,973
|
|
|
|
|
17,457
|
|
75,009
|
|
F-63
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Northstar New Jersey Lottery Group, LLC capital contribution
In June 2013, Northstar New Jersey Lottery Group, LLC (“Northstar NJ”), a consolidated joint venture in which GTECH Corporation indirectly holds an approximate 41% interest, entered into an Agreement (the “Agreement”) with the State of New Jersey, Department of the Treasury, Division of Purchase and Property and Division of Lottery (the “Division of Lottery”) whereby Northstar NJ manages a wide range of the Division of Lottery’s marketing, sales, and related functions which is subject to the Division of Lottery’s continuing control and oversight over the conduct of lottery operations. In connection with the Agreement, Northstar NJ paid the State an upfront payment of $120 million (€91.7 million at the June 2013 acquisition date). For the year ended December 31, 2013, $71.2 million, or €54.4 million of the €65.0 million capital contribution disclosed above was related to this upfront payment.
Acquisition of additional interest in SW Holding S.p.A.
On March 25, 2014, we acquired from UniCredit S.p.A. (“UniCredit”), through the exercise of a call option, the entire 12.5% interest held by UniCredit in SW Holding S.p.A. (“SW”) for cash consideration of €72.2 million. Details of the transaction are as follows (€ thousands):
|
Cash consideration paid to non-controlling shareholders
|
|
(72,183
|
)
|
|
Transaction costs
|
|
(145
|
)
|
|
Total cash consideration
|
|
(72,328
|
)
|
|
Fair value of the call option
|
|
(480
|
)
|
|
Reduction of equity
|
|
(72,808
|
)
|
|
Carrying value of interest acquired
|
|
(63,751
|
)
|
|
Excess charged to retained earnings
|
|
(9,057
|
)
|
In 2010, through its investment in SW, UniCredit had made an indirect equity investment in Lotterie Nazionali S.r.l. (“LN”), a majority-owned GTECH subsidiary that holds an instant ticket concession license in Italy. GTECH’s direct and indirect ownership in LN has increased from 51.5% to 64% as a result of the buyout of UniCredit’s interest.
Capital reallocation
In January 2011, Northstar Lottery Group, LLC (“Northstar”), a consortium in which GTECH Corporation holds an 80% controlling interest, entered into a ten-year lottery management services contract (the “Illinois Contract”) with the State of Illinois. Under GTECH Corporation’s operating agreement with the non-controlling shareholder in Northstar, Northstar profits and losses are allocated 80% to GTECH Corporation and 20% to the non-controlling shareholder, in accordance with their respective ownership interests, subject to the following:
·
First, the non-controlling shareholder’s initial capital contributions amortize on a straight line basis (“Base Amortization Amount”) over the ten-year term of Northstar’s agreement with the Illinois lottery, and the non-controlling shareholder has a profit allocation preference to the extent of its unamortized capital.
·
Second, profits are then allocated in accordance with any additional capital contributions (over and above the non-controlling shareholder’s initial capital contribution commitments of up to US$15 million) before any remaining profits are allocated on an 80/20 basis.
·
Third, in the event that there is a net loss in a given year, and such net loss exceeds the Base Amortization Amount for such year, the amount that the non-controlling shareholder is required to amortize in such year is equal to the full amount of the net loss, up to the amount of the non-controlling shareholder’s then remaining unamortized capital (“Modified Amortization Amount”). This modified net loss (either the Base Amortization Amount or Modified Amortization Amount, whichever is greater) does not affect the allocation of such loss (which remains on an 80/20 basis), but does accelerate the reduction of the non-controlling shareholder’s unamortized capital.
·
Fourth, the operating agreement provides for an annual capital reallocation (on an 80/20 basis) between GTECH Corporation and the non-controlling shareholder, to the extent of the Base Amortization Amount or Modified Amortization Amount, whichever is greater, in such year.
During 2014 and 2013, €2.3 million and €1.7 million, respectively, of capital was reallocated between GTECH Corporation and the non-controlling shareholder in Northstar.
F-64
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.
Information about subsidiaries and non-controlling interests
The material subsidiaries of the Company, whose principal activities are the provision of services and technology in the regulated worldwide gaming markets, are as follows:
|
|
|
Country of
Incorporation and
|
|
Equity interest held at December 31,
|
|
|
Name
|
|
Operation
|
|
2014
|
|
2013
|
|
|
GTECH Corporation
|
|
United States
|
|
100.00
|
%
|
100.00
|
%
|
|
GTECH Global Services Corporation Limited
|
|
Cyprus
|
|
100.00
|
%
|
100.00
|
%
|
|
GTECH Canada ULC
|
|
Canada
|
|
100.00
|
%
|
100.00
|
%
|
|
Lottomatica Videolot Rete S.p.A.
|
|
Italy
|
|
100.00
|
%
|
100.00
|
%
|
|
Lotterie Nazionali S.r.l.
|
|
Italy
|
|
64.00
|
%
|
51.50
|
%
|
|
SW Holding S.p.A.
|
|
Italy
|
|
0.00
|
%
|
71.43
|
%
|
A complete listing of the subsidiaries and affiliates of the Company, along with jurisdiction and ownership interest, is provided in the “List of Subsidiaries and Affiliates” section of this report.
The Company has not made any significant judgments or assumptions in determining that it has control of subsidiaries of the Company.
Financial information of subsidiaries that have material non-controlling interests (“NCI”) is as follows:
|
|
|
Proportion of equity
interest held by NCI
|
|
|
Name
|
|
2014
|
|
2013
|
|
|
Lotterie Nazionali S.r.l.
|
|
36.00
|
%
|
49.50
|
%
|
|
SW Holding S.p.A.
|
|
0.00
|
%
|
28.57
|
%
|
|
|
|
December 31,
|
|
|
Accumulated balances of NCI (€ thousands)
|
|
2014
|
|
2013
|
|
|
Lotterie Nazionali S.r.l.
|
|
195,147
|
|
243,840
|
|
|
SW Holding S.p.A.
|
|
—
|
|
77,745
|
|
|
All other NCI’s
|
|
86,667
|
|
82,035
|
|
|
|
|
281,814
|
|
403,620
|
|
|
|
|
For the year ended
December 31,
|
|
|
Profit (loss) allocated to NCI (€ thousands)
|
|
2014
|
|
2013
|
|
|
Lotterie Nazionali S.r.l.
|
|
23,471
|
|
24,245
|
|
|
SW Holding S.p.A.
|
|
—
|
|
6,402
|
|
|
All other NCI’s
|
|
(9,171
|
)
|
(846
|
)
|
|
|
|
14,300
|
|
29,801
|
|
The summarized financial information of these subsidiaries is provided below. This information is based on amounts before intercompany eliminations.
F-65
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summarized income statement for 2014
|
(€ thousands)
|
|
Lotterie Nazionali
S.r.l.
|
|
SW Holding
S.p.A.
|
|
|
Revenue
|
|
370,023
|
|
—
|
|
|
Costs
|
|
267,536
|
|
—
|
|
|
Operating income
|
|
102,487
|
|
—
|
|
|
Other income and deductions
|
|
(5,182
|
)
|
—
|
|
|
Income before income tax
|
|
97,305
|
|
—
|
|
|
Income tax expense
|
|
(32,105
|
)
|
—
|
|
|
Net income
|
|
65,200
|
|
—
|
|
|
Attributable to non-controlling interests
|
|
23,471
|
|
—
|
|
|
Dividends paid to non-controlling interests
|
|
24,142
|
|
7,589
|
|
|
Capital returned to non-controlling interests
|
|
42,267
|
|
12,878
|
|
Summarized income statement for 2013
|
(€ thousands)
|
|
Lotterie
Nazionali S.r.l.
|
|
SW
Holding S.p.A.
|
|
|
Revenue
|
|
377,292
|
|
30,053
|
|
|
Costs
|
|
273,371
|
|
143
|
|
|
Operating income
|
|
103,921
|
|
29,910
|
|
|
Other income and deductions
|
|
(3,831
|
)
|
1
|
|
|
Income before income tax
|
|
100,090
|
|
29,911
|
|
|
Income tax expense
|
|
(32,742
|
)
|
(386
|
)
|
|
Net income
|
|
67,348
|
|
29,525
|
|
|
Attributable to non-controlling interests
|
|
24,245
|
|
6,402
|
|
|
Dividends paid to non-controlling interests
|
|
24,729
|
|
8,417
|
|
|
Capital returned to non-controlling interests
|
|
22,203
|
|
14,739
|
|
F-66
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summarized statement of financial position at December 31, 2014
|
(€ thousands)
|
|
Lotterie Nazionali
S.r.l.
|
|
SW Holding
S.p.A.
|
|
|
Non-current assets
|
|
433,406
|
|
—
|
|
|
Current assets
|
|
520,840
|
|
—
|
|
|
|
|
954,246
|
|
—
|
|
|
Equity
|
|
542,075
|
|
—
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
412,171
|
|
—
|
|
|
Total Equity and Liabilities
|
|
954,246
|
|
—
|
|
|
|
|
|
|
|
|
|
Attributable to owners of the parent
|
|
759,099
|
|
—
|
|
|
Non-controlling interest
|
|
195,147
|
|
—
|
|
Summarized statement of financial position at December 31, 2013
|
(€ thousands)
|
|
Lotterie Nazionali
S.r.l.
|
|
SW Holding
S.p.A.
|
|
|
Non-current assets
|
|
525,544
|
|
259,181
|
|
|
Current assets
|
|
480,008
|
|
32,331
|
|
|
|
|
1,005,552
|
|
291,512
|
|
|
Equity
|
|
659,349
|
|
291,422
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
346,203
|
|
90
|
|
|
Total Equity and Liabilities
|
|
1,005,552
|
|
291,512
|
|
|
|
|
|
|
|
|
|
Attributable to owners of the parent
|
|
761,712
|
|
213,767
|
|
|
Non-controlling interest
|
|
243,840
|
|
77,745
|
|
On March 25, 2014, GTECH S.p.A. acquired the remaining 28.25% interest in SW Holding S.p.A. from UniCredit S.p.A., increasing its ownership interest to 100%. On December 1, 2014 (effective from December 3, 2014), SW Holding S.p.A. was merged with and into GTECH S.p.A.
F-67
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20.
Debt
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Long-term debt, less current portion
|
|
|
|
|
|
|
Revolving Credit Facilities
|
|
721,938
|
|
—
|
|
|
2010 Notes (due 2018)
|
|
484,837
|
|
496,128
|
|
|
2012 Notes (due 2020)
|
|
472,229
|
|
492,851
|
|
|
Capital Securities
|
|
45,280
|
|
743,803
|
|
|
2009 Notes (due 2016)
|
|
—
|
|
756,558
|
|
|
Facilities
|
|
—
|
|
150,446
|
|
|
Other
|
|
1,454
|
|
1,474
|
|
|
|
|
1,725,738
|
|
2,641,260
|
|
|
Short-term borrowings
|
|
|
|
|
|
|
Short-term borrowings
|
|
8,895
|
|
851
|
|
|
|
|
8,895
|
|
851
|
|
|
Current portion of long-term debt (*)
|
|
|
|
|
|
|
Capital Securities
|
|
747,585
|
|
46,406
|
|
|
2010 Notes (due 2018)
|
|
24,549
|
|
24,549
|
|
|
2012 Notes (due 2020)
|
|
14,408
|
|
14,408
|
|
|
Revolving Credit Facilities
|
|
189
|
|
—
|
|
|
Facilities
|
|
—
|
|
125,901
|
|
|
2009 Notes (due 2016)
|
|
—
|
|
2,926
|
|
|
Other
|
|
147
|
|
306
|
|
|
|
|
786,878
|
|
214,496
|
|
|
Total debt
|
|
2,521,511
|
|
2,856,607
|
|
* Current portion of long-term debt includes accrued interest
The key terms of our material debt are summarized as follows:
|
Borrowing
|
|
Initial
Principal Amount
|
|
Interest Rate (Per Annum)
|
|
Maturity
|
|
|
Revolving Credit Facilities
|
|
$1.4 billion and €850 million (a)
|
|
LIBOR or EURIBOR + margin
|
|
November 2019
|
|
|
2010 Notes (due 2018)
|
|
€500 million
|
|
5.375% (b)
|
|
February 2018
|
|
|
2012 Notes (due 2020)
|
|
€500 million
|
|
3.5% (b)
|
|
March 2020
|
|
|
Capital Securities
|
|
€750 million
|
|
8.25% through March 2016 Six-month EURIBOR + 505 basis points thereafter
|
|
March 2066
|
|
Debt issuance costs, which are net against amounts borrowed, are amortized to interest expense through the maturity dates with the exception of the Capital Securities that are amortized through April 2016, the date the Capital Securities can be redeemed at par.
(a) maximum principal amount
(b) subject to adjustment as described below
F-68
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Revolving Credit Facilities
On November 4, 2014, GTECH S.p.A. and GTECH Corporation entered into a five-year senior facilities agreement with a syndicate of international banks providing for the following credit facilities:
|
Facility
|
|
Borrower
|
|
$1.4 billion multi-currency revolving credit facility (the “US Dollar Revolving Credit Facility”)
|
|
GTECH Corporation
|
|
€850 million multi-currency revolving credit facility (the “Euro Revolving Credit Facility”)
|
|
GTECH S.p.A.
|
The US Dollar Revolving Credit Facility and the Euro Revolving Credit Facility are collectively referred to as the “Revolving Credit Facilities”.
Upon completion of the acquisition of IGT, the US Dollar Revolving Credit Facility increased to $1.5 billion. The Revolving Credit Facilities may be utilized by way of letters of credit up to certain sub-limits and the US Dollar Revolving Credit Facility may be used by way of US dollar swingline loans. The Revolving Credit Facilities may be used for general corporate purposes, including repayment of existing indebtedness.
We repaid outstanding amounts due under our Term Loan Facility (as defined below) and Revolving Facility B (as defined below) with proceeds of utilizations under the Revolving Credit Facilities.
GTECH S.p.A. and GTECH Corporation are the original borrowers and original guarantors under the agreement for the Revolving Credit Facilities. A mechanism is included in the agreement for the Revolving Credit Facilities to enable certain subsidiaries to accede as borrowers subject to certain conditions and also requires that subsidiaries representing 85% of adjusted group assets and 85% of adjusted group EBITDA guarantee the obligations of the borrowers under the Revolving Credit Facilities.
Interest is generally payable between one and six months in arrears at a variable interest rate plus a margin based on our long-term credit ratings. At December 31, 2014, the effective interest rate on the Revolving Credit Facilities was 1.78%.
The agreement for the Revolving Credit Facilities provides that the following fees are payable quarterly in arrears:
|
Fee
|
|
Terms
|
|
Commitment
|
|
Between 35% and 37.5% of the applicable margin depending on our long-term credit ratings per annum on the aggregate undrawn and uncancelled amount of the Revolving Credit Facilities
|
|
|
|
|
|
Utilization
|
|
Payable on the aggregate drawn amount of the Revolving Credit Facilities at a rate determined upon such drawn amount
|
The agreement for the Revolving Credit Facilities contains, among other terms, covenants with respect to the maintenance of certain financial ratios and restrictions with respect to:
·
payment of dividends and making of distributions to shareholders;
·
changing the general nature of our business;
·
incurrence of certain indebtedness by subsidiaries which are not borrowers or guarantors;
·
granting of certain guarantees;
·
granting certain security;
·
disposing of assets; and
·
making of certain acquisitions.
F-69
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Violation of these covenants may result in the full principal amounts of the Revolving Credit Facilities being immediately payable upon written notice. At December 31, 2014, we were in compliance with all covenants.
Letters of Credit
In connection with certain customer contracts, we are required to issue letters of credit that primarily secure our performance under customer contracts. For letters of credit outside of the Revolving Credit Facilities, we enter into agreements as required and pay a fee to the third party based on the amount issued.
|
|
|
Letters of Credit Outstanding
|
|
|
|
|
(€ thousands)
|
|
Outside the
Revolving
Credit Facilities
|
|
Under the
Revolving
Credit Facilities
|
|
Total
|
|
Weighted
Average
Annual Cost
|
|
|
December 31, 2014
|
|
655,957
|
|
—
|
|
655,957
|
|
0.94
|
%
|
Notes
GTECH S.p.A. issued notes in December 2010 due 2018 (the “2010 Notes (due 2018)”), and December 2012 due 2020 (the “2012 Notes (due 2020)”) (the 2010 Notes (due 2018) and 2012 Notes (due 2020) are collectively, the “Notes”) which are all unconditionally and irrevocably guaranteed by GTECH Corporation, GTECH Holdings Corporation, GTECH Rhode Island LLC and Invest Games S.A. The Notes are listed on the Luxembourg Stock Exchange and have received credit ratings of Baa3 and BBB- by Moody’s Investors Service Inc. (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”), respectively. GTECH Holdings Corporation, GTECH Rhode Island LLC and Invest Games S.A. are collectively referred to as the “Other Guarantors”.
GTECH S.p.A. may redeem the Notes in whole, but not in part, as follows:
·
at the greater of 100% of their principal amount together with any accrued interest or at an amount specified in the trust deeds governing the Notes; and
·
at 100% of their principal amount in the event of certain changes affecting taxation in Italy, the United States or Luxembourg.
Holders of the Notes may require GTECH S.p.A. to redeem such issuance in whole or in part at 100% of their principal amount plus accrued interest following the occurrence of certain specified events.
Interest is payable at fixed interest rates that are subject to a 1.25% per annum adjustment in the event of an increase or decrease in credit ratings. The adjustment is subject to a 6.625% ceiling and a 5.375% floor for the 2010 Notes (due 2018) and a 4.75% ceiling and a 3.5% floor for the 2012 Notes (due 2020).
Interest is payable annually in arrears as follows:
|
Borrowing
|
|
Payment Date
|
|
|
2010 Notes (due 2018)
|
|
February 2
|
|
|
2012 Notes (due 2020)
|
|
March 5
|
|
On October 23, 2014, GTECH S.p.A. solicited the holders of each series of the Notes to approve by extraordinary resolutions proposals to: (1) approve the merger of GTECH S.p.A. with and into Georgia Worldwide Plc (now known as International Game Technology Plc) (the “Holdco Merger”) and certain related transactions generally and in accordance with and for purposes of any applicable statutory or court creditor process, (2) agree that no put event (as defined in the conditions of each series of the Notes) will be deemed to occur as a result of or in connection with the Holdco Merger and such related transactions and (3) waive any and all events of default, potential events of default (as such terms are defined in the trust deed governing each series of the Notes) and any other breach of the conditions of each series of the Notes or the trust deeds governing the Notes that had been, are or may be, within the period of 12 months from the passing of the extraordinary resolutions, triggered by or in connection with Holdco Merger or such related transactions. On November 24, 2014, holders of the requisite principal amounts of each series of the Notes passed extraordinary resolutions approving the proposals. GTECH S.p.A. paid an aggregate of €31.3 million in consent fees to the relevant holders of the Notes in connection therewith with proceeds of utilizations under the Revolving Credit Facilities.
F-70
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
GTECH S.p.A. also issued notes in December 2009 due 2016 (the “2009 Notes (due 2016)”) which were unconditionally and irrevocably guaranteed by GTECH Corporation and the Other Guarantors. The 2009 Notes (due 2016) were listed on the Luxembourg Stock Exchange and received credit ratings of Baa3 and BBB- by Moody’s and S&P, respectively. Interest on the 2009 Notes (due 2016) was payable at a fixed interest rate of 5.375% per annum that was subject to a 1.25% per annum adjustment in the event of an increase or decrease in credit ratings.
On December 8, 2014, GTECH S.p.A. redeemed the 2009 Notes (due 2016) for a redemption price of €823.0 million with proceeds of utilizations under the Revolving Credit Facilities. In connection with the redemption, GTECH S.p.A. paid a €73.0 million make-whole to note holders and wrote off unamortized debt issuance costs of €2.6 million. GTECH S.p.A. also held €150 million notional amount of interest rate swaps, which were designated as hedges of fixed interest rates with respect to the 2009 Notes (due 2016), which were settled in December 2014 in connection with the redemption, resulting in a €8.3 million gain. See Note 30 for additional information.
Capital Securities
GTECH S.p.A. issued subordinated interest-deferrable capital securities due 2066 in May 2006 (the “Capital Securities”) which are redeemable at maturity, at par from March 31, 2016 or at any interest payment date thereafter, upon the occurrence of certain tax events, through open market purchases, by public cash tender offer or if a change of control event occurs. The Capital Securities are listed on the Luxembourg Stock Exchange and received credit ratings of Ba2 and BB by Moody’s and S&P, respectively.
Interest is payable annually at a fixed interest rate through March 31, 2016 and thereafter has a variable interest rate payable semi-annually.
The terms of the Capital Securities allow GTECH S.p.A. to optionally defer interest payments and mandates deferral of interest payments if GTECH S.p.A. is in breach of the coverage ratio as defined in the trust deed. Under certain specified circumstances, GTECH S.p.A. is required to settle deferred interest payments with cash and in some circumstances from the proceeds of an issue, offer and sale of equity. GTECH S.p.A. paid €61.9 million of interest on the Capital Securities in 2014 and 2013.
GTECH S.p.A. is required to authorize the issuance of ordinary shares in accordance with a resolution approved by its shareholders. At each annual general meeting, the value of the ordinary shares authorized for issuance must be at least equivalent to the interest payments due during the following two-year period. As of December 31, 2013, the authorization was in place for the issuance of capital up to €125 million. Interest payments over the next two years are approximately €124 million.
On December 18, 2014, GTECH S.p.A invited the holders of the Capital Securities to: (1) tender the Capital Securities for purchase by GTECH S.p.A. for cash and (2) approve proposals by extraordinary resolutions to: (a) acknowledge that a condition of the Capital Securities did not apply to the offer to purchase the Capital Securities and (b) approve certain amendments to the conditions of the Capital Securities and the trust deed governing the Capital Securities.
In January 2015, after the close of calendar 2014, holders of the Capital Securities tendered €704.5 million of the Capital Securities for purchase by GTECH S.p.A. and holders of the requisite principal amount of the Capital Securities passed extraordinary resolutions approving the proposals and GTECH S.p.A. purchased all of the Capital Securities tendered for purchase and paid an aggregate of €816.9 million in consideration to the relevant holders of the Capital Securities in connection therewith with proceeds of utilizations under the Revolving Credit Facilities.
F-71
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Facilities
We had the following unsecured and unsubordinated credit facilities (which were scheduled to expire in 2015):
|
Facility
|
|
Borrower
|
|
$700 million term loan (the “Term Loan Facility”)
|
|
GTECH Corporation
|
|
€500 million multi-currency revolving credit facility (“Revolving Facility A”)
|
|
GTECH Corporation
|
|
€400 million multi-currency revolving credit facility (“Revolving Facility B”)
|
|
GTECH S.p.A.
|
Revolving Facility A and Revolving Facility B are collectively referred to as the “Revolving Facilities” and the Term Loan Facility and the Revolving Facilities are collectively referred to as the “Facilities”.
The Term Loan Facility and Revolving Facility A were fully and unconditionally guaranteed by GTECH S.p.A. and the Other Guarantors. Revolving Facility B was fully and unconditionally guaranteed by GTECH Corporation and the Other Guarantors.
In November 2014, we terminated the agreement for the Facilities and repaid outstanding amounts due under the Term Loan Facility of $385.0 million (€308.4 million) with proceeds of utilizations under the Revolving Credit Facilities and we wrote off unamortized debt issuance costs of €2.8 million. See Note 29 for additional information.
Interest was generally payable between one and six months in arrears at a variable interest rate plus a margin based on our ratio of total net debt to earnings before interest, taxes, depreciation and amortization. At December 31, 2013, the effective interest rate on the Facilities was 1.25%.
The agreement for the Facilities provided that certain fees were payable quarterly in arrears as follows:
|
Fee
|
|
Terms
|
|
Commitment
|
|
37.5% of margin per annum on the total available commitment under the Revolving Facilities
|
|
|
|
|
|
Utilization
|
|
Between 0% and 0.4% per annum based on the average daily amount outstanding under the Revolving Facilities
|
The agreement for the Facilities contained, among other terms, covenants with respect to the maintenance of certain financial ratios and restrictions with respect to:
·
payment of dividends and making of distributions to shareholders;
·
changing the general nature of our business;
·
incurrence of certain indebtedness by subsidiaries which are not borrowers or guarantors;
·
granting of certain guarantees;
·
granting certain security;
·
disposing of assets;
·
making certain acquisitions; and
·
limitations on the repayment, cancellation, redemption, purchase and repurchases of the Capital Securities.
Violation of these terms may have resulted in the full principal amounts of the Facilities being immediately payable upon written notice. At December 31, 2013, we were in compliance with all covenants.
Letters of Credit
In connection with certain customer contracts, we were required to issue letters of credit that primarily secured our performance under customer contracts. For letters of credit outside of the Revolving Facilities, we entered into agreements as required and paid a fee to the third party based on the amount issued.
F-72
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
Letters of Credit Outstanding
|
|
|
|
|
(€ thousands)
|
|
Outside the
Revolving
Facilities
|
|
Under the
Revolving
Facilities
|
|
Total
|
|
Weighted Average
Annual Cost
|
|
|
December 31, 2013
|
|
689,602
|
|
1,194
|
|
690,796
|
|
1.05
|
%
|
Bridge Facility
On July 15, 2014, in connection with our acquisition of IGT, GTECH S.p.A. obtained a debt commitment letter, pursuant to which affiliates of Credit Suisse AG, Barclays PLC and Citigroup Inc. provided commitments to fund a 364-day senior bridge term loan credit facility (the “Bridge Facility”) in an aggregate principal amount of approximately $10.7 billion, of which approximately 45% was denominated in euros and approximately 55% of which was denominated in US dollars. The Bridge Facility consisted of four sub-facilities, the proceeds of which were to be used, among other things, to pay the cash portion of the merger consideration, to fund transaction expenses, to redeem and/or refinance existing specified indebtedness of GTECH S.p.A. and IGT, to the extent applicable, and to fund cash payments to GTECH S.p.A. shareholders exercising rescission rights.
Upon entering into the debt commitment letter for the Bridge Facility, we incurred a fee of €59.1 million (subsequently increased by €32.3 million), which was payable in full upon the earliest occurrence of certain events set forth in the related agreements, including, among others, the closing of the acquisition of IGT or the date the Bridge Facility terminated in accordance with its terms. The fees of €91.4 million were recorded within current financial liabilities, with an offsetting entry in other current assets on the consolidated statements of financial position. The cost deferred in other current assets is being amortized to interest expense over the estimated duration of the Bridge Facility (11½ months beginning July 15, 2014). In addition, a daily ticking fee accrued on the aggregate amount of the commitments in respect of the Bridge Facility during the period from and including July 15, 2014, to but excluding the date upon which the Bridge Facility was terminated, at a rate equal to 0.25% per annum. The ticking fee was payable in full on the earlier of (i) termination or expiration of the commitment letter and (ii) the closing of the acquisition of IGT. The ticking fee was recorded as interest expense in the consolidated income statement and accrued within current financial liabilities on the consolidated statements of financial position. In 2014, we recorded €41.8 million of interest expense relating to the Bridge Facility and paid €52.7 million of Bridge Facility fees.
On February 16, 2015, after the close of calendar 2014, the Bridge Facility was automatically terminated following the issuance of the Temporary New Notes (as defined below).
Developments After Calendar Year 2014
Term Loan Facilities
In January 2015, GTECH S.p.A. entered into a four-year senior facilities agreement with a syndicate of European banks providing for two €400 million term loan facilities, the proceeds of which may be used for general corporate purposes, including repayment of existing indebtedness. Upon the merger of GTECH S.p.A. with and into Georgia Worldwide PLC (now known as International Game Technology PLC) (“Holdco”), Holdco will become the borrower under one of the term loan facilities and a principal Italian operating subsidiary will become the borrower under the other term loan facility.
Credit Ratings
In January 2015, S&P announced that the credit ratings of the 2010 Notes (due 2018) and the 2012 Notes (due 2020) were decreased to BB+ and that the credit rating of the Capital Securities was decreased to B+. As a result of the credit ratings actions with respect to the 2010 Notes (due 2018) and the 2012 Notes (due 2020), the interest rate applicable to the 2010 Notes (due 2018) has been increased from 5.375% to 6.625% per annum effective February 2, 2015 and the interest rate applicable to the 2012 Notes (due 2020) has been increased from 3.5% to 4.75% per annum effective March 5, 2015.
F-73
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Temporary New Notes
In February 2015, GTECH S.p.A. caused Cleopatra Finance Limited, a special purpose vehicle incorporated in and existing under the laws of the Bailiwick of Jersey, to issue:
·
$600,000,000 5.625% senior secured notes due 2020;
·
$1,500,000,000 6.250% senior secured notes due 2022;
·
$1,100,000,000 6.500% senior secured notes due 2025;
·
€700,000,000 4.125% senior secured notes due 2020; and
·
€850,000,000 4.750% senior secured notes due 2023
in the form of temporary new notes (the “Temporary New Notes”) and caused the proceeds of the Temporary New Notes to be deposited into escrow. GTECH has used the proceeds of the Temporary New Notes (which have been exchanged for permanent notes issued by Holdco in connection with the completion of the Holdco Merger and the acquisition of IGT) to pay part of the cash component of the merger consideration for the acquisition of IGT and acquisition-related costs and possibly to refinance certain existing indebtedness of GTECH S.p.A. and IGT.
F-74
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.
Provisions
|
(€ thousands)
|
|
Legal
Matters
|
|
Tax
Matters
|
|
Other
|
|
Total
|
|
|
Long-term provisions
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2014
|
|
8,485
|
|
1,106
|
|
7,908
|
|
17,499
|
|
|
Arising during the year
|
|
1,386
|
|
—
|
|
1,366
|
|
2,752
|
|
|
Utilized
|
|
(902
|
)
|
—
|
|
(18
|
)
|
(920
|
)
|
|
Unused amounts reversed
|
|
(4,144
|
)
|
—
|
|
(22
|
)
|
(4,166
|
)
|
|
Reclassifications
|
|
—
|
|
—
|
|
(2,940
|
)
|
(2,940
|
)
|
|
Foreign currency translation
|
|
803
|
|
10
|
|
—
|
|
813
|
|
|
Balance at December 31, 2014
|
|
5,628
|
|
1,116
|
|
6,294
|
|
13,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term provisions
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2014
|
|
—
|
|
—
|
|
1,185
|
|
1,185
|
|
|
Arising during the year
|
|
—
|
|
—
|
|
1,002
|
|
1,002
|
|
|
Utilized
|
|
—
|
|
—
|
|
(230
|
)
|
(230
|
)
|
|
Unused amounts reversed
|
|
—
|
|
—
|
|
(1,045
|
)
|
(1,045
|
)
|
|
Foreign currency translation
|
|
—
|
|
—
|
|
79
|
|
79
|
|
|
Balance at December 31, 2014
|
|
—
|
|
—
|
|
991
|
|
991
|
|
Legal matters
Provisions relate primarily to the legal matters discussed in Note 41 and are calculated based on management’s expectations of settlement determined with the assistance of legal counsel.
Tax matters (other than income taxes)
Provisions relate primarily to disputed tax assessments and reserves for regulatory audits and are calculated based on assessed taxes and expected payment of tax based on statutory rates.
Other
Provisions primarily consist of warranty and penalty provisions associated with the Italy segment and warranty provisions in the Americas and International segments which generally extend for 12 months on equipment sales and are calculated based on historical cost information.
22.
Other liabilities (non-current and current)
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
Deferred revenue
|
|
38,028
|
|
42,595
|
|
|
Staff severance fund (Note 36)
|
|
9,831
|
|
7,888
|
|
|
Contingent liabilities related to GTECH Corporation acquisition
|
|
6,951
|
|
7,395
|
|
|
Other
|
|
2,918
|
|
4,220
|
|
|
|
|
57,728
|
|
62,098
|
|
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Other current liabilities
|
|
|
|
|
|
|
Accrued expenses
|
|
96,927
|
|
93,204
|
|
|
Employee compensation
|
|
82,496
|
|
80,554
|
|
|
Taxes other than income taxes
|
|
68,931
|
|
72,560
|
|
|
Deferred revenue
|
|
49,566
|
|
56,738
|
|
|
Advance payments from customers
|
|
14,418
|
|
12,252
|
|
|
Advance billings
|
|
14,541
|
|
7,975
|
|
|
Minimum revenue guarantee
|
|
13,178
|
|
30,455
|
|
|
Other
|
|
16,357
|
|
8,002
|
|
|
|
|
356,414
|
|
361,740
|
|
F-75
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
We recorded current liabilities related to the minimum revenue guarantees in the states of Illinois and Indiana as follows:
|
|
|
($ thousands)
|
|
€ thousands
|
|
|
|
|
Illinois
|
|
Indiana
|
|
Total
|
|
Illinois
|
|
Indiana
|
|
Total
|
|
|
Balance at January 1, 2014
|
|
42,000
|
|
—
|
|
42,000
|
|
30,455
|
|
—
|
|
30,455
|
|
|
Additions
|
|
40,000
|
|
17,647
|
|
57,647
|
|
29,287
|
|
13,947
|
|
43,234
|
|
|
Settlement
|
|
(82,000
|
)
|
(1,647
|
)
|
(83,647
|
)
|
(67,540
|
)
|
(1,231
|
)
|
(68,771
|
)
|
|
Foreign currency translation
|
|
—
|
|
—
|
|
—
|
|
7,798
|
|
462
|
|
8,260
|
|
|
Balance at December 31, 2014
|
|
—
|
|
16,000
|
|
16,000
|
|
—
|
|
13,178
|
|
13,178
|
|
The total minimum revenue guarantee settled with the State of Illinois in December 2014 was $97.5 million, of which $15.5 million was recorded as an offset to service revenue in our 2014 consolidated income statement.
The total minimum revenue guarantee for the State of Indiana was $17.6 million, of which $1.6 million was settled and $16.0 million remains outstanding at December 31, 2014.
See Note 38 for additional information.
23.
Raw materials, services and other costs
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Operating expenses
|
|
778,785
|
|
813,594
|
|
845,091
|
|
|
Outside services
|
|
258,247
|
|
234,603
|
|
231,416
|
|
|
Cost of product sales
|
|
145,089
|
|
161,176
|
|
144,445
|
|
|
Consumables
|
|
116,669
|
|
125,664
|
|
132,908
|
|
|
Insurance, miscellaneous taxes and other
|
|
103,621
|
|
100,817
|
|
112,888
|
|
|
Occupancy
|
|
67,716
|
|
59,161
|
|
56,216
|
|
|
Telecommunications
|
|
52,002
|
|
57,794
|
|
55,962
|
|
|
Travel
|
|
26,354
|
|
31,246
|
|
31,060
|
|
|
Write-down of inventories
|
|
451
|
|
1,248
|
|
1,187
|
|
|
|
|
1,548,934
|
|
1,585,303
|
|
1,611,173
|
|
F-76
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.
Personnel
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Payroll
|
|
420,202
|
|
413,306
|
|
385,188
|
|
|
Incentive compensation
|
|
50,918
|
|
53,536
|
|
55,450
|
|
|
Statutory benefits
|
|
40,791
|
|
42,543
|
|
39,751
|
|
|
Company benefits
|
|
36,514
|
|
35,288
|
|
32,804
|
|
|
Share-based payment (Note 34)
|
|
7,768
|
|
8,611
|
|
12,349
|
|
|
Net benefits for staff severance fund (Note 36)
|
|
4,861
|
|
4,887
|
|
4,529
|
|
|
Other
|
|
10,564
|
|
10,095
|
|
9,275
|
|
|
|
|
571,618
|
|
568,266
|
|
539,346
|
|
The Company’s worldwide employees are comprised of the following personnel:
|
|
|
Number of employees
|
|
|
|
|
As of December 31,
|
|
2014
|
|
|
Personnel Description
|
|
2014
|
|
2013
|
|
Average
|
|
|
Executives
|
|
504
|
|
485
|
|
498
|
|
|
Middle Management
|
|
1,265
|
|
1,240
|
|
1,256
|
|
|
All Other Permanent Employees
|
|
6,858
|
|
6,721
|
|
6,797
|
|
|
Employees with Temporary Employment Contracts
|
|
184
|
|
137
|
|
186
|
|
|
|
|
8,811
|
|
8,583
|
|
8,737
|
|
25.
Depreciation
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Systems, equipment and other assets related to contracts, net (Note 7)
|
|
235,791
|
|
241,257
|
|
236,065
|
|
|
Property, plant and equipment, net (Note 8)
|
|
13,686
|
|
13,342
|
|
13,856
|
|
|
|
|
249,477
|
|
254,599
|
|
249,921
|
|
26.
Amortization
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Intangibles amortization recognized in:
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
206,336
|
|
189,684
|
|
185,909
|
|
|
Service revenue (contra-revenue)
|
|
91
|
|
90
|
|
92
|
|
|
|
|
206,427
|
|
189,774
|
|
186,001
|
|
F-77
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
Impairment loss (recovery), net
Impairment loss (recovery), net was recorded by the Company as detailed below:
|
|
|
For the year ended December 31, 2014
|
|
|
(€ thousands)
|
|
Americas
|
|
International
|
|
Total
|
|
|
Systems, equipment and other assets related to contracts, net (Note 7)
|
|
—
|
|
655
|
|
655
|
|
|
Intangible assets, net (Note 10)
|
|
(2,423
|
)
|
—
|
|
(2,423
|
)
|
|
Investments in associates and joint ventures
|
|
—
|
|
1,319
|
|
1,319
|
|
|
Recovery
|
|
—
|
|
(1,746
|
)
|
(1,746
|
)
|
|
|
|
(2,423
|
)
|
228
|
|
(2,195
|
)
|
|
|
|
For the year ended December 31, 2013
|
|
|
(€ thousands)
|
|
Americas
|
|
International
|
|
Total
|
|
|
Systems, equipment and other assets related to contracts, net (Note 7)
|
|
—
|
|
6,313
|
|
6,313
|
|
|
Intangible assets, net (Note 10)
|
|
—
|
|
2,613
|
|
2,613
|
|
|
Investments in associates and joint ventures
|
|
—
|
|
939
|
|
939
|
|
|
Recovery
|
|
—
|
|
(3,807
|
)
|
(3,807
|
)
|
|
|
|
—
|
|
6,058
|
|
6,058
|
|
|
|
|
For the year ended December 31, 2012
|
|
|
(€ thousands)
|
|
Americas
|
|
International
|
|
Total
|
|
|
Systems, equipment and other assets related to contracts, net
|
|
—
|
|
480
|
|
480
|
|
|
Intangible assets, net
|
|
—
|
|
1,082
|
|
1,082
|
|
|
Investments in associates and joint ventures
|
|
—
|
|
4,481
|
|
4,481
|
|
|
Recovery
|
|
—
|
|
184
|
|
184
|
|
|
|
|
—
|
|
6,227
|
|
6,227
|
|
Americas Segment
The 2014 net impairment recovery of €2.4 million in the Americas segment principally relates to the revised estimation of the future profitability of an existing customer contract resulting from changes in the terms and conditions of such contract.
International Segment
The 2014 net impairment loss of €0.2 million in the International segment principally relates to an impairment loss of €1.3 million of an investment in a joint venture due to a delay in governmental approval of an increase in prize payout levels and an impairment loss of €0.7 million in systems, equipment and other assets related to contracts, net due to the lower expected profitability of an international lottery contract over its remaining term, partially offset by a recovery of €1.7 million associated with an impairment loss recorded in 2008 related to a lottery system we deployed for an international customer which has not launched due to a sustained period of political instability.
The 2013 net impairment loss in the International segment of €6.1 million principally relates to a €6.3 million loss in systems, equipment and other assets related to contracts, net due to the lower expected profitability of an international lottery contract over its remaining term. The impairment loss represents the write-down of the assets to their recoverable amount which was based on a value in use calculation determined using a weighted average after-tax discount rate of 11.9%. The impairment recovery of €3.8 million resulted from the receipt of cash associated with an impairment loss recorded in 2008 related to a lottery system we deployed for an international customer which has not launched due to a sustained period of political instability.
The 2012 asset impairment loss in the International segment of €6.2 million principally relates to the lower expected profitability of an equity method joint venture due to a delay in governmental approval of an increase in prize payout levels. The impairment loss represents the write-down of the investment to its recoverable amount which was based on value in use determined using a weighted average after-tax discount rate of 18.7%.
F-78
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28.
Unusual expense, net
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
IGT acquisition costs
|
|
34,986
|
|
—
|
|
|
Gain on sale of ticketing business
|
|
(5,744
|
)
|
—
|
|
|
|
|
29,242
|
|
—
|
|
IGT acquisition costs
IGT acquisition costs include professional fees and expenses related to our acquisition of IGT. See Note 5 for further information.
Gain on sale of ticketing business
The gain on sale of ticketing business relates to the July 2014 sale of our sports and events ticketing business (“LisTicket”) to the international operator TicketOne, CTS Eventim Group as follows (€ thousands):
|
Cash consideration
|
|
(13,905
|
)
|
|
Net book value
|
|
409
|
|
|
Disposal of goodwill (Note 9)
|
|
7,752
|
|
|
Gain on sale of ticketing business
|
|
(5,744
|
)
|
29.
Other expense
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
Make-whole
|
|
(72,999
|
)
|
—
|
|
—
|
|
|
Debt issuance costs
|
|
(2,621
|
)
|
—
|
|
—
|
|
|
Swap gain
|
|
8,321
|
|
—
|
|
—
|
|
|
Subtotal 2009 Notes (due 2016)
|
|
(67,299
|
)
|
—
|
|
—
|
|
|
Debt issuance costs — Facilities
|
|
(2,837
|
)
|
—
|
|
—
|
|
|
Total debt extinguishment costs
|
|
(70,136
|
)
|
—
|
|
—
|
|
|
Other
|
|
(9,841
|
)
|
(11,177
|
)
|
(9,729
|
)
|
|
|
|
(79,977
|
)
|
(11,177
|
)
|
(9,729
|
)
|
Debt extinguishment costs
In November 2014, we entered into a $2.6 billion (€2.1 billion at the December 31, 2014 exchange rate) five-year senior facilities agreement. The agreement for the senior facilities provides for a $1.4 billion multi-currency revolving credit facility for GTECH Corporation and an €850 million multicurrency revolving credit facility for GTECH S.p.A. Upon completion of the acquisition of IGT, the US dollar facility increased to $1.5 billion.
With proceeds from the Revolving Credit Facilities, we repaid outstanding amounts due under our Term Loan Facility and Revolving Facility B (which were scheduled to expire in 2015) and redeemed our 2009 Notes (due 2016), in November 2014 and December 2014, respectively.
In connection with the redemption of the 2009 Notes (due 2016), we paid a €73.0 million make-whole to note holders and wrote off unamortized debt issuance costs of €2.6 million. We also held €150 million notional amount of interest rate swaps, which were designated as hedges of fixed interest rates on the 2009 Notes (due 2016), which were settled in December 2014, in connection with the redemption, resulting in a €8.3 million gain.
Unamortized debt issuance costs for the Term Loan Facility and Revolving Facility B of €2.8 million were written off in November 2014 as a cost of the debt extinguishment.
See Note 20 for additional information.
F-79
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Interest expense
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Capital Securities
|
|
(64,531
|
)
|
(64,531
|
)
|
(64,319
|
)
|
|
Bridge facility
|
|
(41,753
|
)
|
—
|
|
—
|
|
|
2009 Notes (due 2016)
|
|
(34,501
|
)
|
(37,395
|
)
|
(38,634
|
)
|
|
2010 Notes (due 2018)
|
|
(28,041
|
)
|
(27,696
|
)
|
(27,652
|
)
|
|
2012 Notes (due 2020)
|
|
(18,852
|
)
|
(18,509
|
)
|
(1,292
|
)
|
|
Facilities
|
|
(9,183
|
)
|
(11,360
|
)
|
(16,703
|
)
|
|
Revolving Credit Facilities
|
|
(2,280
|
)
|
—
|
|
—
|
|
|
Other
|
|
(5,070
|
)
|
(3,583
|
)
|
(6,764
|
)
|
|
|
|
(204,211
|
)
|
(163,074
|
)
|
(155,364
|
)
|
Interest expense on the Bridge Facility is comprised of (i) amortization of the Bridge Facility fees of €91.4 million, which is recorded within Other current assets on the consolidated statements of financial position and is being amortized over the estimated life of the Bridge Facility (11 ½ months beginning July 15, 2014), and (ii) a daily fee which accrues on the aggregate amount of the commitments during the period from and including July 15, 2014 to, but excluding, the date on which the Commitment letter is terminated or expires.
See Note 20 for details of the debt related components.
31.
Earnings per share
Basic earnings per share/ADRs is calculated by dividing net income for the year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share/ADRs is calculated by dividing net income for the year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year along with the weighted average number of ordinary shares that would be issued upon the conversion of all potentially dilutive ordinary shares into ordinary shares.
GTECH’s American depositary receipts (ADRs) are negotiable certificates representing ordinary shares of GTECH. The ratio of GTECH shares to ADRs is 1:1.
Basic and diluted earnings per share are calculated as follows:
|
|
|
For the year ended December 31,
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
Numerator (€ thousands)
|
|
|
|
|
|
|
|
|
Net income for the year attributable to owners of the parent
|
|
83,825
|
|
175,434
|
|
233,136
|
|
|
Numerator for basic and diluted earnings per share
|
|
83,825
|
|
175,434
|
|
233,136
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (thousands)
|
|
|
|
|
|
|
|
|
Basic weighted average number of ordinary shares
|
|
173,656
|
|
173,234
|
|
172,267
|
|
|
Potential dilutive effect of stock options and restricted shares
|
|
35
|
|
—
|
|
73
|
|
|
Diluted weighted average number of ordinary shares
|
|
173,691
|
|
173,234
|
|
172,340
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share/ADRs
|
|
€
|
0.48
|
|
€
|
1.01
|
|
€
|
1.35
|
|
|
Diluted earnings per share/ADRs
|
|
€
|
0.48
|
|
€
|
1.01
|
|
€
|
1.35
|
|
There were approximately 1.6 million and 0.5 million potential ordinary shares at December 31, 2014 and 2013, respectively, that were excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share because their effect would have been anti-dilutive.
F-80
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32.
Components of other comprehensive income
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
Gains (losses) arising during the year
|
|
3,875
|
|
(1,322
|
)
|
(2,810
|
)
|
|
Reclassification adjustments for gains included in the income statement
|
|
(367
|
)
|
(171
|
)
|
(1,145
|
)
|
|
|
|
3,508
|
|
(1,493
|
)
|
(3,955
|
)
|
33.
Research and development costs
The aggregate amount of research and development expenditures recognized as expense during 2014, 2013 and 2012 was €84.1 million, €77.6 million, and €72.2 million, respectively.
34.
Share-based payments
Stock options and restricted shares are granted annually to key employees of the Company as approved by the Board of Directors under two types of equity-settled share-based payment plans as described below.
Stock Option Plans
The Company grants stock options under a performance based plan with an exercise price that is equal to the average price of GTECH S.p.A.’s ordinary shares one month prior to the grant date. The maximum term of an option is six years and there are no cash settlement alternatives.
Restricted Share Plans
The Company grants restricted shares under a performance based plan and recipients of the shares do not pay any cash consideration for the shares. The maximum term of the shares is five years and they may be settled in cash at the Company’s option. The Company does not have a past practice of cash settlement and does not plan to cash settle shares in the future.
The stock options and restricted shares vest subject to the satisfaction of the following:
·
Performance conditions related to the Company’s EBITDA (earnings before interest, taxes, depreciation and amortization) over a three-year period;
·
Performance conditions related to the Company’s net financial position at the end of the three-year period; and
·
The employees remaining in service to the Company.
Stock options and restricted shares partially vest upon achievement of 90% or more of the performance conditions and if the performance conditions are not met, they are forfeited.
Modifications
During the second quarter of 2014, modifications were made to the performance conditions of certain of our performance based plans but did not result in any incremental fair value required to be recognized as expense. These modifications, along with changes to current vesting expectations, resulted in a cumulative expense adjustment.
F-81
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Stock option movements in the year
The movement in the number of stock options outstanding and the related weighted average exercise prices are as follows:
|
|
|
2014
|
|
2013
|
|
|
|
|
Stock
Options
|
|
Weighted
Average
Exercise Price
|
|
Stock
Options
|
|
Weighted
Average
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
5,805,432
|
|
€
|
16.84
|
|
6,284,372
|
|
€
|
14.80
|
|
|
Granted during the year
|
|
2,066,213
|
|
18.71
|
|
1,616,385
|
|
20.05
|
|
|
Forfeited during the year
|
|
(66,732
|
)
|
17.44
|
|
(769,434
|
)
|
12.13
|
|
|
Exercised during the year
|
|
(304,619
|
)
|
12.60
|
|
(1,198,191
|
)
|
12.13
|
|
|
Expired during the year
|
|
(487,953
|
)
|
29.39
|
|
(127,700
|
)
|
29.45
|
|
|
Outstanding at end of year
|
|
7,012,341
|
|
16.70
|
|
5,805,432
|
|
16.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of year
|
|
1,781,941
|
|
€
|
12.69
|
|
1,002,841
|
|
€
|
20.51
|
|
The weighted average share price for stock options exercised during 2014 and 2013 was €19.15 and €20.29, respectively.
The range of exercise prices and weighted average remaining contractual life for stock options outstanding are as follows:
|
|
|
As of December 31, 2014
|
|
As of December 31, 2013
|
|
|
Exercise Price or Range of Exercise Prices
|
|
Stock
Options
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Stock Options
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
€10.89 - €15.25
|
|
3,367,129
|
|
2.65
|
|
3,707,534
|
|
3.57
|
|
|
€18.71 - €20.05
|
|
3,645,212
|
|
4.90
|
|
1,611,731
|
|
5.33
|
|
|
€ 29.45
|
|
—
|
|
—
|
|
486,167
|
|
0.33
|
|
|
|
|
7,012,341
|
|
|
|
5,805,432
|
|
|
|
Fair value of grants during the year
The fair value of stock options granted is estimated at the date of grant using a binomial model, taking into account the terms and conditions upon which the stock options were granted. The weighted average fair value of stock options granted during 2014 and 2013 was €2.33 per share and €3.49 per share, respectively.
Inputs to the binomial model used to estimate the fair value are as follows:
|
|
|
2014
|
|
2013
|
|
|
Dividend yield (%)
|
|
3.63
|
|
4.27
|
|
|
Expected volatility (%)
|
|
27.72
|
|
28.09
|
|
|
Risk-free interest rate (%)
|
|
0.25
|
|
0.58
|
|
|
Expected life of the stock option (in years)
|
|
4.49
|
|
4.54
|
|
|
Weighted average share price (€)
|
|
17.62
|
|
21.46
|
|
|
Exercise price (€)
|
|
18.71
|
|
20.05
|
|
F-82
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The expected volatility assumes the historical volatility is indicative of future trends, which may not be the actual outcome. The expected life of the stock option is based on historical data and is not necessarily indicative of exercise patterns that may occur. No other features of stock option grants were incorporated into the measurement of fair value.
Restricted share grants
Performance based restricted shares granted during 2014, 2013 and 2012 and their weighted average fair value at the date of grant, which represents the average share price during the employee grant acceptance period, are as follows:
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
Granted during the year
|
|
426,625
|
|
618,005
|
|
794,571
|
|
|
Weighted average fair value at the date of grant
|
|
€
|
17.62
|
|
€
|
21.46
|
|
€
|
16.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense charged to the income statement
The expense recognized during the year arising from employee share-based payment plans and included in personnel in our consolidated income statement was as follows:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Performance based stock options
|
|
2,245
|
|
2,163
|
|
3,487
|
|
|
Performance based restricted shares
|
|
5,523
|
|
6,448
|
|
8,862
|
|
|
|
|
7,768
|
|
8,611
|
|
12,349
|
|
35.
Dividends paid and declared
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Cash dividend declared and paid on ordinary shares:
|
|
|
|
|
|
|
Dividend for 2014: €0.75 per share (2013: €0.73 per share)
|
|
130,525
|
|
125,920
|
|
|
|
|
|
|
|
|
|
Cash dividend declared on ordinary shares:
|
|
|
|
|
|
|
Interim dividend payable in January 2015 for 2014: €0.75 per share
|
|
129,594
|
|
—
|
|
36.
Employee benefits
Staff Severance Fund
The Company has a defined benefit plan (staff severance fund) to provide certain post-employment benefits to Italian employees following termination from the Company. Italian employees may choose to participate in an unfunded plan within the Company or transfer their plan balance to independent external funds. These benefits are funded only to the extent paid to the external funds. The cost of providing benefits under the plan, for those employees that participate in the unfunded plan within the Company, is determined using the projected unit credit actuarial valuation method. The cost of providing benefits for those employees that choose to transfer their plan to independent external funds are considered as defined contributions and are accrued as the employees render the related service. The defined benefit liability represents the present value of the Company’s defined benefit obligation.
F-83
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the components of net benefit expense recognized during the year for the staff severance fund, which is included in personnel in our consolidated income statement.
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Current service cost
|
|
4,861
|
|
4,887
|
|
4,593
|
|
|
Actuarial gain
|
|
—
|
|
—
|
|
(64
|
)
|
|
Net benefit expense
|
|
4,861
|
|
4,887
|
|
4,529
|
|
Changes in the present value of the defined benefit obligation are as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Balance at beginning of year
|
|
7,888
|
|
7,023
|
|
|
Current service cost
|
|
4,861
|
|
4,887
|
|
|
Remeasurement gains in other comprehensive income
|
|
1,452
|
|
922
|
|
|
Acquisition
|
|
710
|
|
46
|
|
|
Interest cost
|
|
264
|
|
—
|
|
|
Benefits paid
|
|
(5,344
|
)
|
(4,990
|
)
|
|
Balance at end of year
|
|
9,831
|
|
7,888
|
|
The present value of the defined benefit obligation at December 31, 2012, 2011, and 2010 was €7.0 million, €7.3 million, and €7.5 million, respectively.
The principal assumptions used in determining the defined benefit obligation are shown below:
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
|
|
Managers
|
|
Other
employees
|
|
Managers
|
|
Other
employees
|
|
|
Assumed inflation rate
|
|
2.00
|
%
|
2.00
|
%
|
2.00
|
%
|
2.00
|
%
|
|
Discount rate
|
|
2.00
|
%
|
2.00
|
%
|
3.50
|
%
|
3.50
|
%
|
|
Future salary increases:
|
|
|
|
|
|
|
|
|
|
|
Up to age 40
|
|
2.75
|
%
|
2.50
|
%
|
2.75
|
%
|
2.50
|
%
|
|
Age between 40 and 55
|
|
2.50
|
%
|
2.25
|
%
|
2.50
|
%
|
2.25
|
%
|
|
Age greater than 55
|
|
2.25
|
%
|
2.00
|
%
|
2.25
|
%
|
2.00
|
%
|
Termination Benefits
Termination benefits expense, primarily related to salary continuation and continued medical benefits coverage for employees who were terminated during the year, was €7.7 million and €11.2 million in 2014 and 2013, respectively.
F-84
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
37.
Related party disclosures
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Tax related receivables
|
|
39,045
|
|
23,749
|
|
|
Trade receivables
|
|
75
|
|
34
|
|
|
De Agostini Group
|
|
39,120
|
|
23,783
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
69
|
|
247
|
|
|
Ringmaster S.r.l.
|
|
69
|
|
247
|
|
|
Total related party receivables
|
|
39,189
|
|
24,030
|
|
|
|
|
|
|
|
|
|
Tax related payables
|
|
122,403
|
|
81,232
|
|
|
Trade payables
|
|
2,685
|
|
8,549
|
|
|
De Agostini Group
|
|
125,088
|
|
89,781
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
1,243
|
|
2,399
|
|
|
Ringmaster S.r.l.
|
|
1,243
|
|
2,399
|
|
|
Total related party payables
|
|
126,331
|
|
92,180
|
|
Tax related receivables and payables arise from the tax consolidation performed at the De Agostini Group level.
The following table sets forth transactions with related parties in 2014, 2013 and 2012:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Service revenue and product sales
|
|
|
|
|
|
|
|
|
Ringmaster S.r.l.
|
|
405
|
|
247
|
|
297
|
|
|
De Agostini Group
|
|
288
|
|
71
|
|
159
|
|
|
CLS-GTECH Company Limited
|
|
—
|
|
—
|
|
263
|
|
|
|
|
693
|
|
318
|
|
719
|
|
|
Raw materials, services and other costs
|
|
|
|
|
|
|
|
|
Ringmaster S.r.l.
|
|
11,209
|
|
6,861
|
|
435
|
|
|
De Agostini Group
|
|
958
|
|
5,544
|
|
4,901
|
|
|
Assicurazioni Generali S.p.A.
|
|
2,756
|
|
2,566
|
|
2,684
|
|
|
|
|
14,923
|
|
14,971
|
|
8,020
|
|
De Agostini Group
GTECH S.p.A. is majority owned by De Agostini S.p.A. Amounts receivable from De Agostini S.p.A. and subsidiaries of De Agostini S.p.A. (“De Agostini Group”) are non-interest bearing.
On May 8, 2013, GTECH S.p.A. entered into a framework agreement with De Agostini S.p.A pursuant to which De Agostini S.p.A. may make short-term loans to GTECH S.p.A. and GTECH S.p.A. may deposit cash with De Agostini S.p.A. on a short-term basis. The framework agreement provides that any such transactions will be in compliance with existing third party loan covenants and concluded on an arm’s length basis. As of December 31, 2014, no transactions under the framework agreement have been executed. The facility details are as follows:
|
|
|
As of December 31, 2014
|
|
|
(€ thousands)
|
|
Amounts
Outstanding
|
|
Maximum
Outstanding
|
|
|
Loans
|
|
—
|
|
134,118
|
|
|
Deposits
|
|
—
|
|
23,000
|
|
The maximum amount of loans that can be outstanding under the framework agreement is equal to 5% of the lesser of consolidated net equity and current market capitalization.
F-85
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Ringmaster S.r.l.
The Company has a 50% interest in Ringmaster S.r.l., an Italian joint venture, which is accounted for using the equity method of accounting. Ringmaster S.r.l. provides software development services for the Company’s interactive gaming business pursuant to an agreement dated December 7, 2011. In addition to the amounts expensed to the income statement above, during 2014, Ringmaster S.r.l. provided software development services to the Company totaling €3.0 million (nil for 2013) which were capitalized to intangible assets, net in our consolidated statement of financial position.
Assicurazioni Generali S.p.A.
Assicurazioni Generali S.p.A. (“Generali”) owns approximately 3% of the Company’s outstanding shares at December 31, 2014. Generali is a related party of the Company as the Chairman of the Company’s Board of Directors also serves on Generali’s Board of Directors. In 2012, the Company entered into a lease agreement to lease the Company’s headquarters facility in Rome, Italy from a wholly-owned subsidiary of Generali.
CLS-GTECH Company Limited
The Company has a 50% interest in CLS-GTECH Company Limited (“CLS-GTECH”), which is accounted for using the equity method of accounting. CLS-GTECH is a joint venture that was formed to provide a nationwide KENO system for Welfare lotteries throughout China.
Yeonama Holdings Co. Limited
The Company has a 30% interest in Yeonama Holdings Co. Limited (“Yeonama”), which is accounted for at fair value. Yeonama is a shareholder in Emma Delta Limited, the fund that holds a 33% interest in OPAP S.A., the Greek gaming and football betting operator.
Connect Venture CLP
In November 2011, the Company jointly with De Agostini S.p.A. and other of its subsidiaries, signed a letter of intent concerning an investment in Connect Ventures CLP, a venture capital fund which targets ‘‘early stage’’ investment operations, with the legal status of limited partnership under English law. The fund has an initial duration of seven years, subject to an additional two year extension.
The fund is considered a related party due to the control exercised over the fund by De Agostini S.p.A., as a result of the size of its investment and because at least one key figure in the fund’s management is related to a number of leading representatives of De Agostini S.p.A., as well as directors of the Company.
2BCOM and ALL-IN ADV
Since the beginning of 2013, the Company, through its subsidiary Lottomatica Scommesse S.r.l., has been party to an agreement with 2BCOM S.r.l. and ALL-IN ADV S.r.l. regarding the launch of a TV channel dedicated generally to gambling. 2BCOM and ALL-IN ADV are both subsidiaries of De Agostini S.p.A. and are therefore considered related parties of the Company. The venture is not considered significant to the Company’s business.
Compensation of Key Management Personnel
Key management personnel are those persons with authority and responsibility for planning, directing and controlling the activities of our Company and are comprised of six executive officers, including our Chief Executive Officer, Chief Financial Officer, and the four executives responsible for our operating segments and Products and Services organization. The amounts recognized as expense during the year related to key management personnel are as follows:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Short-term employee benefits
|
|
10,579
|
|
9,457
|
|
7,840
|
|
|
Share-based payments
|
|
4,652
|
|
4,726
|
|
7,632
|
|
|
Post-employment benefits
|
|
308
|
|
292
|
|
248
|
|
|
|
|
15,539
|
|
14,475
|
|
15,720
|
|
F-86
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
38.
Commitments and contingencies
Commitments
Acquisitions in the Italy segment
The Company has made a number of acquisitions in the Italy segment consisting of strategic investments to exploit growth opportunities in the Sports Betting and Machine Gaming markets. Some of these acquisitions include provisions for the payment of contingent consideration if certain wager or network performance conditions are achieved. Contingent consideration of €0.3 million and €0.3 million was paid during 2014 and 2013, respectively. If the performance conditions continue to be achieved, the Company expects to pay the following additional amounts:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Within one year
|
|
446
|
|
722
|
|
|
After one year but not morre than five years
|
|
529
|
|
472
|
|
|
|
|
975
|
|
1,194
|
|
CLS-GTECH Company Limited
The Company has a capital commitment to CLS-GTECH in the form of a non-interest bearing promissory note to be repaid at the discretion of the CLS-GTECH board of directors. At December 31, 2014, the outstanding commitment was US$3.8 million (€3.1 million at the December 31, 2014 exchange rate), which is included in current financial liabilities in our consolidated statement of financial position.
Yeonama Holdings Co. Limited
In December 2013, the Company invested €19.8 million in Yeonama Holdings Co. Limited (“Yeonama”), a shareholder in Emma Delta Limited, the fund that holds a 33% interest in OPAP S.A., the Greek gaming and football betting operator. At December 31, 2014, the Company had a commitment to invest up to an additional €10.2 million in Yeonama, representing a total potential €30.0 million investment.
Guarantees and indemnifications
Northstar Lottery Group, LLC
In January 2011, Northstar Lottery Group, LLC (“Northstar”), a consortium in which GTECH Corporation holds an 80% controlling interest, entered into a ten-year lottery management services contract (the “Illinois Contract”), subject to early termination provisions, with the State of Illinois, acting through the Department of the Lottery (as the statutory successor to the Department of Revenue, Lottery Division) (the “State of Illinois”). Under the Illinois Contract, Northstar, subject to the State of Illinois’s oversight, manages the day-to-day operations of the lottery and its core functions. Northstar guaranteed the State of Illinois a minimum profit level for each fiscal year of the Illinois contract, commencing with the State of Illinois’ fiscal year ended June 30, 2012. The amounts guaranteed and therefore owed by Northstar as shortfall payments under the Illinois Contract were in dispute.
In August 2014, the Illinois Governor’s Office directed the State of Illinois to end its relationship with Northstar, and in December 2014, the Illinois Contract was terminated pursuant to a termination agreement between Northstar, GTECH Corporation, Scientific Games International, Inc. (“SGI”), and the State of Illinois. Northstar will continue to provide lottery management services in Illinois for a transitional period, as outlined in the termination agreement. GTECH Corporation will retain its separate facilities management contract through June 30, 2021. Over one month after its execution by the Governor of Illinois and the State of Illinois, the Illinois Attorney General notified the State of Illinois that it “disapproves” of the “proposed” termination agreement. Relying on the Attorney General’s “disapproval,” the Governor’s Office informed Northstar that it believed the termination agreement was invalid and unenforceable and therefore the Illinois Contract remained in effect. Both Northstar and GTECH Corporation believe that the termination agreement is valid and binding on the parties.
F-87
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As part of the December 2014 global settlement of disputes in the termination agreement between Northstar, GTECH Corporation, SGI, and the State of Illinois, the shortfall payments Northstar is required to make in relation to its obligation to guarantee minimum profit levels under the Illinois Contract for the fiscal years 2012, 2013 and 2014 have been agreed upon and settled for $21.8 million, $38.6 million and $37.1 million, respectively. No further cash impact will result from this shortfall payments final determination. Northstar will not be responsible for the payment of any other shortfall payment, nor will it be entitled to receive any incentive compensation, for all or any portion of fiscal year 2015, or any subsequent fiscal year.
Included in non-current assets on our consolidated statement of financial position at December 31, 2014 is €56.1 million related to the minimum revenue guarantee which we are amortizing against service revenue over its estimated useful life. In our 2014 fourth quarter we recorded $18.0 million (€14.8 million) as a reduction of service revenue related to the global settlement.
GTECH Indiana, LLC
In October 2012, GTECH Indiana, LLC (“GTECH Indiana”), a wholly-owned subsidiary of GTECH Corporation, entered into a 15-year agreement (the “Indiana Agreement”), with the State Lottery Commission of Indiana (the “State of Indiana”) that ends June 30, 2028, subject to early termination provisions, with transition services that commenced immediately, and with full services that began on July 1, 2013. Under the Indiana Agreement, GTECH Indiana manages the day-to-day operations of the lottery and its core functions subject to the State’s control over all significant business decisions. The Indiana Agreement may be extended through June 30, 2038, with such extensions based on economic performance metrics identified in the Indiana Agreement.
The State of Indiana may terminate the Indiana Agreement early under several scenarios such as (a) for convenience with a 90 day notice, (b) for a change in control of GTECH Indiana not approved by the State of Indiana, (c) under an event of default by GTECH Indiana, or (d) in the event that Net Income Shortfalls (as defined below) equal more than 10% of the applicable Bid Net Income (as defined below) in any two consecutive contract years, or any three contract years in a five contract year period. Should the State of Indiana terminate the Indiana Agreement for convenience, the State of Indiana would be obligated to pay GTECH Indiana a termination fee based on the terms outlined in the Indiana Agreement. GTECH Indiana may also terminate the Indiana Agreement under limited circumstances, as described in the Indiana Agreement.
Commencing with the contract year starting July 1, 2013, to the extent that the actual net income earned by the State of Indiana each year exceeds the net income guaranteed by GTECH Indiana for such year (“Bid Net Income”), GTECH Indiana will earn incentive compensation for each dollar in excess of Bid Net Income, up to an annual maximum of 5% of the actual net income earned by the State of Indiana in such contract year. In the event actual net income is less than Bid Net Income in a contract year (“Net Income Shortfall”), GTECH Indiana will be required to pay the State of Indiana for such Net Income Shortfall, provided that the Net Income Shortfall payment may not exceed 5% of Bid Net Income in such contract year.
GTECH Indiana receives reimbursement for certain costs in connection with the Indiana Agreement, including those related to managing the lottery such as its personnel costs and other overhead expenses, as well as lottery expenses incurred by GTECH Indiana for fees paid to subcontractors for the provision of goods and services. These reimbursements are recorded as service revenue in the consolidated income statements.
We recorded $17.6 million (€13.9 million) as a reduction of service revenue related to the minimum profit level guarantee in 2014 for the State of Indiana’s fiscal years ending June 30, 2014 and June 30, 2015, of which $1.6 million was settled and related to the State of Indiana’s fiscal year ending June 30, 2014.
Northstar New Jersey Lottery Group, LLC
On June 20, 2013, Northstar New Jersey Lottery Group, LLC (“Northstar NJ”), a consolidated joint venture in which GTECH Corporation indirectly holds an approximate 41% interest, entered into an agreement (the “New Jersey Agreement”) with the State of New Jersey (the “State”), Department of the Treasury, Division of Purchase and Property and Division of Lottery (the “Division of Lottery”), which ends June 30, 2029, subject to early termination provisions, with transition services commencing immediately, and with base services that began on October 1, 2013. Under the New Jersey Agreement, Northstar NJ manages a wide range of the Division of Lottery’s marketing, sales and related functions, which is subject to the Division of Lottery’s continuing control and oversight over the conduct of lottery operations.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The State may terminate the New Jersey Agreement early under several scenarios such as (a) for convenience with a 90 day notice, (b) for a change in control of Northstar NJ not approved by the State, (c) under an event of default by Northstar NJ, or (d) in the event that Net Income Shortfalls (as defined below) equal more than 10% of the applicable net income targets (as defined below) in any two consecutive contract years, or any three contract years in a five contract year period. Should the State terminate the New Jersey Agreement for convenience, the State would be obligated to pay Northstar NJ a termination fee based on the terms outlined in the New Jersey Agreement. Northstar NJ may also terminate the New Jersey Agreement under limited circumstances, as described in the New Jersey Agreement.
To the extent that the net income earned by the Division of Lottery each year exceeds the base level income for such year set by the Division of Lottery, Northstar NJ will earn incentive compensation that is awarded based on various levels of performance, up to an annual maximum of 5% of the actual net income earned by the Division of Lottery in such year. The incentive compensation that Northstar NJ may earn in an applicable year under the New Jersey Agreement could be reduced by a Net Income Shortfall (defined below) in the event Northstar NJ’s performance does not achieve the net income target it guaranteed for the applicable year. Northstar NJ will be responsible for payments to the Division of Lottery, based on a formula provided by the New Jersey Agreement, should the net income targets set forth in Northstar NJ’s bid not be achieved (a “Net Income Shortfall”), and to the extent that such Net Income Shortfall amounts exceed incentive compensation earned by Northstar NJ in such contract year, with any such payment further subject to a cap of 2% of the applicable contract year’s actual net income (a “Net Income Shortfall Payment”). Further, over the term of the New Jersey Agreement, Northstar NJ has a credit of up to $20 million (€16.5 million at the December 31, 2014 exchange rate), which is available to offset any Net Income Shortfall Payment due to the Division of Lottery.
Northstar NJ receives reimbursement monthly for certain manager and operating expenses, including personnel costs and other overhead expenses. Certain costs, which include fees to subcontractors, including GTECH Corporation (for online and instant ticket services to be provided to Northstar NJ) and Scientific Games International, Inc. (for instant ticket and other related services to be provided to Northstar NJ), are also reimbursed to Northstar NJ by the State. Third-party reimbursements are recorded as service revenue in the consolidated income statements.
Northstar NJ made a $120 million (€91.7 million at the June 2013 acquisition date) payment to the Division of Lottery upon execution of the New Jersey Agreement, and it has committed to ensuring that 30% of total revenues accruing from lottery ticket sales will be transferred to State institutions and State aid for education on an annual basis. The 2% downside cap and $20 million (€16.5 million at the December 31, 2014 exchange rate) credit set forth above are not applicable with respect to Northstar NJ’s 30% contribution requirement.
At December 31, 2014, our best estimate, based on unaudited results, is that the impact of a Net Income Shortfall will result in the use of $14.2 million (€11.7 million at the December 31, 2014 exchange rate) of Northstar NJ’s $20 million credit for the State’s fiscal year ended June 30, 2014 and therefore we have not recorded any amounts in our consolidated financial statements related to the minimum profit level guarantee. Based on information available to date, the Company currently believes that the impact of any Net Income Shortfalls for the remaining term of the arrangement with the State of New Jersey will not exceed the remaining balance of $5.9 million of Northstar NJ’s $20 million credit.
Loxley GTECH Technology Co., LTD guarantee
The Company has a 49% interest in Loxley GTECH Technology Co., LTD (“LGT”), which is accounted for as an asset held for sale with a de minimis value. LGT is a joint venture that was formed to provide an online lottery system in Thailand.
The Company has guaranteed, along with the 51% shareholder in LGT, performance bonds provided to LGT by an unrelated commercial lender. The performance bonds relate to LGT’s performance under the July 2005 contract between the Government Lottery Office of Thailand and LGT should such contract become operational. The Company is jointly and severally liable with the other shareholder in LGT for this guarantee. There is no scheduled termination date for the Company’s guarantee obligation. The maximum liability under the guarantee is Baht 375 million (€9.4 million). At December 31, 2014, the Company does not have any obligation related to this guarantee because the July 2005 contract to provide the online lottery system is not in operation due to continuing political instability in Thailand.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Commonwealth of Pennsylvania indemnification
GTECH Corporation will indemnify the Commonwealth of Pennsylvania and any related state agencies for claims made relating to the state’s approval of GTECH Corporation’s manufacturer’s license in the Commonwealth of Pennsylvania.
Contingencies
Performance and other bonds
In connection with certain contracts and procurements, we have been required to deliver performance bonds for the benefit of our customers and bid and litigation bonds for the benefit of potential customers, respectively. These bonds give the beneficiary the right to obtain payment and/or performance from the issuer of the bond if certain specified events occur. In the case of performance bonds, which generally have a term of one year, such events include our failure to perform our obligations under the applicable contract. We are required to indemnify the bond issuers against costs they would incur if a beneficiary exercises their rights, although we do not currently anticipate any exercise of these rights. The following table provides information related to potential commitments for bonds outstanding at December 31, 2014:
|
(€ thousands)
|
|
Total Bonds
|
|
|
Performance bonds
|
|
300,444
|
|
|
Litigation bonds
|
|
33,528
|
|
|
All other bonds
|
|
5,705
|
|
|
|
|
339,677
|
|
Leases
Operating Leases
The Company leases certain facilities and equipment under operating leases that expire at various dates through 2027. Certain of these leases have escalation clauses and renewal options. We are generally required to pay all maintenance costs, taxes and insurance premiums relating to our leased assets. There are no restrictions placed upon us by entering into these leases.
Future minimum lease payments under non-cancellable operating leases are as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Within one year
|
|
29,385
|
|
34,776
|
|
|
After one year but not more than five years
|
|
54,200
|
|
69,327
|
|
|
More than five years
|
|
7,214
|
|
9,690
|
|
|
|
|
90,799
|
|
113,793
|
|
Rental expense for operating leases was €29.4 million and €30.3 million in 2014 and 2013, respectively.
Finance Leases
World Headquarters finance lease
The Company has a finance lease for the GTECH world headquarters facility in Providence, Rhode Island, USA. GTECH has the right to cancel the lease after June 30, 2023 if its facilities management contract with the State of Rhode Island is not renewed, in exchange for a termination fee equal to six months of base rent plus operating expenses. The lease includes two ten year extension options. GTECH has the unilateral right to extend the lease under the two extension options under the same terms as in the base term. The lease contains a restriction which does not allow GTECH to assign the lease or sublease its portion of the building without the lessor’s approval, which is not to be unreasonably withheld. As of December 31, 2014, GTECH had no sublease arrangements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments under the World Headquarters finance lease together with the present value of the minimum lease payments are as follows:
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Minimum
Payments
|
|
Present
Value of
Payments
|
|
Minimum
Payments
|
|
Present
Value of
Payments
|
|
|
Within one year
|
|
2,653
|
|
1,191
|
|
2,291
|
|
927
|
|
|
After one year but not more than five years
|
|
11,124
|
|
6,414
|
|
9,610
|
|
5,039
|
|
|
More than five years
|
|
13,158
|
|
11,083
|
|
14,103
|
|
11,413
|
|
|
Non-current
|
|
24,282
|
|
17,497
|
|
23,713
|
|
16,452
|
|
|
Total minimum lease payments
|
|
26,935
|
|
18,688
|
|
26,004
|
|
17,379
|
|
|
Less amounts representing finance charges
|
|
(8,247
|
)
|
—
|
|
(8,625
|
)
|
—
|
|
|
Present value of minimum lease payments
|
|
18,688
|
|
18,688
|
|
17,379
|
|
17,379
|
|
At December 31, 2014 and 2013, the net carrying amount of the World Headquarters finance lease asset is €12.1 million and €11.9 million, respectively, which is included in property, plant and equipment, net in the consolidated statements of financial position. The carrying amount of the liability is recorded in the consolidated statements of financial position as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Non-current financial liabilities
|
|
17,497
|
|
16,452
|
|
|
Current financial liabilities
|
|
1,191
|
|
927
|
|
|
Present value of minimum lease payments
|
|
18,688
|
|
17,379
|
|
Communication equipment finance leases
The Company has finance leases for certain communication equipment that expire between 2019 and 2022. The leases have terms of renewal, options to purchase the equipment and there are no escalation clauses. There are no restrictions placed upon us by entering into these leases.
Future minimum lease payments under the communication equipment finance leases together with the present value of the minimum lease payments are as follows:
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Minimum
Payments
|
|
Present
Value of
Payments
|
|
Minimum
Payments
|
|
Present
Value of
Payments
|
|
|
Within one year
|
|
2,448
|
|
1,633
|
|
1,984
|
|
1,245
|
|
|
After one year but not more than five years
|
|
9,617
|
|
7,609
|
|
7,937
|
|
5,882
|
|
|
More than five years
|
|
3,807
|
|
3,539
|
|
5,226
|
|
4,735
|
|
|
Non-current
|
|
13,424
|
|
11,148
|
|
13,163
|
|
10,617
|
|
|
Total minimum lease payments
|
|
15,872
|
|
12,781
|
|
15,147
|
|
11,862
|
|
|
Less amounts representing finance charges
|
|
(3,091
|
)
|
—
|
|
(3,285
|
)
|
—
|
|
|
Present value of minimum lease payments
|
|
12,781
|
|
12,781
|
|
11,862
|
|
11,862
|
|
At December 31, 2014 and 2013, the net carrying amount of the communication equipment finance lease assets are €11.2 million and €11.5 million, respectively, which is included in systems, equipment and other assets related to contracts, net in the consolidated statements of financial position. The carrying amount of the liability is recorded in the consolidated statements of financial position as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Non-current financial liabilities
|
|
11,148
|
|
10,617
|
|
|
Current financial liabilities
|
|
1,633
|
|
1,245
|
|
|
Present value of minimum lease payments
|
|
12,781
|
|
11,862
|
|
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GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Point of sale finance leases
The Company has finance leases for certain point of sale equipment that expire in 2017. There are no restrictions placed upon us by entering into these leases.
Future minimum lease payments under the point of sale finance leases together with the present value of the minimum lease payments are as follows:
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
Minimum
Payments
|
|
Present
Value of
Payments
|
|
Minimum
Payments
|
|
Present
Value of
Payments
|
|
|
Within one year
|
|
6,286
|
|
5,651
|
|
6,286
|
|
5,651
|
|
|
After one year but not more than five years
|
|
12,572
|
|
11,302
|
|
18,857
|
|
16,952
|
|
|
More than five years
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Non-current
|
|
12,572
|
|
11,302
|
|
18,857
|
|
16,952
|
|
|
Total minimum lease payments
|
|
18,858
|
|
16,953
|
|
25,143
|
|
22,603
|
|
|
Less amounts representing finance charges
|
|
(1,905
|
)
|
—
|
|
(2,540
|
)
|
—
|
|
|
Present value of minimum lease payments
|
|
16,953
|
|
16,953
|
|
22,603
|
|
22,603
|
|
At December 31, 2014 and 2013, the net carrying amount of the point of sale finance lease assets are €17.0 million and €22.6 million, respectively, which is included in systems, equipment and other assets related to contracts, net in the consolidated statement of financial position. The carrying amount of the liability is recorded in the consolidated statement of financial position as follows:
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Non-current financial liabilities
|
|
11,302
|
|
16,952
|
|
|
Current financial liabilities
|
|
5,651
|
|
5,651
|
|
|
Present value of minimum lease payments
|
|
16,953
|
|
22,603
|
|
Sale and Leaseback Transaction
GTECH sold its technology center facility in December 2006 and entered into a sale-leaseback agreement with the new owners that expires in November 2019, including renewal options but no escalation clause. The lease is accounted for as an operating lease and future minimum lease payments are included in the operating leases section above.
39.
Financial risk management objectives and policies
Our principal financial instruments, other than derivatives, are comprised of debt and cash and cash equivalents. The main purpose of these financial instruments is to fund the capital needs of the Company’s operations. We have various other financial assets and liabilities, such as trade receivables and trade payables, which arise directly from operations.
The primary risk inherent in our financial instruments is the market risk arising from adverse changes in interest rates and foreign currency exchange rates. We enter into derivative transactions, including principally interest rate swaps and forward currency contracts, for the purpose of managing interest rate and currency risks arising from our operations and its sources of financing. It is, and has been throughout the year, our policy not to engage in currency or interest rate speculation. Our accounting policies regarding derivatives are set out in Note 3.15.
Credit risk
The Company’s primary credit risk is derived from cash and trade accounts receivable balances. We maintain cash deposits and trade with only recognized, creditworthy third parties. We evaluate the collectibility of trade accounts and sales-type lease receivables on a customer-by-customer basis and we believe our reserves are adequate. A significant amount of our trade accounts receivable is from government lottery entities from which we have historically experienced insignificant write-offs. Trade accounts receivable are reported net of allowances for
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
doubtful accounts and liquidated damages. Allowances for doubtful accounts are generally recorded when there is objective evidence we will not be able to collect the receivable. Uncollectible receivables are written off when all reasonable collection efforts have been exhausted and it is determined that there is minimal chance of any kind of recovery.
The Company does not have significant credit risk exposure to any single customer. Geographically, credit risk is concentrated in Italy. At December 31, 2014 and 2013, approximately 65% and 71%, respectively, of total trade and other receivables, net are from Italy and approximately 62% and 69%, respectively of these receivables relate to our lottery instant ticket business.
With respect to credit risk arising from the other financial assets which comprise cash, available-for-sale financial investments, and certain derivative instruments, our exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments (see Note 14). We manage our exposure to counterparty credit risk by entering into financial instruments with major, financially sound counterparties with high-grade credit ratings, and by limiting exposure to any one counterparty.
Past due financial assets
The following is an analysis of the Company’s past due financial assets which are comprised entirely of trade and other receivables, net of related allowance for doubtful accounts.
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
(€ thousands)
|
|
€
|
|
%
|
|
€
|
|
%
|
|
|
Current
|
|
618,763
|
|
81.7
|
%
|
816,638
|
|
90.3
|
%
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
1-30 days
|
|
77,850
|
|
10.3
|
%
|
40,950
|
|
4.5
|
%
|
|
31-60 days
|
|
15,066
|
|
2.0
|
%
|
15,472
|
|
1.7
|
%
|
|
61-90 days
|
|
3,771
|
|
0.5
|
%
|
4,206
|
|
0.5
|
%
|
|
Over 90 days
|
|
41,994
|
|
5.5
|
%
|
26,982
|
|
3.0
|
%
|
|
|
|
138,681
|
|
18.3
|
%
|
87,610
|
|
9.7
|
%
|
|
Total trade and other receivables, net
|
|
757,444
|
|
100.0
|
%
|
904,248
|
|
100.0
|
%
|
Allowance for doubtful accounts
|
|
|
December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
|
Balance at beginning of year
|
|
(72,263
|
)
|
(70,969
|
)
|
|
Provisions, net
|
|
(11,099
|
)
|
(12,279
|
)
|
|
Amounts written off as uncollectible
|
|
10,859
|
|
10,693
|
|
|
Foreign currency translation
|
|
(248
|
)
|
300
|
|
|
Other
|
|
(2,877
|
)
|
(8
|
)
|
|
Balance at end of year (Note 17)
|
|
(75,628
|
)
|
(72,263
|
)
|
Liquidity risk
The Company’s primary liquidity risk is derived from required debt service on debt and on-going working capital needs. The Company’s objective in managing this risk is to maintain adequate liquidity and flexibility through the use of cash generated from operating activities and bank facilities. We believe our ability to generate cash from operations to reinvest in our business is one of our fundamental financial strengths and combined with our committed borrowing capacity, we expect to meet our financial obligations and operating needs in the foreseeable future. We expect to use cash generated primarily from operating activities to meet contractual obligations, invest in our business and to pay dividends. Our future growth is expected to be financed through a combination of cash generated from operating activities, existing sources of committed liquidity, access to capital markets, and other sources of capital. Our corporate debt ratings of Baa3 (stable outlook) from Moody’s Investors Service Inc. and BBB- (positive outlook) from Standard and Poor’s Ratings Services contribute to our ability to access capital markets at attractive prices, therefore, we do not believe the Company is exposed to a significant concentration of liquidity risk. In January 2015, after the close of calendar 2014, S&P announced that our credit ratings decreased. See Note 43 for additional information.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following tables set out the contractual maturities of the Company’s financial liabilities based on contractual undiscounted payments:
At December 31, 2014
|
(€ thousands)
|
|
Within 1
year
|
|
1-2
years
|
|
2-3
years
|
|
3-4
years
|
|
More
than
4 years
|
|
Total
|
|
|
Fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Securities(1)
|
|
750,911
|
|
—
|
|
—
|
|
—
|
|
45,495
|
|
796,406
|
|
|
2010 Notes (due 2018)
|
|
24,549
|
|
—
|
|
—
|
|
500,000
|
|
—
|
|
524,549
|
|
|
2012 Notes (due 2020)
|
|
14,408
|
|
—
|
|
—
|
|
—
|
|
500,000
|
|
514,408
|
|
|
Bridge facility fees
|
|
44,673
|
|
—
|
|
—
|
|
—
|
|
—
|
|
44,673
|
|
|
Note consent fees
|
|
28,627
|
|
—
|
|
—
|
|
—
|
|
—
|
|
28,627
|
|
|
World Headquarters finance lease
|
|
2,652
|
|
2,703
|
|
2,754
|
|
2,807
|
|
16,018
|
|
26,934
|
|
|
Point of sale finance leases
|
|
6,286
|
|
6,286
|
|
6,286
|
|
—
|
|
—
|
|
18,858
|
|
|
Communication equipment finance leases
|
|
2,448
|
|
2,447
|
|
2,447
|
|
2,447
|
|
6,082
|
|
15,871
|
|
|
|
|
874,554
|
|
11,436
|
|
11,487
|
|
505,254
|
|
567,595
|
|
1,970,326
|
|
|
Floating rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities
|
|
1,737
|
|
—
|
|
—
|
|
—
|
|
738,914
|
|
740,651
|
|
|
Other
|
|
9,042
|
|
147
|
|
73
|
|
—
|
|
—
|
|
9,262
|
|
|
|
|
10,779
|
|
147
|
|
73
|
|
—
|
|
738,914
|
|
749,913
|
|
|
|
|
885,333
|
|
11,583
|
|
11,560
|
|
505,254
|
|
1,306,509
|
|
2,720,239
|
|
(1) GTECH expects to redeem the €45,495 million of the Capital Securities at par on March 31, 2016.
At December 31, 2013
|
(€ thousands)
|
|
Within 1
year
|
|
1-2
years
|
|
2-3
years
|
|
3-4
years
|
|
More
than
4 years
|
|
Total
|
|
|
Fixed rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Securities
|
|
46,406
|
|
—
|
|
—
|
|
—
|
|
750,000
|
|
796,406
|
|
|
2009 Notes (due 2016)
|
|
2,926
|
|
—
|
|
750,000
|
|
—
|
|
—
|
|
752,926
|
|
|
2010 Notes (due 2018)
|
|
24,549
|
|
—
|
|
—
|
|
—
|
|
500,000
|
|
524,549
|
|
|
2012 Notes (due 2020)
|
|
14,408
|
|
—
|
|
—
|
|
—
|
|
500,000
|
|
514,408
|
|
|
World Headquarters finance lease
|
|
2,291
|
|
2,335
|
|
2,379
|
|
2,425
|
|
16,574
|
|
26,004
|
|
|
Point of sale finance leases
|
|
6,286
|
|
6,286
|
|
6,286
|
|
6,285
|
|
—
|
|
25,143
|
|
|
Communication equipment finance leases
|
|
1,984
|
|
1,984
|
|
1,984
|
|
1,984
|
|
7,211
|
|
15,147
|
|
|
|
|
98,850
|
|
10,605
|
|
760,649
|
|
10,694
|
|
1,773,785
|
|
2,654,583
|
|
|
Floating rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facilities
|
|
127,423
|
|
152,273
|
|
—
|
|
—
|
|
—
|
|
279,696
|
|
|
Other
|
|
1,158
|
|
147
|
|
147
|
|
73
|
|
—
|
|
1,525
|
|
|
|
|
128,581
|
|
152,420
|
|
147
|
|
73
|
|
—
|
|
281,221
|
|
|
|
|
227,431
|
|
163,025
|
|
760,796
|
|
10,767
|
|
1,77,785
|
|
2,935,804
|
|
Market risk
Interest rate market risk
Our exposure to changes in market interest rates relates primarily to our net debt obligations with floating interest rates. Our definition of net debt is variable rate debt less variable rate cash investments. Our policy is to manage interest cost using a mix of fixed and variable rate debt. We use various techniques to mitigate the risks associated with future changes in interest rates, including entering into interest rate swap and treasury rate lock agreements.
As of December 31, 2014 there were no interest rate swaps outstanding and approximately 29% of our net debt portfolio was exposed to interest rate fluctuations. As of December 31, 2013, there were €150 million (notional value) in interest rate swaps and approximately 15% of our net debt portfolio was exposed to interest rate fluctuations.
F-94
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Company’s income before income tax expense and equity associated with our floating rate debt over the next year:
|
|
|
Increase (decrease) in
basis points
|
|
Effect on income
before income tax
expense (€000s)
|
|
Effect on equity
(€000s)
|
|
|
2014
|
|
0
|
|
(739
|
)
|
—
|
|
|
|
|
(10
|
)
|
739
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
10
|
|
(429
|
)
|
—
|
|
|
|
|
(10
|
)
|
429
|
|
—
|
|
Foreign currency exchange rate risk
As a result of significant operations worldwide, our consolidated statement of financial position can be affected significantly by movements in exchange rates due to the translation of foreign currency balance sheet accounts into euro balance sheet accounts. We also have transactional currency exposures arising from current and anticipated transactions denominated in currencies other than our functional currency, which is the euro. Translation amounts in other reserves (Note 18) in our consolidated statements of financial position are derived primarily from our US dollar functional currency subsidiaries.
We seek to manage our foreign exchange risk by securing payment from our customers in euros, by sharing risk with our customers, by utilizing foreign currency borrowings, by netting receipts and payments, and by entering into foreign currency forward and option contracts. In addition, a significant portion of the costs attributable to our foreign currency revenues are payable in the local currencies. In limited circumstances, but whenever possible, we negotiate clauses into our contracts that allow for price adjustments should a material change in foreign exchange rates occur.
From time to time, we enter into foreign currency forward and option contracts to reduce the exposure associated with certain firm commitments, variable service revenues, and certain assets and liabilities denominated in foreign currencies, but we do not engage in foreign currency speculation. These contracts generally have average maturities of 12 months or less and are regularly renewed to provide continuing coverage throughout the year. It is our policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximize hedge effectiveness.
As of December 31, 2014, we had forward contracts for the sale of approximately US$513.1 million of foreign currency (primarily euro, US dollars and British pounds) and the purchase of approximately US$445.6 million of foreign currency (primarily euro and Swedish krona).
As of December 31, 2013, we had forward contracts for the sale of approximately US$352 million of foreign currency (primarily euro, British pounds, and Swedish krona) and the purchase of approximately US$501.4 million of foreign currency (primarily euro and Swedish krona). We also had foreign currency option contracts for the sale of approximately US$8.5 million and the purchase of approximately US$8.8 million.
The following demonstrates the sensitivity to a reasonably possible change in the euro to US dollar exchange rate, with all other variables held constant, of the Company’s income before income tax expense and equity associated with our foreign currency denominated assets and liabilities and foreign currency forward contracts:
|
|
|
Favorable (Unfavorable) change in exchange rate
|
|
|
|
|
Effect on income before
income tax expense
|
|
Effect on equity
|
|
|
(€ thousands)
|
|
10%
|
|
(10%)
|
|
10%
|
|
(10%)
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
US dollar
|
|
1,106
|
|
(1,106
|
)
|
266,916
|
|
(266,916
|
)
|
|
British pounds
|
|
1,072
|
|
(1,072
|
)
|
3,945
|
|
(3,945
|
)
|
|
Swedish krona
|
|
532
|
|
(532
|
)
|
10,096
|
|
(10,096
|
)
|
|
Argentine pesos
|
|
502
|
|
(502
|
)
|
—
|
|
—
|
|
|
Canadian dollar
|
|
132
|
|
(132
|
)
|
11,029
|
|
(11,029
|
)
|
|
All other
|
|
1,284
|
|
(1,284
|
)
|
10,619
|
|
(10,619
|
)
|
|
|
|
4,628
|
|
(4,628
|
)
|
302,605
|
|
(302,605
|
)
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
US dollar
|
|
2,463
|
|
(2,463
|
)
|
240,019
|
|
(240,019
|
)
|
|
Canadian dollar
|
|
636
|
|
(636
|
)
|
10,594
|
|
(10,594
|
)
|
|
Argentine pesos
|
|
446
|
|
(446
|
)
|
—
|
|
—
|
|
|
British pounds
|
|
967
|
|
(967
|
)
|
1,189
|
|
(1,189
|
)
|
|
Swedish krona
|
|
—
|
|
—
|
|
10,082
|
|
(10,082
|
)
|
|
All other
|
|
1,205
|
|
(1,205
|
)
|
9,650
|
|
(9,650
|
)
|
|
|
|
5,717
|
|
(5,717
|
)
|
271,534
|
|
(271,534
|
)
|
F-95
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Commodity price risk
Our exposure to commodity price changes is not considered material and is managed through our procurement and sales practices.
Hedging activities and derivatives
Derivatives not designated as hedging instruments
The Company uses foreign currency forward contracts to manage some of its transaction exposures and future foreign currency net cash flows that the Company expects to generate through its operations. These foreign currency forward contracts are not designated as cash flow, fair value, or net investment hedges and are typically matched with current transactions or forecasted foreign currency transactions to be derived from operations. The aggregate fair value loss of the contracts at December 31, 2014 and December 31, 2013 was €3.3 million and €0.6 million, respectively.
Cash flow hedges
Foreign exchange contracts
At December 31, 2014 and 2013, the Company held foreign currency forward contracts designated as hedges of future foreign currency net cash flows that the Company expects to generate through its operations. The terms of the contracts are typically matched with the forecasted foreign currency transactions to be derived from operations up to a period of 12 months. At December 31, 2014, the aggregate fair value of these contracts was €1.2 million. At December 31, 2013, the aggregate fair value loss of these contracts was €2.6 million.
Net unrealized gains from foreign currency cash flow hedges of €2.8 million were included in other comprehensive income during 2014. Net unrealized losses from foreign currency cash flow hedges of €1.0 million were included in other comprehensive income during 2013. Net realized gains of €0.4 million and €0.2 million were reclassified from other comprehensive income and included in the consolidated income statement in 2014 and 2013, respectively. The amounts retained in other comprehensive income at December 31, 2014 are expected to mature and affect the consolidated income statement in 2015. Reclassification adjustments for gains included in the income statement and losses included in other comprehensive income are disclosed in Note 32.
Interest rate swaps
At December 31, 2014 and 2013, the Company did not hold any interest rates swaps designated as cash flow hedges.
Fair value hedges
At December 31, 2013, the Company held €150 million notional amount of interest rate swaps (“swaps”) with an aggregate fair value of €10.6 million, which were designated as hedges of fixed interest rates on the €750 million of senior notes due 2016 (the “2009 Notes”). These swaps effectively converted €150 million of the 2009 Notes fixed interest rate debt to variable rate debt. Under the terms of these swaps, the Company was required to make variable rate interest payments based on a 6 month floating Euribor plus a flat spread rate, collectively ranging between 2.572% and 2.612% as of December 31, 2013, and received fixed interest payments from its counterparties based on a fixed rate of 5.375%. The Euribor rate reset on a semi-annual basis, but settlement occurred annually. Because these swaps converted fixed rate debt to variable rate debt they were considered fair value hedges. With fair value hedges, both the swaps and the hedged item (the 2009 Notes) are recorded at fair value, with the offset being recorded in interest expense. During 2013, we recorded an unrealized loss of €0.1 million on the swaps and an unrealized gain of €0.1 million on the 2009 Notes.
F-96
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2014 the Company did not hold any fair value hedges. The €150 million notional amount of swaps, which were designated as hedges of fixed interest rates on the 2009 Notes were settled in December 2014, in connection with the redemption of the 2009 Notes. See Notes 20 and 29 for additional information.
Hedges of a net investment in a foreign operation
At December 31, 2014, the Company did not hold any foreign currency forward contracts designated as a hedge against a net investment in its subsidiaries.
At December 31, 2013, the Company held SEK 222.5million (€25.1 million at the December 31, 2013 exchange rate) of foreign currency forward contracts designated as a hedge against the net investment in its wholly-owned subsidiary, GTECH Sweden Interactive AB. At December 31, 2013 the aggregate fair value loss of these contracts was €0.2 million.
Capital management
The primary goal of the Company’s capital management strategy is to ensure strong credit ratings and healthy financial ratios in order to support its business while maximizing corporate value and reducing the Company’s financial risks. We consider all equity and debt to be managed capital of the Company.
The Company manages its capital structure and makes adjustments based on long- term strategy decisions in light of changes in economic conditions. Additionally, the Company seeks to preserve an optimal weighted average cost of capital and maintain sufficient financial flexibility to pursue growth opportunities. There were no changes in the objectives, policies, or processes during the years ended December 31, 2014 and 2013.
F-97
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
40.
Supplemental cash flow information
Cash flows from changes in other assets and liabilities are summarized below:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Current financial liabilities
|
|
(25,930
|
)
|
4,554
|
|
1,733
|
|
|
Deferred revenue
|
|
(17,894
|
)
|
22,265
|
|
16,298
|
|
|
Other current assets
|
|
(11,232
|
)
|
(11,415
|
)
|
(71,028
|
)
|
|
Employee compensation
|
|
(4,797
|
)
|
528
|
|
7,589
|
|
|
Other non-current liabilities
|
|
(2,176
|
)
|
(1,127
|
)
|
(563
|
)
|
|
Current financial assets
|
|
(1,616
|
)
|
(2,574
|
)
|
1,613
|
|
|
Taxes other than income tax
|
|
(1,027
|
)
|
(904
|
)
|
2,286
|
|
|
Accrued expenses
|
|
(905
|
)
|
11,055
|
|
(13,836
|
)
|
|
Provisions
|
|
(902
|
)
|
(1,946
|
)
|
(1,483
|
)
|
|
Non-current financial assets
|
|
(518
|
)
|
(288
|
)
|
16
|
|
|
Advance payments from customers
|
|
714
|
|
(29,466
|
)
|
18,811
|
|
|
Non-current financial liabilities
|
|
3,410
|
|
(1,696
|
)
|
(2,590
|
)
|
|
Other non-current assets
|
|
3,605
|
|
3,816
|
|
(1,469
|
)
|
|
Advance billings
|
|
5,741
|
|
(4,176
|
)
|
(2,283
|
)
|
|
Other current liabilities
|
|
20,090
|
|
3,900
|
|
1,296
|
|
|
|
|
(33,437
|
)
|
(7,474
|
)
|
(43,610
|
)
|
Non-cash investing and financing activities are excluded from the consolidated statement of cash flows and are summarized as follows:
|
|
|
For the year ended December 31,
|
|
|
(€ thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
|
Accrued systems, equipment and other assets related to contracts
|
|
(13,341
|
)
|
(29,481
|
)
|
(30,630
|
)
|
|
Accrued intangible assets
|
|
—
|
|
(4,437
|
)
|
—
|
|
|
Accrued property, plant and equipment
|
|
—
|
|
(570
|
)
|
—
|
|
|
Communication equipment acquired under a finance lease
|
|
—
|
|
—
|
|
(1,573
|
)
|
|
Non-cash investing activities, net
|
|
(13,341
|
)
|
(34,488
|
)
|
(32,203
|
)
|
|
|
|
|
|
|
|
|
|
|
Dividends declared
|
|
(129,594
|
)
|
—
|
|
—
|
|
|
Note consent fees
|
|
(28,627
|
)
|
—
|
|
—
|
|
|
Capital increase — non-controlling interest
|
|
11,269
|
|
3,036
|
|
—
|
|
|
Non-cash financing activities, net
|
|
(146,952
|
)
|
3,036
|
|
—
|
|
41.
Litigation
Due to the nature of our business, we are involved in a number of legal, regulatory and arbitration proceedings regarding, among other matters, claims by and against us, injunctions by third parties arising out of the ordinary course of our business and investigations and compliance inquiries related to our ongoing operations. The outcome of these proceedings and similar future proceedings cannot be predicted with certainty. It is difficult to accurately estimate the outcome of any proceeding. As such, the amounts of the provision for litigation risk, which has been accrued on the basis of assessments made by external counsel, could vary significantly from the amounts which we would ultimately be obligated or agree to pay to settle any such proceeding. In addition, unfavorable resolution of or significant delay in adjudicating such proceedings could require us to pay substantial monetary damages or penalties and/or incur costs which may exceed any provision for litigation risks or, under certain circumstances, cause the termination or revocation of the relevant concession, license or authorization and thereby have a material adverse effect on our consolidated results of operations, business, financial condition or prospects. At December 31, 2014 and December 31, 2013, provisions for litigation matters amounted to €5.6 million and €8.5 million, respectively. During 2014, there were no material accruals to or uses of the provision for legal matters. See Note 21.
F-98
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Italy Segment
1.
Lotto Game Concession: Lottomatica/AAMS Arbitration — Stanley International Betting Limited Appeal
Arbitration Lottomatica (GTECH S.p.A.)/AAMS
On January 24, 2005, GTECH initiated an arbitration proceeding to determine the effective initial date of the Italian Lotto Concession. GTECH requested the Board of Arbitrators to declare that the initial starting date of the Italian Lotto Concession was June 8, 1998 (the date on which the European Commission in Brussels notified the Italian Government that infringement procedure no. 91/0619 was closed) and that, as a result, the final expiration date of the Lotto Concession is June 8, 2016.
On August 1, 2005, the Board of Arbitrators ruled in favor of GTECH, finding that the Italian Lotto Concession became operative only once the infringement procedure initiated by the European Commission was closed. ADM challenged the arbitration award before the Rome Court of Appeals, seeking ruling that the final expiration date of the Lotto Concession was April 17, 2012. Stanley International Betting Limited (“Stanley”) intervened in the appeal, seeking the annulment of the arbitration award.
On March 6, 2012, the Rome Court of Appeals rejected the appeal presented by ADM against the arbitration award. The Court also declared Stanley’s appeal inadmissible.
On May 29, 2012, ADM notified GTECH of its appeal before the Supreme Court of Cassation seeking the annulment of the ruling issued by the Rome Court of Appeal. The ADM appeal is based on the assumption that such ruling would be invalid for lack of motivation because the Court of Appeal failed to explain the grounds of its judgment. In addition, on May 28, 2012, Stanley provided notice of its appeal before the Supreme Court of Cassation, asking for the annulment of (i) the part of the ruling issued by the Rome Court of Appeal that ordered Stanley to pay, jointly and severally with ADM, the litigation costs and (ii) the part of the ruling that declared inadmissible Stanley’s intervention in the judgment.
On February 3, 2014, the Supreme Court of Cassation definitively rejected all of ADM’s arguments and declared inadmissible Stanley’s intervention in the judgment.
Despite arbitral awards and judicial decisions in GTECH’s favor, ADM or other governmental or judicial authority nonetheless may continue to seek monetary or other relief from GTECH in respect of these four disputed years of concession, potentially through additional judicial actions. As described herein, although GTECH has strong arguments in defense of these allegations, an adverse finding or settlement could result in significant damages or other payments or sanctions (including under certain circumstances, revocation of existing concession or Italian Legislative Decree No. 231 of June 8, 2001 sanctions).
Stanley International Betting Limited Appeal
On June 18, 2007 Stanley served upon ADM and GTECH a summons before TAR of Lazio seeking the annulment and/or the non-application of the note of April 19, 2007, as well as the related deeds of the Lotto Concession, in connection with which ADM had rejected the request of the plaintiff’s co-management of the service of the Lotto. Similar summons were also served by Sisal S.p.A., which also intervened in the appeal of Stanley Betting. GTECH appeared in the proceeding and demanded the dismissal of appeals.
TAR of Lazio rejected the two appeals for procedural reasons. Notice of the judgment of the TAR of Lazio was provided by GTECH to both Sisal and Stanley on June 24, 2010. Stanley Betting appealed against the decision before the Council of State (Consiglio di Stato) and GTECH appeared in the proceeding while Sisal did not, and so for that company the term for the appeal expired on October 8, 2010 (60 days from notification). The decision is now final for Sisal.
Stanley’s appeal was discussed before the Council of State at a hearing on December 4, 2012. In the ruling lodged on January 7, 2013, the Council of State rejected the appeal filed by Stanley, stating that the note of April 2007 was not an administrative deed and, therefore, was per se not challengeable. The Council of State also decided to postpone its definitive decision regarding the renewal of the Lotto Concession until after the decision of the Supreme Court of Cassation on the term of the Lotto Concession, giving the parties a term of sixty (60) days to
F-99
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
resume the trial in the Council of State after the decision of the Court of Cassation. (See the previous discussion of GTECH’s appeal.) After the elapse of the deadline given by the Council of State, GTECH has submitted a request for the declaration of the closure of the judgment due to the fact that the same was not resumed on time. With decree n. 497/2014, the trial was declared closed but on June 18th, 2014 Stanley Betting filed an appeal against the same decree. The hearing date has not yet been set.
Stanley has also presented an administrative appeal before the President of the Republic (Ricorso straordinario al Capo dello Stato) against ADM decrees of January 23, 2013 and March 14, 2013 regarding the introduction of remote collection of Lotto, based on the same issues and bases of the appeal on illegitimacy of the Lotto concession renewal. On July 12, 2013, GTECH requested a discussion of this administrative appeal before the administrative judge with a specific act of notice to ADM and Stanley. Stanley has resumed the appeal before TAR Lazio but the hearing date has not yet been set.
2.
“LAS VEGAS” Instant Lottery Petition
Non-winning “Las Vegas” instant lottery (Scratch & Win) tickets have been presented to the Consorzio Lotterie Nazionali (“Consorzio”), currently in liquidation, for payment starting in April 2006.
As of December 31, 2014 the outstanding petitions and requests for injunctive payments for alleged prizes and liquidated damages are approximately € 3.1 million. The litigation proceedings pending before the court of Messina have been settled without any charges for Consorzio. There have also been numerous requests for out-of-court payments with the same demand.
The claims are related to:
a)
Payment of prizes for non-winning tickets. In particular, the players claim that, according to their interpretation of the Rules of the games established by Decree of the Ministry of Economy and Finance dated February 16, 2005, the amounts corresponding to the prizes listed in the various areas of the game tickets are to be paid every time the cards from 10 to K appear assuming that these cards have the same value.
b)
Requests for damages, since the Consorzio, following the bulk of the judgments undertaken by players referred to in subparagraph a) has released a series of tickets bearing the words “The card K, Q, J, A have different scores” and so changing the rules.
The Consorzio filed its appeals against the unfavorable rulings and many of the appeal judgments were already issued in favor of the Consorzio by the Courts, overruling the first degree judgments made by the “Judges of the Peace” and ordering the reimbursement of the sums paid by the Consorzio. The Consorzio has initiated the procedures necessary to verify the recoverability of the sums already paid.
3.
TOTOBIT — Navale Assicurazione Arbitration
Totobit Informatica Software e Sistemi S.p.A. (“Totobit”), a subsidiary of GTECH S.p.A., within the scope of its business activities enters into contracts regarding IT services (cellular phone top-ups) with third party retailers.
On January 23, 2002 Totobit executed with Navale Assicurazioni S.p.A. an insurance policy in order to guarantee the fulfillment of payment obligations of the retailers under the corresponding contracts regarding the above mentioned activities performed by the retailers. The insurance policy had a 3 year duration starting from January 28, 2002. According to the policy provisions, any breach on the part of the retailers shall be reported by Totobit to Navale Assicurazioni within and not later than 3 months of the policy’s annual expiration; the guarantee outside this deadline would no longer be valid.
On November 22, 2004 Navale Assicurazioni sent Totobit a notice informing the same that the policy would be terminated effective as of January 28, 2005, thus refusing the settlement of claims allegedly reported late by Totobit for a total of €1.5 million. In view of said missed payment, the arbitration proceeding was initiated on November 8, 2005 by Totobit.
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The Arbitration Board approved the expert witness Mr. Enrico Proia to make a technical-accounting review of the documents produced by Totobit on request by Navale Assicurazioni.
On January 22, 2007 the Arbitration Award partly accepted the requests made by Totobit and ruled Navale Assicurazioni S.p.A. to pay the sum of €239,811.66. The amount referred exclusively to enforcement actions prior to April 28, 2005. The Arbitration Award partly accepted the counterclaim of Navale Assicurazioni S.p.A. regarding some requests of payment made by Totobit and for this reason ordered Totobit to pay the sum of €200,654.19.
Totobit and its counsels filed the appeal against the arbitration award. At the June 6, 2008 hearing the Court of Appeals of Rome set the pre-trial evidentiary hearing to November 18, 2011. Due to the replacement of the reporting judge, the hearing was postponed to January 25, 2013 and then again April 11, 2014. The President of the Court of Appeal of Rome has accepted the request lodged by Navale Assicurazioni, setting an oral hearing to discuss the case before the Court on January 16, 2015. The hearing was held on January 16, 2015, and the parties are waiting for the decision.
4.
Administrative Procedures on the Setting-Up and Operation of a Screen-Based Gaming Management Network
On June 1, 2007, the Regional Public Prosecutor of the Government Audit Department (Corte dei Conti) served Lottomatica Videolot Rete S.p.A. (“Videolot”) and all other nine concessionaires, an invitation to submit their briefs with regard to an investigation on possible damages to the State Treasury.
The Regional Prosecutor contested that Videolot, in conjunction with some ADM officials, inaccurately did not fulfill a number of obligations relating to the concession and failed to comply with certain service levels.
The damage to the State Treasury supposedly caused by Videolot, in conjunction with said ADM officials, was alleged to add up to approximately €4.0 billion.
On January 8, 2008, the Regional Public Prosecutor for the Audit Department served notice to Videolot regarding the charges brought forth which partially reduced the penalties to approximately €3.0 billion.
On February 17, 2012 the Audit Government Department, Lazio Regional Office, handed down the first ruling against all 10 Italian gaming machine concessionaires. The Audit Department quantified Videolot’s responsibility at €100.0 million.
On May 4, 2012, Videolot filed its appeal against the court ruling (which appeal suspends the ruling by law), requesting its annulment for the same reasons presented in the appeal against the partial decision mentioned above and because the ruling did not take into consideration numerous and essential elements contained in the report filed by Digit PA favorable to the concessionaires. Further, the ruling, according to Videolot, did not give any evidence of loss of revenue for the State because Videolot has always consistently stated and demonstrated the full compliance of its business and operations management and has always paid Prelievo Erariale Unico (“PREU”), a tax on gaming.
On October 15, 2013, Videolot filed a request of settlement according to the emergency decree n. 102/2013. At the October 30th hearing, the Court decided to accept the request filed by Videolot by increasing the amount due to 30% (the maximum amount allowed by law), with a deadline for payment set on November 15, 2013. The decision was published on November 4, 2013.
On October 29, 2013, the emergency decree was converted into law with amendments allowing a settlement by paying an amount equal to 20% of the first decree ruling, provided that the settlement request was submitted together with the payment confirmation before November 4th and that the Court decision had already been issued and was positive. Considering the above, Videolot submitted a new request asking for settlement at 20%. The case was decided at a hearing on November 8, 2013, at which the Court rejected the new request for settlement and confirmed the previous one rendered on October 30, 2013, setting the date for final closure of the judgment on January 31, 2014. At this final hearing, the Court, having checked the correctness of the payment, declared the closure of the judgment with decision n. 52/2014 on February 7, 2014. With regard to the total €30.0 million paid
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for the settlement as explained above, Videolot considered such a settlement amount deductible for tax purposes. Given the specific nature of such settlement, Videolot received an external third party legal opinion which substantially confirmed its position.
On February 6, 2015 the Audit Department issued its decision (which is final) on the appeal filed by the two concessionaires which had not submitted the request of settlement. In its ruling, the Audit Department reduced the amount of the damages imposed upon these concessionaires in the original judgment.
In parallel with the proceedings before the Audit Department, Videolot also filed appeals before the administrative judge against ADM’s request regarding penalties for the failure to comply with the obligations to complete the activation of the online network and the failure to comply with service levels (the first 3 penalties), asking for an amount equal to approximately €10.1 million.
The TAR of Lazio dismissed the motions filed by Videolot on November 30, 2009 and in January 2010 Videolot filed the appeal before the State Council. In rulings issued on August 22, 2011, the State Council upheld the appeals filed by Videolot. The Appeals Judge said that there was no damage (and in addition no proof of damage) and also considered that the breach of contract ascribed to the concessionaires did not have any impact on the eventual delay of the start of the public service under the concession.
On February 23, 2012, ADM notified Videolot of the definitive calculation of the so-called fourth penalty (related to the alleged noncompliance of the service level obligation contained in Section 2, letter B, of the concession), rejecting all the conclusions filed by Videolot and confirming the amount of approximately €9.7 million.
Videolot, considering that the ADM request is illegitimate, filed its appeal against the fourth penalty, asking to suspend the execution as a matter of law until the case is resolved.
On May 24, 2012 Tar Lazio issued a court order suspending the fourth penalty and setting the hearing for discussion on February 20, 2013. On June 17, 2013, the ruling was published annulling the ADM request regarding the fourth penalty, already suspended. On January 27, 2014, AAMS notified Videolot of an appeal against this ruling before the State Council. Videolot has filed its defense against the ADM appeal. The hearing has been set for May 26, 2015.
5.
Auditing Court — Judicial Account Appeals (years 2004-2005 and 2004-2009)
The Regional Public Prosecutor of the Auditing Court (“Corte dei Conti”) served Lottomatica Videolot Rete S.p.A (“Videolot”) and the other nine concessionaires, a summons for the rendering of the judicial accounts related to 2004-2005 years.
Videolot appeared before the Court on March 2, 2009 by submitting a regulation of jurisdiction in order to challenge the Auditing Court’s jurisdiction due to the fact that Videolot is not an accounting agent but a “fiscal passive subject” as so also qualified by the rules in PREU sector.
On April 13, 2010 the Regional Prosecutor of the Auditing Court (irrespective of the fact that at that time was still pending the decision of the Supreme Court), having considered definitely expired the term for delivery of the rendering of accounts (May 2009), notified Videolot with a new summons ordering Videolot to pay a penalty of €80.0 million because of its failure to submit the rendering of account.
On April 20, 2010 the Supreme Court of Cassation declared the jurisdiction of the Auditing Court.
The hearing was held on October 7, 2010.
With a ruling notified to Videolot on November 18, 2010, the Auditors Court rejected the instance of the Prosecutor and acquitted Videolot (considering that Videolot, in the meantime, had submitted the judicial accounts), ordering the liquidation of legal costs of €1,000 in favor of Videolot.
The Regional Prosecutor at the Auditors Court, on April 13, 2011, appealed the ruling of the Judicial Section of the Lazio Region Auditors Court.
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As of the date of this report, a hearing date was not yet set for the said appeal. The appeal has already been ruled on for other concessionaires. In these cases, the Court has reverted the decision of first degree and has ordered the concessionaires to pay a fine equal to €5,000 for the delay in submitting the judicial accounts.
On August 3, 2012 the Regional Prosecutor served Videolot with an opinion on the reliability of the judicial accounts related to the years 2004-2009 that were duly approved by ADM and submitted to Videolot in 2010. The reporting judge has determined the inability to verify the correctness of the judicial accounts due to the fact that according to the evidence of the ruling of the Audit Government Department in February 2012 (see previous litigation item 4), most of the amusement with prize machines were installed but not properly connected to the central system, and, therefore, the calculation of the prizes was an estimate and it was impossible to determine the exact amount of the compensation fees paid to the concessionaires (net of the amount paid to the shut operators).
In decision n. 447/2013, the Court ruled that the accounts produced cannot be considered as judicial accounts. This conclusion led to the Regional Prosecutor’s examination regarding administrative responsibility for these matters. On January 31, 2014, Videolot filed its appeal against decision n. 447/2013. On February 25, 2015, the ruling was issued and the case was remanded for a new evaluation of the accounts.
6.
Soggea vs. Lottomatica Scommesse
On October 17, 2012, Soggea S.p.A. served Lottomatica Scommesse, a wholly-owned GTECH subsidiary, with a summons before the Tribunal of Rome asking for damages equal to €20.5 million. The claim is related to an agreement between Lottomatica Scommesse and Soggea in accordance with which Lottomatica Scommesse allowed Soggea to be part of its tournament circuit for online gaming and shared liquidity.
The agreement was executed by the parties on February 2, 2010 and Soggea entered into the Lottomatica Scommesse circuit “PokerClub” through its trademark “Joka”. The agreement had a duration of 2 years with a renewal clause unless termination of the agreement was communicated by one party to the other. Lottomatica Scommesse, using the termination clause provided for in the agreement, terminated the agreement with effect in April 2012.
Soggea, following termination of the agreement, has asked the Tribunal to ascertain the legitimacy of the termination by Lottomatica Scommesse and to impose on Lottomatica Scommesse a payment of approximately €20.5 million or as an alternative, a payment of approximately €12.3 million.
The first hearing was held on February 11, 2013 and was postponed to May 22, 2013 for the admissions of the means of proof. The judge decided to not admit requests for proofs and, having determined that the case is ready for a decision, established a final hearing date of July 1, 2015.
Lottomatica Scommesse is fully convinced of the legitimacy of the termination of the agreement.
7.
Cogetech vs. Lottomatica Scommesse
On June 17, 2013, Cogetech S.p.A. served Lottomatica Scommesse, GTECH S.p.A., Boss Media AB and prof. Giovanni Puoti with a summons before the Tribunal of Rome in order to declare the termination of the contract signed by Cogetech and Lottomatica Scommesse on September 7, 2011 and ask for damages not yet quantified. Before this, Cogetech had filed a request for a precautionary injunction before the Tribunal of Rome in order to be re-admitted on the Circuit but the judge denied that request. The claim is related to an agreement between Lottomatica Scommesse and Cogetech in accordance with which Lottomatica allowed Cogetech to be part of its tournament circuit for online gaming and shared liquidity and is based on the fact that Lottomatica Scommesse contested with Cogetech the breach by Cogetech of its obligations of fairness and good faith according to Circuit Regulation, as confirmed by the Auditor (prof. Puoti). In accordance with that, on March 29, 2013 Lottomatica Scommesse communicated to Cogetech its termination of the agreement and the end of the shared liquidity. Lottomatica Scommesse has submitted its brief contesting all Cogetech’s claims and has asked for payment of the damages caused by Cogetech by virtue of its behavior.
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At the first hearing of May 14, 2014, the judge ordered the joinder of a third request by prof. Puoti, rescheduling the hearing for October 16, 2014. At the hearing on October 16, 2014, the judge adjourned the case until April 9, 2015 for the admission of evidence.
8.
Appeal against the decree of ADM c.d. Law of Stability (L. n. 190/2014)
Article 1, par. 649 of the Italian 2015 Budget Law introduces a review of the fees and commissions regime applicable to the operation of VLTs and AWP machines (new slots) as follows: a) an aggregate reduction of €500 million per year, starting from 2015 in the fees due to the concessionaires and other operators, to be paid by concessionaires and operators proportionately to the number of VLTs and AWP machines they operate as of December 31 of any given year, starting from December 31, 2014. On January 15, 2015, ADM determined that as of December 31, 2014, the amount to be paid by GTECH for 2015 is approximately €96.5 million. The amount is payable in two tranches: 40% by April 30, 2015 and 60% by October 31, 2015; b) operators shall return to the concessionaries the entire amount (coin in) of the VLTs or AWP machines less prizes; and c) concessionaries and operators are required to re-negotiate their contracts in order to determine how to share the amount of their respective fees. The concessionaires will not be entitled to return to the operators their portion of the compensation fee until the contracts have been re-negotiated and executed. Lottomatica Videolot Rete, together with all other concessionaires and some operators, filed its appeal to the TAR against the ADM’s measures asking suspension of it and referral to the Constitutional Court to evaluate the constitutionality of Article 1, paragraph 649 of the Budget law. The hearing has been set for March 18, 2015.
9.
Italian Tax Matters
In December 2013, GTECH paid €34.7 million to the Italian tax agency (Agenzia delle Entrate) in settlement of certain tax matters of which €28 million involved the corporate reorganization and subsequent restructuring of certain intercompany financing transactions during the years 2006, 2007, 2008 and 2009 related to the acquisition of GTECH in 2006. As required by Italian law, the Italian tax agency referred the matter to the Rome Public Prosecutor’s office, which had the obligation to start an investigation on both GTECH’s Chairman and its CEO as legal representatives of GTECH and signatories of the tax declarations. Charges, if any, would be based on the alleged errors and omissions of the tax declarations during the three years which were already the subject of the settlement by GTECH with the Italian tax agency.
On April 28, 2015, representatives of the Rome Public Prosecutor came to IGT PLC’s offices in Rome to collect documents and files. In addition, one senior executive and one member of the Board of Directors of IGT PLC were served with a notice that each is subject to a criminal investigation in Italy relating to Italian tax returns filed by IGT PLC’s predecessor company, GTECH S.p.A. (fka Lottomatica S.p.A. referred to herein as “GTECH”), for the tax years 2006-2013. Under the relevant Italian statutes, the signatories of the corporate tax returns, and not the corporation itself, are subject to investigation. The individuals are Lorenzo Pellicioli, then chairman of GTECH’s Board of Directors and currently Vice-Chairman of IGT PLC’s Board of Directors, who was GTECH’s legal representative who signed the Italian corporate tax return for the 2013 tax year; and Marco Sala, then GTECH’s CEO and the current CEO and a director of IGT PLC, who signed the Italian corporate tax returns for the 2006, 2007 and 2008 tax years. Renato Ascoli, then the general manager of GTECH’s Italian operations, who signed the Italian corporate tax returns for the 2009, 2010, 2011 and 2012 tax years, was also named in the notices, although he has not yet been served.
It is IGT PLC’s understanding that the current investigation is principally focused on the structuring of the original leveraged buyout of GTECH Holdings Corporation by Lottomatica S.p.A. and the subsequent conversion of a portion of the original debt incurred by GTECH Corporation into an equity increase from the parent company, Lottomatica S.p.A.
The Public Prosecutor is investigating whether GTECH’s income was under-reported in Italy for any of the tax years 2006-2013. If the Public Prosecutor determines that income was under-reported in one or more tax years, the Public Prosecutor may choose to bring criminal charges in Italy against any or all of the above referenced individuals.
IGT believes that the actions of the Company and the relevant managers were appropriate and complied with all applicable tax and other laws and that the allegations underlying the investigation are without merit.
Americas Segment
1.
CEF Contract Proceedings
Background
In January 1997, Caixa Economica Federal (“CEF”), the operator of Brazil’s National Lottery, and Racimec Informática Brasileira S.A. (“Racimec”), the predecessor of GTECH Brazil, entered into a four-year contract pursuant to which GTECH Brazil agreed to provide on-line lottery services and technology to CEF (the “1997 Contract”). In May 2000, CEF and GTECH Brazil terminated the 1997 Contract and entered into a new agreement (the “2000 Contract”) obliging GTECH Brazil to provide lottery goods and services and additional financial transaction services to CEF for a contract term that, as subsequently extended, was scheduled to expire in April 2003. In April 2003, GTECH Brazil entered into an agreement with CEF (the “2003 Contract Extension”) pursuant to which: (a) the term of the 2000 Contract was extended into May 2005, and (b) fees payable to GTECH Brazil under the 2000 Contract were reduced by 15%. On August 13, 2006, all agreements between GTECH and CEF terminated in accordance with their terms.
Criminal Allegations Against Certain Employees
In late March 2004, federal attorneys with Brazil’s Public Ministry (the “Public Ministry Attorneys”) recommended that criminal charges be brought against nine individuals, including four senior officers of CEF, Antonio Carlos Rocha, the former Senior Vice President of GTECH and President of GTECH Brazil, and Marcelo Rovai, then GTECH Brazil’s marketing director and currently employed in GTECH’s Latin America region (“Denuncia 1”).
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The Public Ministry Attorneys had recommended that Messrs. Rocha and Rovai be charged with offering an improper inducement in connection with the negotiation of the 2003 Contract Extension, and co-authoring, or aiding and abetting, certain allegedly fraudulent or inappropriate management practices of the CEF management who agreed to enter into the 2003 Contract Extension. Neither GTECH nor GTECH Brazil were the subject of this criminal investigation, and under Brazilian law, entities cannot be subject to criminal charges in connection with this matter.
In June 2004, the judge reviewing the charges in Denuncia 1 prior to their being filed refused to initiate the criminal charges against the nine individuals but instead granted a request by the Brazilian Federal Police to continue the investigation which had been suspended upon the recommendation of the Public Ministry Attorneys that criminal charges be brought against these individuals. The report following the conclusion of the investigation did not recommend that indictments be issued against Messrs. Rocha or Rovai, or against any current or former employee of GTECH or GTECH Brazil.
The Public Ministry attorneys then requested that the Brazilian Federal Police reopen their investigation and, in August 2010, the Brazilian Federal Police issued a report, based entirely upon the June 21, 2006 Brazilian congressional report described below, and sent the report to the Public Ministry attorneys.
Notwithstanding the favourable resolution of the Brazilian Federal Police’s initial investigation, on June 21, 2006, a special investigating panel of the Brazilian congress issued a report and voted, among other things, to ask the Public Ministry attorneys to indict 84 individuals, including one current and three former employees of GTECH Brazil, on allegations that the individuals helped GTECH Brazil to illegally obtain the 2003 Contract Extension. Further, GTECH conducted an internal investigation of the 2003 Contract Extension under the supervision of the independent directors of GTECH Holdings Corporation. GTECH found no evidence that GTECH, GTECH Brazil, or any of their current or former employees violated any law, or are otherwise guilty of any wrongdoing in connection with these matters.
The U.S. SEC began an informal inquiry in February 2004, which informal inquiry became a formal investigation in July 2004, into the Brazilian criminal allegations against Messrs. Rocha and Rovai, and GTECH’s involvement in the facts surrounding the 2003 Contract Extension, to ascertain whether there has been any violation of United States law in connection with these matters. In addition, in May 2005, representatives of the United States Department of Justice (“DOJ”) asked to participate in a meeting with GTECH and the SEC. GTECH cooperated fully with the SEC and the DOJ with regard to these matters, including by responding to their requests for information and documentation. In August 2009, GTECH was advised by the SEC that the SEC had concluded its investigation and did not intend to recommend enforcement action.
These favorable developments notwithstanding, in September 2010, GTECH received a copy of new criminal charges that Public Ministry attorneys recommend to a Brazilian Federal judge be filed against 16 individuals, including 14 current or former CEF officers and employees, Antonio Carlos Rocha and Marcos Andrade, a former officer of GTECH Brazil (“Denuncia 2”). The Public Ministry attorneys asserted that the defendants “swindled public money” through entering into successive illegal price changes, contract extensions and other amendments to CEF’s contracts with Racimec and GTECH Brazil, and agreeing to reduce or eliminate contractual fines and penalties that should properly have been imposed upon Racimec and GTECH Brazil. Such allegations echo charges which have been made in the past by the: (i) Public Ministry attorneys in their April 2004 civil action and (ii) the Federal Court of Accounts in their 2003 TCU Audit Report. The TCU matter was dismissed (as previously reported by GTECH) and the trial judge in the April 2004 matter (as also previously reported by GTECH) ruled in GTECH’s favor in November 2011. These more recent allegations by the Public Ministry Attorneys include the claim made in the April 2004 civil action that a consulting company in which a former CEF director held an interest served as an intermediary in contract negotiations between CEF and a Brazilian public utility pursuant to which CEF allowed the public utility to provide prepaid cellular phone cards through the CEF lottery network operated by GTECH Brazil. GTECH Brazil was not a party to this agreement, entered into in 1999. The Public Ministry attorneys advanced the theory that the consulting company received the 1999 contract in consideration for the former CEF director’s assistance in influencing CEF negotiations to the advantage of GTECH Brazil.
In October 2014, GTECH learned that the charges in Denuncia 2 were rejected by a Brazilian Federal judge who found there was no evidence of or grounds for a criminal prosecution. GTECH Brazil was advised that the Public Ministry Attorneys are likely to appeal this decision.
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In November 2010, GTECH received a copy of criminal charges that Public Ministry attorneys recommend to a Brazilian Federal judge be filed against nine individuals, including Antonio Carlos Rocha, Marcelo Rovai and Marcos Andrade (“Denuncia 3”). The Public Ministry attorneys assert that the defendants be charged with corruption for using improper influence and offering undue advantage as a form of payment to obtain the 2003 Contract Extension.
Neither GTECH nor GTECH Brazil is named as a defendant in these criminal charges and, as noted above, under Brazilian law entities cannot be subject to criminal charges in connection with these matters. GTECH believes that its two former employees and one current employee involved have strong substantive and procedural defenses and that the assertions made against them are groundless.
The Brazilian Federal judge has approved the filing of the charges in Denuncia 3 to be brought against all but one defendant in this matter. The judge is allowing one defendant, because he was a former government employee, the opportunity to present a defense prior to determining whether to accept Denuncia 3.
2.
ICMS Tax
On July 26, 2005, the State of São Paulo challenged GTECH Brazil for classifying the remittances of printing ribbons, rolls of paper and wagering slips (“Consumables”) to lottery outlets in Brazil as non-taxable shipments. The tax authorities disagree with that classification and argue that these Consumables would be subject to ICMS tax as opposed to the lower rate ISS tax that GTECH Brazil paid. The tax authorities argue that in order for printed matter to be considered non-taxable it has to be “personalized.” To be considered personalized, the Consumables must be intended for the exclusive use of the one ordering them. GTECH Brazil filed its defense against the Tax Assessment Notice, which was dismissed. GTECH Brazil filed an Ordinary Appeal and a Special Appeal to the Court of Taxes and Fees, both of which were not granted. The State Treasury of São Paulo has filed a tax foreclosure to collect the tax obligation amounting to 22,910,722 Brazilian Reals (approximately €7.1 million at exchange rates in effect as of December 31, 2014) plus statutory interest, penalties and fees of approximately 100.0 million Brazilian Reals for a total obligation of approximately 122.9 million Brazilian Reals (approximately €38.1 million at exchange rates in effect as of December 31, 2014). GTECH Brazil is preparing to file an appeal of this matter with the First District Court of the State Treasury (Barueri). Prior to filing the appeal, it is likely that GTECH Brazil will be required to provide security for the tax obligation in the event it is unsuccessful in the appeal. GTECH Brazil has been advised by Brazilian counsel that these proceedings are likely to take several years, and could take longer than seven years to litigate through the appellate process to final judgment. In November 2012, GTECH Brazil filed a new action in São Paolo state court to annul the ICMS claim based upon the lack of merit of the tax authority’s claim. GTECH Brazil believes that these claims are groundless.
3.
Oregon State Lottery
On December 31, 2014, a representative of a purported class of persons alleged to have been financially harmed by relying on the auto hold feature of various manufacturers’ video poker machines played in Oregon, filed suit against the Oregon State Lottery and various manufacturers, including GTECH. The matter was filed in the Circuit Court for the State of Oregon, County of Multnomah and is captioned Justin Curzi, On Behalf of Himself and All Other Similarly Situated Individuals v. Oregon State Lottery, IGT (Inc.), GTECH USA, LLC, and WMS Gaming Inc. (case number 14CV20598). The suit alleges the auto hold feature of video poker games is perceived by players as providing the best possible playing strategy that will maximize the odds of the player winning, when such auto hold feature does not maximize the players’ odds of winning. The suit seeks in excess of $134 million in monetary damages. GTECH intends to vigorously defend against the claims asserted in the lawsuit.
42.
International Financial Reporting Standards issued but not yet effective
The new and amended standards that were issued but not yet effective as of December 31, 2014 are described below.
IFRS 9 Financial Instruments
On July 24, 2014, the IASB published the final and complete version of IFRS 9 Financial Instruments, which replaces IAS 39 and supersedes the previous two IFRS 9 publications issued in November 2009 and November 2013. This standard includes requirements for the classification and measurement of financial assets; new
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requirements on accounting for financial liabilities; a carryover from IAS 39 of the requirements for the derecognition of financial assets and financial liabilities; a new general hedge accounting model, which allows the early adoption of the treatment of fair value changes due to own credit on liabilities designated at fair value through profit or loss; incorporates a new expected loss impairment model; and introduces limited amendments to the classification and measurement requirements for financial assets. IFRS 9 is effective for annual periods beginning on or after January 1, 2018 with early adoption permitted. The Company has not yet performed an analysis of the impact the standard will have on the consolidated financial statements when adopted on January 1, 2018 and therefore has not yet quantified the extent of the impact.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and applies to an entity’s annual reporting period beginning on or after January 1, 2017. IFRS 15 specifies how and when an entity will recognize revenue as well as requiring such entities to provide users of financial statements with more informative and relevant disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers. The Company has not yet performed an analysis of the impact the standard will have on the consolidated financial statements when adopted on January 1, 2017 and therefore has not yet quantified the extent of the impact.
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception
These amendments were issued in December 2014 and are effective for annual periods beginning on or after January 1, 2016. The amendments introduce clarifications to the requirements when accounting for investment entities. The adoption of these amendments is not expected to have a material impact on the financial position or performance of the Company when adopted.
Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
These amendments were issued in September 2014 and are effective for annual periods beginning on or after January 1, 2016. The amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The Company has not yet performed an analysis of the impact the amendments will have on the consolidated financial statements when adopted on January 1, 2016 and therefore has not yet quantified the extent of the impact.
Amendments to IFRS 11: Accounting for Acquisitions of Interests in Joint Operations
These amendments were issued in May 2014 and are effective for annual periods beginning on or after January 1, 2016. The amendments require an acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in IFRS 3 Business Combinations) to apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11, and to disclose the information required by IFRS 3 and other IFRSs for business combinations. The amendments apply both to the initial acquisition of an interest in a joint operation, and the acquisition of an additional interest in a joint operation. The Company has not yet performed an analysis of the impact the amendments will have on the consolidated financial statements when adopted on January 1, 2016 and therefore has not yet quantified the extent of the impact.
Amendments to IAS 1: Disclosure Initiative
—These amendments were issued in December 2014 and are effective from January 1, 2016 with earlier application permitted. The amendments clarify, rather than significantly change, existing IAS 1 requirements.
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization
These amendments were issued in May 2014 and are effective for annual periods beginning on or after January 1, 2016. The amendments, among other things, clarify the use of depreciation and amortization methods that are based on revenue that is generated by an activity. The Company has not yet performed an analysis of the impact the amendments will have on the consolidated financial statements when adopted on January 1, 2016 and therefore has not yet quantified the extent of the impact.
Amendments to IAS 19: Defined Benefit Plans: Employee Contributions
— These amendments were issued in November 2013 and are effective from July 1, 2014 with earlier application permitted. The amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to
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simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. The adoption of these amendments is not expected to have a material impact on the financial position or performance of the Company when adopted.
Annual Improvements to IFRSs issued in December 2013
In December 2013 the IASB issued two cycles of Annual Improvements IFRSs - 2010-2012 Cycle and 2011-2013 Cycle, which contains amendments to its standards and the related basis for conclusions that provides a mechanism for making necessary, but non-urgent, amendments to IFRS. The effective date of the amendments is on or before July 1, 2014. The adoption of these amendments is not expected to have a material impact on the financial position or performance of the Company when adopted. The effect of each standard is described below:
·
IFRS 2 Share-based Payment —
This amendment clarifies the definitions of performance condition and service condition.
·
IFRS 3 Business Combinations —
This amendment clarifies that contingent consideration in a business acquisition that is not classified as equity is subsequently measured at fair value through profit or loss whether or not it falls within the scope of IFRS 9 Financial Instruments. It also clarifies that joint arrangements are outside the scope of IFRS 3.
·
IFRS 8 Operating Segments —
This amendment clarifies that operating segments may be combined/aggregated and if so, the entity must provide additional disclosures. It also clarifies that the reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.
·
IFRS 13 Fair Value Measurement —
This amendment clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 or IAS 39, as applicable.
·
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets —
This amendment provides more detail on how users can perform revaluation of assets and clarifies how an adjustment is recognized.
·
IAS 24 Related Party Disclosures —
This amendment clarifies that a management entity, an entity that provides key management personnel services, is a related party subject to the related party disclosures.
·
IAS 40 Investment Property —
This amendment clarifies the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.
Annual Improvements to IFRSs issued in September 2014
In September 2014 the IASB issued Annual Improvements to IFRSs 2012-2014 Cycle which contains amendments to its standards and the related basis for conclusions that provides a mechanism for making necessary, but non-urgent, amendments to IFRS. The effective date of the amendments is on or before January 1, 2016. The adoption of these amendments is not expected to have a material impact on the financial position or performance of the Company when adopted. The effect of each standard is described below:
·
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations —
This amendment adds specific guidance in cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.
·
IFRS 7 Financial Instruments: Disclosures —
This amendment adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required. It also clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements.
F-108
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
IAS 19 Employee Benefits —
This amendment clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid.
·
IAS 34 Interim Financial Reporting —
This amendment clarifies the meaning of “elsewhere in the interim report” and requires a cross-reference.
43.
Events after the reporting period
Capital Securities
In December 2014, GTECH invited holders of its €750 million Capital Securities due 2066 to tender any and all Capital Securities for purchase by GTECH for cash and to consider approving proposals, as described in the offer solicitation, by separate extraordinary resolutions (the “Offer”). Each noteholder that offers its Capital Securities for purchase, also agrees to approve the proposals and will receive a further cash payment, in addition to the purchase price and accrued interest, as additional consideration for the purchase of the Capital Securities of 3% of the aggregate principal amount of such Capital Securities.
The Offer expired on January 22, 2015 and resulted in €704.5 million of Capital Securities tendered and purchased by GTECH on January 23, 2015, and then cancelled. The aggregate principal amount of Capital Securities outstanding following the purchase and cancellation is €45.5 million.
Term Loan Agreement
In January 2015, GTECH entered into a €800 million four-year senior facilities agreement with BNP Paribas, Intesa San Paolo, Mediobanca and UniCredit (the “Term Loan Agreement”). The Term Loan Agreement provides for two €400 million term loan facilities to GTECH, which may be used for general corporate purposes, including repayment of existing indebtedness. Upon the merger of GTECH with and into Holdco, Holdco became the borrower under one of the term loan facilities and a principal Italian operating subsidiary became the borrower under the other term loan facility.
Credit Ratings
In January 2015, S&P announced that the credit ratings of the 2010 Notes (due 2018) and the 2012 Notes (due 2020) were decreased to BB+ and that the credit rating of the Capital Securities was decreased to B+. As a result of the credit ratings actions with respect to the 2010 Notes (due 2018) and the 2012 Notes (due 2020), the interest rate applicable to the 2010 Notes (due 2018) has been increased from 5.375% to 6.625% per annum effective February 2, 2015 and the interest rate applicable to the 2012 Notes (due 2020) has been increased from 3.5% to 4.75% per annum effective March 5, 2015.
Dividend Payment
On January 21, 2015, GTECH declared an interim dividend of €0.75 per share, resulting in an aggregate of €129.6 million, of which €114.7 million was paid.
Senior Secured Notes
In February 2015, GTECH announced the closing of the offering of a series of senior secured notes denominated in US dollars ($3.2 billion) and euros (€1.55 billion) equivalent in aggregate to approximately $5 billion at the January 31, 2015 exchange rate, subject to customary closing conditions, as part of its financing for the acquisition of IGT. GTECH intends to use the proceeds from the offering to pay part of the cash component of the merger consideration for the acquisition of IGT and acquisition-related costs, and to refinance certain existing indebtedness of GTECH and IGT.
Temporary New Notes
In February 2015, GTECH S.p.A. caused Cleopatra Finance Limited, a special purpose vehicle incorporated in and existing under the laws of the Bailiwick of Jersey, to issue:
·
$600,000,000 5.625% senior secured notes due 2020;
·
$1,500,000,000 6.250% senior secured notes due 2022;
·
$1,100,000,000 6.500% senior secured notes due 2025;
F-109
Table of Contents
GTECH S.P.A. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
·
€700,000,000 4.125% senior secured notes due 2020; and
·
€850,000,000 4.750% senior secured notes due 2023
in the form of temporary new notes (the “Temporary New Notes”) and caused the proceeds of the Temporary New Notes to be deposited into escrow. GTECH has used the proceeds of the Temporary New Notes (which have been exchanged for permanent notes issued by Holdco in connection with the completion of the Holdco Merger and the acquisition of IGT) to pay part of the cash component of the merger consideration for the acquisition of IGT and acquisition-related costs and possibly to refinance certain existing indebtedness of GTECH S.p.A. and IGT.
See Note 5 for additional information relating to the IGT Acquisition.
F-110
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
Atronic Australia Pty Ltd.
|
|
Australia
|
|
2,000
|
|
100
|
|
Atronic Australien GmbH
|
|
Atronic Australien GmbH
|
|
Germany
|
|
573
|
|
100
|
|
GTECH S.p.A.
|
|
Banca ITB S.p.A. ***
|
|
Italy
|
|
25,120
|
|
13.33
|
|
GTECH S.p.A.
|
|
Big Easy S.r.l. (2)
|
|
Italy
|
|
2,300
|
|
51
|
|
Lottomatica Videolot Rete S.p.A.
|
|
CartaLis Imel S.p.A.
|
|
Italy
|
|
10,000
|
|
85
|
|
Lottomatica Italia Servizi S.p.A.
|
|
Consel Consorzio Elis ***
|
|
Italy
|
|
51
|
|
0.1
|
|
GTECH S.p.A.
|
|
Consorzio Lotterie Nazionali (3)
|
|
Italy
|
|
7,500
|
|
63
|
|
GTECH S.p.A.
|
|
Consorzio Lottomatica Giochi Sportivi (4)
|
|
Italy
|
|
100
|
|
90
|
|
GTECH S.p.A. (85%); Totobit Informatica Software e Sistemi S.p.A. (5%)
|
|
D&D Electronic & Software GmbH ***
|
|
Germany
|
|
26
|
|
50
|
|
GTECH Germany GmbH
|
|
Easy Nolo S.p.A. (5) ***
|
|
Italy
|
|
1,900
|
|
10
|
|
Lottomatica Italia Servizi S.p.A.
|
|
Georgia Worldwide Corporation (6)
|
|
Nevada, USA
|
|
**
|
|
100
|
|
Georgia Worldwide Plc
|
|
Grips RSA
|
|
South Africa
|
|
**
|
|
100
|
|
GTECH Austria GmbH
|
|
GTECH Austria GmbH f/k/a Spielo International Austria GmbH (7)
|
|
Austria
|
|
300
|
|
100
|
|
GTECH Germany GmbH
|
|
GTECH Canada ULC f/k/a Spielo International Canada ULC (8)
|
|
Nova Scotia, Canada
|
|
54,261
|
|
100
|
|
GTECH S.p.A.
|
|
GTECH German Holdings Corporation GmbH
|
|
Germany
|
|
25
|
|
100
|
|
GTECH S.p.A.
|
|
GTECH Germany GmbH f/k/a Spielo International Germany GmbH (9)
|
|
Germany
|
|
302
|
|
100
|
|
GTECH German Holdings Corporation GmbH
|
|
GTECH Monaco S.A.M. f/k/a Spielo International Monaco S.A.M. (10)
|
|
Monaco
|
|
150
|
|
98
|
|
GTECH Austria GmbH
|
F-111
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
GTECH Peru S.A. f/k/a Spielo International Peru S.A. (11)
|
|
Peru
|
|
31,565.442
|
|
98
|
|
GTECH Germany GmbH
|
|
GTECH USA, LLC f/k/a Spielo International USA, LLC (12)
|
|
Nevada, USA
|
|
19,992
|
|
100
|
|
GTECH S.p.A.
|
|
International Game Technology Plc f/k/a Georgia Worldwide Plc (13)
|
|
United Kingdom
|
|
50.001
|
|
100
|
|
GTECH S.p.A.
|
|
Invest Games S.A.
|
|
Luxembourg
|
|
93,100
|
|
100
|
|
GTECH S.p.A.
|
|
L-Gaming S.A. (14) ***
|
|
Greece
|
|
60
|
|
50
|
|
Lottomatica International Greece S.r.l.
|
|
LIS Istituto di Pagamento S.p.A. (15)
|
|
Italy
|
|
1,000
|
|
100
|
|
Lottomatica Italia Servizi S.p.A.
|
|
Lotterie Nazionali S.r.l. (16) (17)
|
|
Italy
|
|
31,000
|
|
64
|
|
Lottomatica Holding S.r.l.
|
|
Lottomatica S.p.A. (18)
|
|
Italy
|
|
50
|
|
100
|
|
GTECH S.p.A.
|
|
Lottomatica Giochi e Partecipazioni S.r.l.
|
|
Italy
|
|
10
|
|
100
|
|
GTECH S.p.A.
|
|
Lottomatica Holding S.r.l. (19)
|
|
Italy
|
|
23,392
|
|
100
|
|
GTECH S.p.A.
|
|
Lottomatica International Greece S.r.l. (20)
|
|
Italy
|
|
10
|
|
84
|
|
GTECH S.p.A.
|
|
Lottomatica Italia Servizi S.p.A. (21)
|
|
Italy
|
|
2,582
|
|
100
|
|
Lottomatica Holding S.r.l.
|
|
Lottomatica Scommesse S.r.l. (22)
|
|
Italy
|
|
20,000
|
|
100
|
|
Lottomatica Holding S.r.l.
|
|
Lottomatica Videolot Rete S.p.A. (23)
|
|
Italy
|
|
3,226
|
|
100
|
|
Lottomatica Holding S.r.l.
|
|
Neurosoft S.A.***
|
|
Greece
|
|
8,750
|
|
16.58
|
|
GTECH S.p.A.
|
|
Optima Gaming Service S.r.l. (24)
|
|
Italy
|
|
10
|
|
100
|
|
Lottomatica Videolot Rete S.p.A.
|
|
PCC Giochi e Servizi S.p.A.
|
|
Italy
|
|
21,000
|
|
100
|
|
GTECH S.p.A.
|
F-112
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
Ringmaster S.r.l. (1) ***
|
|
Italy
|
|
10
|
|
50
|
|
GTECH S.p.A.
|
|
SED Multitel S.r.l. (25)
|
|
Italy
|
|
800
|
|
100
|
|
Lottomatica Holding S.r.l.
|
|
Siderbet S.r.l. (26)
|
|
Italy
|
|
10
|
|
100
|
|
Lottomatica Scommesse S.r.l.
|
|
Spielo International Argentina S.r.l.
|
|
Argentina
|
|
44.3
|
|
86.45
|
|
GTECH Germany GmbH
|
|
Spielo International Italy S.r.l. (27)
|
|
Italy
|
|
1,000
|
|
100
|
|
GTECH S.p.A.
|
|
SW Holding S.p.A. (28) (29)
|
|
Italy
|
|
350
|
|
100
|
|
GTECH S.p.A.
|
|
Technology and Security Printing S.r.l. (1) ***
|
|
Italy
|
|
10
|
|
50
|
|
PCC Giochi e Servizi S.p.A.
|
|
Totobit Informatica Software e Sistemi S.p.A. (30)
|
|
Italy
|
|
3,043
|
|
100
|
|
Lottomatica Italia Servizi S.p.A.
|
|
GTECH Holdings Corporation
|
|
Delaware, USA
|
|
3,358,895.382
|
|
100
|
|
Invest Games S.A.
|
|
GTECH Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Holdings Corporation
|
|
Anguilla Lottery and Gaming Company, Ltd.
|
|
Anguilla
|
|
10
|
|
100
|
|
Leeward Islands Lottery Holding Company, Inc.
|
|
Antigua Lottery Company, Ltd.
|
|
Antigua
|
|
**
|
|
100
|
|
Leeward Islands Lottery Holding Company, Inc.
|
|
BG Monitoring Center Holding Company Limited
|
|
Cyprus
|
|
US $20
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
Beijing GTECH Computer Technology Company Ltd. (31)
|
|
China (PRC)
|
|
US $1,750
|
|
100
|
|
GTECH Foreign Holdings Corporation
|
|
BillBird S.A.
|
|
Poland
|
|
4,490.368
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
Boss Casinos N.V. (32)
|
|
Curacao
|
|
US $4.2318
|
|
100
|
|
GTECH Sweden Interactive AB
|
|
Boss Media Canada Gaming Services Ltd. (33)
|
|
Canada
|
|
3,000
|
|
100
|
|
GTECH Sweden Interactive AB
|
|
Business Venture Investments No 1560 Proprietary Limited
|
|
South Africa
|
|
**
|
|
100
|
|
GTECH Global Services Corporation Limited
|
F-113
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
CLS-GTECH Company Limited (1) ***
|
|
British Virgin Islands
|
|
US $25,689.9
|
|
50
|
|
GTECH Global Services Corporation Limited
|
|
CLS-GTECH Technology (Beijing) Co., Ltd. (1) *** (34)
|
|
China (PRC)
|
|
US $6,500
|
|
100
|
|
CLS-GTECH Company Limited
|
|
Cam Galaxy Group Ltd.
|
|
United Kingdom
|
|
100
|
|
100
|
|
GTECH Corporation
|
|
Caribbean Lottery Services, Inc.
|
|
U.S. Virgin Islands
|
|
**
|
|
100
|
|
Leeward Islands Lottery Holding Company, Inc.
|
|
Data Transfer Systems, Inc.
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
Dreamport, Inc.
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
Dreamport do Brasil Ltda.
|
|
Brazil
|
|
3,534.113
|
|
100
|
|
Dreamport, Inc. (99.75%); GTECH Foreign Holdings Corporation (0.25%)
|
|
Dreamport Suffolk Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
Europrint (Games) Limited
|
|
United Kingdom
|
|
20
|
|
100
|
|
Europrint Holdings Ltd.
|
|
Europrint Holdings Limited
|
|
United Kingdom
|
|
90.908
|
|
100
|
|
Cam Galaxy Group (40%); JSJ Ltd. (60%)
|
|
Europrint (Promotions) Limited
|
|
United Kingdom
|
|
**
|
|
100
|
|
Europrint Holdings Ltd.
|
|
GTECH Asia Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Australasia Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Avrasya Teknik Hizmetler Ve Musavirlik A.S.
|
|
Turkey
|
|
280
|
|
99.6
|
|
GTECH Corporation
|
|
GTECH Brasil Ltda.
|
|
Brazil
|
|
96,582.428
|
|
100
|
|
GTECH Corporation (99.75%); GTECH Foreign Holdings Corporation (0.25%)
|
|
GTECH Colombia Ltda.
|
|
Colombia
|
|
6,884,500
|
|
100
|
|
GTECH Global Services Corporation Limited (99.998%); GTECH Comunicaciones Colombia Ltda. (.001%);
Maria Clara Martinez (.001%) (Nominee share)
|
F-114
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
GTECH Comunicaciones Colombia Ltda.
|
|
Colombia
|
|
1,408,043
|
|
100
|
|
GTECH Foreign Holdings Corporation (99.99%); Alvaro Rivas (.01%) (Nominee share)
|
|
GTECH Computer Systems Sdn Bhd (35)
|
|
Malaysia
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Corporation
|
|
Utah, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Cote d’Ivoire
|
|
Ivory Coast
|
|
1,000
|
|
100
|
|
GTECH Foreign Holdings Corporation
|
|
GTECH Czech Services s.r.o.
|
|
Czech Republic
|
|
1,000
|
|
100
|
|
GTECH Global Services Corporation Limited (98%); GTECH Ireland Operations Limited (2%)
|
|
GTECH Czech Republic, LLC
|
|
Delaware, USA
|
|
3,000
|
|
37
|
|
GTECH Corporation
|
|
GTECH Far East Pte Ltd
|
|
Singapore
|
|
25
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Foreign Holdings Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH France SARL
|
|
France
|
|
8
|
|
100
|
|
GTECH Foreign Holdings Corporation
|
|
GTECH (Gibraltar) Limited f/k/a Spielo International (Gibraltar) Limited (36)
|
|
Gibraltar
|
|
**
|
|
100
|
|
GTECH (Gibraltar) Holdings Limited
|
|
GTECH (Gibraltar) Holdings Limited f/k/a St. Enodoc Holdings Limited (37)
|
|
Gibraltar
|
|
15.701
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH GmbH
|
|
Germany
|
|
500
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Global Lottery S.L. (38)
|
|
Spain
|
|
8.8088
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Global Services Corporation Limited
|
|
Cyprus
|
|
US $486,574.326
|
|
100
|
|
GTECH Corporation
|
|
GTECH Indiana, LLC
|
|
Indiana, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
F-115
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
GTECH India Private Limited f/k/a Springboard Technologies Private Limited (39)
|
|
India
|
|
100
|
|
100
|
|
GTECH Global Services Corporation Limited (99.99%); GTECH Far East Pte Ltd. (0.01%)
|
|
GTECH Ireland Operations Limited
|
|
Ireland
|
|
100
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Latin America Corporation
|
|
Delaware, USA
|
|
**
|
|
80
|
|
GTECH Corporation; Computers and Controls (Holdings) Limited (20%)
|
|
GTECH Malta Holdings Limited f/k/a Boss Holdings Ltd.(40)
|
|
Malta
|
|
15
|
|
99.99
|
|
GTECH Sweden Interactive AB
|
|
GTECH Malta Casino Limited f/k/a Boss Media Malta Casino Ltd. (41)
|
|
Malta
|
|
80
|
|
99.99
|
|
GTECH Malta Holdings Limited
|
|
GTECH Malta Poker Limited f/k/a Boss Media Malta Poker Ltd. (42)
|
|
Malta
|
|
40
|
|
99.99
|
|
GTECH Malta Holdings Limited
|
|
GTECH Management P.I. Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Mexico S.A. de C.V.
|
|
Mexico
|
|
50,000
|
|
100
|
|
GTECH Corporation (99.656696%); GTECH Foreign Holdings Corporation (0.343297%); GTECH Latin America Corporation (0.000007%)
|
|
GTECH Northern Europe Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Poland Sp. z o.o.
|
|
Poland
|
|
52,382
|
|
100
|
|
GTECH Corporation
|
|
GTECH Rhode Island LLC
|
|
Rhode Island, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH SAS
|
|
Colombia
|
|
25,000
|
|
100
|
|
GTECH Global Services Corporation Limited (80%); GTECH Comunicaciones Ltda. (10%); GTECH Foreign Holdings Corporation (10%)
|
|
GTECH Servicios de México, S. de R.L. de C.V.
|
|
Mexico
|
|
**
|
|
100
|
|
GTECH Corporation (99.9%); GTECH Foreign Holdings
|
F-116
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
|
|
|
|
|
|
|
|
Corporation (0.1%)
|
|
GTECH Slovakia Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Southern Africa (Pty) Ltd.
|
|
South Africa
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH Spain S.A. f/k/a G2 Gaming Spain, S.A. (43)
|
|
Spain
|
|
101
|
|
100
|
|
GTECH Global Lottery S.L.
|
|
GTECH Sports Betting Solutions Limited
|
|
United Kingdom
|
|
**
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Sweden AB
|
|
Sweden
|
|
100
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Sweden Interactive AB f/k/a Boss Media AB (44)
|
|
Sweden
|
|
1,141.3
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
GTECH Sweden Investment AB f/k/a Boss Media Investment AB (45)
|
|
Sweden
|
|
300
|
|
100
|
|
GTECH Sweden Interactive AB
|
|
GTECH U.K. Limited
|
|
United Kingdom
|
|
200
|
|
100
|
|
GTECH Corporation
|
|
GTECH UK Games Limited f/k/a SI Games UK Limited (46)
|
|
United Kingdom
|
|
**
|
|
100
|
|
GTECH Sweden Interactive AB
|
|
GTECH UK Interactive Limited f/k/a Spielo International UK Limited (47)
|
|
United Kingdom
|
|
1.172
|
|
100
|
|
GTECH Sports Betting Solutions Limited
|
|
GTECH Ukraine
|
|
Ukraine
|
|
9,548.63029
|
|
100
|
|
GTECH Asia Corporation (99%); GTECH Management P.I. Corporation (1%)
|
|
GTECH VIA DR, SAS (48)
|
|
Dominican Republic
|
|
300
|
|
100
|
|
GTECH Global Services Corporation Limited (99.9997%); GTECH Ireland Operations Limited (0.0003%)
|
|
GTECH WaterPlace Park Company, LLC
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
GTECH West Africa Lottery
|
|
Nigeria
|
|
10,000
|
|
100
|
|
GTECH Global Services Corporation Limited (75%);
|
F-117
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
Limited
|
|
|
|
|
|
|
|
GTECH Ireland Operations Limited (25%)
|
|
GTECH Worldwide Services Corporation
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
Innoka Oy
|
|
Finland
|
|
16.2
|
|
81
|
|
GTECH Global Services Corporation Limited
|
|
Interactive Games International Limited
|
|
United Kingdom
|
|
**
|
|
100
|
|
Europrint Holdings Ltd.
|
|
International Poker Network Ltd. (49)
|
|
Malta
|
|
40
|
|
99.99
|
|
Boss Holdings Ltd.
|
|
JSJ Ltd.
|
|
United Kingdom
|
|
690
|
|
100
|
|
GTECH Corporation
|
|
Leeward Islands Lottery Holding Company, Inc.
|
|
St. Kitts & Nevis
|
|
13,600
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
Lottery Equipment Company
|
|
Ukraine
|
|
**
|
|
100
|
|
GTECH Asia Corporation (99.994%); GTECH Management P.I. Corporation (.006%)
|
|
Loxley GTECH Technology Co., Ltd. ***
|
|
Thailand
|
|
1,470
|
|
49
|
|
GTECH Global Services Corporation Limited (39%); GTECH Corporation (10%)
|
|
Mobile Payment Services Limited (50) (51)
|
|
U.K.
|
|
**
|
|
100
|
|
Probability Games Corporation Limited
|
|
Northstar Lottery Group, LLC
|
|
Illinois, USA
|
|
86,182
|
|
80
|
|
GTECH Corporation
|
|
Northstar New Jersey Holding Company, LLC
|
|
New Jersey, USA
|
|
103,917
|
|
50.15
|
|
GTECH Corporation
|
|
Northstar New Jersey Lottery Group, LLC
|
|
New Jersey, USA
|
|
113,786
|
|
82.31
|
|
Northstar New Jersey Lottery Holding Company, LLC
|
|
Northstar SupplyCo New Jersey, LLC
|
|
New Jersey, USA
|
|
41,073
|
|
70
|
|
GTECH Corporation
|
|
Online Transaction Technologies SARL à Associé Unique
|
|
Morocco
|
|
33,500
|
|
100
|
|
GTECH Foreign Holdings Corporation
|
F-118
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
Orbita Sp. z o.o.
|
|
Poland
|
|
68
|
|
100
|
|
GTECH Corporation
|
|
Oy GTECH Finland Ab
|
|
Finland
|
|
8
|
|
100
|
|
GTECH Corporation
|
|
Playyoo SA (51)
|
|
Switzerland
|
|
16.347
|
|
100
|
|
Probability Limited
|
|
Probability Games Corporation Limited (51)
|
|
U.K
|
|
151.450
|
|
100
|
|
Probability Limited
|
|
Probability (Gibraltar) Limited (51)
|
|
Gibraltar
|
|
**
|
|
100
|
|
Probability Limited
|
|
Probability Limited (51)
|
|
U.K.
|
|
35,917.866
|
|
199
|
|
GTECH UK Interactive Limited
|
|
Prodigal Lottery Services, N.V.
|
|
Netherlands Antilles
|
|
US $10
|
|
100
|
|
Leeward Islands Lottery Holding Company, Inc.
|
|
Retail Display and Service Handlers, LLC
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
SB Indústria e Comércio Ltda.
|
|
Brazil
|
|
4,138.646
|
|
100
|
|
GTECH Corporation (99.99%); GTECH Foreign Holdings Corporation (0.01%)
|
|
Siam GTECH Company Limited
|
|
Thailand
|
|
19.993
|
|
99.97
|
|
GTECH Corporation
|
|
St. Kitts and Nevis Lottery Company, Ltd.
|
|
St. Kitts & Nevis
|
|
**
|
|
100
|
|
Leeward Islands Lottery Holding Company, Inc.
|
|
St. Minver (UK) Limited (52)
|
|
United Kingdom
|
|
**
|
|
100
|
|
GTECH (Gibraltar) Holdings Limited
|
|
Taiwan Sports Technology and Services Holding Company (53)
|
|
Taiwan
|
|
20,000
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
Taiwan Sports Management and Technology Service Company (54)
|
|
Taiwan
|
|
**
|
|
100
|
|
Taiwan Sports Technology and Services Holding Company
|
|
Technology Risk Management Services, Inc.
|
|
Delaware, USA
|
|
**
|
|
100
|
|
GTECH Corporation
|
|
Turkish Lottery Holding B.V. (55) ***
|
|
Netherlands
|
|
**
|
|
40
|
|
GTECH Ireland Operations Limited
|
|
Turks and Caicos Lottery Company Ltd. (56)
|
|
Turks & Caicos
|
|
US $50
|
|
100
|
|
Leeward Islands Lottery Holding Company, Inc.
|
F-119
Table of Contents
List of GTECH S.p.A. Subsidiaries and Affiliates
|
Name
|
|
Jurisdiction
|
|
Share
Capital*
|
|
Ownership
%
|
|
Shareholder
|
|
UTE Logista-GTECH, Law 18/1982, No. 1
|
|
Spain
|
|
2,000
|
|
50
|
|
GTECH Global Lottery S.L.
|
|
VIA TECH Servicios SpA
|
|
Chile
|
|
**
|
|
100
|
|
GTECH Global Services Corporation Limited
|
|
VIATEC S.r.l.
|
|
Argentina
|
|
100
|
|
100
|
|
GTECH Foreign Holdings Corporation (95%); GTECH Corporation (5%)
|
|
Yeonama Holdings Co. Limited ***
|
|
Cyprus
|
|
1,980.6
|
|
30
|
|
GTECH Global Services Corporation Limited
|
NOTES
Unless otherwise noted, the consolidation method for all subsidiaries listed above is on a line-by-line basis.
*
All Share Capital amounts are stated in local currency amounts unless otherwise indicated, and in thousands.
**
Share Capital is less than €1,000.
***
Companies not consolidated.
(1)
Accounted for by the equity method of accounting.
(2)
On April 1, 2014, the share capital of Big Easy S.r.l. was increased to €2,300,000.
(3)
Consorzio Lotterie Nazionali is in liquidation.
(4)
On November 21, 2014 Consorzio Giochi Sportivi was struck off the Italian Companies’ Register.
(5)
Due to the merger of Totobit Informatica S.p.A. into Lottomatica Italia Servizi S.p.A., Totobit Informatica S.p.A. sold the participation in Easy Nolo S.r.l. to Lottomatica Italia Servizi S.p.A.
(6)
On July 11, 2014, Georgia Worldwide Corporation was formed in the State of Nevada, in the United States of America.
(7)
On April 25, 2014, Spielo International Austria GmbH changed its name to GTECH Austria GmbH.
(8)
On January 20, 2014, Spielo International Canada ULC changed its name to GTECH Canada ULC.
(9)
Effective February 12, 2014, Spielo International Germany GmbH changed its name to GTECH Germany GmbH.
(10)
As of November 3, 2014, Spielo International Monaco S.A.M. changed its name to GTECH Monaco S.A.M.
F-120
Table of Contents
(11)
On March 21, 2014, Spielo International Peru S.A. changed its name to GTECH Peru S.A. On December 28, 2014, by resolution of the sole shareholder of GTECH Peru S.A., the share capital was increased to S/.31,565,442.
(12)
On January 17, 2014, Spielo International USA, LLC changed its name to GTECH USA, LLC.
(13)
On July 11, 2014 Georgia Worldwide Limited was formed in the U.K. with GTECH S.p.A. being the sole shareholder of the company. On September 15, 2014, 50,000 sterling non-voting shares at £1.00 per share were issued to Elian Corporate Services (UK) Limited. On September 16, 2014, Georgia Worldwide Limited was re-registered as a public limited company and became known as Georgia Worldwide Plc. GTECH S.p.A. continues to be the holder of 100% of the voting shares of Georgia Worldwide Plc. On February 26, 2015, after the close of 2014, Georgia Worldwide Plc changed its name to International Game Technology Plc.
(14)
On December 16, 2014 L-Gaming (stock interest) was sold by Lottomatica International Greece S.r.l. to Helexaco.
(15)
On November 26, 2014, with the merger of Totobit Informatica S.p.A. in Lottomatica Italia Servizi S.p.A., Lottomatica Italia Servizi S.p.A. acquired the participation in LIS Istituto di Pagamento S.p.A.
(16)
Due to the acquisition of the entire shareholding in SW Holding S.pA. as of March 25, 2014, GTECH S.p.A. holds, directly and indirectly, 64% ownership of Lotterie Nazionali S.r.l.
(17)
On December 17, 2014 GTECH S.p.A. sold the participation in Lotterie Nazionali S.r.l. to Lottomatica Holding S.r.l.
(18)
On November 24, 2014 GTECH S.p.A. formed Lottomatica S.p.A.
(19)
On October 6, 2014 GTECH S.p.A. formed Lottomatica Holding S.r.l.
(20)
On December 23, 2014 Lottomatica International Greece S.r.l. was struck off the Italian Companies’ Register.
(21)
On December 17, 2014 GTECH S.p.A. transferred the participation in Lottomatica Italia Servizi S.p.A. to Lottomatica Holding S.r.l.
(22)
On December 17, 2014 GTECH S.p.A. transferred the participation in Lottomatica Scommesse S.r.l. to Lottomatica Holding S.r.l.
(23)
On December 17, 2014 GTECH S.p.A. sold the participation in Lottomatica Videolot Rete S.p.A. to Lottomatica Holding S.r.l.
(24)
On June 26, 2014, Lottomatica Videolot Rete S.p.A. formed Optima Gaming Service S.r.l.
(25)
On December 17, 2014 GTECH S.p.A. transferred the participation in SED Multitel S.r.l. to Lottomatica Holding S.r.l.
(26)
On June 27, 2014 (effective from July 30, 2014) Siderbet S.r.l. was merged with and into Lottomatica Scommesse S.r.l.
(27)
On April 15, 2014, the share capital of Spielo International Italy S.r.l. was increased to €1,000,000.
(28)
On March 25, 2014, GTECH S.p.A. acquired the remaining 28.25% interest in SW Holding S.p.A. from UniCredit S.p.A., increasing its ownership interest to 100%.
(29)
On December 1, 2014 (effective from December 3, 2014), SW Holding S.p.A. was merged with and into GTECH S.p.A.
F-121
Table of Contents
(30)
On November 26, 2014 (effective from December 1, 2014), Totobit Informatica Software e Sistemi S.p.A. was merged with and into Lottomatica Italia Servizi S.p.A.
(31)
On April 3, 2014, Beijing GTECH Technology Company increased its share capital to US $1,750,000.
(32)
On February 13, 2014, Boss Casinos N.V. was dissolved and liquidated.
(33)
On September 1, 2014, GTECH Sweden Interactive sold its interest in Boss Media Canada Gaming Services Ltd. to GTECH Canada ULC and on September 15, 2014, Boss Media Canada Gaming Services Ltd. was dissolved.
(34)
On January 16, 2015, after the close of 2014, the share capital of CLS-GTECH Technology (Beijing) Co., Ltd. was increased to US$6.5 million.
(35)
As of June 16, 2014, GTECH Computer Systems Sdn Bhd is dissolved and liquidated.
(36)
On February 11, 2014, Spielo International (Gibraltar) Limited changed its name to GTECH (Gibraltar) Limited.
(37)
On February 11, 2014, St. Enodoc Holdings Limited changed its name to GTECH (Gibraltar) Holdings Limited.
(38)
By resolution dated April 30, 2014, the sole shareholder of GTECH Global Lottery S.L. approved the reduction in share capital to €8,808.80.
(39)
On October 28, 2014, Springboard Technologies Private Limited changed its name to GTECH India Private Limited.
(40)
On March 26, 2014, Boss Holdings changed its name to GTECH Malta Holdings Limited.
(41)
On April 2, 2014, BOSS Media Malta Casino Limited changed its name to GTECH Malta Casino Limited.
(42)
On March 26, 2014, BOSS Media Malta Poker Limited changed its name to GTECH Malta Poker Limited.
(43)
On July 4, 2014, G2 Gaming Spain S.A. changed its name to GTECH Spain S.A.
(44)
On February 24, 2014, Boss Media AB changed its name to GTECH Sweden Interactive AB.
(45)
On February 24, 2014, Boss Media Investment AB changed its name to GTECH Sweden Investment AB.
(46)
On January 29, 2014, SI Games UK Limited changed its name to GTECH UK Games Limited.
(47)
On January 29, 2014, Spielo International UK Limited changed its name to GTECH UK Interactive Limited.
(48)
On May 1, 2014, GTECH VIA DR, SAS was formed in the Dominican Republic.
(49)
On January 17, 2014, International Poker Network Limited was struck off the register under the Companies Act, 1995 in Malta.
(50)
On February 3, 2015, after the close of 2014, Mobile Payment Services Limited was dissolved via voluntary strike-off from Companies House in the U.K.
(51)
On May 2, 2014, GTECH UK Interactive Limited completed the acquisition of Probability Plc and its subsidiaries, namely, Mobile Payment Services Limited, Playyoo SA, Probability Games Corporation Limited and Probability (Gibraltar) Limited. On May 2, 2014 Probability Plc reregistered as a private company and changed its name to Probability Limited. On February 3, 2015, after the close of 2014, Mobile Payment Services Limited was dissolved via voluntary strike-off.
F-122
Table of Contents
(52)
On December 23, 2014, St. Minver (UK) Limited was dissolved and stricken from the records of Companies House.
(53)
On January 21, 2014, Taiwan Sports Technology and Services Holding Company was liquidated.
(54)
On March 20, 2014, Taiwan Sports Management and Technology Service Company was liquidated.
(55)
On April 22, 2014, GTECH Ireland Operations Limited acquired a 40% interest in Turkish Lottery Holding B.V.
(56)
The Turks and Caicos Islands Financial Services Commission advised that Turks and Caicos Lottery Company Ltd. was struck from the Registry of Companies on June 18, 2012.
F-123
Exhibit 1.1
|
|
CLIFFORD CHANCE LLP
|
Company No. 09127533
AGREED FORM ARTICLES
THE COMPANIES ACT 2006
PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
of
INTERNATIONAL GAME TECHNOLOGY PLC
Adopted on 7 April 2015
CONTENTS
|
Article
|
|
Page
|
|
|
|
|
|
|
PART 1 INTERPRETATION AND LIMITATION OF LIABILITY
|
|
1
|
|
|
|
|
|
|
1.
|
Defined terms
|
|
1
|
|
2.
|
Model articles or regulations not to apply
|
|
4
|
|
3.
|
Liability of members
|
|
4
|
|
|
|
|
|
|
PART 2 DIRECTORS
|
|
4
|
|
|
|
|
|
|
DIRECTORS’ POWERS AND RESPONSIBILITIES
|
|
4
|
|
|
|
|
|
4.
|
Directors’ general authority
|
|
4
|
|
5.
|
Compliance with NYSE rules
|
|
5
|
|
6.
|
Borrowing powers
|
|
5
|
|
7.
|
Directors may delegate
|
|
5
|
|
8.
|
Committees
|
|
6
|
|
|
|
|
|
|
DECISION-MAKING BY DIRECTORS
|
|
6
|
|
|
|
|
|
|
9.
|
Directors to take decisions collectively
|
|
6
|
|
10.
|
Calling a directors’ meeting
|
|
6
|
|
11.
|
Participation in directors’ meetings
|
|
7
|
|
12.
|
Quorum for directors’ meetings
|
|
7
|
|
13.
|
Chairing directors’ meetings
|
|
7
|
|
14.
|
Voting at directors’ meetings: general rules
|
|
7
|
|
|
|
|
|
|
DIRECTORS’ INTERESTS
|
|
8
|
|
|
|
|
|
|
15.
|
Directors’ interests
|
|
8
|
|
16.
|
Directors’ interests other than in relation to transactions or arrangements with the Company
|
|
8
|
|
17.
|
Confidential information and attendance at directors’ meetings
|
|
8
|
|
18.
|
Declaration of interests in proposed or existing transactions or arrangements with the Company
|
|
9
|
|
19.
|
Ability to enter into transactions and arrangements with the Company notwithstanding interest
|
|
10
|
|
20.
|
Remuneration and benefits
|
|
11
|
|
21.
|
General voting and quorum requirements
|
|
11
|
|
22.
|
Proposing directors’ written resolutions
|
|
12
|
|
23.
|
Adoption of directors’ written resolutions
|
|
13
|
|
24.
|
Directors’ discretion to make further rules
|
|
13
|
|
|
|
|
|
|
APPOINTMENT OF DIRECTORS
|
|
13
|
|
|
|
|
|
|
25.
|
Number of directors
|
|
13
|
|
26.
|
Initial directors
|
|
13
|
|
27.
|
Methods of appointing directors
|
|
13
|
|
28.
|
Termination of director’s appointment
|
|
15
|
|
29.
|
Directors’ fees
|
|
16
|
|
30.
|
Directors’ additional remuneration
|
|
16
|
|
31.
|
Directors’ pensions and other benefits
|
|
16
|
|
32.
|
Remuneration of executive directors
|
|
17
|
|
33.
|
Directors’ expenses
|
|
17
|
|
|
|
|
|
|
PART 3 DECISION-MAKING BY MEMBERS
|
|
18
|
|
|
|
|
|
|
ORGANISATION OF GENERAL MEETINGS
|
|
18
|
|
|
|
|
|
|
34.
|
Annual general meetings
|
|
18
|
|
35.
|
Calling general meetings
|
|
18
|
|
36.
|
Notice of general meetings
|
|
18
|
|
37.
|
Attendance and speaking at general meetings
|
|
19
|
|
38.
|
Meeting security
|
|
20
|
|
39.
|
Quorum for general meetings
|
|
20
|
|
40.
|
Chairing general meetings
|
|
20
|
|
41.
|
Conduct of meeting
|
|
21
|
|
42.
|
Attendance and speaking by directors and non-members
|
|
21
|
|
43.
|
Dissolution and adjournment if quorum not present
|
|
21
|
|
44.
|
Adjournment if quorum present
|
|
22
|
|
45.
|
Notice of adjourned meeting
|
|
22
|
|
46.
|
Business at adjourned meeting
|
|
23
|
|
|
|
|
|
|
VOTING AT GENERAL MEETINGS
|
|
23
|
|
|
|
|
|
|
47.
|
Voting: general
|
|
23
|
|
48.
|
Chairman’s declaration
|
|
24
|
|
49.
|
Errors and disputes
|
|
25
|
|
50.
|
Demanding a poll
|
|
25
|
|
51.
|
Procedure on a poll
|
|
26
|
|
52.
|
Appointment of proxy
|
|
26
|
|
53.
|
Content of proxy notices
|
|
27
|
|
54.
|
Delivery of proxy notices
|
|
27
|
|
55.
|
Corporate representatives
|
|
28
|
|
56.
|
Termination of authority
|
|
28
|
|
57.
|
Amendments to resolutions
|
|
29
|
|
|
|
|
|
|
RESTRICTIONS ON MEMBERS’ RIGHTS
|
|
29
|
|
|
|
|
|
|
58.
|
No voting of shares on which money owed to company
|
|
29
|
|
|
|
|
|
|
APPLICATION OF RULES TO CLASS MEETINGS AND RIGHTS
|
|
30
|
|
59.
|
Variation of class rights
|
|
30
|
|
60.
|
Disclosure of interests in shares
|
|
30
|
|
61.
|
Failure to disclose interests in shares
|
|
31
|
|
|
|
|
|
|
PART 4 SHARES AND DISTRIBUTIONS ISSUE OF SHARES
|
|
32
|
|
|
|
|
|
|
62.
|
Allotment and pre-emption
|
|
32
|
|
63.
|
Powers to issue different classes of share
|
|
34
|
|
64.
|
Rights and restrictions attaching to shares
|
|
34
|
|
65.
|
Nominee
|
|
37
|
|
66.
|
Payment of commissions on subscription for shares
|
|
39
|
|
67.
|
Purchase of own shares
|
|
39
|
|
|
|
|
|
|
INTERESTS IN SHARES
|
|
40
|
|
|
|
|
|
|
68.
|
Company not bound by less than absolute interests
|
|
40
|
|
|
|
|
|
|
SHARE CERTIFICATES
|
|
40
|
|
|
|
|
|
|
69.
|
Certificates to be issued except in certain cases
|
|
40
|
|
70.
|
Contents and execution of certificates
|
|
41
|
|
71.
|
Consolidated certificates
|
|
41
|
|
72.
|
Replacement certificates
|
|
42
|
|
|
|
|
|
|
PARTLY PAID SHARES
|
|
42
|
|
|
|
|
|
|
73.
|
Company’s lien over partly paid shares
|
|
42
|
|
74.
|
Enforcement of the company’s lien
|
|
43
|
|
75.
|
Call notices
|
|
44
|
|
76.
|
Liability to pay calls
|
|
44
|
|
77.
|
When call notice need not be issued
|
|
45
|
|
78.
|
Failure to comply with call notice: automatic consequences
|
|
45
|
|
79.
|
Payment of uncalled amount in advance
|
|
46
|
|
80.
|
Notice of intended forfeiture
|
|
46
|
|
81.
|
Directors’ power to forfeit shares
|
|
46
|
|
82.
|
Effect of forfeiture
|
|
46
|
|
83.
|
Procedure following forfeiture
|
|
47
|
|
84.
|
Surrender of shares
|
|
48
|
|
|
|
|
|
|
UNTRACED SHAREHOLDERS
|
|
48
|
|
|
|
|
|
|
85.
|
Power of sale
|
|
48
|
|
86.
|
Application of proceeds of sale
|
|
49
|
|
|
|
|
|
|
TRANSFERS AND TRANSMISSION OF SHARES
|
|
49
|
|
|
|
|
|
|
87.
|
Transfers of shares
|
|
49
|
|
88.
|
Transmission of shares
|
|
50
|
|
89.
|
Transmittees’ rights
|
|
50
|
|
90.
|
Exercise of transmittees’ rights
|
|
51
|
|
91.
|
Transmittees bound by prior notices
|
|
51
|
|
|
|
|
|
|
CONSOLIDATION/DIVISION OF SHARES
|
|
51
|
|
|
|
|
|
|
92.
|
CONSOLIDATION/DIVISION OF SHARES
|
|
51
|
|
93.
|
Procedure for disposing of fractions of shares
|
|
51
|
|
|
|
|
|
|
DISTRIBUTIONS
|
|
52
|
|
|
|
|
|
|
94.
|
Procedure for declaring dividends
|
|
52
|
|
95.
|
Calculation of dividends
|
|
53
|
|
96.
|
Payment of dividends and other distributions
|
|
53
|
|
97.
|
Deductions from distributions in respect of sums owed to the company
|
|
55
|
|
98.
|
No interest on distributions
|
|
56
|
|
99.
|
Unclaimed distributions
|
|
56
|
|
100.
|
Non-cash distributions
|
|
56
|
|
101.
|
Waiver of distributions
|
|
57
|
|
102.
|
Scrip dividends
|
|
57
|
|
|
|
|
|
|
CAPITALISATION OF PROFITS AND RESERVES
|
|
59
|
|
|
|
|
|
|
103.
|
Authority to capitalise and appropriation of capitalised sums
|
|
59
|
|
104.
|
Record dates
|
|
60
|
|
|
|
|
|
|
PART 5 MISCELLANEOUS PROVISIONS
|
|
60
|
|
|
|
|
|
|
COMMUNICATIONS
|
|
60
|
|
|
|
|
|
|
105.
|
Means of communication to be used
|
|
60
|
|
106.
|
Loss of entitlement to notices
|
|
62
|
|
|
|
|
|
|
ADMINISTRATIVE ARRANGEMENTS
|
|
63
|
|
|
|
|
|
|
107.
|
Secretary
|
|
63
|
|
108.
|
Change of name
|
|
63
|
|
109.
|
Authentication of documents
|
|
63
|
|
110.
|
Company seals
|
|
64
|
|
111.
|
Records of proceedings
|
|
64
|
|
112.
|
Destruction of documents
|
|
65
|
|
113.
|
Accounts
|
|
66
|
|
114.
|
Provision for employees on cessation of business
|
|
66
|
|
115.
|
Winding up of the company
|
|
67
|
|
|
|
|
|
|
DIRECTORS’ INDEMNITY AND INSURANCE
|
|
67
|
|
|
|
|
|
|
116.
|
Indemnity of officers and funding directors’ defence costs
|
|
67
|
|
117.
|
Insurance
|
|
69
|
PART 1
INTERPRETATION AND LIMITATION OF LIABILITY
1.
DEFINED TERMS
1.1
In the articles, unless the context requires otherwise:
“
Act
” means the Companies Act 2006;
“
articles
” means the Company’s articles of association;
“
associate
” means any body corporate in which a company is interested directly or indirectly so that it is able to exercise or control the exercise of 20 per cent. or more of the votes eligible to be cast at general meetings on all, and substantially all, matters;
“
auditors
” means the auditors from time to time of the Company;
“
bankruptcy
” includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy;
“
business day
” means a day (not being a Saturday or Sunday) on which clearing banks are open for business in London, New York, Rome and Milan;
“
call
” has the meaning given in article 75.1;
“
call notice
” has the meaning given in article 75.1;
“
certificate
” means a paper certificate evidencing a person’s title to specified shares or other securities;
“
chairman
” means the person appointed to that role pursuant to article 13.1;
“
chairman of the meeting
” has the meaning given in article 40.4;
“
clear days
” means, in relation to a period of notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect;
“
company
” includes any body corporate (not being a corporation sole) or association of persons, whether or not a company within the meaning of the Act;
“
Company
” means International Game Technology PLC, a company incorporated in England and Wales, with registered number 09127533;
“
Companies Acts
” means the Companies Acts (as defined in section 2 of the Act), in so far as they apply to the Company;
“
company’s lien
” has the meaning given in article 73.1;
“
corporate representative
” has the meaning given in article 55.1;
1
“
director
” means a director of the Company, and includes any person occupying the position of director, by whatever name called;
“
Disclosure and Transparency Rules
” means the Disclosure Rules and Transparency Rules of the UK Financial Conduct Authority made pursuant to Part VI of FSMA, as revised from time to time;
“
distribution recipient
” has the meaning given in article 96.2;
“
document
” includes, unless otherwise specified, any document sent or supplied in electronic form;
“
fully paid
” in relation to a share, means that the nominal value and any premium to be paid to the Company in respect of that share has been paid to the Company;
“
Group
” means the Company and its subsidiaries and subsidiary undertakings from time to time;
“
holder
” in relation to a share means the person whose name is entered in the register of members as the holder of that share;
“
independent director
” means a director who meets the independence standards of the NYSE applicable to non-controlled domestic US issuers;
“
instrument
” means a document in hard copy form;
“
lien enforcement notice
” has the meaning given in article 74;
“
member
” means a member of the Company;
“
Loyalty Plan
” means the loyalty plan relating to the Special Voting Shares;
“
Model Articles
” means the model articles for public companies limited by shares contained in Schedule 3 of the Companies (Model Articles) Regulations 2008 (SI 2009/3229) as amended prior to the date on which the Company was incorporated;
“
Nominee
” means any person appointed by the Company to hold Special Voting Shares in accordance with these articles;
“
NYSE
” means the New York Stock Exchange;
“
Ordinary Shares
” means ordinary shares of US$0.10 each in the capital of the Company, having the rights and restrictions set out in article 64.1;
“
paid
” and “
paid up
” mean paid or credited as paid;
“
participate
”, in relation to a directors’ meeting, has the meaning given in article 11.1 and “
participating director
” shall be construed accordingly;
“
partly paid
” in relation to a share means that part of that share’s nominal value and any premium at which it was issued which has not been paid to the Company;
“
proxy notice
” has the meaning given in article 53.1;
2
“
qualifying person
” means an individual who is a member of the Company, a corporate representative in relation to a meeting or a person appointed as proxy of a member in relation to a meeting;
“
register
” means the register of members of the Company kept under section 113 of the Act and, where the context requires, any register maintained by the Company of persons holding any renounceable right of allotment of a share;
“
seal
” means the common seal of the Company or any official or securities seal that the Company may have or may be permitted to have under the Act;
“
secretary
” means the secretary of the Company and includes any joint, assistant or deputy secretary and a person appointed by the directors to perform the duties of the secretary;
“
senior holder
” means, in the case of a share held by two or more joint holders, whichever of them is named first in the register;
“
shares
” means any shares in the Company;
“
Special Voting Shares
” means special voting shares with a nominal value of US$0.000001 each in the capital of the Company, having the rights and restrictions set out in article 64.7;
“
Sterling Non-Voting Shares
” means the sterling non-voting shares of the Company with a nominal value of £1 each, having the rights and restrictions set out in article 64.17;
“
Sterling Shareholder
” means any person appointed by the Company to hold the Sterling Non-Voting Shares;
“
subsidiary undertaking
” or “
parent undertaking
” is to be construed in accordance with section 1162 (and Schedule 7) of the Act and for the purposes of this definition, a subsidiary undertaking shall include any person the shares or ownership interests in which are subject to security and where the legal title to the shares or ownership interests so secured are registered in the name of the secured party or its nominee pursuant to such security;
“
transmittee
” means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; and
“
writing
” means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise.
1.2
Unless the context requires otherwise, words or expressions contained in these articles bear the same meaning given by the Act as it is in force when the articles are adopted.
1.3
Where an ordinary resolution of the Company is expressed to be required for any purpose, a special resolution is also effective for that purpose.
3
1.4
References to a “
meeting
” shall not be taken as requiring more than one person to be present if any quorum requirement can be satisfied by one person.
1.5
The headings in the articles do not affect their interpretation.
1.6
References to any statutory provision or statute include all modifications and re-enactments (with or without modification) to such provision or statute and all subordinate legislation made under any such provision or statute, in each case for the time being in force. This article 1.6 does not affect the interpretation of article 1.2.
1.7
The
ejusdem generis
principle of construction shall not apply. Accordingly, general words shall not be given a restrictive meaning by reason of their being preceded or followed by words indicating a particular class of acts, matters or things or by examples falling within the general words.
1.8
In the articles, words importing one gender shall include each gender and a reference to a “spouse” shall include a reference to a civil partner under the Civil Partnership Act 2004.
2.
MODEL ARTICLES OR REGULATIONS NOT TO APPLY
No model articles or regulations contained in any statute or subordinate legislation, including those contained in the Model Articles, apply as the articles of association of the Company.
3.
LIABILITY OF MEMBERS
The liability of the members is limited to the amount, if any, unpaid on the shares held by them.
PART 2
DIRECTORS
DIRECTORS’ POWERS AND RESPONSIBILITIES
4.
DIRECTORS’ GENERAL AUTHORITY
4.1
Subject to the Act and the articles, the directors are responsible for the management of the Company’s business, for which purpose they may exercise all the powers of the Company whether relating to the management of the business or not.
4.2
No alteration of the articles invalidates anything which the directors have done before the alteration.
4.3
The provisions of the articles giving specific powers to the directors do not limit the general powers given by this article 4.
4.4
The directors can appoint a person (not being a director) to an office having the title including the word “director” or attach such a title to an existing office. The directors can also terminate the appointment or use of that title. Even though a person’s title includes “director”, this does not imply that they are (or are deemed to be) directors of
4
the Company or that they can act as a director as a result of having such a title or be treated as a director of the Company for any of the purposes of the Act or the articles.
4.5
The directors may in their discretion exercise (or cause to be exercised) the powers conferred by shares of another company held (or owned) by the Company or a power of appointment to be exercised by the Company (including the exercise of the voting power or power of appointment in favour of the appointment of a director as an officer or employee of that company).
4.6
Subject to the Act, the directors may exercise the powers of the Company regarding keeping an overseas, local or other register and may make and vary regulations as they think fit concerning the keeping of such a register.
5.
COMPLIANCE WITH NYSE RULES
For as long as the Ordinary Shares are listed on the NYSE, the Company shall comply with all NYSE corporate governance standards set forth in Section 3 of the NYSE Listed Company Manual applicable to non-controlled domestic U.S. issuers, regardless of whether the Company is a foreign private issuer.
6.
BORROWING POWERS
The directors may exercise all the powers of the Company to borrow money and to mortgage or charge all or part of the undertaking, property and assets (present or future) and uncalled capital of the Company and, subject to the Act, to issue debentures and other securities, whether outright or as collateral security for a debt, liability or obligation of the Company or of a third party.
7.
DIRECTORS MAY DELEGATE
7.1
Subject to the articles, the directors may delegate any of the powers, authorities and discretions which are conferred on them under the articles:
7.1.1
to such person or committee;
7.1.2
by such means (including by power of attorney);
7.1.3
to such an extent;
7.1.4
in relation to such matters or territories; and
7.1.5
on such terms and conditions;
as they think fit.
7.2
If the directors so specify, any such delegation may authorise further delegation of the directors’ powers, authorities and discretions by any person to whom they are delegated.
7.3
If the directors delegate under article 7.1, they may retain or exclude the right to exercise the delegated powers, authorities and discretions together with that person or committee.
5
7.4
Where a provision in the articles refers to the exercise of a power, authority or discretion by the directors and that power, authority or discretion has been delegated by the directors to a person or a committee under article 7.1, the provision shall be construed as permitting the exercise of the power, authority or discretion by that person or committee.
7.5
The directors may revoke any delegation in whole or part, or alter its terms and conditions.
8.
COMMITTEES
8.1
Committees to which the directors delegate any of their powers must follow procedures which are based as far as they are applicable on those provisions of the articles which govern the taking of decisions by directors.
8.2
For as long as the Ordinary Shares are listed on the NYSE, all committees shall comply with the applicable rules of the NYSE applicable to non-controlled domestic US issuers. The directors may otherwise make rules of procedure for all or any committees, which prevail over rules derived from the articles.
DECISION-MAKING BY DIRECTORS
9.
DIRECTORS TO TAKE DECISIONS COLLECTIVELY
9.1
Decisions of the directors may be taken:
9.1.1
at a directors’ meeting; or
9.1.2
in the form of a directors’ written resolution.
10.
CALLING A DIRECTORS’ MEETING
10.1
Any director may call a directors’ meeting.
10.2
The secretary must call a directors’ meeting if a director so requests.
10.3
A directors’ meeting is called by giving notice of the meeting to the directors.
10.4
Notice of any directors’ meeting must indicate:
10.4.1
its proposed date and time (which shall be not less than 48 hours after the notice is given);
10.4.2
where it is to take place; and
10.4.3
if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting.
10.5
Notice of a directors’ meeting must be given to each director, but need not be in writing.
6
10.6
Notice of a directors’ meeting need not be given to a director who waives his entitlement to notice of that meeting, by giving notice to that effect to the Company at any time before or after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it.
11.
PARTICIPATION IN DIRECTORS’ MEETINGS
11.1
Subject to the articles, directors “
participate
” in a directors’ meeting, or part of a directors’ meeting, when:
11.1.1
the meeting has been called and takes place in accordance with the articles; and
11.1.2
they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting.
11.2
In determining whether a director is participating in a directors’ meeting, it is irrelevant where the director is or how he communicates with the others.
11.3
If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as taking place wherever any of them is.
12.
QUORUM FOR DIRECTORS’ MEETINGS
12.1
At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting.
12.2
The quorum for directors’ meetings shall be at least a majority of the directors then in office.
13.
CHAIRING DIRECTORS’ MEETINGS
13.1
The directors may appoint a director to chair their meetings.
13.2
The directors may appoint other directors as vice, deputy or assistant chairmen to chair directors’ meetings in the chairman’s absence.
13.3
The directors may terminate the appointment of the chairman, vice, deputy or assistant chairman at any time.
13.4
If neither the chairman nor any director appointed generally to chair directors’ meetings in the chairman’s absence is participating in a meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of their number to chair it.
14.
VOTING AT DIRECTORS’ MEETINGS: GENERAL RULES
14.1
Subject to the articles, a decision is taken at a duly convened directors’ meeting by a majority of the votes cast at such meeting.
14.2
Subject to the articles, each director participating in a directors’ meeting has one vote.
7
DIRECTORS’ INTERESTS
15.
DIRECTORS’ INTERESTS
15.1
A director shall be authorised for the purposes of section 175 of the Act to act or continue to act as a director of the Company notwithstanding that at the time of his appointment or subsequently he also holds office as a director of, or holds any other office, employment or engagement with, any other member of the Group.
16.
DIRECTORS’ INTERESTS OTHER THAN IN RELATION TO TRANSACTIONS OR ARRANGEMENTS WITH THE COMPANY
16.1
The directors may authorise any matter proposed to them which would, if not so authorised, involve a breach of duty by a director under section 175 of the Act.
16.2
Any authorisation under article 16.1 will be effective only if:
16.2.1
any requirement as to the quorum at the meeting or part of the meeting at which the matter is considered is met without counting the director in question or any other director interested in the matter under consideration; and
16.2.2
the matter was agreed to without such directors voting or would have been agreed to if such directors’ votes had not been counted.
16.3
The directors may give any authorisation under article 16.1 upon such terms and conditions as they think fit. The directors may vary or terminate any such authorisation at any time.
16.4
For the purposes of articles 15 to 21 a conflict of interest includes a conflict of interest and duty and a conflict of duties, and “interest” includes both direct and indirect interests.
17.
CONFIDENTIAL INFORMATION AND ATTENDANCE AT DIRECTORS’ MEETINGS
17.1
A director shall be under no duty to the Company with respect to any information which he obtains or has obtained otherwise than as a director of the Company and in respect of which he owes a duty of confidentiality to another person. In particular the director shall not be in breach of the general duties he owes to the Company by virtue of sections 171 to 177 of the Act because he:
17.1.1
fails to disclose any such information to the directors or to any director or other officer or employee of the Company; and/or
17.1.2
does not use or apply any such information in performing his duties as a director of the Company.
However, to the extent that his relationship with that other person gives rise to a conflict of interest or possible conflict of interest, this article 17.1 applies only if the existence of that relationship has been authorised by the directors under article 16.1 (subject, in any such case, to any terms and conditions upon which such authorisation was given).
8
17.2
Where the existence of a director’s relationship with another person has been authorised by the directors under article 16.1 and his relationship with that person gives rise to a conflict of interest or possible conflict of interest, without prejudice to the provisions of article 21, the director shall not be in breach of the general duties he owes to the Company by virtue of sections 171 to 177 of the Act because he:
17.2.1
absents himself from meetings of the directors or a committee of directors (or the relevant portions thereof) at which any matter relating to the conflict of interest or possible conflict of interest will or may be discussed or from the discussion of any such matter at a meeting or otherwise; and/or
17.2.2
makes arrangements not to receive documents and information relating to any matter which gives rise to the conflict of interest or possible conflict of interest sent or supplied by the Company and/or for such documents and information to be received and read by a professional adviser on his behalf,
for so long as he reasonably believes such conflict of interest (or possible conflict of interest) subsists, provided that if a majority of the independent directors of the Company so determine (excluding any independent director who is conflicted in respect of the particular matter), such conflicted director may be permitted to participate in the relevant meeting (or part thereof), and to receive documents and information relating to the matter, but not to vote (save to the extent that such participation or access to such documents and information would constitute a breach of applicable competition law or regulation).
17.3
The provisions of articles 17.1 and 17.2 are without prejudice to any equitable principle or rule of law which may excuse the director from:
17.3.1
disclosing information, in circumstances where disclosure would otherwise be required under these articles; and/or
17.3.2
attending meetings or discussions or receiving documents and information as referred to in article 17.2, in circumstances where such attendance or receiving such documents and information would otherwise be required under these articles.
18.
DECLARATION OF INTERESTS IN PROPOSED OR EXISTING TRANSACTIONS OR ARRANGEMENTS WITH THE COMPANY
18.1
A director who is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the Company must declare the nature and extent of his interest to the other directors before the Company enters into the transaction or arrangement.
18.2
A director who is in any way, directly or indirectly, interested in a transaction or arrangement that has been entered into by the Company must declare the nature and extent of his interest to the other directors as soon as is reasonably practicable, unless the interest has already been declared under article 18.1.
18.3
Any declaration required by article 18.1 may (but need not) be made:
18.3.1
at a meeting of the directors;
9
18.3.2
by notice in writing in accordance with section 184 of the Act; or,
18.3.3
by general notice in accordance with section 185 of the Act.
18.4
Any declaration required by article 18.2 must be made:
18.4.1
at a meeting of the directors;
18.4.2
by notice in writing in accordance with section 184 of the Act; or,
18.4.3
by general notice in accordance with section 185 of the Act.
18.5
If a declaration made under article 18.1 or 18.2 above proves to be, or becomes, inaccurate or incomplete, a further declaration must be made under article 18.1 or 18.2 as appropriate.
18.6
A director need not declare an interest under this article 18:
18.6.1
if it cannot reasonably be regarded as likely to give rise to a conflict of interest;
18.6.2
if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware);
18.6.3
if, or to the extent that, it concerns terms of his service contract that have been or are to be considered by a meeting of the directors or by a committee of the directors appointed for the purpose under these articles; or
18.6.4
if the director is not aware of his interest or is not aware of the transaction or arrangement in question (and for this purpose a director is treated as being aware of matters of which he ought reasonably to be aware).
19.
ABILITY TO ENTER INTO TRANSACTIONS AND ARRANGEMENTS WITH THE COMPANY NOTWITHSTANDING INTEREST
19.1
Subject to the Act and provided that he has declared to the directors the nature and extent of any direct or indirect interest of his in accordance with article 18 or where article 18.6 applies and no declaration of interest is required, a director notwithstanding his office:
19.1.1
may be a party to, or otherwise be interested in, any transaction or arrangement with the Company or in which the Company is directly or indirectly interested;
19.1.2
may act by himself or through his firm in a professional capacity for the Company (otherwise than as auditor), and in any such case on such terms as to remuneration and otherwise as the directors may decide; or
19.1.3
may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise be interested in, any body corporate in which the Company is directly or indirectly interested.
10
20.
REMUNERATION AND BENEFITS
20.1
A director shall not, by reason of his office, be accountable to the Company for any remuneration or other benefit which he derives from any office or employment or from any transaction or arrangement or from any interest in any body corporate:
20.1.1
the acceptance, entry into or existence of which has been authorised by the directors under article 16.1 (subject, in any such case, to any terms and conditions upon which such authorisation was given); or
20.1.2
which he is permitted to hold or enter into by virtue of article 19 or otherwise under these articles,
nor shall the receipt of any such remuneration or other benefit constitute a breach of his duty under section 176 of the Act. No transaction or arrangement authorised or permitted under articles 16.1 or 19 or otherwise under these articles shall be liable to be avoided on the ground of any such interest or benefit.
21.
GENERAL VOTING AND QUORUM REQUIREMENTS
21.1
Save as otherwise provided by these articles, a director shall not vote on or be counted in the quorum in relation to a resolution of the directors or committee of the directors concerning a matter in which he has a direct or indirect interest which is, to his knowledge, a material interest (otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through the Company), but this prohibition does not apply to any interest arising only because a resolution concerns any of the following matters:
21.1.1
the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings;
21.1.2
the giving of a guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which the director has assumed responsibility in whole or in part, either alone or jointly with others, under a guarantee or indemnity or by the giving of security;
21.1.3
a transaction or arrangement concerning an offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings for subscription or purchase, in which offer he is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which he is to participate;
21.1.4
a transaction or arrangement to which the Company is or is to be a party concerning another company (including a subsidiary undertaking of the Company) in which he or any person connected with him is interested (directly or indirectly) whether as an officer, shareholder, creditor or otherwise (a “
relevant company
”), if he and any persons connected with him do not to his knowledge hold an interest in shares (as that term is used in sections 820 to 825 of the Act) representing one per cent. or more of either any class of the equity share capital (excluding any share of that class held as treasury shares)
11
in the relevant company or of the voting rights available to members of the relevant company;
21.1.5
a transaction or arrangement for the benefit of the employees of the Company or any of its subsidiary undertakings (including any pension fund or retirement, death or disability scheme) which does not award him a privilege or benefit not generally awarded to the employees to whom it relates; or
21.1.6
a transaction or arrangement concerning the purchase or maintenance of any insurance policy for the benefit of directors or for the benefit of persons including directors.
21.2
A director shall not vote on or be counted in the quorum in relation to a resolution of the directors or committee of the directors concerning his own appointment (including fixing or varying the terms of his appointment or its termination) as the holder of an office or place of profit with the Company or any body corporate in which the Company is directly or indirectly interested. Where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment or its termination) of two or more directors to offices or places of profit with the Company or a body corporate in which the Company is directly or indirectly interested, such proposals may be divided and a separate resolution considered in relation to each director. In that case, each of the directors concerned (if not otherwise debarred from voting under article 21) is entitled to vote (and be counted in the quorum) in respect of each resolution except that concerning his own appointment.
21.3
If a question arises at a meeting as to the materiality of a director’s interest or as to the entitlement of a director to vote or be counted in a quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or being counted in the quorum, the question shall be decided by resolution of the directors or committee members present at the meeting (excluding the director in question) whose majority vote is conclusive and binding on all concerned.
21.4
The Company may by ordinary resolution suspend or relax the provisions of articles 15 to 21 to any extent. Subject to the Act, the Company may by ordinary resolution ratify any transaction or arrangement not properly authorised by reason of a contravention of articles 15 to 21.
22.
PROPOSING DIRECTORS’ WRITTEN RESOLUTIONS
22.1
Any director may propose a directors’ written resolution.
22.2
The secretary must propose a directors’ written resolution if a director so requests.
22.3
A directors’ written resolution is proposed by giving written notice of the proposed resolution to each director.
22.4
Notice of a proposed directors’ written resolution must indicate:
22.4.1
the proposed resolution;
22.4.2
the time by which it is proposed that the directors should adopt it; and
12
22.4.3
the manner in which directors can indicate their agreement in writing to it, for the purposes of article 23.
23.
ADOPTION OF DIRECTORS’ WRITTEN RESOLUTIONS
23.1
A proposed directors’ written resolution is adopted when all the directors entitled to vote at a meeting of the board or of a committee of the board in respect of the proposed resolution (being not less than the number of directors required to form a quorum at a duly convened meeting) have signed one or more copies of it, or have otherwise indicated their agreement in writing to it (which may include by electronic means). A director indicates his agreement in writing to a proposed directors’ written resolution when the Company receives from him an authenticated document identifying the resolution to which it relates and indicating the director’s agreement to the resolution, in accordance with section 1146 of the Act. Once a director has so indicated his agreement, it may not be revoked.
23.2
It is immaterial whether any director signs the resolution or otherwise indicates his agreement in writing to it before or after the time by which the notice proposed that it should be adopted.
23.3
Once a directors’ written resolution has been adopted, it must be treated as if it had been a decision taken at a directors’ meeting or committee meeting in accordance with the articles. All directors shall be notified after a director’s written resolution has been passed.
24.
DIRECTORS’ DISCRETION TO MAKE FURTHER RULES
Subject to the articles, the directors may make any rule which they think fit about how they take decisions, and about how such rules are to be recorded or communicated to directors.
APPOINTMENT OF DIRECTORS
25.
NUMBER OF DIRECTORS
Unless and until otherwise decided by the board (where, for the period of three years from the date of adoption of these articles, not less than three-quarters of the directors shall have voted in favour of such decision), the number of directors will be 13. The composition of the board (and, if applicable, each director) will satisfy the requirements of applicable law and any securities exchange on which the Company’s securities are listed.
26.
INITIAL DIRECTORS
The directors in office immediately following the unconditional adoption of these articles shall be appointed for a term of three years from such date.
27.
METHODS OF APPOINTING DIRECTORS
27.1
Subject to the articles, any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director:
13
27.1.1
by ordinary resolution;
27.1.2
at a general meeting called under article 35.4;
27.1.3
by a decision of the directors.
27.2
Subject to the Act, the directors may enter into an agreement or arrangement with any director for the provision of any services outside the scope of the ordinary duties of a director. Any such agreement or arrangement may be made on such terms and conditions as (subject to the Act) the directors think fit and (without prejudice to any other provision of the articles) they may remunerate any such director for such services as they think fit.
27.3
The only persons who can be elected directors at a general meeting are the following:
27.3.1
a person who is recommended by the directors;
27.3.2
a person who has been proposed by a member (other than the person to be proposed) who is entitled to attend and to vote at the meeting. The proposing member must provide written notice that he intends to propose the person for election and the notice must:
(a)
be delivered to the Company’s registered office at least 30 but not more than 90 days before the date of the meeting;
(b)
state the particulars which would be required to be included in the register of directors if the proposed director were appointed (or reappointed), as well as (for so long as the Ordinary Shares are listed on the NYSE) all information required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for appointment of directors, or is otherwise required, in each case pursuant to Regulation 14A under the US Securities Exchange Act of 1934, as amended from time to time; and
(c)
be accompanied by notice given by proposed director of his willingness to be appointed (or reappointed).
27.4
The directors may require that any notice of a proposed director by a member include additional disclosure regarding such proposed director, including such person’s interest in the Company.
27.5
A resolution for the appointment of two or more persons as directors by a single resolution is void unless a resolution that the resolution for appointment is proposed in this way has first been proposed by the meeting without a vote being given against it.
27.6
A director need not be a member.
27.7
All acts done by:
27.7.1
a meeting of the directors;
14
27.7.2
a meeting of a committee of the directors;
27.7.3
written resolution of the directors; or
27.7.4
a person acting as a director, or a committee,
shall be valid notwithstanding that it is discovered afterwards that there was a defect in the appointment of a person or persons acting or that any of them were disqualified from holding office, had ceased to hold office or were not entitled to vote on the matter in question.
28.
TERMINATION OF DIRECTOR’S APPOINTMENT
28.1
A person ceases to be a director as soon as:
28.1.1
the period expires, if he has been appointed for a fixed period;
28.1.2
he ceases to be a director by virtue of any provision of the Act, is removed from office under the articles or is prohibited from being a director by law;
28.1.3
he is deemed unfit or has otherwise been requested to be removed from office by any gaming regulatory authority in any applicable jurisdiction;
28.1.4
a bankruptcy order is made against him;
28.1.5
a composition is made with his creditors generally in satisfaction of his debts;
28.1.6
a registered medical practitioner who is treating that person gives a written opinion to the Company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months and the directors resolve that he cease to be a director;
28.1.7
by reason of his mental health, a court makes an order which wholly or partly prevents that person from personally exercising any powers or rights which that person would otherwise have and the directors resolve that he cease to be a director;
28.1.8
he is absent, without the permission of the directors, from directors’ meetings for six consecutive months and the directors resolve that he cease to be a director;
28.1.9
notification is received by the Company from the director that the director is resigning from office as director, and such resignation has taken effect in accordance with its terms; or
28.1.10
being an executive director he ceases, for whatever reason, to be employed or engaged by the Group (provided that this article 28.1.10 shall not apply to the initial directors as referred to in article 26).
28.2
A unanimous resolution of the directors (excluding the director the subject of this article) declaring a director to have ceased to be a director under the terms of this article is conclusive as to the fact and grounds of cessation stated in the resolution.
15
28.3
If a director ceases to be a director for any reason, he shall cease to be a member of any committee of the directors.
29.
DIRECTORS’ FEES
29.1
Directors may undertake any services for the Company that the directors decide.
29.2
Unless otherwise determined by ordinary resolution, directors are entitled for their services to such total fees as the directors determine (or such sum as the Company may decide by ordinary resolution). The total fees will be divided among the directors in the proportions that the directors decide. If no decision is made, the total fees will be divided equally. A fee payable under this article 29.2 is distinct from any salary, remuneration or other amount payable to a director under the articles or otherwise. Unless the directors determine otherwise, a fee payable under this article 29.2 accrues from day to day.
29.3
Subject to the Act and the articles, directors’ fees may be payable in any form and, in particular, the directors may arrange for part of a fee payable under this article 29 to be provided in the form of fully paid shares of the Company. The amount of the fee payable in this way is at the directors’ discretion. The amount of the fee will be applied to purchase or subscribe for shares on behalf of the director.
29.4
Unless the directors decide otherwise, a director is not accountable to the Company for any remuneration which he receives as a director or other officer or employee of the Company’s subsidiary undertakings or of any other body corporate in which the Company is interested.
30.
DIRECTORS’ ADDITIONAL REMUNERATION
30.1
The directors can pay additional remuneration (whether by way of salary, percentage of profits or otherwise) and expenses to any director who at the request of the directors:
30.1.1
makes a special journey for the Company;
30.1.2
performs a special service for the Company; or,
30.1.3
works abroad in connection with the Company’s business.
31.
DIRECTORS’ PENSIONS AND OTHER BENEFITS
31.1
The directors may decide whether to pay or provide (by insurance or otherwise):
31.1.1
pensions, retirement or superannuation benefits;
31.1.2
death, sickness or disability benefits;
31.1.3
gratuities; or,
31.1.4
other allowances,
to any person who is or who was a director of:
16
31.1.5
the Company;
31.1.6
a subsidiary undertaking of the Company;
31.1.7
any company which is or was allied to or associated with the Company or any of its subsidiary undertakings; or
31.1.8
a predecessor in business of the Company or any of its subsidiary undertakings,
or to a member of his family including a spouse, former spouse or a person who is (or was) dependent on him.
31.2
For the purpose of article 31.1, the directors may establish, maintain, subscribe and contribute to any scheme trust or fund and pay premiums. The directors may arrange for this to be done either by the Company alone or in conjunction with another person.
32.
REMUNERATION OF EXECUTIVE DIRECTORS
32.1
The salary or remuneration of a director appointed to hold employment or executive office in accordance with these articles may be:
32.1.1
a fixed sum;
32.1.2
wholly or partly governed by business done or profits made; or
32.1.3
as the directors decide.
This salary or remuneration may be in addition to or instead of a fee payable to him for his services as a director under these articles.
33.
DIRECTORS’ EXPENSES
33.1
The Company may repay any reasonable travelling, hotel and other expenses which a director properly incurs in performing his duties as director in connection with his attendance at:
33.1.1
directors’ meetings;
33.1.2
committee meetings;
33.1.3
general meetings; or
33.1.4
separate meetings of the holders of any class of shares or of debentures of the Company,
or otherwise in connection with the exercise of their powers and the discharge of his responsibilities in relation to the Company.
33.2
Subject to the Act, the directors may make arrangements to provide a director with funds to meet expenditure incurred (or to be incurred) by him for the purposes of:
33.2.1
the Company;
17
33.2.2
enabling him to properly perform his duties as an officer of the Company; or
33.2.3
enabling him to avoid incurring any such expenditure.
PART 3
DECISION-MAKING BY MEMBERS
ORGANISATION OF GENERAL MEETINGS
34.
ANNUAL GENERAL MEETINGS
34.1
Subject to the Act, the Company must hold an annual general meeting within six months following its accounting fiscal year end date.
34.2
The directors may decide where and when to hold annual general meetings.
35.
CALLING GENERAL MEETINGS
35.1
The directors may call a general meeting whenever they think fit.
35.2
On the requirement of members under the Act, the directors must call a general meeting:
35.2.1
within 21 days from the date on which the directors become subject to the requirement; and
35.2.2
to be held on a date not more than 28 days after the date of the notice calling the meeting.
35.3
At a general meeting called by a requisition (or by requisitionists), no business may be transacted except that stated by the requisition or proposed by the directors.
35.4
A general meeting may also be called under this article 35.4. if:
35.4.1
the Company has fewer than two directors; and
35.4.2
the director (if any) is unable or unwilling to appoint sufficient directors to make up a quorum or to call a general meeting to do so,
then two or more members may call a general meeting (or instruct the secretary to do so) for the purpose of appointing one or more directors.
36.
NOTICE OF GENERAL MEETINGS
36.1
At least 21 clear days’ notice must be given to call an annual general meeting. Subject to the Act, at least 14 clear days’ notice must be given to call all other general meetings. A general meeting may be called by shorter notice if it is so agreed by a majority in number of the members having a right to attend and vote at the meeting, being a majority who together hold not less than 95 per cent. in nominal value of the shares giving that right.
36.2
Notice of a general meeting must be given to:
18
36.2.1
the members (other than any who, under the provisions of the articles or the terms of allotment or issue of shares, are not entitled to receive notice);
36.2.2
the directors;
36.2.3
beneficial owners nominated to enjoy information rights under the Act; and
36.2.4
the auditors.
36.3
The directors may decide that persons entitled to receive notices of a general meeting are those on the register at the close of business on a day the directors decide.
36.4
The notice of a general meeting must specify a time (which must not be more than 48 hours, excluding any part of a day that is not a working day, before the time fixed for the meeting) by which a person must be entered on the register in order to have the right to attend or vote at the meeting. Changes to entries on the register after the time specified in the notice will be disregarded in deciding the rights of any person to attend or vote.
36.5
In the case of an annual general meeting, the notice shall specify the meeting as such. In the case of a meeting to pass a special resolution, the notice shall specify the intention to propose the resolution as a special resolution.
36.6
The accidental omission to give notice of a general meeting or to send, supply or make available any document or information relating to a meeting to, or the non receipt of any such notice, document or information by, a person entitled to receive any such notice, document or information will not invalidate the proceedings at that meeting.
36.7
Subject to the Act, if, after the sending of notice of a general meeting, the directors decide that it is impractical or unreasonable for any reason to hold a general meeting at the time, date or place set out in the notice for calling the meeting, they can move or postpone the meeting (or both). Subject to the Act, if the directors do this, an announcement of the time, date and place of the re-arranged meeting will, if practical, be published on the Company’s website. Notice of the business of the meeting does not need to be given again. The directors must take reasonable steps to ensure that any member trying to attend the meeting at the original time, date and/or place is informed of the new arrangements. If a meeting is re-arranged in this way, proxy forms can be delivered as specified in article 54. The directors can also move or postpone (or both) the re-arranged meeting under this article.
37.
ATTENDANCE AND SPEAKING AT GENERAL MEETINGS
37.1
The directors may make whatever arrangements they consider appropriate to enable those attending a general meeting to exercise their rights to speak and vote at it.
37.2
A person is able to exercise the right to vote at a general meeting when:
37.2.1
that person is able to vote, during the meeting, on resolutions put to the vote at the meeting; and
19
37.2.2
that person’s vote can be taken into account in determining whether or not such resolutions are passed at the same time as the votes of all the other persons attending the meeting.
38.
MEETING SECURITY
38.1
The directors may make any arrangement and impose any restriction they consider appropriate to ensure the security of a general meeting including the searching of a person attending the meeting and the restriction of the items of personal property that may be taken into the meeting place.
38.2
The directors may authorise one or more persons, including a director or the secretary or the chairman of the meeting, to:
38.2.1
refuse entry to a meeting to a person who refuses to comply with these arrangements or restrictions; and
38.2.2
eject from a meeting any person who causes the proceedings to become disorderly.
39.
QUORUM FOR GENERAL MEETINGS
39.1
No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending the meeting do not constitute a quorum.
39.2
If the Company has only one member entitled to attend and vote at the general meeting, one qualifying person present at the meeting and entitled to vote is a quorum.
39.3
Subject to the Act, in all cases other than that in article 39.2, qualifying persons representing a majority of the votes of the Company entitled to be exercised at the meeting are a quorum.
40.
CHAIRING GENERAL MEETINGS
40.1
If the directors have appointed a chairman, the chairman shall chair general meetings if present and willing to do so.
40.2
If the chairman is absent and the directors have appointed a vice, deputy or assistant chairman, then the senior of them shall act as the chairman.
40.3
If the directors have not appointed a chairman (or vice, deputy or assistant chairman), or if the chairman (or vice, deputy or assistant chairman) is unwilling to chair the meeting or is not present within ten minutes of the time at which a meeting was due to start:
40.3.1
the directors present; or
40.3.2
(if no directors are present), the meeting,
20
must appoint a director or member to chair the meeting. If only one director is present and willing and able to act, he shall be the chairman. The appointment of the chairman of the meeting must be the first business of the meeting.
40.4
The person chairing a meeting in accordance with this article is referred to as “
the chairman of the meeting
”.
41.
CONDUCT OF MEETING
41.1
Without prejudice to any other power which he may have under the articles or at common law, the chairman of the meeting may take such action as he thinks fit to promote the orderly conduct of the business of the meeting as specified in the notice of meeting. His decision on matters of procedure or arising incidentally from the business of the meeting will be final, as will be his decision as to whether any matter is of such a nature.
41.2
If it appears to the chairman of the meeting that the meeting place specified in the notice calling the meeting is inadequate to accommodate all members entitled and wishing to attend, the meeting shall be duly constituted and its proceedings valid if the chairman is satisfied that adequate facilities are available to ensure that a member who is unable to be accommodated is able to:
41.2.1
participate in the business for which the meeting has been called;
41.2.2
exercise his rights to speak and to vote at the meeting in accordance with article 37;
41.2.3
hear and see all persons present who speak (whether by the use of microphones, loud-speakers, audio-visual communications equipment or otherwise), whether in the meeting place or elsewhere; and
41.2.4
be heard and seen by all other persons present in the same way.
42.
ATTENDANCE AND SPEAKING BY DIRECTORS AND NON-MEMBERS
42.1
Directors may attend and speak at general meetings whether or not they are members.
42.2
The chairman of the meeting may permit other persons who are not:
42.2.1
members of the Company, or
42.2.2
otherwise entitled to exercise the rights of members in relation to general meetings,
to attend and speak at a general meeting if he considers it will assist the deliberations of the meeting.
43.
DISSOLUTION AND ADJOURNMENT IF QUORUM NOT PRESENT
43.1
If a general meeting was requisitioned by members and the persons attending the meeting within 30 minutes of the time at which the meeting was due to start (or such longer time as the chairman of the meeting decides to wait) do not constitute a
21
quorum, or if during the meeting a quorum ceases to be present, the meeting is dissolved.
43.2
In the case of a general meeting other than one requisitioned by members, if the persons attending the meeting within 30 minutes of the time at which the meeting was due to start (or such longer time as the chairman of the meeting decides to wait) do not constitute a quorum, or if during the meeting a quorum ceases to be present, the chairman of the meeting must adjourn it.
43.3
The continuation of a general meeting adjourned under article 43.2 for lack of quorum is to take place either:
43.3.1
on a day that is not less than 14 days but not more than 28 days after it was adjourned and at a time and/or place specified for the purpose in the notice calling the meeting; or
43.3.2
where no such arrangements have been specified, on a day that is not less than 14 days but not more than 28 days after it was adjourned and at such time and/or place as the chairman of the meeting decides (or, in default, the directors decide).
43.4
In the case of a general meeting to take place under article 43.3.2, the Company must give not less than seven clear days’ notice of any adjourned meeting and the notice must state the quorum requirement.
43.5
At an adjourned meeting the quorum is one qualifying person present and entitled to vote. If a quorum is not present within five minutes from the time fixed for the start of the meeting, the adjourned meeting is dissolved.
44.
ADJOURNMENT IF QUORUM PRESENT
44.1
The chairman may, with the consent of a general meeting at which a quorum is present (and must, if so directed by the meeting), adjourn a meeting from time to time and from place to place or for an indefinite period.
44.2
Without prejudice to any other power which he may have under the provisions of the articles or at common law, the chairman of the meeting may, without the consent of the general meeting, interrupt or adjourn a meeting from time to time and from place to place or for an indefinite period if he decides that it has become necessary to do so in order to:
44.2.1
secure the proper and orderly conduct of the meeting;
44.2.2
give all persons entitled to do so a reasonable opportunity of speaking and voting at the meeting; or
44.2.3
ensure that the business of the meeting is properly disposed of.
45.
NOTICE OF ADJOURNED MEETING
45.1
Whenever a general meeting is adjourned for 28 days or more or for an indefinite period under article 44 at least seven clear days’ notice shall be given to:
22
45.1.1
the members (other than any who, under the provisions of the articles or the terms of allotment or issue of the shares, are not entitled to receive notice);
45.1.2
the directors;
45.1.3
beneficial owners nominated to enjoy information rights under the Act; and
45.1.4
the auditors.
Except in these circumstances it is not necessary to give notice of a general meeting adjourned under article 44 or of the business to be transacted at the adjourned meeting.
45.2
The directors may decide that persons entitled to receive notice of an adjourned meeting in accordance with this article 45 are those persons entered on the register at the close of business on a day determined by the directors.
45.3
The notice of an adjourned meeting given in accordance with this article 45 shall also specify a time (which shall not be more than 48 hours (excluding any part of a day that is not a working day) before the time fixed for the meeting) by which a person must be entered on the register in order to have the right to attend or vote at the meeting. Changes to entries on the register after the time so specified in the notice will be disregarded in determining the rights of any person to attend or vote.
46.
BUSINESS AT ADJOURNED MEETING
46.1
No business may be transacted at an adjourned general meeting which could not properly have been transacted at the meeting if the adjournment had not taken place.
VOTING AT GENERAL MEETINGS
47.
VOTING: GENERAL
47.1
A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles.
47.2
Subject to special rights or restrictions as to voting attached to any class of shares by or in accordance with the articles, on a vote on a resolution:
47.2.1
on a show of hands at a meeting:
(a)
every qualifying person (not being a proxy) present and entitled to vote on the resolution has one vote; and
(b)
every proxy present who has been appointed by a member entitled to vote on the resolution has one vote, except where:
(i)
that proxy has been appointed by more than one member entitled to vote on the resolution; and
(ii)
the proxy has been instructed:
23
(A)
by one or more of those members to vote for the resolution and by one or more of those members to vote against the resolution; or
(B)
by one or more of those members to vote in the same way on the resolution (whether for or against) and one or more of those members has permitted the proxy discretion as to how to vote,
in which case, the proxy has one vote for and one vote against the resolution; and
47.2.2
on a poll taken at a meeting, every qualifying member present and entitled to vote on the resolution has one vote in respect of each Ordinary Share and 0.9995 votes in respect of each Special Voting Share held by the relevant member.
47.3
In the case of joint holders of a share, only the vote of the senior holder who votes (or any proxy duly appointed by him) may be counted by the Company.
47.4
A member in respect of whom an order has been made by a court or official having jurisdiction (whether in the United Kingdom or elsewhere) that he is or may be suffering from mental disorder or is otherwise incapable of running his affairs may vote, whether on a show of hands or on a poll, by his guardian, receiver, curator bonis or other person authorised for that purpose and appointed by the court. A guardian, receiver, curator bonis or other person authorised for that purpose and appointed by the court may vote by proxy if evidence (to the satisfaction of the directors) of the authority of the person claiming to exercise the right to vote is received at the registered office of the Company (or at another place specified in accordance with the articles for the delivery or receipt of forms of appointment of a proxy) or in any other manner specified in the articles for the appointment of a proxy within the time limits prescribed by the articles for the appointment of a proxy for use at the meeting, adjourned meeting or poll at which the right to vote is to be exercised.
47.5
In the case of an equality of votes whether on a show of hands or on a poll, the chairman of the meeting shall not be entitled to a casting vote.
47.6
The Company is not obliged to verify that a proxy or corporate representative has acted in accordance with the terms of his appointment and any failure to so act in accordance with the terms of his appointment shall not affect the validity of any proceedings at a meeting of the Company.
48.
CHAIRMAN’S DECLARATION
48.1
Subject to article 50.1.2, on a vote on a show of hands a declaration by the chairman of the meeting that the resolution has or has not been passed, or has or has not been passed by a particular majority, is conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.
24
48.2
An entry in respect of such a declaration in minutes of the meeting recorded in accordance with section 355 of the Act is also conclusive evidence of that fact without such proof.
49.
ERRORS AND DISPUTES
49.1
No objection may be raised to the qualification of a voter or to the counting of, or failure to count, a vote except at the meeting or adjourned meeting at which the vote objected to is tendered. Every vote not disallowed at the meeting is valid.
49.2
Any such objection must be referred to the chairman of the meeting whose decision is final. An objection only invalidates the decision of a meeting if in the opinion of the chairman of the meeting, it is of sufficient magnitude to affect the decision of the meeting.
50.
DEMANDING A POLL
50.1
A poll on a resolution may be demanded:
50.1.1
in advance of the general meeting where it is to be put to the vote; or
50.1.2
at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared.
50.2
A poll may be demanded by:
50.2.1
the chairman of the meeting;
50.2.2
the directors;
50.2.3
five or more qualifying persons having the right to vote on the resolution;
50.2.4
a qualifying person (or qualifying persons) representing in total not less than 10 per cent. of the total voting rights of all the members having the right to vote on the resolution (excluding any voting rights attached to any shares in the Company held as treasury shares); or
50.2.5
a qualifying person (or qualifying persons) representing shares conferring a right to vote on a resolution, being shares on which a total sum has been paid up equal to not less than 10 per cent. of the total sum paid up on all shares conferring that right (excluding any voting rights attached to any shares in the Company held as treasury shares).
50.3
A demand for a poll may be withdrawn if:
50.3.1
the poll has not yet been taken, and
50.3.2
the chairman of the meeting consents to the withdrawal.
A demand so withdrawn validates the result of a show of hands declared before the demand was made. If a poll is demanded before the declaration of the result of a
25
show of hands and the demand is duly withdrawn, the meeting will continue as if the demand had not been made.
51.
PROCEDURE ON A POLL
51.1
Subject to the articles, polls at general meetings must be taken when, where and in such manner as the chairman of the meeting directs.
51.2
The chairman of the meeting may appoint scrutineers (who need not be members) and decide how and when the result of the poll is to be declared.
51.3
The result of a poll shall be the decision of the general meeting in respect of the resolution on which the poll was demanded.
51.4
A poll on:
51.4.1
the election of the chairman of the meeting; or
51.4.2
a question of adjournment,
must be taken immediately.
51.5
Other polls must be taken within 30 clear days of their being demanded.
51.6
A demand for a poll (other than on the election of the chairman of the meeting or on a question of adjournment) does not prevent a general meeting from continuing, except as regards the question on which the poll was demanded.
51.7
No notice need be given of a poll not taken immediately if the time, date and place at which it is to be taken are announced at the meeting at which it is demanded.
51.8
In any other case, at least seven clear days’ notice must be given specifying the time, date and place at which the poll is to be taken.
51.9
On a poll taken at a general meeting of the Company, a qualifying person present and entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way.
52.
APPOINTMENT OF PROXY
52.1
A member may appoint another person as his proxy to exercise all (or any) of his rights to attend and to speak and to vote (both on a show of hands and on a poll) on:
52.1.1
a resolution;
52.1.2
an amendment of a resolution; or
52.1.3
on other business arising at a general meeting of the Company.
Unless the contrary is stated in it, the appointment of a proxy shall be deemed to confer authority to exercise all such rights, as the proxy thinks fit.
26
52.2
A member may appoint more than one proxy in relation to a general meeting, provided that each proxy is appointed to exercise the rights attached to different shares held by the member.
52.3
When two or more valid but differing appointments of proxy are received for the same share for use at the same general meeting, the one which is last validly delivered or received (regardless of its date or the date of its execution) shall be treated as replacing and revoking the other or others as regards that share. If the Company is unable to determine which appointment was last validly delivered or received, none of them shall be treated as valid in respect of that share.
52.4
A proxy need not be a member.
52.5
The appointment of a proxy shall (unless the contrary is stated in it) be valid for an adjournment of the general meeting as well as for the meeting to which it relates.
52.6
The appointment of a proxy shall be valid for 12 months from the date of execution or, in the case of an appointment of proxy delivered by electronic means, for 12 months from the date of delivery unless otherwise specified by the directors.
52.7
Subject to the Act, the Company may send a form of appointment of proxy to all or none of the persons entitled to receive notice of and to vote at a meeting.
53.
CONTENT OF PROXY NOTICES
53.1
Subject to article 53.2, the appointment of a proxy (a “
proxy notice
”) shall be in writing in any usual form (or in another form approved by the directors) and shall be:
53.1.1
signed by the appointor or his duly appointed attorney; or,
53.1.2
if the appointor is a company, executed under its seal or signed by its duly authorised officer or attorney or other person authorised to sign.
53.2
Subject to the Act, the directors may accept a proxy notice received by electronic means on such terms and subject to such conditions as they consider fit.
53.3
A proxy notice received by electronic means shall not be subject to the requirements of article 53.1.
53.4
For the purposes of articles 53.1 and 53.2, the directors may require such reasonable evidence they consider necessary to determine:
53.4.1
the identity of the member and the proxy; and
53.4.2
where the proxy is appointed by a person acting on behalf of the member, the authority of that person to make the appointment.
54.
DELIVERY OF PROXY NOTICES
54.1
Any notice of a general meeting must specify the address or addresses (“
proxy notification address
”) at which the Company or its agents will receive proxy notices
27
relating to that meeting, or any adjournment of it, delivered in hard copy or by electronic means.
54.2
A person who is entitled to attend, speak or vote (either on a show of hands or on a poll) at a general meeting remains so entitled in respect of that meeting or any adjournment of it, even though a valid proxy notice has been received by the Company by or on behalf of that person.
54.3
Subject to articles 54.4 and 54.5, a proxy notice must be received at a proxy notification address not less than 48 hours (excluding any part of a day that is not a working day) before the general meeting or adjourned meeting to which it relates.
54.4
In the case of:
54.4.1
a general meeting adjourned for not more than 48 hours; or
54.4.2
a poll not taken during the general meeting but taken not more than 48 hours after it was demanded,
the proxy notice must be received by not later than the adjourned meeting or the meeting at which the poll was demanded.
54.5
In the case of:
54.5.1
a meeting adjourned for less than 28 days but more than 48 hours; or
54.5.2
a poll taken more than 48 hours after it is demanded,
the proxy notice must be received at a proxy notification address not less than 24 hours (excluding any part of a day that is not a working day) before the time appointed for the holding of the adjourned meeting or the taking of the poll.
55.
CORPORATE REPRESENTATIVES
55.1
In accordance with the Act, a corporation which is a member may, by resolution of its directors or other governing body, authorise a person or persons to act as its representative or representatives at any general meeting of the Company (a “
corporate representative
”).
55.2
A director, the secretary or other person authorised for the purpose by the secretary may require a corporate representative to produce a certified copy of the resolution of authorisation before permitting the corporate representative to exercise his powers.
56.
TERMINATION OF AUTHORITY
56.1
The termination of the authority of a person to act as proxy or as a corporate representative does not affect:
56.1.1
whether he counts in deciding whether there is a quorum at a general meeting;
56.1.2
the validity of anything he does as chairman of a meeting;
28
56.1.3
the validity of a poll demanded by him at a general meeting; or
56.1.4
the validity of a vote given by that person,
unless the Company receives notice of the termination at the proxy notification address not later than the last time at which a proxy notice should have been received in order to be valid for use at the relevant meeting or adjourned meeting or (in the case of a poll taken otherwise than at or on the same day as the general meeting or adjourned meeting) for use on the holding of the poll at which the vote is cast.
57.
AMENDMENTS TO RESOLUTIONS
57.1
No amendment to a resolution duly proposed as an ordinary resolution (other than an amendment to correct a grammatical or other non-substantive error) may be considered or voted on unless either:
57.1.1
at least 48 hours (excluding any part of a day that is not a working day)before the time appointed for holding the general meeting or adjourned meeting at which the ordinary resolution is to be considered, notice of the terms of the amendment and intention to move it has been received at the registered office of the Company; or
57.1.2
the chairman of the meeting in his absolute discretion decides that the amendment may be considered or voted on.
If an amendment proposed to a resolution under consideration is ruled out of order by the chairman of the meeting the proceedings on the substantive resolution are not invalidated by an error in his ruling.
57.2
A special resolution to be proposed at a general meeting may be amended by ordinary resolution, if:
57.2.1
the chairman of the meeting proposes the amendment at the general meeting at which the resolution is to be proposed; and
57.2.2
the amendment does not go beyond what is necessary to correct a grammatical or other non-substantive error in the resolution.
57.3
If the chairman of the meeting, acting in good faith, wrongly decides that an amendment to a resolution is out of order, the chairman’s error does not invalidate the vote on that resolution.
RESTRICTIONS ON MEMBERS’ RIGHTS
58.
NO VOTING OF SHARES ON WHICH MONEY OWED TO COMPANY
Unless the directors decide otherwise, no voting rights (or other rights conferred by membership in relation to a meeting or poll) attached to a share may be exercised at any general meeting, at any adjournment of it, or on any poll called at or in relation to it, unless all amounts payable to the Company in respect of that share have been paid.
29
APPLICATION OF RULES TO CLASS MEETINGS AND RIGHTS
59.
VARIATION OF CLASS RIGHTS
59.1
Subject to article 64.15, the Ordinary Shares and the Special Voting Shares shall be treated as if they are a single class of shares and not divided into separate classes for voting purposes. Save as otherwise provided in these articles, any special rights attached to any shares in the capital of the Company may (unless otherwise provided by the terms of issue of the shares of that class) be varied or abrogated, either whilst the Company is a going concern or during or in contemplation of a winding up, with the consent in writing of those entitled to attend and vote at general meetings of the Company representing 75 per cent. of the voting rights attaching to the Ordinary Shares and the Special Voting Shares, in aggregate, which may be exercised at such meetings, or with the sanction of 75 per cent. of those votes attaching to Ordinary Shares and the Special Voting Shares, in aggregate, cast on a special resolution proposed at a separate general meeting of all those entitled to attend and vote at general meetings of the Company, but not otherwise.
59.2
A resolution to vary any class rights relating to the giving, variation, revocation or renewal of any authority of the directors to allot shares or relating to a reduction of the Company’s capital may only be varied or abrogated in accordance with the Act but not otherwise.
59.3
The rights attached to a class of shares are not, unless otherwise expressly provided for in the rights attaching to those shares, deemed to be varied by the creation, allotment or issue of further shares ranking pari passu with or subsequent to them or by the purchase or redemption by the Company of its own shares in accordance with the Act.
59.4
Subject to sections 334(2), 334(2A) and section 334(3) of the Act, a separate meeting for the holders of a class of shares must be called and conducted as nearly as possible in the same way as a general meeting, except that:
59.4.1
no member is entitled to notice of it or to attend unless he is a holder of shares of that class;
59.4.2
no vote may be cast except in respect of a share of that class;
59.4.3
the quorum at a meeting (other than an adjourned meeting) is two qualifying persons present and holding at least one-third in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares);
59.4.4
the quorum at an adjourned meeting is one qualifying person present and holding shares of that class; and
59.4.5
any qualifying person holding shares of that class present may demand a poll.
60.
DISCLOSURE OF INTERESTS IN SHARES
Each member must comply with the notification obligations to the Company contained in Chapter 5 (
Vote Holder and Issuer Notification Rules
) of the Disclosure and Transparency Rules (including, without limitation, the provisions of DTR 5.1.2)
30
as if the Company were an issuer whose home member state is the United Kingdom, save that the obligation to notify the Company in accordance with the provisions of the Disclosure and Transparency Rules shall arise if the percentage of voting rights reaches, exceeds or falls below one per cent. and each one per cent. threshold thereafter (up or down) up to one hundred per cent. The provisions of this article apply in addition to any other obligations which may arise under any other applicable law or regulation.
61.
FAILURE TO DISCLOSE INTERESTS IN SHARES
61.1
Where notice is served by the Company under section 793 of the Act (a “
section 793 notice
”) on a member, or another person appearing to be interested in shares held by that member, and the member or other person has failed in relation to any shares (the “
default shares
”, which expression includes any shares allotted or issued after the date of the section 793 notice in respect of those shares) to give the Company the information required within the prescribed period from the date of service of the section 793 notice, the following sanctions apply, unless the directors otherwise decide:
61.1.1
the member shall not be entitled in respect of the default shares to be present or to vote (either in person, by proxy or by corporate representative) at a general meeting or at a separate meeting of the holders of a class of shares or on a poll; and
61.1.2
where the default shares represent at least 0.25 per cent. in nominal value of the issued shares of their class (excluding any shares of their class held as treasury shares):
(a)
a dividend (or any part of a dividend) or other amount payable in respect of the default shares shall be withheld by the Company, which has no obligation to pay interest on it, and the member shall not be entitled to elect, under article 102, to receive shares instead of a dividend; and
(b)
no transfer of any default shares shall be registered unless the transfer is an excepted transfer or:
(i)
the member is not himself in default in supplying the information required; and
(ii)
the member proves to the satisfaction of the directors that no person in default in supplying the information required is interested in any of the shares the subject of the transfer.
61.2
The sanctions under article 61.1 cease to apply seven days after the earlier of:
61.2.1
receipt by the Company of notice of an excepted transfer, but only in relation to the shares thereby transferred; and
61.2.2
receipt by the Company, in a form satisfactory to the directors, of all the information required by the section 793 notice.
31
61.3
Where, on the basis of information obtained from a member in respect of a share held by him, the Company issues a section 793 notice to another person, it shall at the same time send a copy of the section 793 notice to the member, but the accidental omission to do so, or the non-receipt by the member of the copy, does not invalidate or otherwise affect the application of article 61.1.
61.4
For the purposes of this article 61:
61.4.1
a person, other than the member holding a share, shall be treated as appearing to be interested in that share if the member has informed the Company that the person is or may be interested, or if the Company (after taking account of information obtained from the member or, under a section 793 notice, from anyone else) knows or has reasonable cause to believe that the person is or may be so interested;
61.4.2
“
interested
” shall be construed as it is for the purpose of section 793 of the Act;
61.4.3
reference to a person having failed to give the Company the information required by a section 793 notice, or being in default in supplying such information, includes:
(a)
reference to his having failed or refused to give all or any part of it; and
(b)
reference to his having given information which he knows to be false in a material particular or having recklessly given information which is false in a material particular;
61.4.4
the “
prescribed period
” means 14 days; and
61.4.5
an “
excepted transfer
” means, in relation to shares held by a member:
(a)
a transfer pursuant to acceptance of a takeover offer for the Company (within the meaning of section 974 of the Act); or
(b)
a transfer which is shown to the satisfaction of the directors to be made in consequence of a sale of the whole of the beneficial interest in the shares to a person who is unconnected with the member or with any other person appearing to be interested in the shares.
61.5
The provisions of this article are in addition and without prejudice to the provisions of the Act.
PART 4
SHARES AND DISTRIBUTIONS
ISSUE OF SHARES
62.
ALLOTMENT AND PRE-EMPTION
62.1
Subject to the Act and relevant authority given by the Company in general meeting, the directors have general and unconditional authority to allot, grant options over, or
32
otherwise dispose of, unissued shares of the Company or rights to subscribe for or convert any security into shares, to such persons, at such times and on such terms as the directors may decide, except that no share may be issued at a discount.
62.2
Upon any allotment of Ordinary Shares, such number of Special Voting Shares shall be allotted simultaneously to the Nominee as results in the aggregate number of Ordinary Shares in issue being equal to the aggregate number of Special Voting Shares in issue.
62.3
If, at any time, the aggregate number of Special Voting Shares in issue is less than the aggregate number of Ordinary Shares in issue, the directors shall, subject to article 62.4, as soon as practicable allot to the Nominee such number of Special Voting Shares as is required to result in an equal number of Special Voting Shares and Ordinary Shares in issue.
62.4
The directors have general and unconditional authority, pursuant to section 551 of the Act, to exercise all powers of the Company to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company to an aggregate nominal amount equal to the general allotment amount for (as the case may be) the first period and thereafter, each subsequent period.
62.5
By the authority conferred by article 62.4, the directors may during a period which is the first period or a subsequent period, make offers and enter into agreements before the authority expires which would, or might, require shares in the Company to be allotted or rights to subscribe for or convert any security in the Company to be granted after the authority expires and the directors may allot such shares or grant such rights under any such offer or agreement as if the authority had not expired.
62.6
The directors have general power, pursuant to section 570 of the Act, to allot equity securities for cash pursuant to the authority conferred by article 62.4 and/or where the allotment constitutes an allotment of equity securities by virtue of section 560(2) of the Act, in each case free of the restriction in section 561(1) of the Act for (as the case may be) the first period and thereafter, each subsequent period. This power is limited to the allotment of equity securities up to a nominal amount equal to the pre-emption disapplication amount.
62.7
By the power conferred by article 62.6, the board may, during a period which is a first period or a subsequent period, make offers and enter into agreements which would, or might, require equity securities to be allotted after the power expires and the directors may allot equity securities under any such offer or agreement as if the power had not expired.
62.8
In this article 62:
62.8.1
“
first period
” means the period commencing on the date of the resolution (the “
original resolution
”) granting the authority referred to in article 62.4 or the power referred to in article 62.6 (as the case may be) and expiring on the date on which a resolution to renew such authorities (or either of them, respectively) is passed or the fifth anniversary of the date of the original resolution, whichever is the earlier;
33
62.8.2
“
general allotment amount
” means, for the first period, $185,000,000.00 and, for a subsequent period, the amount stated in the relevant ordinary or special resolution and identified as the general allotment amount;
62.8.3
“
pre-emption disapplication amount
” means, for the first period, $185,000,000.00 and, for a subsequent period, the amount stated in the relevant special resolution;
62.8.4
“
subsequent period
” means any period starting on or after the expiry of the first period for which the authority conferred by:
(a)
article 62.4 is renewed by ordinary or special resolution stating the general allotment amount;
(b)
article 62.6 is renewed by special resolution stating the pre-emption disapplication amount; and
62.8.5
the nominal amount of securities is, in the case of rights to subscribe for or convert any securities into shares of the Company, the nominal amount of shares which may be allotted pursuant to those rights.
62.9
The directors may at any time after the allotment of a share, but before a person has been entered in the register as the holder of the share, recognise a renunciation of the share by the allottee in favour of another person and may grant to an allottee a right to effect a renunciation on such terms and conditions as the directors think fit.
63.
POWERS TO ISSUE DIFFERENT CLASSES OF SHARE
63.1
Subject to the Act and the articles, but without prejudice to the rights attached to any existing share, the Company may issue shares with such rights or restrictions as may be determined by ordinary resolution. If no such resolution is passed or if the relevant resolution does not make specific provision, the directors may determine these rights and restrictions.
63.2
Subject to the Act, the Company may issue shares which are to be redeemed, or are liable to be redeemed at the option of the Company or the holder, and the directors may determine the terms, conditions and manner of redemption of any such shares.
64.
RIGHTS AND RESTRICTIONS ATTACHING TO SHARES
Ordinary Shares
64.1
The Ordinary Shares shall entitle the holders thereof to the rights set out below.
Dividend
64.2
The directors may declare and pay dividends on the Ordinary Shares in accordance with articles 94 to 102.
34
Return of capital
64.3
On a return of capital on a winding-up or otherwise, any surplus assets of the Company available for distribution shall, after paying any holders of Special Voting Shares in accordance with article 64.9, any holders of deferred shares in accordance with article 64.16, and any holders of Sterling Non-Voting Shares in accordance with article 64.19, be distributed to each holder of an Ordinary Share
pro rata
to its shareholding.
Votes
64.4
Subject to article 61, each holder of an Ordinary Share shall have one vote for every Ordinary Share of which it is the holder.
Transfer
64.5
Ordinary Shares are freely transferable.
Further Rights
64.6
Each Ordinary Share entitles a member to elect, after such Ordinary Share has been held by that member (legally and beneficially, or otherwise as determined by the board, in accordance with the terms and conditions of the Loyalty Plan from time to time, to have been held (or deemed to have been held) beneficially by a person (“a
relevant interest
”)) for a continuous period of three years, to direct the exercise of the voting rights attached to one Special Voting Share in respect of that Ordinary Share (and which shall be considered to be “associated with” that Ordinary Share), until such time as that relevant interest may be later transferred, whereupon the right to direct the exercise of such voting rights shall cease with immediate effect.
Special Voting Shares
64.7
The Special Voting Shares shall entitle the holders thereof to the rights set out below. The directors may adopt such policies and procedures as they, in their absolute discretion, determine in good faith to be necessary or desirable from time to time to give effect to articles 64.6 to 64.16 and article 65.
Dividend
64.8
The holders of the Special Voting Shares shall not be entitled to participate in the profits of the Company.
Return of capital
64.9
On a return of capital of the Company on a winding up or otherwise, the holders of the Special Voting Shares shall be entitled to receive out of the assets of the Company available for distribution to its shareholders the sum of, in aggregate, US$1 but shall not be entitled to any further participation in the assets of the Company.
Voting
64.10
Subject to article 61, the holders of the Special Voting Shares shall have 0.9995 votes for every Special Voting Share of which it is the holder.
35
64.11
Save in respect of the Nominee (which shall vote in accordance with article 65), a member must direct the exercise of the 0.9995 votes attaching to each Special Voting Share in the same way as it exercises the vote attaching to the associated Ordinary Share (and for the avoidance of doubt, if a member does not exercise the vote attaching to the associated Ordinary Share, it may not validly direct the exercise of the 0.9995 votes attaching to the Special Voting Share).
Transfer
64.12
The Special Voting Shares may not be transferred, save for transfers pursuant to article 64.13, in the event of a change of Nominee the mandatory transfer for nil consideration by the outgoing Nominee to the replacement Nominee, and as may otherwise be permitted by the board (in accordance with the terms and conditions of the Loyalty Plan from time to time).
Redemption or repurchase
64.13
No Special Voting Shares may be purchased or redeemed by the Company except in accordance with the provisions of article 64.14, article 64.16, or article 67, or to reduce the number of Special Voting Shares held by the Nominee in order to align the aggregate number of Ordinary Shares and Special Voting Shares in issue from time to time. The Company may redeem the Special Voting Shares from the Nominee in accordance with this article 64.13 for nil consideration.
64.14
If, at any time, the aggregate number of Special Voting Shares in issue is more than the aggregate number of Ordinary Shares in issue, the Company shall as soon as practicable either redeem or repurchase from the Nominee for nil consideration, and cancel, or convert into deferred shares (having the rights set out in article 64.16), such number of Special Voting Shares as is required to result in an equal number of Special Voting Shares and Ordinary Shares in issue.
Termination of the Loyalty Plan
64.15
The Loyalty Plan may be terminated at any time with immediate effect by a resolution passed on a poll taken at a general meeting with the approval of members representing 75% or more of the total voting rights attaching to the Ordinary Shares of members who, being entitled to vote on that resolution, do so in person or by proxy. For the avoidance of doubt, the votes attaching to the Special Voting Shares shall not be exercisable upon such resolution.
64.16
Upon termination of the Loyalty Plan, the directors may elect to redeem or repurchase the Special Voting Shares, or reclassify the Special Voting Shares into deferred shares carrying no voting rights and no economic rights (or any other rights), save that on a return of capital on a winding up or otherwise the deferred shares shall entitle the holder(s) of such shares to, in aggregate, US$1.
Sterling Non-Voting Shares
64.17
The Sterling Non-Voting Shares shall entitle the holders thereof to the rights set out below.
36
Dividend
64.18
The holders of the Sterling Non-Voting Shares shall not be entitled to participate in the profits of the Company.
Return of capital
64.19
On a return of capital of the Company on a winding up or otherwise, the holders of the Sterling Non-Voting Shares shall be entitled to receive out of the assets of the Company available for distribution to its shareholders the sum of, in aggregate, £1 but shall not be entitled to any further participation in the assets of the Company.
Votes
64.20
The Sterling Shareholder shall have no right to attend, speak or vote, either in person or by proxy, at any general meeting of the Company or any meeting of a class of members of the Company in respect of the Sterling Non-Voting Shares (save where required by law) and shall not be entitled to receive any notice of meeting.
Transfer
64.21
The Sterling Non-Voting Shares shall not be transferable save with the prior consent of the board.
Redemption or repurchase
64.22
The Company may redeem the Sterling Non-Voting Shares for nil consideration at any time.
Rights and restrictions
64.23
If rights and restrictions attaching to shares are determined by ordinary resolution or by the directors under article 63, those rights and restrictions shall apply in place of any rights or restrictions that would otherwise apply by virtue of the Act in the absence of any provisions in the articles, as if those rights and restrictions were set out in the articles.
65.
NOMINEE AND STERLING SHAREHOLDER
65.1
The Nominee shall exercise the votes attaching to the Special Voting Shares held by it from time to time:
65.1.1
at a general meeting or a class meeting:
(a)
in respect of any votes attaching to Special Voting Shares to which persons are entitled to direct the exercise pursuant to article 64.6, in accordance with the directions of any such person; and
(b)
in respect of all other Special Voting Shares, in the same percentage as the outcome of the vote of any general meeting (taking into account any votes exercised pursuant to (a) above);
65.1.2
on a cancellation scheme of arrangement or similar corporate reorganisation, in the same percentage as the outcome of the vote (implemented in accordance
37
with article 65.1.1) on the resolution to reduce the share capital of the Company at the general meeting in connection with such scheme.
65.2
Subject to the provisions of the Act, but without prejudice to any indemnity to which the Nominee or Sterling Shareholder (respectively) may otherwise be entitled, each of the Nominee and Sterling Shareholder are entitled to be indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by it as a result of investigating, defending or settling a claim made against it in its capacity as Nominee or Sterling Shareholder (as the case may be) by the Company or any of the members (or any person interested in shares) unless and to the extent that such costs, charge, loss or liability is due to the fraud, negligence or wilful default of the Nominee or Sterling Shareholder (as the case may be).
65.3
Save as otherwise expressly provided in these articles, neither the Nominee or the Sterling Shareholder shall be liable to the Company in respect of anything done or omitted to be done by it in its capacity as the Nominee or Sterling Shareholder (as the case may be) under or in relation to any of the articles otherwise than by reason of its own fraud, negligence or wilful default.
65.4
Each of the Nominee and the Sterling Shareholder:
65.4.1
does not owe any duty to any member (or any person interested in shares);
65.4.2
shall be immune from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process brought against it by any member (or any person interested in shares); and
65.4.3
shall not be liable to any member (or any person interested in shares),
in respect of anything done or omitted to be done by it in its capacity as the Nominee or Sterling Shareholder (as the case may be) otherwise than by reason of its own fraud, negligence or wilful default.
65.5
Without prejudice to article 65.3, no member (or any person interested in shares) shall commence proceedings against the Nominee or Sterling Shareholder in respect of any action or omission of the Nominee or Sterling Shareholder (as the case may be) in its capacity as the Nominee or Sterling Shareholder (respectively) which is in accordance with the articles. If the Nominee or Sterling Shareholder ceases to act for any reason, the directors shall be entitled, but not obliged, to appoint a replacement to act as Nominee or Sterling Shareholder (as the case may be).
65.6
For the avoidance of doubt, in exercising the votes attaching to the Special Voting Shares held by it from time to time, the Nominee in its capacity as the Nominee shall have no fiduciary duty to the Company or any member (or any person interested in shares), and its only liabilities and duties with respect to the exercise of such votes shall be owed to the Company as expressly set out in an agreement with any member of the Group, if any, concerning the exercise of such votes.
65.7
The directors are authorised to establish such clearing and settlement procedures for the shares of the Company as they deem fit from time to time.
38
66.
PAYMENT OF COMMISSIONS ON SUBSCRIPTION FOR SHARES
66.1
Subject to the Act, the Company may pay any person a commission in consideration for that person:
66.1.1
subscribing, or agreeing to subscribe, for shares; or
66.1.2
procuring, or agreeing to procure, subscriptions for shares.
66.2
Subject to the Act, any such commission may be paid:
66.2.1
in cash, or in fully paid or partly paid shares or other securities, or partly in one way and partly in the other; and
66.2.2
in respect of a conditional or an absolute subscription.
67.
PURCHASE OF OWN SHARES
67.1
Subject to, and in accordance with, the provisions of the Act, the Company is authorised generally and unconditionally to purchase any of its own shares of any class (including redeemable shares) on the terms of any buyback contract approved by the members (or otherwise as may be permitted by the Act), provided that:
67.1.1
the maximum aggregate number of Ordinary Shares authorised to be purchased shall equal the Repurchase Cap for the first period, and thereafter, each subsequent period, and the maximum price that may be paid to purchase an Ordinary Share shall be the Maximum Repurchase Price;
67.1.2
the maximum aggregate number of Special Voting Shares authorised to be purchased shall equal the Repurchase Cap for the first period, and thereafter, each subsequent period, and the maximum price that may be paid to purchase a Special Voting Share is its nominal value;
67.1.3
the authority conferred by this resolution shall expire on the fifth anniversary of the date of adoption of these articles.
67.2
Upon a purchase by the Company of Ordinary Shares, the associated SVSs may be:
67.2.1
purchased by the Company from the Nominee; or
67.2.2
reclassified as deferred shares,
as may be determined by the directors. The directors, in making such determination shall act in good faith and in the best interests of the Company, and their decision shall be final and binding.
67.3
In this article 67:
67.3.1
“
first period
” means the period commencing on the date of the resolution (the “
original resolution
”) granting the authority referred to in article 67.1 and expiring on the date on which a resolution to renew or vary such authority is
39
passed or the fifth anniversary of the date of the original resolution, whichever is the earlier;
67.3.2
“
Maximum Repurchase Price
” means, for the first period, 105% of the average market value of an Ordinary Share in the Company for the five business days prior to the day the purchase is made (subject to any further price restrictions contained in any buyback contract) and, for a subsequent period, the amount stated in the relevant ordinary resolution and identified as the Maximum Repurchase Cap;
67.3.3
“
Repurchase Cap
” means, for the first period, 20% of the total issued shares of the relevant class immediately following the adoption of these articles and, for a subsequent period, the amount stated in the relevant ordinary resolution and identified as the Repurchase Cap, provided that the number of shares subject to the Repurchase Cap shall be adjusted automatically on a proportionate basis to take into account any consolidation or division of shares from time to time;
67.3.4
“
s
ubsequent period
” means any period starting on or after the expiry of the first period for which the authority conferred by article 67.1 is renewed or varied by ordinary resolution.
INTERESTS IN SHARES
68.
COMPANY NOT BOUND BY LESS THAN ABSOLUTE INTERESTS
Except as required by law or the articles, no person is to be recognised by the Company as holding any share upon any trust and the Company is not in any way to be bound by or recognise any interest in a share other than the holder’s absolute ownership of it and all the rights attaching to it.
SHARE CERTIFICATES
69.
CERTIFICATES TO BE ISSUED EXCEPT IN CERTAIN CASES
69.1
Except where otherwise provided in the articles, the Company must issue each member with one or more certificates in respect of the shares which that member holds within two months of allotment or lodgement with the Company of a transfer to him of those shares or any other period as the terms of issue of the shares provide.
69.2
This article does not apply to:
69.2.1
shares in respect of which a share warrant has been issued; or
69.2.2
shares in respect of which the Companies Acts permit the Company not to issue a certificate;
69.2.3
Special Voting Shares; or
69.2.4
Sterling Non-Voting Shares.
40
69.3
Except as otherwise specified in the articles, all certificates must be issued free of charge.
69.4
No certificate may be issued in respect of shares of more than one class.
69.5
If more than one person holds a share, only one certificate may be issued in respect of it. Delivery of a certificate to the senior holder shall constitute delivery to all of the holders of the share.
70.
CONTENTS AND EXECUTION OF CERTIFICATES
70.1
Every certificate must specify:
70.1.1
in respect of how many shares and of what class it is issued;
70.1.2
the nominal value of those shares;
70.1.3
the amount paid up on them; and
70.1.4
any distinguishing numbers assigned to them.
70.2
Certificates must:
70.2.1
be executed under the Company’s seal, which may be affixed or printed on it; or
70.2.2
be otherwise executed in accordance with the Companies Acts.
71.
CONSOLIDATED CERTIFICATES
71.1
When a member’s holding of shares of a particular class increases, the Company may issue that member with:
71.1.1
a single, consolidated certificate in respect of all the shares of a particular class which that member holds; or
71.1.2
a separate certificate in respect of only those shares by which that member’s holding has increased.
71.2
When a member’s holding of shares of a particular class is reduced, the Company must ensure that the member is issued with one or more certificates in respect of the number of shares held by the member after that reduction. But the Company need not (in the absence of a request from the member) issue any new certificate if:
71.2.1
all the shares which the member no longer holds as a result of the reduction; and
71.2.2
none of the shares which the member retains following the reduction,
were, immediately before the reduction, represented by the same certificate.
71.3
A member may request the Company, in writing, to replace:
41
71.3.1
the member’s separate certificates with a consolidated certificate, or
71.3.2
the member’s consolidated certificate with two or more separate certificates representing such proportion of the shares as the member may specify.
71.4
When the Company complies with such a request it may charge such reasonable fee as the directors may decide for doing so.
71.5
A consolidated certificate or separate certificates must not be issued unless any certificates which they are to replace have first been returned to the Company for cancellation or the holder has complied with such conditions as to evidence and indemnity as the directors decide.
72.
REPLACEMENT CERTIFICATES
72.1
Subject to having first complied with the obligations in articles 72.2.2 and 72.2.3, if a certificate issued in respect of a member’s shares is:
72.1.1
damaged or defaced; or
72.1.2
said to be lost, stolen or destroyed,
that member is entitled to be issued with a replacement certificate in respect of the same shares.
72.2
A member exercising the right to be issued with such a replacement certificate:
72.2.1
may at the same time exercise the right to be issued with a single certificate or separate certificates;
72.2.2
must return the certificate which is to be replaced to the Company if it is damaged or defaced; and
72.2.3
must comply with such conditions as to evidence, indemnity and the payment of a reasonable fee as the directors decide.
PARTLY PAID SHARES
73.
COMPANY’S LIEN OVER PARTLY PAID SHARES
73.1
The Company has a lien (the “
company’s lien
”) over every share which is partly paid for any part of:
73.1.1
that share’s nominal value; and
73.1.2
any premium at which it was issued,
which has not been paid to the Company, and which is payable immediately or at some time in the future, whether or not a call notice has been sent in respect of it.
73.2
The company’s lien over a share:
73.2.1
takes priority over any third party’s interest in that share; and
42
73.2.2
extends to any dividend or other money payable by the Company in respect of that share and (if the lien is enforced and the share is sold by the Company) the proceeds of sale of that share.
73.3
The directors may at any time decide that a share which is or would otherwise be subject to the Company’s lien shall not be subject to it, either wholly or in part. Unless otherwise agreed with the transferee, the registration of a transfer of a share operates as a waiver of the Company’s lien (if any) on that share solely for the purposes of the transfer.
74.
ENFORCEMENT OF THE COMPANY’S LIEN
74.1
Subject to the provisions of this article, if:
74.1.1
a lien enforcement notice has been given in respect of a share; and
74.1.2
the person to whom the notice was given has failed to comply with it,
the Company may sell that share in such manner as the directors decide.
74.2
A lien enforcement notice:
74.2.1
must be in writing;
74.2.2
may only be given in respect of a share which is subject to the company’s lien, in respect of which a sum is payable and the due date for payment of that sum has passed;
74.2.3
must specify the share concerned;
74.2.4
must require payment of the sum payable within 14 days of the notice;
74.2.5
must be addressed either to the holder of the share or to a person entitled to it by reason of the holder’s death, bankruptcy or otherwise; and
74.2.6
must state the company’s intention to sell the share if the notice is not complied with.
74.3
Where shares are sold under this article:
74.3.1
the directors may authorise any person to execute an instrument of transfer of the shares to the purchaser or a person nominated by the purchaser; and
74.3.2
the transferee is not bound to see to the application of the purchase money, and the transferee’s title is not affected by any irregularity in or invalidity of the process leading to the sale.
74.4
The net proceeds of any such sale (after payment of the costs of sale and any other costs of enforcing the lien) must be applied:
74.4.1
first, in payment or towards satisfaction of the amount in respect of which the lien exists; and
43
74.4.2
secondly, to the person entitled to the shares immediately before the sale, but only after the certificate for the shares sold has been surrendered to the Company for cancellation, or a suitable indemnity has been given for any lost certificates.
74.5
A statutory declaration by a director or the secretary that the declarant is a director or the secretary and that a share has been sold to satisfy the Company’s lien on a specified date:
74.5.1
is conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share; and
74.5.2
subject to compliance with any other formalities of transfer required by the articles or by law, constitutes a good title to the share.
75.
CALL NOTICES
75.1
Subject to the articles and the terms on which shares are allotted, the directors may send a notice (a “
call notice
”) to a member requiring the member to pay the Company a specified sum of money (a “
call
”) which is payable in respect of shares which that member holds at the date of the call notice.
75.2
A call notice:
75.2.1
may not require a member to pay a call which exceeds the total sum unpaid on that member’s shares (whether as to the share’s nominal value or any amount payable to the Company by way of premium);
75.2.2
must state the date by which it is to be paid (the “
due date for payment
”) and how any call to which it relates it is to be paid; and
75.2.3
may permit or require the call to be paid by instalments.
75.3
A member must comply with the requirements of a call notice, but no member is obliged to pay any call before 14 days have passed since the notice was given.
75.4
Before the Company has received any call due under a call notice the directors may:
75.4.1
revoke it wholly or in part; or
75.4.2
specify a later time for payment than is specified in the call notice,
by a further notice in writing to the member in respect of whose shares the call is made.
75.5
Delivery of a call notice to the senior holder shall constitute delivery to all of the holders of the share.
76.
LIABILITY TO PAY CALLS
76.1
Liability to pay a call is not extinguished or transferred by transferring the shares in respect of which it is required to be paid.
44
76.2
Joint holders of a share are jointly and severally liable to pay all calls in respect of that share.
76.3
Subject to the terms on which shares are allotted, the directors may, when issuing shares, provide that call notices sent to the holders of those shares may require them:
76.3.1
to pay calls which are not the same; or
76.3.2
to pay calls at different times.
77.
WHEN CALL NOTICE NEED NOT BE ISSUED
77.1
A call notice need not be issued in respect of sums which are specified, in the terms on which a share is issued, as being payable to the Company in respect of that share (whether in respect of nominal value or premium):
77.1.1
on allotment;
77.1.2
on the occurrence of a particular event; or
77.1.3
on a date fixed by or in accordance with the terms of issue,
each a “
due date for payment
”.
77.2
But if the due date for payment of such a sum has passed and it has not been paid, the holder of the share concerned at the due date for payment is treated in all respects as having failed to comply with a call notice in respect of that sum, and is liable to the same consequences as a person having failed to comply with a call notice as regards the payment of interest and forfeiture.
78.
FAILURE TO COMPLY WITH CALL NOTICE: AUTOMATIC CONSEQUENCES
78.1
If a person is liable to pay a call and fails to do so by the due date for payment:
78.1.1
the directors may issue a notice of intended forfeiture to that person; and
78.1.2
until the call is paid, that person must pay the Company interest on the call from the due date for payment to the actual date of payment (both dates inclusive) at the relevant rate.
78.2
For the purposes of this article the “
relevant rate
” is:
(a)
the rate fixed by the terms on which the share in respect of which the call is due was allotted or issued; or
(b)
if no rate is fixed under (a), such other rate as was fixed in the call notice which required payment of the call, or has otherwise been determined by the directors; or
(c)
if no rate is fixed in either of these ways, 5 per cent. per annum.
78.3
The relevant rate must not exceed 20 per cent. per annum.
45
78.4
The directors may waive any obligation to pay interest on a call wholly or in part.
79.
PAYMENT OF UNCALLED AMOUNT IN ADVANCE
79.1
The directors may, in their discretion, accept from a member some or all of the uncalled amounts which are unpaid on shares held by him.
79.2
A payment in advance of a call extinguishes, to the extent of the payment, the liability of the member on the shares in respect of which the payment is made.
79.3
The Company may pay interest on the amount paid in advance (or that portion of it that exceeds the amount called on shares).
79.4
The directors may decide this interest rate which must not exceed 20 per cent. per annum.
80.
NOTICE OF INTENDED FORFEITURE
80.1
A notice of intended forfeiture:
80.1.1
must be in writing;
80.1.2
may be sent in respect of any share in respect of which a call has not been paid as required by a call notice;
80.1.3
must be sent to the holder of that share or to a person entitled to it by reason of the holder’s death, bankruptcy or otherwise;
80.1.4
must require payment of the call and any accrued interest (and all costs, charges and expenses incurred by the Company by reason of non-payment) by a date which is not less than 14 days after the date of the notice;
80.1.5
must state how the payment is to be made; and
80.1.6
must state that if the notice is not complied with, the shares in respect of which the call is payable will be liable to be forfeited.
81.
DIRECTORS’ POWER TO FORFEIT SHARES
If a notice of intended forfeiture is not complied with before the date by which payment (including interest, costs, charges and expenses) of the call is required in the notice of intended forfeiture, the directors may decide that any share in respect of which it was given is forfeited, and the forfeiture is to include all dividends or other moneys payable in respect of the forfeited shares and not paid before the forfeiture.
82.
EFFECT OF FORFEITURE
82.1
Subject to the articles, the forfeiture of a share extinguishes:
82.1.1
all interests in that share, and all claims and demands against the Company in respect of it, and
46
82.1.2
all other rights and liabilities incidental to the share as between the person whose share it was prior to the forfeiture and the Company.
82.2
Any share which is forfeited in accordance with the articles:
82.2.1
is deemed to have been forfeited when the directors decide that it is forfeited;
82.2.2
is deemed to be the property of the Company; and
82.2.3
may be sold, re-allotted or otherwise disposed of as the directors think fit.
82.3
If a person’s shares have been forfeited:
82.3.1
the Company must send that person notice that forfeiture has occurred, but no forfeiture is invalidated by an omission to give such notice, and record it in the register of members;
82.3.2
that person ceases to be a member in respect of those shares;
82.3.3
that person must surrender the certificate (if any) for the shares forfeited to the Company for cancellation;
82.3.4
that person remains liable to the Company for all sums payable by that person under the articles at the date of forfeiture in respect of those shares, including any interest at the relevant rate set out in article 79 (whether accrued before or after the date of forfeiture) and costs, charges and expenses; and
82.3.5
the directors may waive payment of such sums wholly or in part or enforce payment without any allowance for the value of the shares at the time of forfeiture or for any consideration received on their disposal.
82.4
At any time before the Company disposes of a forfeited share, the directors may decide to cancel the forfeiture on payment of all calls and interest due in respect of it and on such other terms as they think fit.
83.
PROCEDURE FOLLOWING FORFEITURE
83.1
If a forfeited share is to be disposed of by being transferred, the Company may receive the consideration for the transfer and the directors may authorise any person to transfer a forfeited share to a new holder. The Company may register the transferee as the holder of the share.
83.2
A statutory declaration by a director or the secretary that the declarant is a director or the secretary and that a share has been forfeited on a specified date:
83.2.1
is conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share; and
83.2.2
subject to compliance with any other formalities of transfer required by the articles or by law, constitutes a good title to the share.
47
83.3
A person to whom a forfeited share is transferred is not bound to see to the application of the consideration (if any) nor is that person’s title to the share affected by any irregularity in or invalidity of the process leading to the forfeiture or transfer of the share.
83.4
If the Company sells a forfeited share, the person who held it prior to its forfeiture is entitled to receive from the Company the proceeds of such sale, net of any interest, expenses or commission, and excluding any amount which:
83.4.1
was, or would have become, payable; and
83.4.2
had not, when that share was forfeited, been paid by that person in respect of that share,
but no interest is payable to such a person in respect of such proceeds and the Company is not required to account for any money earned on them.
84.
SURRENDER OF SHARES
84.1
A member may surrender any share:
84.1.1
in respect of which the directors may issue a notice of intended forfeiture;
84.1.2
which the directors may forfeit; or
84.1.3
which has been forfeited.
84.2
The directors may accept the surrender of any such share.
84.3
The effect of surrender of a share is the same as the effect of forfeiture of that share.
84.4
A share which has been surrendered may be dealt with in the same way as a share which has been forfeited.
UNTRACED SHAREHOLDERS
85.
POWER OF SALE
85.1
The Company may sell the share of a member or of a person entitled by transmission at the best price reasonably obtainable at the time of sale, if:
85.1.1
during a period of not less than 12 years before the date of publication of the advertisements referred to in article 85.1.3 (or, if published on two different dates, the first date) (the “
relevant period
”) at least three cash dividends have become payable in respect of the share;
85.1.2
throughout the relevant period no cheque, warrant or money order payable on the share has been presented by the holder of, or the person entitled by transmission to, the share to the paying bank of the relevant cheque, warrant or money order, no payment made by the Company by any other means permitted by article 96.1 has been claimed or accepted and, so far as any director of the Company at the end of the relevant period is then aware, the
48
Company has not at any time during the relevant period received any communication from the holder of, or person entitled by transmission to, the share;
85.1.3
the Company has given notice of its intention to sell the share by advertisement in a national newspaper and in a newspaper circulating in the area of the address of the holder of, or person entitled by transmission to, the share shown in the register; and
85.1.4
the Company has not, so far as the directors are aware, during a further period of three months after the date of the advertisements referred to in article 85.1.3 (or the later advertisement if the advertisements are published on different dates) and before the exercise of the power of sale received a communication from the holder of, or person entitled by transmission to, the share.
85.2
Where a power of sale is exercisable over a share under this article 85 (a “
sale share
”), the Company may at the same time also sell any additional share issued in right of such sale share or in right of such an additional share previously so issued provided that the requirements of articles 85.1.2 to 85.1.4 (as if the words “throughout the relevant period” were omitted from article 85.1.2) have been satisfied in relation to the additional share.
85.3
To give effect to a sale under articles 85.1 or 85.2, the directors may authorise any person to transfer the share in the name and on behalf of the holder of, or the person entitled by transmission to, the share, or to cause the transfer of such share, to the purchaser or his nominee. The purchaser is not bound to see to the application of the purchase money and the title of the transferee is not affected by an irregularity in or invalidity of the proceedings connected with the sale of the share.
86.
APPLICATION OF PROCEEDS OF SALE
86.1
The Company shall be indebted to the member or other person entitled by transmission to the share for the net proceeds of sale and shall credit any amount received on sale to a separate account.
86.2
The Company is deemed to be a debtor and not a trustee in respect of that amount for the member or other person.
86.3
Any amount credited to the separate account may either be employed in the business of the Company or invested as the directors may think fit.
86.4
No interest is payable on that amount and the Company is not required to account for money earned on it.
TRANSFERS AND TRANSMISSION OF SHARES
87.
TRANSFERS OF SHARES
87.1
The directors may, in their absolute discretion, refuse to register a transfer of shares to any person, whether or not it is fully paid or a share on which the Company has a lien.
49
87.2
Shares may be transferred by means of an instrument of transfer in writing in any usual form or any other form approved by the directors, which is executed by or on behalf of:
87.2.1
the transferor; and
87.2.2
(if any of the shares is partly paid) the transferee.
87.3
The Company (at its option) may or may not charge a fee for registering:
87.3.1
the transfer of a share; or
87.3.2
for making any other entry in the register.
87.4
If the directors refuse to register the transfer of a share, the instrument of transfer must be returned to the transferee as soon as practicable and in any event within two months after the date on which the transfer was lodged with the Company with the notice of refusal and reasons for refusal unless they suspect that the proposed transfer may be fraudulent.
87.5
Subject to article 112, the Company may retain all instruments of transfer which are registered.
88.
TRANSMISSION OF SHARES
88.1
If title to a share passes to a transmittee, the Company may only recognise the transmittee as having any title to a share held by that member alone or to which he was alone entitled. In the case of a share held jointly by two or more persons, the Company may recognise only the survivor or survivors as being entitled to it.
88.2
Nothing in these articles releases the estate of a deceased member from any liability in respect of a share solely or jointly held by that member.
89.
TRANSMITTEES’ RIGHTS
89.1
Where a person becomes entitled by transmission to a share, the rights of the holder in relation to a share cease.
89.2
A transmittee may give an effective receipt for dividends and other sums payable in respect of that share.
89.3
A transmittee who produces such evidence of entitlement to shares, subject to the Act, as the directors may properly require:
89.3.1
may, subject to the articles, choose either to become the holder of those shares or to have them transferred to another person; and
89.3.2
subject to the articles, and pending any transfer of the shares to another person, has the same rights as the holder had.
89.4
But transmittees do not have the right to receive notice of or exercise rights conferred by membership in relation to meetings of the Company (or at a separate meeting of
50
the holders of a class of shares) in respect of shares to which they are entitled by reason of the holder’s death or bankruptcy or otherwise, unless they become the holders of those shares.
90.
EXERCISE OF TRANSMITTEES’ RIGHTS
90.1
Transmittees who wish to become the holders of shares to which they have become entitled must notify the Company in writing of that wish.
90.2
If the transmittee wishes to have the share transferred to another person, the transmittee must execute an instrument of transfer in respect of it.
90.3
Any transfer made or executed under this article is to be treated as if it were made or executed by the person from whom the transmittee has derived rights in respect of the share, and as if the event which gave rise to the transmission had not occurred.
91.
TRANSMITTEES BOUND BY PRIOR NOTICES
91.1
The directors may give notice requiring a person to make the choice referred to in article 89.3.1.
91.2
If that notice is not complied with within 60 days, the directors may withhold payment of all dividends and other sums payable in respect of the share until the choice has been made.
91.3
If a notice is given to a member in respect of shares and a transmittee is entitled to those shares, the transmittee is bound by the notice if it was given to the member before the transmittee’s name has been entered in the register.
CONSOLIDATION/DIVISION OF SHARES
92.
CONSOLIDATION/DIVISION OF SHARES
92.1
Upon any consolidation or division of Ordinary Shares, the Special Voting Shares shall be consolidated or divided in the same manner.
93.
PROCEDURE FOR DISPOSING OF FRACTIONS OF SHARES
93.1
This article applies where:
93.1.1
there has been a consolidation and division or sub-division of shares; and
93.1.2
as a result, members are entitled to fractions of shares.
93.2
Subject to the Act, the directors may, in effecting divisions and/or consolidations, treat a member’s shares held in certificated form and uncertificated form as separate holdings.
93.3
The directors may on behalf of the members deal with fractions as they think fit, in particular they may:
51
93.3.1
sell the shares representing the fractions to any person including (subject to the Act) the Company for the best price reasonably obtainable;
93.3.2
in the case of a certificated share, authorise any person to execute an instrument of transfer of the shares to the purchaser or a person nominated by the purchaser;
93.3.3
distribute the net proceeds of sale in due proportion among the holders of the shares or, if the directors decide, some or all of the sum raised on sale may be retained for the benefit of the Company;
93.3.4
subject to the Act, allot or issue to a member, credited as fully paid, by way of capitalisation the minimum number of shares required to round up his holding of shares to a number which, following consolidation and division or sub-division, leaves a whole number of shares (such allotment or issue being deemed to have been effected immediately before consolidation and division or sub-division, as the case may be).
93.4
To give effect to a sale under article 93.3.1 the directors may arrange for the shares representing the fractions to be entered in the register as certificated shares.
93.5
The directors may authorise any person to transfer the shares to, or to the direction of, the purchaser.
93.6
The person to whom the shares are transferred is not obliged to ensure that any purchase money is received by the person entitled to the relevant fractions.
93.7
The transferee’s title to the shares is not affected by any irregularity in or invalidity of the process leading to their sale.
93.8
If shares are allotted or issued under article 93.3.4, the amount required to pay up those shares may be capitalised as the directors think fit out of amounts standing to the credit of reserves (including a share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution, and applied in paying up in full the appropriate number of shares.
93.9
A resolution of the directors capitalising part of the reserves has the same effect as if the capitalisation had been declared by ordinary resolution of the Company under article 103. In relation to the capitalisation the directors may exercise all the powers conferred on them by article 103 without an ordinary resolution of the Company.
DISTRIBUTIONS
94.
PROCEDURE FOR DECLARING DIVIDENDS
94.1
Subject to the Act and the articles, the Company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends.
94.2
A dividend must not be declared unless the directors have made a recommendation as to its amount. Such a dividend must not exceed the amount recommended by the directors.
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94.3
No dividend may be declared or paid unless it is in accordance with members’ respective rights.
94.4
Unless the members’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each member’s holding of shares on the date of the resolution or decision to declare or pay it.
94.5
The directors may pay any dividend (including any dividend payable at a fixed rate) if it appears to them that the profits available for distribution justify the payment.
94.6
If the Company’s share capital is divided into different classes, no interim dividend may be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any preferential dividend is in arrears.
94.7
If the directors act in good faith, they do not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on shares with deferred or non-preferred rights.
95.
CALCULATION OF DIVIDENDS
95.1
Except as otherwise provided by the articles or the rights attached to or the terms of issue of shares, all dividends must be:
95.1.1
declared and paid according to the amounts paid up on the shares on which the dividend is paid; and
95.1.2
apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid.
95.2
If any share is issued on terms providing that it ranks for dividend as from a particular date, that share ranks for dividend accordingly.
95.3
For the purposes of calculating dividends, no account is to be taken of any amount which has been paid up on a share in advance of the due date for payment of that amount.
95.4
Except as otherwise provided by the rights attached to shares, dividends may be declared or paid in any currency.
95.5
The directors may agree with any member that dividends which may at any time or from time to time be declared or become due on his shares in one currency shall be paid or satisfied in another, and may agree the basis of conversion to be applied and how and when the amount to be paid in the other currency shall be calculated and paid and for the Company or any other person to bear any costs involved.
96.
PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS
96.1
Where a dividend or other sum which is a distribution is payable in respect of a share, it must be paid by one or more of the following means:
53
96.1.1
in cash;
96.1.2
by transfer to a bank or building society account specified by the distribution recipient in writing or as the directors otherwise decide;
96.1.3
by sending a cheque, warrant or money order made payable to the distribution recipient by post to the distribution recipient at the distribution recipient’s registered address (if the distribution recipient is a holder of the share), or (in any other case) to an address specified by the distribution recipient in writing or as the directors otherwise decide;
96.1.4
by sending a cheque, warrant or money order made payable to such person by post to such person at such address as the distribution recipient has specified in writing or as the directors otherwise decide; or
96.1.5
by any other means of payment as the directors agree with the distribution recipient either in writing or by such other means as the directors decide.
96.2
In respect of the payment of any dividend or other sum which is a distribution, the directors may decide, and notify distribution recipients, that:
96.2.1
one or more of the means described in article 96.1 will be used for payment and a distribution recipient may elect to receive the payment by one of the means so notified in the manner prescribed by the directors;
96.2.2
one or more of such means will be used for the payment unless a distribution recipient elects otherwise in the manner prescribed by the directors; or
96.2.3
one or more of such means will be used for the payment and that distribution recipients will not be able to elect otherwise.
The directors may for this purpose decide that different methods of payment may apply to different distribution recipients or groups of distribution recipients.
96.3
In the event that:
96.3.1
a distribution recipient does not specify an address, or does not specify an account of a type prescribed by the directors, or other details necessary in order to make a payment of a dividend or other distribution by the means by which the directors have decided in accordance with this article that a payment is to be made, or by which the distribution recipient has elected to receive payment, and such address or details are necessary in order for the Company to make the relevant payment in accordance with such decision or election; or
96.3.2
if payment cannot be made by the Company using the details provided by the distribution recipient,
then the dividend or other distribution shall be treated as unclaimed for the purposes of these articles.
96.4
In the articles, the “
distribution recipient
” means, in respect of a share in respect of which a dividend or other sum is payable:
54
96.4.1
the holder of the share;
96.4.2
if the share has two or more joint holders, the senior holder;
96.4.3
if the holder is no longer entitled to the share by reason of death or bankruptcy, or otherwise by operation of law, the transmittee (or, where two or more person are jointly entitled by transmission to the share, to any one transmittee and that person shall be able to give effective receipt for payment); or
96.4.4
in any case, to a person that the person or persons entitled to payment may direct in writing.
96.5
Every cheque, warrant or money order sent by post is sent at the risk of the distribution recipient. If payment is made by transfer to a bank or building society account, by means of a relevant system or by another method at the direction of the distribution recipient, the Company is not responsible for amounts lost or delayed in the course of making that payment.
96.6
Without prejudice to article 91, the directors may withhold payment of a dividend (or part of a dividend) payable to a transmittee until he has provided such evidence of his right as the directors may reasonably require.
97.
DEDUCTIONS FROM DISTRIBUTIONS IN RESPECT OF SUMS OWED TO THE COMPANY
97.1
If:
97.1.1
a share is subject to the Company’s lien; and
97.1.2
the directors are entitled to issue a lien enforcement notice in respect of it,
they may, instead of issuing a lien enforcement notice, deduct from any dividend or other sum payable in respect of the share any sum of money which is payable to the Company in respect of that share to the extent that they are entitled to require payment under a lien enforcement notice.
97.2
Money so deducted must be used to pay any of the sums payable in respect of that share.
97.3
The Company must notify the distribution recipient in writing of:
97.3.1
the fact and amount of any such deduction;
97.3.2
any non-payment of a dividend or other sum payable in respect of a share resulting from any such deduction; and
97.3.3
how the money deducted has been applied.
55
98.
NO INTEREST ON DISTRIBUTIONS
98.1
The Company may not pay interest on any dividend or other sum payable in respect of a share unless otherwise provided by:
98.1.1
the rights attached to the share; or
98.1.2
the provisions of another agreement between the holder of that share and the Company.
99.
UNCLAIMED DISTRIBUTIONS
99.1
All dividends or other sums which are:
99.1.1
payable in respect of shares; and
99.1.2
unclaimed after having been declared or become payable,
may be invested or otherwise made use of by the directors for the benefit of the Company until claimed.
99.2
The payment of an unclaimed dividend or other sum into a separate account does not make the Company a trustee in respect of it.
99.3
If:
99.3.1
12 years have passed from the date on which a dividend or other sum became due for payment; and
99.3.2
the distribution recipient has not claimed it,
the distribution recipient is no longer entitled to that dividend or other sum and it ceases to remain owing by the Company.
99.4
If, in respect of a dividend or other sum payable in respect of a share, on any one occasion:
99.4.1
a cheque, warrant or money order is returned undelivered or left uncashed; or
99.4.2
a transfer made by a bank or other funds transfer system is not accepted,
and reasonable enquiries have failed to establish another address or account of the distribution recipient, the Company is not obliged to send or transfer a dividend or other sum payable in respect of that share to that person until he notifies the Company of an address or account to be used for that purpose. If the cheque, warrant or money order is returned undelivered or left uncashed or transfer not accepted on two consecutive occasions, the Company may exercise this power without making any such enquiries.
100.
NON-CASH DISTRIBUTIONS
100.1
Subject to the terms of issue of the share in question, the Company may, by ordinary resolution on the recommendation of the directors, decide to pay all or part of a
56
dividend or other distribution payable in respect of a share by transferring non-cash assets of equivalent value (including shares or other securities in any company).
100.2
For the purposes of paying a non-cash distribution, the directors may make whatever arrangements they think fit, including, where any difficulty arises regarding the distribution:
100.2.1
issuing fractional certificates (or ignoring fractions);
100.2.2
fixing the value of any assets;
100.2.3
paying cash to any distribution recipient on the basis of that value in order to adjust the rights of recipients; and
100.2.4
vesting any assets in trustees.
101.
WAIVER OF DISTRIBUTIONS
101.1
Distribution recipients may waive their entitlement to a dividend or other distribution payable in respect of a share by giving the Company notice in writing to that effect, but if:
101.1.1
the share has more than one holder; or
101.1.2
more than one person is entitled to the share, whether by reason of the death or bankruptcy of one or more joint holders,
the notice is not effective unless it is expressed to be given, and signed, by all the holders or persons otherwise entitled to the share.
102.
SCRIP DIVIDENDS
102.1
Subject to the Act, but without prejudice to article 60, the directors may, with the prior authority of an ordinary resolution of the Company, allot to those holders of a particular class of shares who have elected to receive them further shares of that class or ordinary shares in either case credited as fully paid (“
new shares
”) instead of cash in respect of all or part of a dividend or dividends specified by the resolution.
102.2
The directors may on any occasion determine that the right of election under article 102.1 shall be subject to any exclusions, restrictions or other arrangements that the directors may in their absolute discretion deem necessary or expedient to deal with legal or practical problems under the laws of, or the requirements of a recognised regulatory body or a stock exchange in, any territory.
102.3
Where a resolution under article 102.1 is to be proposed at a general meeting and the resolution relates in whole or in part to a dividend to be declared at that meeting, then the resolution declaring the dividend is deemed to take effect at the end of that meeting.
102.4
A resolution under article 102.1 may relate to a particular dividend or to all or any dividends declared or paid within a specified period, but that period may not end later than five years after the date of the meeting at which the resolution is passed.
57
102.5
The entitlement of each holder of shares to new shares shall be such that the relevant value of the entitlement shall be as nearly as possible equal to (but not greater than) the cash amount (disregarding any associated tax credit) of the dividend which would otherwise have been received by the holder (the “
relevant dividend
”) provided that, in calculating the entitlement, the directors may at their discretion adjust the figure obtained by dividing the relevant value by the amount payable on the new shares up or down so as to procure that the entitlement of each holder of shares may be represented by a simple numerical ratio. For this purpose the “
relevant value
” of each of the new shares shall be as determined by or in accordance with the resolution under article 102.1. A certificate or report by the auditors as to the value of the new shares to be allotted in respect of any dividend shall be conclusive evidence of that amount.
102.6
The directors may make any provision they consider appropriate in relation to an allotment made or to be made under this article (whether before or after the passing of the resolution under article 102.1), including:
102.6.1
the giving of notice to holders of the right of election offered to them;
102.6.2
the provision of forms of election (whether in respect of a particular dividend or dividends generally);
102.6.3
determination of the procedure for making and revoking elections;
102.6.4
the place at which, and the latest time by which, forms of election and other relevant documents must be lodged in order to be effective; and
102.6.5
the disregarding or rounding up or down or carrying forward of fractional entitlements, in whole or in part, or the accrual of the benefit of fractional entitlements to the Company (rather than to the holders concerned).
102.7
The dividend (or that part of the dividend in respect of which a right of election has been offered) is not declared or payable on shares in respect of which an election has been duly made (the “
elected shares
”); instead new shares are allotted to the holders of the elected shares on the basis of allotment calculated as in article 102.5. For that purpose, the directors may resolve to capitalise out of amounts standing to the credit of reserves (including a share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution, a sum equal to the aggregate nominal amount of the new shares to be allotted and apply it in paying up in full the appropriate number of new shares for allotment and distribution to the holders of the elected shares. A resolution of the directors capitalising part of the reserves has the same effect as if the directors had resolved to effect the capitalisation with the authority of an ordinary resolution of the Company under article 103. In relation to the capitalisation the directors may exercise all the powers conferred on them by article 103 without an ordinary resolution of the Company.
102.8
The new shares rank pari passu in all respects with each other and with the fully paid shares of the same class in issue on the record date for the dividend in respect of which the right of election has been offered, but they will not rank for a dividend or other distribution or entitlement which has been declared or paid by reference to that record date.
58
102.9
In relation to any particular proposed dividend, the directors may in their absolute discretion decide:
102.9.1
that holders shall not be entitled to make any election in respect of, and that any election previously made shall not extend to, such dividend; or
102.9.2
at any time prior to the allotment of the new shares which would otherwise be allotted in lieu of such dividend, that all elections to take new shares in lieu of such dividend shall be treated as not applying to that dividend, and if so the dividend shall be paid in cash as if no elections had been made in respect of it.
CAPITALISATION OF PROFITS AND RESERVES
103.
AUTHORITY TO CAPITALISE AND APPROPRIATION OF CAPITALISED SUMS
103.1
Subject to the Act and the articles, the directors may, if they are so authorised by an ordinary resolution:
103.1.1
decide to capitalise any amount standing to the credit of the Company’s reserves (including share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution which are not required for paying a preferential dividend; and
103.1.2
appropriate any sum which they so decide to capitalise (a “
capitalised sum
”) to the persons who would have been entitled to it if it were distributed by way of dividend (the “
persons entitled
”) and in the same proportions.
103.2
Capitalised sums must be applied:
103.2.1
on behalf of the persons entitled; and
103.2.2
in the same proportions as a dividend would have been distributed to them.
103.3
Any capitalised sum may be applied in paying up new shares of a nominal amount equal to the capitalised sum which are then allotted credited as fully paid to the persons entitled or as they may direct.
103.4
A capitalised sum which was appropriated from profits available for distribution may be applied:
103.4.1
in or towards paying up any amounts unpaid on existing shares held by the persons entitled; or
103.4.2
in paying up new debentures of the Company which are then allotted credited as fully paid to the persons entitled or as they may direct.
103.5
Subject to the Act and the articles the directors may:
103.5.1
apply capitalised sums in accordance with articles 103.3 and 103.4 partly in one way and partly in another;
59
103.5.2
make such arrangements as they think fit to resolve a difficulty arising in the distribution of a capitalised sum and in particular to deal with shares or debentures becoming distributable in fractions under this article the directors may deal with fractions as they think fit (including the issuing of fractional certificates, disregarding fractions or selling shares or debentures representing the fractions to a person for the best price reasonably obtainable and distributing the net proceeds of the sale in due proportion amongst the members (except that if the amount due to a member is less than $5, or such other sum as the directors may decide, the sum may be retained for the benefit of the Company));
103.5.3
authorise any person to enter into an agreement with the Company on behalf of all the persons entitled which is binding on them in respect of the allotment of shares and debentures to them or the payment by the Company on behalf of the members of the amounts or part of the amounts or part of the amounts remaining unpaid on their existing shares under this article; and
103.5.4
generally do all acts and things required to give effect to the resolution.
103.6
Notwithstanding any other provision of this article 103, subject to the Act and the articles, the directors may decide to capitalise any amount standing to the credit of the Company’s reserves (including share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution, which are not required for paying a preferential dividend, and appropriate any sum which they so decide to capitalise in paying up new Special Voting Shares which are then allotted credited as fully paid to the Nominee in accordance with the articles.
104.
RECORD DATES
104.1
Notwithstanding any other provision of the articles, but subject to the Act and rights attached to shares, the Company or the directors may fix any date as the record date for a dividend, distribution, allotment or issue. The record date may be on or at any time before or after a date on which the dividend, distribution, allotment or issue is declared, made or paid.
PART 5 - MISCELLANEOUS PROVISIONS
COMMUNICATIONS
105.
MEANS OF COMMUNICATION TO BE USED
105.1
Save where these articles expressly require otherwise, any notice, document or information to be sent or supplied by, or on behalf of or to the Company may be sent or supplied in accordance with the Act (whether authorised or required to be sent or supplied by the Act or otherwise):
105.1.1
in hard copy form;
105.1.2
in electronic form; or
105.1.3
by means of a website.
60
105.2
Subject to the articles, any notice or document to be sent or supplied to a director in connection with the taking of decisions by directors may also be sent or supplied by the means by which that director has asked to be sent or supplied with such notices or documents for the time being.
105.3
A director may agree with the Company that notices or documents sent to that director in a particular way are to be deemed to have been received within a specified time of their being sent, and for the specified time to be less than 48 hours.
105.4
If by reason of the suspension or curtailment of postal services in the United Kingdom the Company is unable effectively to call a general meeting by notices sent by post, then subject to the Act, the directors may, in their absolute discretion and as an alternative to any other method of service permitted by the articles, resolve to call a general meeting by a notice advertised in at least one United Kingdom national newspaper. In this case, the Company must send confirmatory copies of the notice to those members by post if at least seven clear days before the meeting the posting of notices to addresses throughout the United Kingdom again becomes practicable.
105.5
A notice, document or information sent by post and addressed to a member at his registered address or address for service in the United Kingdom is deemed to be given to or received by the intended recipient 24 hours after it was put in the post if pre paid as first class post and 48 hours after it was put in the post if pre paid as second class post, and in proving service it is sufficient to prove that the envelope containing the notice, document or information was properly addressed, pre paid and posted.
105.6
A notice, document or information sent or supplied by electronic means to an address specified for the purpose by the member is deemed to have been given to or received by the intended recipient 24 hours after it was sent, and in proving service it is sufficient to prove that the communication was properly addressed and sent.
105.7
A notice, document or information sent or supplied by means of a website is deemed to have been given to or received by the intended recipient when:
105.7.1
the material was first made available on the website; or
105.7.2
if later, when the recipient received (or, in accordance with this article 105, is deemed to have received) notification of the fact that the material was available on the website.
105.8
A notice, document or information not sent by post but delivered by hand (which include delivery by courier) to a registered address or address for service in the United Kingdom is deemed to be given on the day it is left.
105.9
Where notice is given by newspaper advertisement, the notice is deemed to be given to all members and other persons entitled to receive it at noon on the day when the advertisement appears or, where notice is given by more than one advertisement and the advertisements appear on different days, at noon on the last of the days when the advertisements appear.
105.10
A notice, document or information served or delivered by or on behalf of the Company by any other means authorised in writing by the member concerned is
61
deemed to be served when the Company has taken the action it has been authorised to take for that purpose.
105.11
A qualifying person present at a meeting of the holders of a class of shares is deemed to have received due notice of the meeting and, where required, of the purposes for which it was called.
105.12
A person who becomes entitled to a share by transmission, transfer or otherwise is bound by a notice in respect of that share (other than a notice served by the Company under section 793 of the Act) which, before his name is entered in the register, has been properly served on a person from whom he derives his title.
105.13
In the case of joint holders of a share, a notice, document or information shall be validly sent or supplied to all joint holders if sent or supplied to whichever of them is named first in the register in respect of the joint holding. Anything to be agreed or specified in relation to a notice, document or information to be sent or supplied to joint holders, may be agreed or specified by the joint holder who is named first in the register in respect of the joint holding.
105.14
The Company may give a notice, document or information to a transmittee as if he were the holder of a share by addressing it to him by name or by the title of representative of the deceased or trustee of the bankrupt member (or by similar designation) at an address in the United Kingdom supplied for that purpose by the person claiming to be a transmittee. Until an address has been supplied, a notice, document or information may be given in any manner in which it might have been given if the death or bankruptcy had not occurred. The giving of notice in accordance with this article is sufficient notice to any other person interested in the share.
105.15
A member whose registered address is not within the United Kingdom, Italy or the United States shall not be entitled to receive any notice, document or information from the Company unless:
105.15.1 the Company is able, in accordance with the Act, to send the notice, document or information in electronic form or by means of a website; or
105.15.2 the member gives to the Company a postal address within the United Kingdom, Italy or the United States at which notices to the member may be given.
106.
LOSS OF ENTITLEMENT TO NOTICES
106.1
Subject to the Act, a member (or in the case of joint holders, the person who is named first in the register) who has no registered address within the United Kingdom, and has not supplied to the Company an address within the United Kingdom at which notice or other documents or information can be given to him, shall not be entitled to receive any notice or other documents or information from the Company. Such a member (or in the case of joint holders, the person who is named first in the register) shall not be entitled to receive any notice or other documents or information from the Company even if he has supplied an address for the purposes of receiving notices or other documents or information in electronic form.
62
106.2
If:
106.2.1
the Company sends two consecutive documents to a member over a period of at least 12 months; and
106.2.2
each of those documents is returned undelivered, or the Company receives notification that it has not been delivered,
that member ceases to be entitled to receive notices from the Company.
106.3
A member who has ceased to be entitled to receive notices from the Company becomes entitled to receive such notices again by sending the Company:
106.3.1
a new address to be recorded in the register; or
106.3.2
if the member has agreed that the Company should use a means of communication other than sending things to such an address, the information that the Company needs to use that means of communication effectively.
ADMINISTRATIVE ARRANGEMENTS
107.
SECRETARY
107.1
Subject to the Act, the directors shall appoint a secretary or joint secretaries and may appoint one or more persons to be an assistant or deputy secretary on such terms and conditions (including remuneration) as they think fit.
107.2
The directors may remove a person appointed under this article 107 from office and appoint another or others in his place.
107.3
Any provision of the Act or of the articles requiring or authorising a thing to be done by or to a director and the secretary is not satisfied by its being done by or to the same person acting both as director and as, or in the place of, the secretary.
108.
CHANGE OF NAME
The directors may change the name of the Company.
109.
AUTHENTICATION OF DOCUMENTS
109.1
A director or the secretary or another person appointed by the directors for the purpose may authenticate:
109.1.1
documents affecting the constitution of the Company (including the articles);
109.1.2
resolutions passed by the Company or holders of a class of shares or the directors or a committee of the directors; and
109.1.3
books, records, documents and accounts relating to the business of the Company,
109.1.4
and may certify copies or extracts as true copies or extracts.
63
110.
COMPANY SEALS
110.1
The directors must provide for the safe custody of every seal.
110.2
A seal may be used only by the authority of a resolution of the directors or of a committee of the directors.
110.3
The directors may decide who will sign an instrument to which a seal is affixed (or, in the case of a share certificate, on which the seal may be printed) either generally or in relation to a particular instrument or type of instrument. The directors may also decide, either generally or in a particular case, that a signature may be dispensed with or affixed by mechanical means.
110.4
Unless otherwise decided by the directors:
110.4.1
share certificates and certificates issued in respect of debentures or other securities (subject to the provisions of the relevant instrument) need not be signed or, if signed, a signature may be applied by mechanical or other means or may be printed; and
110.4.2
every other instrument to which a seal is affixed shall be signed by one director and by the secretary or a second director, or by one director in the presence of a witness who attests his signature.
111.
RECORDS OF PROCEEDINGS
111.1
The directors must make sure that proper minutes are kept in minute books of:
111.1.1
all appointments of officers and committees made by the directors and of any remuneration fixed by the directors; and
111.1.2
all proceedings (including the names of the directors present at such meeting) of general meetings;
111.1.3
meetings of the holders of any class of shares in the Company;
111.1.4
the directors’ meetings; and
111.1.5
meetings of committees of the directors.
111.2
If purporting to be signed by the chairman of the meeting at which the proceedings were held or by the chairman of the next succeeding meeting, minutes are conclusive evidence of the proceedings at the meeting.
111.3
The directors must ensure that the Company keeps records, in the books kept for the purpose, of all directors’ written resolutions.
111.4
All such minutes and written resolutions must be kept for at least 10 years from the date of the meeting or written resolution as the case may be.
64
112.
DESTRUCTION OF DOCUMENTS
112.1
The Company is entitled to destroy:
112.1.1
all instruments of transfer of shares (including documents constituting the renunciation of an allotment of shares) which have been registered, and all other documents on the basis of which any entries are made in the register, from six years after the date of registration;
112.1.2
all dividend mandates (or mandates for other amounts), variations or cancellations of such mandates, and notifications of change of address, from two years after they have been recorded;
112.1.3
all share certificates which have been cancelled from one year after the date of the cancellation;
112.1.4
all paid dividend warrants and cheques from one year after the date of actual payment;
112.1.5
all proxy notices from one year after the end of the meeting to which the proxy notice relates; and
112.1.6
all other documents on the basis of which any entry in the register is made at any time after 10 years from the date an entry in the register was first made in respect of it.
112.2
If the Company destroys a document in good faith, in accordance with the articles, and without express notice to the Company that the preservation of the document is relevant to a claim, it is conclusively presumed in favour of the Company that:
112.2.1
entries in the register purporting to have been made on the basis of an instrument of transfer or other document so destroyed were duly and properly made;
112.2.2
any instrument of transfer so destroyed was a valid and effective instrument duly and properly registered;
112.2.3
any share certificate so destroyed was a valid and effective certificate duly and properly cancelled; and
112.2.4
any other document so destroyed was a valid and effective document in accordance with its recorded particulars in the books or records of the Company.
112.3
This article does not impose on the Company any liability which it would not otherwise have if it destroys any document before the time at which this article permits it to do so or in any case where the conditions of this article are not fulfilled.
112.4
In this article, references to the destruction of any document include a reference to its being disposed of in any manner.
65
113.
ACCOUNTS
113.1
The directors must ensure that accounting records are kept in accordance with the Act.
113.2
The accounting records shall be kept at the registered office of the Company or, subject to the Act, at another place decided by the directors and shall be available during business hours for the inspection of the directors and other officers. No member (other than a director or other officer) has the right to inspect an accounting record or other document except if that right is conferred by the Act or he is authorised by the directors or by an ordinary resolution of the Company.
113.3
In respect of each financial year, a copy of the Company’s annual accounts, the directors’ report, the strategic report, the directors’ remuneration report, and the auditors’ report on those accounts and on the auditable part of the directors’ remuneration report shall be sent or supplied to:
113.3.1
every member (whether or not entitled to receive notices of general meetings);
113.3.2
every holder of debentures (whether or not entitled to receive notices of general meetings); and
113.3.3
every other person who is entitled to receive notices of general meetings,
not less than 21 clear days before the date of the meeting at which copies of those documents are to be laid in accordance with the Act. This article does not require copies of the documents to which it applies to be sent or supplied to:
113.3.4
a member or holder of debentures of whose address the Company is unaware; or
113.3.5
more than one of the joint holders of shares or debentures.
113.4
The directors may determine that persons entitled to receive a copy of the Company’s annual accounts, the directors’ report, the strategic report, the directors’ remuneration report, and the auditors’ report on those accounts and on the auditable part of the directors’ remuneration report are those persons entered on the register at the close of business on a day determined by the directors.
113.5
Where permitted by the Act, the strategic report with supplementary material in the form and containing the information prescribed by the Act may be sent or supplied to a person so electing in place of the documents required to be sent or supplied by article 113.3.
114.
PROVISION FOR EMPLOYEES ON CESSATION OF BUSINESS
The directors may decide to make provision for the benefit of persons (other than a director or former director or shadow director) employed or formerly employed by the Company or any of its subsidiary undertakings (or any member of his family, including a spouse or former spouse, or any person who is or was dependent on him) in connection with the cessation or transfer to any person of the whole or part of the undertaking of the Company or that subsidiary undertaking.
66
115.
WINDING UP OF THE COMPANY
115.1
On a voluntary winding up of the Company the liquidator may, on obtaining any sanction required by law:
115.1.1
divide among the members in kind the whole or any part of the assets of the Company, whether or not the assets consist of property of one kind or of different kinds; and
115.1.2
vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members as he, with the like sanction, shall determine.
115.2
For this purpose the liquidator may:
115.2.1
set the value he deems fair on a class or classes of property; and
115.2.2
determine on the basis of that valuation and in accordance with the then existing rights of members how the division is to be carried out between members or classes of members.
115.3
The liquidator may not, however, distribute to a member without his consent an asset to which there is attached a liability or potential liability for the owner.
DIRECTORS’ INDEMNITY AND INSURANCE
116.
INDEMNITY OF OFFICERS AND FUNDING DIRECTORS’ DEFENCE COSTS
116.1
To the fullest extent permitted by the Act and without prejudice to any indemnity to which he may otherwise be entitled, every person who is or was a director or other officer of the Company or any of its associates (other than any person (whether or not an officer of the Company or any of its associates) engaged by the Company of any of its associates as auditor) shall be and shall be kept indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by him (whether in connection with any negligence, default, breach of duty or breach of trust by him or otherwise as a director or such other officer of the Company or any of its associates) in relation to the Company or any of its associates or its/their affairs provided that such indemnity shall not apply in respect of any liability incurred by him:
116.1.1
to the Company or to any of its associates;
116.1.2
to pay a fine imposed in criminal proceedings;
116.1.3
to pay a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (howsoever arising);
116.1.4
in defending any criminal proceedings in which he is convicted;
116.1.5
in defending any civil proceedings brought by the Company, or any of its associates, in which judgment is given against him; or
67
116.1.6
in connection with any application under any of the following provisions in which the court refuses to grant him relief, namely:
(a)
section 661(3) or (4) of the Act (acquisition of shares by innocent nominee); or
(b)
section 1157 of the Act (general power to grant relief in case of honest and reasonable conduct).
116.2
In article 116.1.4, 116.1.5 or 116.1.6 the reference to a conviction, judgment or refusal of relief is a reference to one that has become final. A conviction, judgment or refusal of relief becomes final:
116.2.1
if not appealed against, at the end of the period for bringing an appeal; or
116.2.2
if appealed against, at the time when the appeal (or any further appeal) is disposed of.
An appeal is disposed of:
116.2.3
if it is determined and the period for bringing any further appeal has ended; or
116.2.4
if it is abandoned or otherwise ceases to have effect.
116.3
To the extent permitted by the Act and without prejudice to any indemnity to which he may otherwise be entitled, every person who is or was a director of the Company acting in its capacity as a trustee of an occupational pension scheme shall be and shall be kept indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by him in connection with the Company’s activities as trustee of the scheme provided that such indemnity shall not apply in respect of any liability incurred by him:
116.3.1
to pay a fine imposed in criminal proceedings;
116.3.2
to pay a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (howsoever arising); or
116.3.3
in defending criminal proceedings in which he is convicted.
For the purposes of this article, a reference to a conviction is to the final decision in the proceedings. The provisions of article 116.2 shall apply in determining when a conviction becomes final.
116.4
Without prejudice to article 116.1 or to any indemnity to which a director may otherwise be entitled, and to the extent permitted by the Act and otherwise upon such terms and subject to such conditions as the directors may in their absolute discretion think fit, the directors shall have the power to make arrangements to provide a director with funds to meet expenditure incurred or to be incurred by him in defending any criminal or civil proceedings or in connection with an application under section 661(3) or (4) of the Act (acquisition of shares by innocent nominee) or section 1157 of the Act (general power to grant relief in case of honest and reasonable
68
conduct) or in defending himself in an investigation by a regulatory authority or against action proposed to be taken by a regulatory authority or to enable a director to avoid incurring any such expenditure.
116.5
Where at any meeting of the directors or a committee of the directors any arrangement falling within article 116.4 is to be considered, a director shall be entitled to vote and be counted in the quorum at such meeting unless the terms of such arrangement confers upon such director a benefit not generally available to any other director; in that event, the interest of such director in such arrangement shall be deemed to be a material interest for the purposes of article 21 and he shall not be so entitled to vote or be counted in the quorum.
117.
INSURANCE
117.1
To the extent permitted by the Act, the directors may exercise all the powers of the Company to purchase and maintain insurance for the benefit of a person who is or was:
117.1.1
a director or a secretary of the Company or of a company which is or was a subsidiary undertaking of the Company or in which the Company has or had an interest (whether direct or indirect); or
117.1.2
trustee of a retirement benefits scheme or other trust in which a person referred to in article 117.1.1 is or has been interested,
indemnifying him and keeping him indemnified against liability for negligence, default, breach of duty or breach of trust or other liability which may lawfully be insured against by the Company.
69
Exhibit 4.6
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CLIFFORD CHANCE STUDIO LEGALE
IN ASSOCIAZIONE CON CLIFFORD CHANCE
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Conformed Copy
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GTECH S.P.A.
AS PARENT
GTECH CORPORATION
GTECH S.P.A.
AS BORROWERS
J.P. MORGAN LIMITED
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
AS GLOBAL COORDINATORS, BOOKRUNNERS AND MANDATED LEAD ARRANGERS
THE ENTITIES LISTED IN PART III OF SCHEDULE 1
AS BOOKRUNNERS AND MANDATED LEAD ARRANGERS
THE ENTITIES LISTED IN PART IV OF SCHEDULE 1
AS MANDATED LEAD ARRANGERS
THE ENTITIES LISTED IN PART V OF SCHEDULE 1
AS ARRANGERS
THE ROYAL BANK OF SCOTLAND PLC
AS AGENT
KEYBANK NATIONAL ASSOCIATION
AS SWINGLINE AGENT
AND
OTHERS
US$1,800,000,000 AND €1,050,000,000 MULTICURRENCY REVOLVING CREDIT FACILITIES FOR GTECH CORPORATION AND GTECH S.P.A.
i
CONTENTS
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Clause
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Page
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1.
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DEFINITIONS AND INTERPRETATION
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4
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2.
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THE FACILITIES
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51
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3.
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PURPOSE
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53
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4.
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CONDITIONS OF UTILISATION
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53
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5.
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UTILISATION — REVOLVING FACILITY LOANS
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55
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6.
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UTILISATION — LETTERS OF CREDIT
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56
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7.
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UTILISATION - US DOLLAR SWINGLINE LOANS
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62
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8.
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LETTERS OF CREDIT
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65
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9.
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REPAYMENT
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69
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10.
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OPTIONAL CURRENCIES
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70
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11.
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US DOLLAR SWINGLINE FACILITY
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70
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12.
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ILLEGALITY, VOLUNTARY PREPAYMENT AND CANCELLATION
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73
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13.
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MANDATORY PREPAYMENT
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76
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14.
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RESTRICTIONS
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77
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15.
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INTEREST
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77
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16.
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INTEREST PERIODS
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79
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17.
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CHANGES TO THE CALCULATION OF INTEREST
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79
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18.
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FEES
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81
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19.
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TAX GROSS UP AND INDEMNITIES
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83
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20.
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INCREASED COSTS
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98
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21.
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OTHER INDEMNITIES
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100
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22.
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MITIGATION
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101
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23.
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COSTS AND EXPENSES
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101
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24.
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GUARANTEE AND INDEMNITY
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102
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25.
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REPRESENTATIONS
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108
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26.
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INFORMATION UNDERTAKINGS
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114
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27.
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FINANCIAL COVENANTS
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118
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28.
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GENERAL UNDERTAKINGS
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120
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29.
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EVENTS OF DEFAULT
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130
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30.
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CHANGES TO THE LENDERS
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136
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31.
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CHANGES TO THE OBLIGORS
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143
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ii
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32.
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ROLE OF THE AGENT, THE ARRANGING PARTIES, THE GLOBAL COORDINATORS, THE SWINGLINE AGENT, THE ISSUING AGENT AND OTHERS
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145
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33.
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CONDUCT OF BUSINESS BY THE FINANCE PARTIES
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154
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34.
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SHARING AMONG THE FINANCE PARTIES
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154
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35.
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PAYMENT MECHANICS
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155
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36.
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SET-OFF
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160
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37.
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NOTICES
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160
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38.
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CALCULATIONS AND CERTIFICATES
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163
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39.
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TAX CHARACTERIZATION
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164
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40.
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PARTIAL INVALIDITY
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164
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41.
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REMEDIES AND WAIVERS
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164
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42.
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AMENDMENTS AND WAIVERS
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164
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43.
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NEGOTIATED AGREEMENT
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168
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44.
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CONFIDENTIALITY
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168
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45.
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COUNTERPARTS
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171
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46.
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GOVERNING LAW
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171
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47.
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ENFORCEMENT
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171
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SCHEDULE 1 THE ORIGINAL PARTIES
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173
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SCHEDULE 2 CONDITIONS PRECEDENT
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183
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SCHEDULE 3 REQUESTS
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188
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SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
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191
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SCHEDULE 5 FORM OF ASSIGNMENT AGREEMENT
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194
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SCHEDULE 6
FORM OF ACCESSION LETTER
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196
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SCHEDULE 7
FORM OF RESIGNATION LETTER
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197
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SCHEDULE 8
FORM OF COMPLIANCE CERTIFICATE
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198
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SCHEDULE 9 TIMETABLES - LOANS - NOTICES TO THE AGENT
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199
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SCHEDULE 10
FORM OF LETTER OF CREDIT
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202
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SCHEDULE 11 AGENTS’ DETAILS
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208
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SCHEDULE 12 ORIGINAL BORROWERS’ DETAILS
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209
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SCHEDULE 13 AGREED SECURITY PRINCIPLES
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210
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SCHEDULE 14 FORM OF AFFIDAVIT
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214
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SCHEDULE 15 FORM OF SUBSTITUTE AFFILIATE LENDER DESIGNATION NOTICE
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221
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SCHEDULE 16 SELF DECLARATION FORM
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223
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iii
THIS SENIOR FACILITIES AGREEMENT
(this “
Agreement
”) is dated 4 November 2014, amended on 2 April 2015 and made
BETWEEN
:
(1)
GTECH S.p.A.
, a company incorporated in Italy as a
società per azioni
(“
GTECH
”);
(2)
GTECH CORPORATION
, a Delaware corporation (“
GTECH Corporation
” and together with GTECH, the “
Original Borrowers
”);
(3)
THE ENTITIES
listed in Part I of Schedule 1 as original guarantors (the “
Original Guarantors
”);
(4)
J.P. MORGAN LIMITED AND MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.p.A.
(directly or by way of their Affiliates) as global coordinators, bookrunners and mandated lead arrangers (the “
Global Coordinators, Bookrunners and Mandated Lead Arrangers
”);
(5)
THE ENTITIES
listed in Part III of Schedule 1 as bookrunners and mandated lead arrangers (the “
Bookrunners and Mandated Lead Arrangers
”);
(6)
THE ENTITIES
listed in Part IV of Schedule 1 as mandated lead arrangers (the “
Mandated Lead Arrangers
”);
(7)
THE ENTITIES
listed in Part V of Schedule 1 as arrangers (the “
Arrangers
”);
(8)
THE FINANCIAL INSTITUTIONS
listed in Part IIA of Schedule 1 (
The Original Parties
) as lenders (the “
Original Lenders
”);
(9)
THE ROYAL BANK OF SCOTLAND PLC
as facility agent of the other Finance Parties (the “
Agent
”);
(10)
THE ROYAL BANK OF SCOTLAND PLC
as issuing agent of the Lenders (the “
Issuing Agent
”);
(11)
KEYBANK
NATIONAL
ASSOCIATION
as agent of the US Dollar Swingline Lenders (the “
Swingline Agent
”); and
(12)
THE FINANCIAL INSTITUTIONS
listed in Part IIB of Schedule 1 (
The Original US Dollar Swingline Lenders
) as US Dollar Swingline Lenders (the “
Original US Dollar Swingline Lenders
”).
IT IS AGREED
as follows:
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
In this Agreement:
“
Acceptable Bank
” means:
4
(a)
a bank or financial institution which has a rating for its long term unsecured and non credit-enhanced debt obligations of BBB- or higher by S&P or Fitch or Baa3 or higher by Moody’s or a comparable rating from an internationally recognised credit rating agency; or
(b)
an Original Lender or any of its Affiliates; or
(c)
any other bank or financial institution approved by the Agent, the Swingline Agent and the Issuing Agent.
“
Accession Letter
” means a document substantially in the form set out in Schedule 6 (
Form of Accession Letter
) or in any other form acceptable to the Parent and the Agent.
“
Accounting Principles
” means generally accepted accounting principles in the United States, the United Kingdom and Italy or IFRS.
“
Additional Borrower
” means a company which becomes a Borrower in accordance with Clause 31 (
Changes to the Obligors
).
“
Additional Guarantor
” means a person which becomes a Guarantor in accordance with Clause 31 (
Changes to the Obligors
).
“
Additional Obligor
” means an Additional Borrower or an Additional Guarantor.
“
Administrative Questionnaire
” means an Administrative Questionnaire in a form supplied by the Agent.
“
Affidavit
”
means the affidavit substantially in the form set out in Schedule 14 (
Form of Affidavit
) as approved by the Italian Revenues Agency and made available on the website
www.agenziaentrate.gov.it
.
“
Affiliate
” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company. Notwithstanding the foregoing, in relation to The Royal Bank of Scotland plc, the term “Affiliate” shall include The Royal Bank of Scotland N.V. and each of its subsidiaries or subsidiary undertakings, but shall not include (i) the UK government or any member or instrumentality thereof, including Her Majesty’s Treasury and UK Financial Investments Limited (or any directors, officers, employees or entities thereof) or (ii) any persons or entities controlled by or under common control with the UK government or any member or instrumentality thereof (including Her Majesty’s Treasury and UK Financial Investments Limited) and which are not part of The Royal Bank of Scotland Group plc and its subsidiaries or subsidiary undertakings.
“
Agent’s Fee Letter
” means the fee letter dated on or about the date of this Agreement between the Agent and the Borrowers.
“
Agent’s Spot Rate of Exchange
” means, for a currency, the rate determined by the Agent, the Swingline Agent or the Issuing Agent (as applicable) to be the rate quoted by the person acting in such capacity as the spot rate for the purchase by such person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two (2) Business Days prior to the date as of which the foreign exchange computation is made;
provided that
the Agent, the Swingline
5
Agent or the Issuing Agent may obtain such spot rate from another financial institution designated by the Agent, the Swingline Agent or the Issuing Agent if the person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency; and
provided further that
the Issuing Agent may use such spot rate quoted on the date as of which the foreign exchange computation is made in the case of any Letter of Credit denominated in an Optional Currency.
“
Agreed Security Principles
” means the principles set out in Schedule 13 (
Agreed Security Principles
).
“
Anti-Corruption Laws
” means all laws, rules and regulations of any jurisdiction applicable to a Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.
“
Anti-Terrorism Law
” means each of:
(a)
the Executive Order;
(b)
the USA PATRIOT Act;
(c)
the Money Laundering Control Act of 1986, Public Law 99-570;
(d)
the Foreign Asset Control Laws;
(e)
the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq.);
(f)
the Money Laundering Control Act of 1986 (18 U.S.C. §§ 1956 et seq.);
(g)
the International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq.);
(h)
the Trading with the Enemy Act (50 U.S.C. App. §§1 et seq.); and
(i)
any similar law enacted in the United States of America subsequent to the date of this Agreement.
“
Arrangement Fee Letter(s)
” means each arrangement fee letter dated on or about the date of this Agreement among the Original Borrowers and the Arranging Parties.
“
Arranging Parties
” means the Global Coordinators, Bookrunners and Mandated Lead Arrangers, the Bookrunners and Mandated Lead Arrangers, the Mandated Lead Arrangers and the Arrangers.
“
Assignment Agreement
” means an agreement substantially in the form set out in Schedule 5 (
Form of Assignment Agreement
) or any other form agreed between the relevant assignor and assignee.
“
Auditors
” means PricewaterhouseCoopers or any other firm approved in advance by the Agent (such approval not to be unreasonably withheld or delayed).
“
Authorisation
” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.
6
“
Availability Period
” means:
(a)
in relation to Revolving Facility A, the period from and including the date of this Agreement to and including the date falling one (1) Month prior to the Final Maturity Date; and
(b)
in relation to Revolving Facility B, the period from and including the date of this Agreement to and including the date falling one (1) Month prior to the Final Maturity Date.
“
Available Revolving Commitment
” means, in relation to:
(a)
Revolving Facility A (but without limiting Clause 7.5 (
Relationship with Revolving Facility
A
), a Lender’s Revolving Facility A Commitment less:
(i)
the Base Currency Amount of its participation in any outstanding Utilisations (including any Revolving Facility A Loan deemed as such pursuant to Clause 8.3 (
Claims under a Letter of Credit
)); and
(ii)
in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Utilisations (other than the proposed Utilisation) that are due to be made under Revolving Facility A on or before the proposed Utilisation Date; and
(b)
Revolving Facility B, a Lender’s Revolving Facility B Commitment less:
(i)
the Base Currency Amount of its participation in any outstanding Utilisations (including any Revolving Facility B Loan deemed as such pursuant to Clause 8.3 (
Claims under a Letter of Credit
)); and
(ii)
in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Utilisations (other than the proposed
Utilisation
) that are due to be made under Revolving Facility B on or before the proposed Utilisation Date,
it being understood in each case that for the purposes of calculating the “Available Revolving Commitment”, any Revolving Facility Commitment of Wells Fargo Bank, NA shall only be deemed to be a Revolving Facility A Commitment or a Revolving Facility B Commitment, as the case may be, from and including the Target Accession Date.
For the purposes of calculating a Lender’s Available Revolving Commitment in relation to any proposed Utilisation of Loans, such Lender’s participation in any Loans under Revolving Facility A or as the case may be, Revolving Facility B that are due to be repaid or prepaid on or before the proposed Utilisation Date as well as such Lender’s US Dollar Swingline Commitments to the extent that they are due to be reduced or cancelled on or before the proposed Utilisation Date shall not be deducted from a Lender’s Commitment under such Revolving Facility.
For the purposes of calculating a Lender’s Available Revolving Commitment in relation to any proposed Utilisation under a Revolving Facility, such Lender’s participation in any Letters of Credit issued under such Revolving Facility that are due to be reduced or cancelled on or
7
before the proposed Utilisation Date under such Revolving Facility shall not be deducted from a Lender’s Commitment under the relevant Revolving Facility.
“
Available Revolving Facility
” means, in relation to each Revolving Facility, the aggregate for the time being of each Lender’s Available Revolving Commitment in respect of that Revolving Facility.
“
Available US Dollar Swingline Commitment
” of a US Dollar Swingline Lender means (but without limiting Clause 7.5 (
Relationship with Revolving Facility A
)) that Lender’s US Dollar Swingline Commitment minus:
(a)
the amount of its participation in any outstanding US Dollar Swingline Loans; and
(b)
in relation to any proposed Utilisation under the US Dollar Swingline Facility, the amount of its participation in any US Dollar Swingline Loans that are due to be made under the US Dollar Swingline Facility on or before the proposed Utilisation Date,
other than that Lender’s participation in any US Dollar Swingline Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date.
“
Available US Dollar Swingline Facility
” means the aggregate for the time being of each US Dollar Swingline Lender’s Available US Dollar Swingline Commitment.
“
B&D Holding
” means B&D Holding di Marco Drago e C. S.a.p.a., a company incorporated in Italy as a
società in accomandita per azioni
.
“
Base Currency
” means, in relation to Revolving Facility A, US Dollars and, in respect of Revolving Facility B, Euro.
“
Base Currency Amount
” means in relation to a Utilisation, the amount specified in the Utilisation Request delivered by the relevant Borrower for that Utilisation (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Agent’s Spot Rate of Exchange on the date which is two (2) Business Days before the Utilisation Date or, if later, on the date the Agent receives the Utilisation Request in accordance with the terms of this Agreement and, in the case of a Letter of Credit, as adjusted under Clause 6.10 (
Revaluation of Letters of Credit
) to reflect any repayment (other than a repayment arising from a change of currency), prepayment, cancellation or reduction (as applicable) of the Utilisation, as adjusted to reflect any repayment, prepayment, consolidation or division of a Utilisation.
“
Base Reference Bank Rate
” means the arithmetic mean of the rates (rounded upwards to four (4) decimal places) as supplied to the Agent at its request by the Base Reference Banks:
(a)
in relation to LIBOR, as the rate at which the relevant Base Reference Bank could borrow funds in the London interbank market; or
(b)
in relation to EURIBOR, as the rate at which the relevant Base Reference Bank could borrow funds in the European interbank market,
in the relevant currency and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.
8
“
Base Reference Banks
” means in relation to LIBOR, the principal London offices of Banca IMI S.p.A., Milan and Bank of America, N.A., London Branch and the principal Milan office of Mediobanca — Banca di Credito Finanziario S.p.A., Milan and, in relation to EURIBOR, the principal office in London of Banca IMI S.p.A., Milan and Bank of America, N.A., London Branch and the principal Milan office of Mediobanca — Banca di Credito Finanziario S.p.A., Milan or such other banks as may be appointed by the Agent (acting on the instructions of the Majority Lenders) in consultation with the Parent.
“
Blacklisted Resident Entity
” means any person that is resident, domiciled, located for Tax purposes, or acting through a lending office qualifying as a Permanent Establishment to which any payment under the Finance Document is effectively connected, in a Blacklisted Jurisdiction.
“
Blacklisted Jurisdiction
” means:
(a)
any country or territory listed as having a privileged tax regime in the Italian Ministerial Decree dated 23 January 2002 and issued by the Italian Minister of Finance, as amended or updated from time to time
; or
(b)
(
as from the fiscal year in which the decree to be issued pursuant to article 168-bis of Italian Presidential Decree of 22 December 1986, No. 917 is effective, any country or territory which is not included in the list of countries and territories (the “
White List
”) allowing an adequate exchange of information with the Italian Tax authorities (for the five (5) years starting on the date of publication of such decree in the Official Gazette, countries and territories that are not included in the current black-lists set forth by Italian Ministerial Decrees of 4 May 1999, 21 November 2001 and 23 January 2002, nor in the current white list set forth by Italian Ministerial Decree of 4 September 1996 or included under article 2 of Ministerial Decree 21 November 2001, with regards to the persons therein enclosed, and under article 3 of Ministerial Decree 21 November 2001, with the exclusions of the persons therein enclosed, are deemed to be included in the White List); or
(c)
upon the occurrence of any Change of Tax Law, any country or territory listed in any regulation referred to under Article 110, Paragraph 10 of
Italian
Presidential Decree of 22 December 1986, No. 917, as from time to time amended or restated,
as not allowing an adequate exchange of information with the Italian Tax authorities.
“
Borrower
” means an Original Borrower or an Additional Borrower, unless it has ceased to be a Borrower in accordance with Clause 31 (
Changes to the Obligors
).
“
Borrower DTTP Filing
” shall have the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Borrower Materials
” shall have the meaning ascribed thereto in Clause 26.7 (
Posting on electronic system
).
“
Break Costs
” means the amount (if any) by which:
(a)
the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had
9
the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds:
(b)
the amount which such Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.
“
Bridge Facilities
” means the 364-day senior bridge facility to be entered into in accordance with the terms of the commitment letter dated 15 July 2014 among
inter alios
the Parent and Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citigroup Global Markets Limited and Citibank N.A., London Branch, as joint lead bookrunners and joint lead arrangers.
“
Business
” means, with respect to the Group:
(a)
the design, manufacture, sale, lease, delivery, installation, operation or maintenance of hardware and equipment (e.g. computers, computer terminals, on-line lottery terminals, instant ticket vending and dispensing machines, self-service terminals, gaming devices and machines, video lottery terminals, slot machines and amusement with prize machines) (collectively, “
Gaming Hardware
”) and the design, development, sale, licensing, delivery, installation, operation or maintenance of software or game content (collectively, “
Gaming Software
”) pertaining to the operation of games of chance or skill or pari-mutuel or fixed odds games (including lotteries (e.g. on-line, off-line, passive ticket, instant/scratch ticket, break-open ticket and video), pari-mutuel betting, bingo, race tracks, jai alai, legalized bookmaking, off-track betting, casino games, racino, keno, lotto and sports betting) (collectively, “
Games
”) and the provision of any type of ancillary service or product related to or connected with the foregoing;
(b)
the management, ownership or operation of (i) Games; (ii) Gaming Hardware; (iii) Gaming Software; and (iv) sales channels (retail, interactive and mobile) and the exercise of any governmental power or authority granted to any member of the Group in connection with any of the foregoing businesses set out at (i) to (iv) (including acting as operator/private manager of legal gaming licenses and concessions) and the provision of any products or services related to any of the foregoing businesses set out at (i) to (iv) (including, without limitation, marketing activities and services, player tracking activities and loyalty management, back-office software (player management tools), field service, field sales force management and security and consulting services to customers including software, telecommunications, marketing and other related advisory services or other ancillary tools and platform related services);
(c)
(i) the provision of any type of government or state benefits processing or eligibility, or payment processing (including tax, utility, fines, fees and duties payment processing) and any products or services related to any of the foregoing businesses set out at paragraphs (a) and (b) and this paragraph (c); and (ii) the exercise of any governmental power or authority granted to any member of the Group in connection with the foregoing businesses described in paragraphs (a) and (b) above and in this paragraph (c);
10
(d)
the provision of any type of commercial transaction processing or distribution services, including (i) debit, credit and bill payment transactions and money transfer transactions; (ii) distribution services such as electronic top-up services for pre-paid mobile and fixed-line telephone accounts and ticketing services for sporting, musical and other events; (iii) stored value services such as pre-paid cards for pay TV channels and debit cards; and (iv) any products or services related to the foregoing businesses described in paragraphs (a) through (c) above and in this paragraph (d);
(e)
the provision of any type of information technology or any services derived from the technical, management, operational or other expertise developed or used by any member of the Group in connection with any business described herein and any products or services related to the foregoing businesses described in paragraphs (a) through (d) above and in this paragraph (e);
(f)
the provision of any type of telecommunication services and other communications services similar to those or provided in connection with the businesses described in paragraphs (a) through (d) above;
(g)
the design, manufacture, printing, sale or distribution (whether physically, electronically or by any other method) of instant, scratch, traditional or other lottery tickets (whether such tickets are physical, electronic or expressed through any other medium and whether such tickets allow the player to remove a cover layer (or any semblance thereof) physically, electronically or by any other method, to reveal whether the ticket is a prize winner) and the provision of any products or services related to the foregoing business described in paragraphs (a) through (f) above and in this paragraph (g);
(h)
the employment of any hardware or software utilised in any of the businesses described in paragraphs (a) through (g) above whether by sale, lease, license or service in either government or commercial enterprises worldwide;
(i)
the provision of social games, including, without limitation, through Internet websites and applications for smart phones, tablets and other devices; and
(j)
any other business that is related to, or which is an extension, development or expansion of, any of the foregoing businesses described in paragraphs (a) through (i).
“
Business Day
” means a day (other than a Saturday or Sunday) on which banks are open for general business in Las Vegas, London, Milan and New York and:
(a)
(in relation to any date for payment or purchase of a currency other than Euro and US Dollars) the principal financial centre of the country of that currency; or
(b)
(in relation to any date for payment or purchase of Euro) any TARGET Day.
“
Calculation Date
” has the meaning given to it in Clause 27.1 (
Financial definitions
).
“
Cancellation Date
” means the date specified in the notice which cancels and prepays the Existing Facilities in full.
“
Capital Securities
” means the €750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066 and issued on 17 May 2006 by GTECH.
11
“
Cash Collateral Account
” means:
(a)
an account to be established by the Agent in its name for the deposit of cash cover required to be posted pursuant to paragraph (b) of Clause 6.9 (
Revaluation of Letters of Credit
) and any replacement account thereof; and
(b)
an account to be established by the Issuing Agent in its name for the deposit of cash cover required pursuant to Clause 8.6 (
Cash cover by Borrower
) to be posted in respect of Issuing Agent or Lender exposure to a Borrower or a beneficiary and any replacement account thereof.
“
Cash Equivalent Investments
” means at any time:
(a)
demand or overnight deposits, time deposits, Eurodollar time deposits, bankers acceptances or certificates of deposit (in any case maturing within one (1) year after the relevant date of calculation):
(i)
with or
issued
by an Acceptable Bank; or
(ii)
with or issued by a Non-Acceptable Bank;
provided that
the amount of any such investments does not at any time exceed in the aggregate US$50,000,000 (or its equivalent in any other currencies);
(b)
any investment in marketable debt obligations issued or guaranteed by the government of the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State or by an instrumentality or agency of any of them having an equivalent credit rating and any auction rate, variable rate or demand securities issued or guaranteed by any federal, state or municipal governmental authority of the United States of America, in each case, having a credit rating equal to BBB or higher by S&P or Baa2 or higher by Moody’s, maturing or having a scheduled auction within one (1) year after the relevant date of calculation and not convertible or exchangeable to any other security;
(c)
commercial paper not convertible or exchangeable to any other security:
(i)
for which a recognised trading market exists;
(ii)
issued by an issuer incorporated in the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State;
(iii)
which matures within one (1) year after the relevant date of calculation; and
(iv)
which has a credit rating of either A-1 or higher by S&P or F-1 or higher by Fitch or P-1 or higher by Moody’s, or, if no rating is available in respect of the commercial paper, the issuer of which has, in respect of its long-term unsecured and non-credit enhanced debt obligations, an equivalent rating;
(d)
sterling bills of exchange eligible for rediscount at the Bank of England and accepted by an Acceptable Bank (or their dematerialised equivalent);
12
(e)
any investment accessible within thirty (30) days in money market funds which have a credit rating of either A-1 or higher by S&P or F-1 or higher by Fitch Rating Ltd or P-1 or higher by Moody’s and which invest substantially all their assets in securities of the types described in paragraphs (a) through (d) above; or
(f)
any other debt security approved by the Majority Lenders,
in each case to which any member of the Group is beneficially entitled at that time and which is not issued or guaranteed by any member of the Group or subject to any Security.
“
Change of Control
” means any person or group of persons acting in concert (other than any of the entities or companies constituting the Principal Shareholders) gains control of the Parent.
For the purpose of the paragraph above “control” means:
(a)
the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
(i)
cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of GTECH (or, following the completion of the Mergers, of Holdco); or
(ii)
appoint or remove all, or the majority, of the directors or other equivalent officers of GTECH (or, following completion of the Mergers, of Holdco); or
(iii)
give directions with respect to the operating and financial policies of GTECH (or, following completion of the Mergers, of Holdco) with which the directors or other equivalent officers of GTECH (or, following completion of the Mergers, of Holdco) are obliged to comply; or
(b)
the holding of more than thirty per cent. (30%) of the issued share capital of the Parent (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) save in circumstances where the Principal Shareholders between them continue to hold directly or indirectly (whether by way of ownership of shares, proxy, contract, agency or otherwise) more of such issued share capital than the relevant person or group of persons.
For the purpose of the paragraph above “acting in concert” means, a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them, either directly or indirectly, of shares in GTECH (or, following completion of the Mergers, of Holdco), to obtain or consolidate control of GTECH (or, following completion of the Mergers, of Holdco).
“
Change of Tax Law
” shall have the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Code
” means the United States Internal Revenue Code of 1986 (26 U.S.C. §§ 1 et seq.), as amended from time to time.
“
Commodity Exchange Act
” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
13
“
Compliance Certificate
” means a certificate substantially in the form set out in Schedule 8 (
Form of Compliance Certificate
) or otherwise in form and substance satisfactory to the Agent.
“
Confidential Information
” means all information relating to the Parent, any Obligor, the Group, the Finance Documents or a Revolving Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or a Revolving Facility from either:
(a)
any member of the Group or any of its advisers; or
(b)
another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
(i)
is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of the terms of this Agreement; or
(ii)
is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or
(iii)
is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.
“
Confidentiality Undertaking
” means a confidentiality undertaking substantially in the recommended form of the LMA or in any other form agreed between the Borrowers and the Agent.
“
Consolidated Interest Expense
” has the meaning given to it in Clause 27.1 (
Financial Definitions
).
“
Default
” means an Event of Default or any event or circumstance specified in Clause 29 (
Events of Default
) which would (with the expiry of a grace period or the giving of notice, the making of any determination (where any provision of Clause 29 expressly requires a determination to be made) or any combination of any of the foregoing) be an Event of Default.
“
Defaulting Lender
” means any Lender:
(a)
which has failed to make its participation in a Loan available or has notified the Agent that it will not make its participation in a Loan available by the Utilisation Date of that Loan in accordance with Clause 5.4 (
Lenders’ participation
);
(b)
which has otherwise rescinded or repudiated a Finance Document; or
(c)
with respect to which an Insolvency Event has occurred and is continuing.
14
Unless, in the case of paragraph (a) above:
(i)
its failure to pay is caused by:
(A)
administrative or technical error; or
(B)
a Disruption Event; and,
payment is made within one (5) Business Days of its due date; or
(ii)
the Lender is disputing in good faith whether it is contractually obliged to make the payment in question.
“
Designated Person
” means a person or entity:
(a)
listed in the annex to, or otherwise subject to the provisions of, the Executive Order;
(b)
named as a “Specially Designated National and Blocked Person” on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list; or
(c)
to the best of the Obligor’s knowledge, with which any Finance Party is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law.
“
Designated Website
” has the meaning given to that term in Clause 37.7 (
Use of websites
).
“
Dispute
” has the meaning given to that term in paragraph (a) of Clause 47.1 (
Jurisdiction of English courts
).
“
Disruption Event
” means either or both of:
(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facilities (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:
(i)
from performing its payment obligations under the Finance Documents; or
(ii)
from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
“
Distribution
” means:
15
(a)
any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of share capital (or any class of share capital); or
(b)
the payment or distribution of any dividend or share premium reserve.
“
Double Taxation Treaty
” means a double taxation agreement made between any Relevant Tax Jurisdiction and any other jurisdiction which makes provision for full exemption from, or a reduction in, Tax imposed by such Relevant Tax Jurisdiction on interest.
“
EBITDA
” has the meaning given to it in Clause 27.1 (
Financial Definitions
).
“
ERISA
” means the Employee Retirement Income Security Act of 1974 of the United States of America as amended from time to time and any applicable regulations promulgated thereunder.
“
ERISA Affiliate
” means, with respect to any Obligor, any person that for the purposes of Title IV of ERISA is from time to time a member of the controlled group of any Obligor or under common control with any Obligor within the meaning of Section 414 of the Code.
“
ERISA Event
” means:
(a)
the occurrence of a reportable event, within the meaning of Section 4043(c) of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC; or
(b)
the requirements of Section 4043(b) of ERISA applied with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following thirty (30) days;
(c)
the application for a minimum funding waiver with respect to a Plan;
(d)
the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA);
(e)
the cessation of operations at a facility of any Obligor or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA;
(f)
the withdrawal by any Obligor or any ERISA Affiliate from a Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(g)
the failure to make a required contribution to any Plan that would result in the imposition of an encumbrance under the Code or ERISA;
(h)
the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan;
16
(i)
a determination that any Plan is, or is expected to be, in at-risk status (within the meaning of Title IV of ERISA); or
(j)
the receipt by any Obligor or ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Obligor or ERISA Affiliate of any notice that a Multiemployer Plan is in endangered or critical status (within the meaning of Section 305 of ERISA).
“
EURIBOR
” means, in relation to any Loan in euro:
(a)
the applicable Screen Rate; or
(b)
(if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or
(c)
if:
(i)
no Screen Rate is available for the currency of that Loan; or
(ii)
no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan,
the Base Reference Bank Rate,
as of, in the case of paragraphs (a) and (c) above, the Specified Time on the Quotation Day for Euro and for a period equal in length to the Interest Period of that Loan and, if that rate is less than zero, EURIBOR shall be deemed to be zero.
“
Euro
” or “
€
” means the single currency of the Participating Member States.
“
Event of Default
” means any event or circumstance specified as such in Clause 29 (
Events of Default
).
“Excluded Assets”
means (i) loans to and receivables from other members of the Group, (ii) investments in Subsidiaries and (iii) consolidation entries (e.g., purchase accounting entries for goodwill and fair value adjustments to assets and liabilities) and elimination entries.
“Excluded EBITDA Entries”
means consolidation entries and elimination entries.
“Excluded Swap Obligation”
means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of Security to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason not to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Guarantor or the grant of such Security becomes effective with respect to such related Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or Security is or becomes illegal.
17
“Executive Order
” means the US Executive Order No. 13224 on Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism.
“
Exempt Lender
” shall have the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Existing GTECH Facilities
” means the revolving credit facilities and term loan facility made available under a senior facilities agreement dated 20 December 2010 and made among,
inter alios
, GTECH (formerly known as Lottomatica Group S.p.A.) as the Parent, GTECH and GTECH Corporation as Borrowers, Banc of America Securities Limited, Banca IMI S.p.A. and Mediobanca — Banca di Credito Finanziario as Global Coordinators, Bookrunners and Mandated Lead Arrangers and Banc of America Securities Limited as Agent (as amended from time to time).
“
Existing GTECH Notes
” means each of the following issuances of debt securities by GTECH:
(a)
€750,000,000 5.375% Guaranteed Notes due 2016;
(b)
€500,000,000 5.375% Guaranteed Notes due 2018;
(c)
€500,000,000 3.500% Guaranteed Notes due 2020; and
(d)
the Capital Securities.
“
Existing Indebtedness
” means any Financial Indebtedness outstanding at any time under the Bridge Facilities, the Existing GTECH Facilities, the Existing GTECH Notes and the Existing Target Facility.
“
Existing Lender
” has the meaning given to that term in Clause 30.1 (
Assignments and transfers by the Lenders
).
“
Existing Target Facility
” means the revolving credit facility made available under an amended and restated credit agreement dated as of 23 April 2013 and made among
inter alios
Target, as the Borrower, Wells Fargo Securities, LLC, RBS Securities Inc. and Union Bank, N.A., as Joint Lead Arrangers and Joint Book Runners and The Royal Bank of Scotland plc as Administrative Agent and Swing Line Lender.
“
Expiry Date
” means, for a Letter of Credit, the last day of its Term.
“
Facility Office
” means in respect of a Lender or an Issuing Agent, the office or offices notified by such Lender or an Issuing Agent to the Agent in writing on or before the date it becomes a Lender or an Issuing Agent (and, following that date, by not less than five (5) Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.
“
Facilities
” means Revolving Facility A, Revolving Facility B
and the US Dollar Swingline Facility and
“
Facility
” means any one of them.
“
FATCA
” means:
(a)
Sections 1471 to 1474 of the Code or any associated regulations;
18
(b)
any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or
(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
“
FATCA Application Date
” means:
(a)
in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;
(b)
in relation to a “withholdable payment” described in section 1473(1)(A)(ii) of the Code (which relates to “gross proceeds” from the disposition of property of a type that can produce interest from sources within the US), 1 January 2017; or
(c)
in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
“
FATCA Deduction
” means a deduction or withholding from a payment under a Finance Document required by FATCA.
“
FATCA Exempt Party
” means a Party that is entitled to receive payments free from any FATCA Deduction.
“
Federal Funds Rate
” means, in relation to any day, the rate per annum equal to:
(a)
the weighted average of the rates on overnight Federal funds transactions with members of the US Federal Reserve System arranged by Federal funds brokers, as published for that day (or, if that day is not a New York Business Day, for the immediately preceding New York Business Day) by the Federal Reserve Bank of New York; or
(b)
if a rate is not so published for any day which is a New York Business Day, the average of the quotations for that day on such transactions received by the Agent from three Federal funds brokers of recognised standing selected by the Agent.
“
Federal Reserve Board
” means the Board of Governors of the Federal Reserve System of the United States (or any successor thereto).
“
Fee Letter
” means each Arrangement Fee Letter, the Agent’s Fee Letter, the Swingline Agent’s Fee Letter and any letter or letters dated on or about the date of this Agreement between,
inter alios
, the Global Coordinators and the Borrowers (or the Agent and the Borrowers) setting out any of the fees referred to in Clause 18 (
Fees
).
19
“
Final Maturity Date
” means, in relation to each Facility, the date falling five (5) years after the date of this Agreement.
“
Finance Document
” means this Agreement, any Accession Letter, any Compliance Certificate, the Mandate Letter, any Fee Letter, any Resignation Letter, any Utilisation Request and any document, agreement or instrument entered into by an Issuing Agent and a Borrower or in favour of an Issuing Agent and relating to any Letter of Credit and any other document designated as a “
Finance Document
” by the Agent and the Borrowers.
“
Finance Party
” means the Agent, the Arranging Parties, any US Dollar Swingline Lender, the Lenders, the Swingline Agent and any Issuing Agent.
“
Financial Indebtedness
” means any indebtedness for or in respect of (without double counting):
(a)
monies borrowed;
(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;
(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with the Accounting Principles, be treated as a finance or capital lease;
(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
(f)
for the purposes of paragraph (e) of the definition of Permitted Guarantee, Clause 28.12 (
Priority Financial Indebtedness
) and an Event of Default only, any Treasury Transaction (and, when calculating the value of that Treasury Transaction, only the marked to market value as at the relevant date on which Financial Indebtedness is calculated (or, if any actual amount is due as a result of the termination or close-out of that Treasury Transaction, that amount) shall be taken into account);
(g)
any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution;
(h)
any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or (ii) the agreement is in respect of the supply of assets or services and payment is due more than one hundred and fifty (150) days after the date of supply;
(i)
any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; and
(j)
the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) through (i) above;
20
provided that
any counter-indemnity obligation in respect of performance or similar bonds, letters of credit (including Letters of Credit) or guarantees, in each case, guaranteeing performance by a member of the Group in relation to a liability (other than a liability in respect of Financial Indebtedness) which arises in the ordinary course of those activities described in the definition of “Business” shall not constitute Financial Indebtedness unless and until, and to the extent that, such performance or similar bonds, letters of credit (including Letters of Credit) or guarantees are drawn or called (as applicable).
“
Financial Quarter
” means, with respect to the Parent, each of the quarterly periods ending on 31 March, 30 June, 30 September and 31 December in each Financial Year by reference to which the quarterly accounts of members of the Group are prepared.
“
Financial Year
” means each period ending on 31 December in respect of which annual audited consolidated financial statements of the Group are required to be prepared.
“
Fitch
” means Fitch
Ratings Ltd.
“
Foreign Asset Control Laws
” means the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., the Trading with the Enemy Act, 50 U.S.C. App. §§ 1 et seq., any Executive Order or regulation promulgated thereunder and administered by OFAC.
“
Fraudulent Transfer Law
” means any applicable US Bankruptcy Law or any applicable US state fraudulent transfer or conveyance law.
“
Group
” means GTECH (or, following completion of the Merger, Holdco) and its Subsidiaries from time to time and “
member of the Group
” means any one of them.
“
Guarantee Sub-limit
” means:
(a)
with respect to Revolving Facility A, the lesser of:
(i)
US$200,000,000 (or its equivalent in other currencies); and
(ii)
the Total Revolving Facility A Commitments; and
(b)
with respect to Revolving Facility B, the lesser of:
(i)
€200,000,000 (or its equivalent in other currencies); and
(ii)
the Total Revolving Facility B Commitments.
“
Guarantor
” means an Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 31 (
Changes to the Obligors
).
“
Hedging Bank
” means any (i) Lender or (ii) Affiliate of a Lender which has delivered an Accession Letter in the form set out in Schedule 6 (
Form of Accession Letter
) in each case which has entered into a hedging arrangement with any member of the Group in respect of a Treasury Transaction.
“
Hedging Document
” means the documents entered into between a Hedging Bank and a member of the Group for the purposes of implementing a hedging arrangement in respect of a Treasury Transaction.
21
“
Holdco
” means Georgia Worldwide PLC, a public limited company organised under the laws of England and Wales and a wholly owned Subsidiary of GTECH.
“
Holdco Merger
” means the series of transactions which consist principally of (i) the merger of GTECH with and into Holdco and (ii) the payment to GTECH’s shareholders exercising withdrawal rights following such merger, each in accordance with the steps set out in the Structure Memorandum.
“
Holding Company
” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
“
IFRS
” means international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.
“
Impaired Agent
” means the Agent, the Swingline Agent or the Issuing Agent, as the context requires, at any time when:
(a)
it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;
(b)
it otherwise rescinds or repudiates a Finance Document;
(c)
(if it is also a Lender) it is a Defaulting Lender under paragraph (a) or (b) of the definition of “Defaulting Lender”; or
(d)
an Insolvency Event has occurred and is continuing with respect to it;
(e)
unless, in the case of paragraph (a) above:
(i)
its failure to pay is caused by:
(A)
administrative or technical error; or
(B)
a Disruption Event; and
payment is made within five (5) Business Days of its due date; or
(ii)
it is disputing in good faith whether it is contractually obliged to make the payment in question.
“
Increased Costs
” has the meaning given to it in paragraph (b) of Clause 20.1 (
Increased Costs
).
“
Initial Margin Trigger
Event
” means the first to occur of the following events:
(a)
the completion of the Transactions;
(b)
a change of at least one of the two Public Debt Ratings issued by S&P and Moody’s; and
(c)
termination of the Merger Agreement, or the public disclosure by the Parent that it no longer intends to proceed with the completion of the Mergers;
22
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, paragraph (b) shall be interpreted so as to mean a change of at least two of the three Public Debt Ratings.
“
Insolvency Event
” in relation to a Finance Party means that the Finance Party:
(a)
is dissolved (other than pursuant to a consolidation, amalgamation or merger);
(b)
becomes insolvent or is unable to pay its debts as they become due or fails or admits in writing its inability generally to pay its debts as they become due;
(c)
makes a general assignment, arrangement or composition with or for the benefit of its creditors generally;
(d)
institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official;
(e)
has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in paragraph (d) above and:
(i)
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or
(ii)
is not dismissed, discharged, stayed or restrained in each case within thirty (30) days of the institution or presentation thereof;
(f)
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);
(g)
seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets;
(h)
has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days thereafter;
(i)
causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in paragraphs (a) through (h) above; or
23
(j)
takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.
“
Insufficiency
” means, with respect to any Plan, the amount, if any, of its unfunded liabilities, as defined in section 4001(a)(18) of ERISA.
“
Intellectual Property
” means:
(a)
any patents, trade marks, service marks, designs, business names, copyrights, design rights, moral rights, inventions, confidential information, know-how and other intellectual property rights and interests, whether registered or unregistered; and
(b)
the benefit of all applications and rights to use such assets of each member of the Group.
“
Interest Period
” means, in relation to a Loan, each period determined in accordance with Clause 16 (
Interest Periods
) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 15.4 (
Default interest
).
“
Interpolated Screen Rate
” means, in relation to LIBOR or EURIBOR for any Loan, the rate which results from interpolating on a linear basis between:
(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of that Loan; and
(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of that Loan,
each as of the Specified Time on the Quotation Day for the currency of that Loan.
“
IRAP”
means the Italian Regional tax on productive activities set forth by Italian Legislative Decree of 15 December 1997, No. 446.
“
ITA
”
means the Income Tax Act 2007 of the United Kingdom.
“
Italian Borrower
” means a Borrower which is resident in Italy for Tax purposes and not acting for the purposes of the Finance Documents through a Permanent Establishment located outside Italy.
“
Italian Civil Code
” means the Italian civil code, enacted by Royal Decree No. 262 of 16 March 1942.
“
Italian Guarantor
” means a Guarantor which is resident in Italy for Tax purposes pursuant to article 73 of Italian Presidential Decree No. 917 of 22 December 1986 not acting for the purposes of the Finance Documents through a Permanent Establishment located outside Italy.
“
Italian Holdco
” means Lottomatica Holding S.r.l., a company incorporated in Italy as a
società a responsabilità limitata
with its registered office at Viale del Campo Boario 56/D 00154 Rome, Italy, and having registration number 13044331000.
“
Italian Insolvency Proceeding
” means, with respect to the Parent, each Obligor incorporated in Italy and each Material Subsidiary incorporated in Italy (i) any proceeding concerning its
24
liquidation, bankruptcy, dissolution, reorganisation, moratorium or proceedings similar or analogous thereto including bankruptcy (
fallimento
), arrangements with creditors (
concordato preventivo
), forced administration liquidation (
liquidazione coatta amministrativa
), extraordinary administration of large companies in insolvency (
amministrazione straordinaria delle grandi imprese in stato di insolvenza
), assignments for the benefit of creditors (
cessione di beni ai creditori
), arrangements with creditors in the context of Article 67, paragraph 2, letter d) of the Italian Insolvency Law or restructuring arrangements pursuant to Article 182
bis
of Italian Insolvency Law, out-of-court restructurings or winding-up (
liquidazione
) set out in the Italian Insolvency Law, the Italian Civil Code or any other applicable Italian laws, as well as any other proceeding defined as “
procedura di risanamento
” or “
procedura concorsuale
” under Legislative Decree no. 170 dated 21 May 2004, and (ii) any equivalent or analogous liquidation, insolvency or reorganisation proceedings under the applicable laws, legislation, rules and regulations of any other jurisdiction.
“
Italian Insolvency Law
” means Royal Decree No. 267 of 16 March 1942.
“
Italian Obligor
” means an Italian Borrower or an Italian Guarantor.
“
Italian Opco
” means an Italian newly incorporated Subsidiary of the Parent to which the operating assets and liabilities of the Parent are contributed pursuant to the Italian Reorganisation and in accordance with the Structure Memorandum.
“
Italian Qualifying Lender
” shall have the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Italian
Reorganisation
” means the series of transactions which consists principally of (i) the contribution of the operating assets of GTECH to Italian Opco, (ii) the assumption of the liabilities related to such assets by Italian Opco and (iii) the contribution of shares in the Italian Opco and certain other Subsidiaries of GTECH by GTECH into Italian Holdco, each in accordance with the steps set out in the Structure Memorandum.
“
Italian Treaty Lender
” shall have the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Joint Venture
” means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity in which the Group has a 50 per cent. or a minority interest and which is accordingly not consolidated in the financial statements of that member of the Group as a Subsidiary, it being understood however that in each case the proportion of the Group’s interest in the joint venture entity may be consolidated in the financial statements of the relevant member of the Group on a proportional basis.
“
L/C Proportion
” means, in relation to a Lender in respect of any Letter of Credit, the proportion (expressed as a percentage) borne by such Lender’s Available Revolving Commitment to the Available Revolving Facility immediately prior to the issue of that Letter of Credit, adjusted to reflect any assignment or transfer under this Agreement to or by such Lender.
“
Legal Opinion
” means any legal opinion delivered to the Agent under Clause 4.1 (
Initial Conditions Precedent
) or Clause 31 (
Changes to the Obligors
).
“
Legal Reservations
” means any matters which are set out as qualifications or reservations as to matters of law of general application in the Legal Opinions.
25
“
Lender
” means:
(a)
any Original Lender; and
(b)
any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 30 (
Changes to the Lenders
),
which, in each case, has not ceased to be a Party in accordance with the terms of this Agreement.
“
Letter of Credit
” means:
(a)
a syndicated letter of credit substantially in the form set out in Schedule 10 (
Form of Letter of Credit
); or
(b)
any syndicated letter of credit, syndicated guarantee, syndicated indemnity or other instrument of a similar nature in a form requested by the Borrowers which meets the minimum requirements of Clause 6.6 (
Form of Letters of Credit
) and agreed by the Agent and the Issuing Agent (acting on the instructions of all the Lenders under the Revolving Facility pursuant to which it is requested),
in each case issued or deemed issued under this Agreement.
“
Letter of Credit Fee
” means the fee payable to the Agent (for the account of each Lender participating in the relevant Letter of Credit) in accordance with the provisions set out in Clause 18.6 (
Fees payable in respect of Letters of Credit
).
“
LIBOR
” means, in relation to any Loan in any currency other than Euro:
(a)
the applicable Screen Rate;
(b)
(if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or
(c)
if:
(i)
no Screen Rate is available for the currency of that Loan; or
(ii)
no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan,
the Base Reference Bank Rate,
as of, in the case of paragraphs (a) and (c) above, the Specified Time on the Quotation Day for the currency of that Loan and for a period equal in length to the Interest Period of that Loan and, if that rate is less than zero, LIBOR shall be deemed to be zero.
“
LMA
” means the Loan Market Association.
“
Loan
” means a Revolving Facility A Loan, a Revolving Facility B Loan or a US Dollar Swingline Loan.
26
“Majority Lenders
” means a Lender or Lenders whose Revolving Facility Commitments aggregate more than 66
2
/
3
per cent. of the Total Facility Commitments (or, if the Total Facility Commitments have been reduced to zero, aggregated more than 66
2
/
3
per cent. of the Total Facility Commitments immediately prior to that reduction).
“
Mandate Letter
” means the appointment letter dated 5 September 2014 among GTECH, GTECH Corporation and the Global Coordinators.
“
Margin
” means:
(a)
at any time prior to an Initial Margin Trigger Event, 1.60 per cent. per annum; and
(b)
from and including an Initial Margin Trigger Event until the Termination Date for Revolving Facility A and Revolving Facility B, such percentage per annum as is set out below in the column “Applicable Margin” in respect of the Public Debt Rating applicable below:
|
Public Debt Ratings
|
|
Applicable Margin
|
|
|
BBB/Baa2 or higher
|
|
1.00
|
%
|
|
BBB-/Baa3
|
|
1.40
|
%
|
|
BB+/Ba1
|
|
1.80
|
%
|
|
BB/Ba2
|
|
2.20
|
%
|
|
BB-/Ba3 or lower
|
|
2.75
|
%
|
Provided that
:
(a)
in the event of split Public Debt Ratings, the Applicable Margin shall be the average of the two (2) Applicable Margins;
(b)
in the event of withdrawal of a Public Debt Rating, the Applicable Margin shall be such rate which is the average of the applicable rate for the remaining Public Debt Rating and 2.75%; and
(c)
in the event of withdrawal of all Public Debt Ratings, the Applicable Margin shall be 2.75% until at least one Public Debt Rating is reinstated;
(d)
any increase or decrease in the Margin for a Loan shall take effect on the date which is the first day of the next Interest Period for that Loan following the occurrence of the relevant Margin Rating Event;
(e)
any increase or decrease in the Margin for a Loan for the purpose of calculation of the Commitment Fee shall take effect as of the date on which the relevant Margin Rating Event occurs;
27
(f)
in circumstances where there is no Loan outstanding, the Margin for the purposes of calculating any commitment fee shall nevertheless increase or decrease in accordance with the table set out in paragraph (b) above; and
(g)
notwithstanding paragraphs (a) through (f) above, when an Event of Default is continuing, the highest rate set out in the table in paragraph (b) above shall apply effective from the date on which the Event of Default occurs,
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, then the Public Debt Ratings in the table above and the references to Public Debt Ratings in paragraphs (a) through (c) above shall be interpreted on the basis of the three Public Debt Ratings such that references to “two (2)” shall be to “three (3)”.
“
Margin Rating Event
” means:
(a)
the Initial Margin Trigger Event; and
(b)
subsequently, a change of at least one of the two Public Debt Ratings issued by S&P and Moody’s;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, paragraph (b) shall be interpreted so as to mean a change of at least two of the three Public Debt Ratings.
“
Margin Stock
” means “margin stock” as defined in Regulation U.
“
Market Disruption Event
” has the meaning given to it in Clause 17.2 (
Market disruption
).
“
Material Adverse Effect
” means a material adverse effect on:
(a)
the ability of the Obligors (taken as a whole) to perform in a timely manner their payment obligations arising under the Finance Documents, the obligations arising under Clause 27 (
Financial Covenants
) or any other material obligations under any of the Finance Documents;
(b)
the business, financial condition, assets or revenues of the Group taken as a whole; or
(c)
the legality, validity or enforceability against the Obligors of any Finance Document subject always to the Legal Reservations.
“
Material Subsidiary
” means a Subsidiary of the Parent whose:
(a)
total unconsolidated assets excluding the Excluded Assets are greater than or equal to ten per cent. (10%) (if the Subsidiary of the Parent is not a Guarantor) or five per cent. (5%) (if the Subsidiary is a Guarantor) of the total consolidated assets of the Group excluding the Excluded Assets, or
(b)
unconsolidated earnings before interest, taxes, depreciation and amortization (calculated on the same basis that EBITDA of the Group is calculated but excluding the Excluded EBITDA Entries are greater than or equal to ten per cent. (10%) (if the Subsidiary of the Parent is not a Guarantor) or five per cent. (5%) (if the Subsidiary is a Guarantor) of the EBITDA of the Group excluding the Excluded EBITDA Entries.
28
A Material Subsidiary will be determined by reference to the latest balance sheet and income statement (or, if available, audited financial statements) of such Subsidiary and the latest audited consolidated financial statements of the Group. However, if a Subsidiary has been acquired since the date as at which the latest audited consolidated financial statements of the Group were prepared, the balance sheet and income statement (or, if available, audited financial statements) shall be deemed to be adjusted in order to take into account the acquisition of that Subsidiary (that adjustment being certified by an authorised officer of the Parent as representing an accurate reflection of the revised consolidated assets or EBITDA of the Group if so requested by the Agent).
“
Maximum Amount
” has the meaning given to it in Clause 24.13 (
Guarantee limitations applicable to GTECH as Parent
).
“
Merger Agreement
” means the agreement and plan of merger agreement dated 15 July 2014 and entered into among GTECH, GTECH Corporation (solely with respect to Section 5.02(a) and Article VIII), Holdco, Target Merger Sub and Target relating to the Mergers.
“
Merger Capital Reduction
” means the initial proposed court-approved reduction of capital of Holdco under the UK Companies Act 2006, to be implemented following completion of the Mergers
as described in and effected in accordance with,
the Structure Memorandum.
“
Mergers
” means the Holdco Merger and the Target Merger.
“
Month
” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a)
(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;
(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and
(c)
if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.
The above rules will only apply to the last Month of any period. “
Monthly
” shall be construed accordingly.
“
Moody’s
” means Moody’s Investor Services Limited.
“
Multiemployer Plan
” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, then or at any time during the previous five (5) years maintained for, or contributed to (or to which there is or was an obligation to contribute) on behalf of, employees of any Obligor or ERISA Affiliates.
29
“
Multiple Employer Plan
” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that:
(a)
is maintained for employees of any Obligor or any ERISA Affiliate and at least one person (other than the Obligors and the ERISA Affiliates); or
(b)
was so maintained and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
“
New Lender
” has the meaning given to it in Clause 30.1 (
Assignment and transfers by the Lenders
).
“
New York Business Day
” means a day (other than a Saturday or a Sunday) on which banks are open for general business in New York City.
“
Non-Acceptable Bank
” means any bank or financial institution that does not meet the requirements of paragraph (a) or (b) of the definition of “Acceptable Bank”.
“
Non-Consenting Lender
” has the meaning given to it in paragraph (c) of Clause 42.3 (
Replacement of Lender
).
“
Obligor
” means a Borrower or a Guarantor.
“
Obligor’s Agent
” means the Parent, appointed to act on behalf of each Obligor in relation to the Finance Documents pursuant to Clause 2.3 (
Obligors’ Agent
).
“
OFAC
” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“
Optional Currency
” means, as applicable, US Dollars, Euro, Pounds Sterling and any other currency agreed by all Lenders and, in the case of a Letter of Credit, another currency (other than the Base Currency) which complies with the conditions set out in Clause 4.3 (
Conditions relating to Optional Currencies
).
“
Original Financial Statements
” means:
(a)
in relation to the Parent, the audited consolidated financial statements of the Group for the Financial Year ended 31 December 2013; and
(b)
in relation to GTECH Corporation, its audited financial statements for its financial year ended 31 December 2013.
“
Original Guarantors
” has the meaning given to it in the preamble of this Agreement.
“
Original Lenders
” has the meaning given to it in the preamble to this Agreement.
“
Original Obligor
” means an Original Borrower or an Original Guarantor.
“
Original US Dollar Swingline Lenders
” has the meaning given to it in the preamble to this Agreement.
“
Overall Facility A Commitment
” of a Lender means:
30
(a)
its Revolving Facility A Commitment; or
(b)
in the case of a US Dollar Swingline Lender which does not have a Revolving Facility A Commitment, the Revolving Facility A Commitment of a Lender which is its Affiliate.
“
PBGC
” means the Pension Benefit Guaranty Corporation of United States of America established pursuant to Section 4002 of ERISA (or any successor).
“
Paper Form Lender
” has the meaning given to it in paragraph (a) of Clause 37.7 (
Use of Websites
).
“
Parent
” means GTECH and, following completion of the Holdco Merger, Holdco.
“
Pari Passu Indebtedness
” has the meaning given to it in Clause 28.23 (
Security following Debt Ratings decrease
).
“
Participating Member State
” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“
Party
” means a party to this Agreement.
“
Permanent Establishment
” means any fixed base of business (
stabile organizzazione
) regulated by article 162 of Presidential Decree No. 917 of 22 December 1986, Article 5 of the Organization for Economic Cooperation and Development Model Tax Convention and or any equivalent provision provided for by any relevant legislation.
“
Permitted Acquisition
” means any and all of the following:
(a)
any acquisition which constitutes a Permitted Transaction;
(b)
an acquisition by a member of the Group of an asset sold, leased, transferred or otherwise disposed of by another member of the Group in circumstances constituting a Permitted Disposal;
(c)
an acquisition of shares or securities pursuant to a Permitted Acquisition Share Issue;
(d)
an acquisition of securities or other investments which are Cash Equivalent Investments;
(e)
an acquisition in circumstances constituting a Joint Venture or the incorporation of a Joint Venture;
(f)
the incorporation or other organization of a person who upon incorporation or other organization becomes a member of the Group (and such incorporation may be by way of subscription for shares in cash or a transfer of assets permitted by this Agreement in lieu of cash); or
(g)
an acquisition by way of purchase, merger, consolidation or otherwise, of (A) at least a controlling interest in a person or (B) a business, line of business, division, or other business unit of a person, or an undertaking carried on as a going concern, but only if:
31
(i)
no Default is continuing on the closing date for the acquisition or would occur as a result of the acquisition;
(ii)
the acquired company, business or undertaking is (A) principally engaged in any part of the Business or is a Holding Company with respect to a company which is principally engaged in any part of the Business or (B) is empowered under its constitutional documents or by-laws to be engaged in any part of the Business; and
either
(A)
the consideration (including associated costs and expenses) for the acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in the acquired company (or any such business) at the date of acquisition (when aggregated with the consideration (including associated costs and expenses) for any other Permitted Acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in any such acquired companies or businesses at the time of acquisition (A) does not exceed in aggregate in any Financial Year of the Parent, ten per cent. (10%) of the consolidated total assets of the Group and (B) does not exceed in aggregate at any time, US$2,250,000,000 (or its equivalent in other currencies) unless and until the Group obtains a Public Debt Rating upgrade to BBB by S&P and Baa2 by Moody’s, in which case the cap of US$2,250,000,000 (or its equivalent in other currencies) will cease to apply for such time as the Group retains such ratings upgrade;
or
(B)
upon confirmation of the acquisition, each of Moody’s and S&P disclose publicly that the Group has a Public Debt Rating and its indebtedness has, in each case, a credit rating of at least Baa3 and BBB-, respectively;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (g) shall be interpreted so as to mean the date on which at least two of the three Public Debt Ratings issued by the Rating Agencies are so upgraded or disclosed.
“
Permitted Acquisition Share Issue
” means:
(a)
an issue of shares constituting a Permitted Transaction;
(b)
an issue of shares by one wholly owned Subsidiary of the Parent to its direct Holding Company which is another wholly owned Subsidiary of the Parent or to the Parent (or to another member of the Group which is the shareholder); or
(c)
an issue of shares by a Subsidiary of the Parent to the member of the Group which is its direct Holding Company and any minority shareholder in the relevant Subsidiary.
“
Permitted Disposal
” means any sale, lease, licence, transfer or other disposal:
(a)
which constitutes a Permitted Transaction;
32
(b)
of trading stock or inventory, supplies, materials, assets or cash made by any member of the Group in the ordinary course of business of the disposing entity;
(c)
of any asset by a member of the Group (the “
Disposing Company
”) to another member of the Group (the “
Acquiring Company
”), but if:
(i)
the Disposing Company is an Obligor, the Acquiring Company must also be an Obligor; and
(ii)
the Disposing Company is a Guarantor, the Acquiring Company must be a Guarantor guaranteeing at all times an amount no less than that guaranteed by the Disposing Company,
it being understood that (A) if any of the assets being sold, leased, licensed, transferred or otherwise disposed of are at such time subject to Security in favour of the Lenders, then the Agent is reasonably satisfied that the Lenders will continue to benefit from the same or equivalent Security; and (B) any disposal of assets by a member of the Group to another member of the Group which sale is made as an intermediate step for the purpose of effecting a subsequent disposal to a third party that is not a member of the Group and that is otherwise permitted under the definition of “Permitted Disposal” shall not be considered for the purposes of this sub-paragraph (c) or sub-paragraph (i) as long as such subsequent disposal is completed within a period of two (2) months from the date of such first disposal. For the avoidance of doubt, any subsequent disposal to a third party that is not a member of the Group shall be considered for the purposes of sub-paragraph (i);
(d)
of assets (other than shares), in exchange for other assets substantially comparable or superior as to type, value or quality;
(e)
of (i) obsolete, worn out, inefficient or redundant vehicles, plant fixtures, equipment or other property or (ii) leases or subleases of Real Property (including surplus office and parking space);
(f)
of Cash Equivalent Investments for cash or in exchange for other Cash Equivalent Investments;
(g)
constituted by a licence of intellectual property rights permitted by Clause 28.14 (
Intellectual Property
);
(h)
by a member of the Group of any of its receivables on non-recourse terms where the relevant sale or disposal of such receivables does not constitute Financial Indebtedness for the purposes of the relevant applicable Accounting Principles and;
provided that
it is on normal commercial terms and in the ordinary course of business; or
(i)
of assets for cash where the greater of the fair market value and net consideration receivable (when aggregated with the greater of the fair market value and net consideration receivable for any other sale, lease, licence, transfer or other disposal not allowed under the preceding paragraphs or as a Permitted Merger) does not exceed (A) in any Financial Year of the Parent, five per cent. (5%) of the consolidated total assets of the Group or (B) at any time, US$1,125,000,000 (or its equivalent in other currencies),
33
it being understood that nothing in this Agreement will be taken to permit the disposal of a Guarantor or Borrower (whether by Third Party Disposal or otherwise) save in circumstances where prior to the disposal the relevant Guarantor or Borrower resigns as Guarantor or Borrower (or both, as they case may be) in accordance with paragraph (a) of Clause 31.3 (
Resignation of an Obligor
), satisfies the conditions set out in and has its resignation is accepted pursuant to, paragraph (b) of Clause 31.3 (
Resignation of an Obligor
).
“
Permitted Guarantee
” means:
(a)
any guarantee or counter-indemnity by a member of the Group which constitutes a Permitted Transaction;
(b)
the endorsement of negotiable instruments in the ordinary course of business;
(c)
any guarantee guaranteeing performance by a member of the Group in relation to an obligation or liability (other than an obligation or liability in respect of Financial Indebtedness) which arises in the ordinary course of business;
(d)
any counter-indemnities for performance or similar bond or letters of credit, or any guarantees, in each case guaranteeing performance by a member of the Group in relation to a liability (other than a liability in respect of Financial Indebtedness, save to the extent arising under the relevant performance or similar bond, letter of credit or guarantee itself) which arises in the ordinary course of business or by operation of law, including by way of example and without limitation, counter-indemnities for guarantees or bonds issued on behalf of any member of the Group in the ordinary course of business in respect of tax claims or otherwise as a result of any legal proceedings brought against any member of the Group, in each case which are being contested in good faith;
(e)
any guarantee by a Guarantor of Financial Indebtedness not restricted under Clause 28.12 (
Priority Financial Indebtedness
), including any guarantee issued pursuant to the terms of this Agreement;
(f)
any guarantee given in respect of the netting or set-off arrangements permitted pursuant to paragraph (d) of the definition of “Permitted Security”; or
(g)
any other guarantee made by any member of the Group so long as the aggregate amount of all such guarantees outstanding does not exceed US$75,000,000 (or its equivalent in other currencies) at any time.
“
Permitted Loan
” means:
(a)
any loan extended or made which constitutes a Permitted Transaction;
(b)
any trade credit extended by any member of the Group to its customers on normal commercial terms and in the ordinary course of business;
(c)
any financing extended in connection with the sale of products manufactured by a member of the Group by (i) a member of the Group or (ii) a distributor of products manufactured by a member of the Group to a customer, in each case on normal commercial terms and in the ordinary course of such member’s trade or business;
34
(d)
a loan extended or made by a member of the Group to another member of the Group;
(e)
a loan extended or made by a member of the Group to an employee or director of any member of the Group if the amount of that loan when aggregated with the amount of all loans outstanding to employees and directors by members of the Group does not exceed US$15,000,000 (or its equivalent in other currencies) at any time; and
(f)
loans extended or made by any member of the Group (other than a loan made by a member of the Group to another member of the Group) so long as the aggregate amount of all such loans outstanding does not exceed US$35,000,000 (or its equivalent in other currencies) at any time.
“
Permitted Merger
” means:
(a)
any solvent amalgamation, merger, consolidation, intra-group demerger, corporate reconstruction, liquidation or reorganisation which constitutes a Permitted Transaction;
(b)
any amalgamation, merger or consolidation by and between Obligors on a solvent basis or any intra-group demergers or corporate reconstructions by Obligors on a solvent basis;
provided that
in the case of a merger between a Borrower and an Obligor which is not a Borrower, such Borrower shall be the surviving entity, obtain all of the rights and assume all of the obligations and liabilities of the other Obligor and confirm all existing Security granted by such other Obligor and such Security is not materially and adversely affected;
(c)
any amalgamation, merger or consolidation by and between an Obligor and any member of the Group on a solvent basis which is not an Obligor;
provided that
either (i) the Obligor is the surviving entity, obtains all of the rights and assumes all of the obligations and liabilities of the other member of the Group and confirms all existing Security granted by such other member of the Group or (ii) the non-Obligor is the surviving entity, accedes to this Agreement as a Borrower or a Guarantor, as applicable, obtains all of the rights and assumes all of the obligations and liabilities of the other member of the Group and confirms all existing Security previously granted by such Obligor and such Security is not materially and adversely affected;
(d)
any amalgamation, merger or consolidation by and between members of the Group which are not Obligors;
(e)
any intra-group de-merger, corporate reconstruction, liquidation or reorganisation of any member of the Group which is not an Obligor; and
(f)
the Merger Reduction of Capital.
“
Permitted Restricted Payment
” means the any of the following:
(a)
a Permitted Transaction;
(b)
subject to the proviso below, for the Financial Year ending on 31 December 2014, any Restricted Payments;
provided that
the aggregate amount of all Restricted Payments made in the Financial Year ending on 31 December 2014 shall not exceed the applicable limit set forth in paragraph (c) and which shall reduce the applicable limit set forth in paragraph (c) for the Financial Year ending on 31 December 2015;
35
(c)
subject to the proviso below, for the Financial Year ending on 31 December 2015 and each Financial Year thereafter, Restricted Payments in an aggregate amount up to:
(i)
US$400,000,000 for each Financial Year if the Public Debt Ratings are equal to or higher than BB+ and Ba1;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BB+ or Ba1 as applicable; and
(ii)
US$300,000,000 for each Financial Year if any Public Debt Rating is lower than BB+ or Ba1 or any Public Debt Rating is withdrawn;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (ii) shall be interpreted to mean two of the three Public Debt Ratings issued by the Rating Agencies being lower than BB+ or Ba1 as applicable,
subject in each case to the Parent certifying
pro forma
compliance with ninety per cent (90%) of the Total Net Debt to EBITDA ratio applicable for the immediately preceding Relevant Period pursuant to Clause 27.2(b) (
Financial Conditions
);
(d)
subject to the proviso below, Rescission Payments in an aggregate amount which is greater than twenty per cent. (20%) of the aggregate share capital of GTECH and which, with respect to the period starting on the date of this Agreement and ending on 30 June 2015, do not exceed an aggregate amount (in addition to the limits set forth in paragraph (c) above) US$400,000,000;
provided that
, for the period starting on the date of this Agreement and ending on 31 December 2015, the aggregate amount of Restricted Payments and Rescission Payments under paragraphs (b), (c) and (d) shall not exceed:
(i)
US$690,000,000 if the Public Debt Ratings are equal to or higher than BB+ or Ba1;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BB+ or Ba1 as applicable; and
(ii)
US$540,000,000 if the Public Debt Ratings are lower than BB+ or Ba1 or any Public Debt Rating is withdrawn;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (ii) shall be interpreted to mean two of the three Public Debt Ratings issued by the Rating Agencies being lower than BB+ or Ba1 as applicable;
(e)
for the period starting on 1 January 2016 and ending on the Final Maturity Date and for so long as the Public Debt Ratings are equal to or higher than BB+ and Ba1 (in addition to amounts permitted under paragraphs (a) through (d) above), Share Buy Backs in an aggregate amount up to US$150,000,000;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (e) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BB+ or Ba1 as applicable;
(f)
any Shareholder Payments in the ordinary course of business and on market terms in an aggregate amount up to US$3,000,000 in any Financial Year; and
36
(g)
any Restricted Payments made in connection with share capital of the Parent owned by management of the Group as part of an employee compensation plan, including, without limitation, stock based compensation and management incentive plans.
“
Permitted Security
” means:
(a)
any Security granted pursuant to
Clause 28.23(a) (
Security following Debt Ratings Decrease
);
(b)
any Security or Quasi-Security arising as a result of a Permitted Transaction and subject always to Clause 28.23(a) (
Security following Debt Ratings Decrease
);
(c)
any lien arising by operation of law and in the ordinary course of its trading and not as a result of any default or omission on the part of any member of the Group;
(d)
Security constituted by any netting or set off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances (other than cash collateral) of members of the Group;
provided that
such arrangement does not (i) permit or require credit balances of Obligors to be netted or set off against debit balances of non-Obligors or (ii) give rise to other Security over the assets of Obligors in support of the liabilities of non-Obligors;
(e)
any Security or Quasi-Security over or affecting any assets acquired by a member of the Group after the date of this Agreement if:
(i)
the Security or Quasi-Security was not created in contemplation of the acquisition of that asset by a member of the Group;
(ii)
the principal amount secured has not been increased in contemplation of or since the acquisition of that asset by a member of the Group and is not guaranteed by a member of the Group; and
(iii)
the Security or Quasi-Security is removed or discharged within three (3) months of the date of acquisition of such asset;
(f)
any Security or Quasi-Security over or affecting any asset of any company which becomes a member of the Group after the date of this Agreement, where the Security or Quasi-Security is created prior to the date on which that company becomes a member of the Group if
(i)
the Security or Quasi-Security was not created in contemplation of the acquisition of that company;
(ii)
the principal amount secured has not increased in contemplation of or since the acquisition of that company; and
(iii)
the Security or Quasi-Security is removed or discharged within three (3) months of the date of acquisition of such asset;
(g)
any Security arising under any retention of title, hire purchase or conditional sale arrangement in respect of goods or assets supplied to any member of the Group in the ordinary course of the trading of such Group member and on the supplier’s standard or
37
usual terms in respect of the goods or assets supplied (and not arising as a result of any default or omission by any member of the Group);
(h)
any Security or Quasi-Security arising as a result of any disposal which is a Permitted Disposal;
(i)
any Security constituted by rights of set off existing in the ordinary course of trading activities between any member of the Group and its respective suppliers or customers (and not as a result of any default or omission by any member of the Group);
(j)
any rights of set-off or netting on market standard terms arising under derivative transactions not prohibited by Clause 28.15 (
No Speculative Hedging Arrangements
);
(k)
any Security over cash or goods or documents of title to goods and insurances in favour of the Issuing Agent by a member of the Group arising in the ordinary course of its trade or as a result of Clause 8.6 (
Cash cover by a Borrower
) (and not by reason of a default or omission by any member of the Group);
(l)
any Security arising pursuant to an order of attachment or injunction restraining disposal of assets or similar legal process arising in connection with court proceedings which are contested by any member of the Group in good faith by appropriate proceedings with a reasonable prospect of success and which legal process does not constitute a Default;
(m)
any Security arising (other than by way of affirmative action taken by or in favour of any taxation authority or any government authority or organization) in respect of Taxes, assessments or governmental charges which are either (i) being contested by the relevant member of the Group in good faith by appropriate proceedings and with a reasonable prospect of success, with respect to which appropriate reserves have been made on the relevant financial statement of the subject member of the Group, or (ii) not yet due and payable;
(n)
any Security arising in connection with, and deposits made to secure, the payment and performance of bids, trade contracts (other than for borrowed money), contracts with respect to the business of the Group, leases, statutory obligations, surety and appeal bonds, performance bonds, indemnity agreements in favour of issuers of bonds and other obligations of a like nature, and rights of usufruct and similar rights to continued use and possession of lottery equipment or other property in favour of lottery customers, in each case incurred in the ordinary course of business; and
(o)
any Security not permitted by Clause 28.7 (
Negative Pledge
) securing Financial Indebtedness incurred in the ordinary course of business of the Group which in aggregate does not at any time exceed US$125,000,000 (or its equivalent in other currencies).
“
Permitted Transaction
” means:
(a)
any transaction set out in the Structure Memorandum, as well as any other transaction which is necessary as a consequence of or ancillary to the implementation of such
transactions
, including, without limitation, the payment of any Rescission Payments in an aggregate amount which is less than or equal to twenty per cent. (20%) of the aggregate share capital of GTECH;
38
(b)
any loans, bond or other financing contracted or incurred by any member of the Group constituting Pari Passu Indebtedness, including, without limitation, pursuant to the Bridge Facilities, subject, always to Clause 28.25 (
MFN to Financial Covenants and Mandatory Prepayments
);
(c)
Security granted by any member of the Group in favour of the creditors of Pari Passu Indebtedness, subject always to Clause 28.23 (
Security following Debt Ratings Decrease
); and
(d)
any guarantee granted by any member of the Group in favour of the creditors of Pari Passu Indebtedness, subject always to Clause 28.24(c) (
Guarantor Threshold Test and Additional Guarantors
).
“
Plan
” means a Single Employer Plan or a Multiple Employer Plan.
“
Platform
” has the meaning given to it in Clause 26.7 (
Posting on electronic system
).
“
Principal Shareholders
” means De Agostini S.p.A. (a company incorporated in Italy as a
società per azioni
), its Subsidiaries or B&D Holding, or any other entity;
provided that
in each case, it is controlled by one or more of the beneficial holders,
provided further that
for the purposes of this definition, an entity or B&D Holding shall be treated as being controlled, directly or indirectly, by any such holder(s) if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) have or has (as applicable) the power to (i) appoint or remove all, or the majority, of its directors or other equivalent officers or (ii) direct its operating and financial policies. For the purpose of this definition, “
beneficial holder
” means each of the beneficial holders that directly or indirectly control B&D Holding as at 4 November 2014 (an “
original
beneficial holder
”) and any spouse, legal or testamentary heir, legal or testamentary executor and legal or testamentary administrator of an original beneficial holder.
“
Prohibited Jurisdiction
” means:
(a)
the United States of America, Hong Kong, Israel and Turkey;
(b)
any jurisdiction in which a licence is required to conduct online gaming activities and in which the Group does not possess the relevant licence; and
(c)
each other jurisdiction which the Group reasonably believes, based on advice of reputable and experienced counsel, prohibits, or is reasonably capable of enforcing against any member of the Group prohibitions on, internet gaming.
“
Protected Party
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Public Debt Rating
” means each solicited long-term credit rating of the Parent issued by a Rating Agency for an issue of debt or debt securities issued or guaranteed by, the Parent, where such rating is based primarily on the unsecured credit risk of the Parent.
“
Qualified ECP Guarantor
” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding US$10,000,000 at the time the relevant Guarantee or grant of the relevant Security becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible
39
contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“
Qualifying Lender
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Quasi-Security
” has the meaning given to it in Clause 28.7 (
Negative pledge
).
“
Quotation Day
” means:
(a)
the second TARGET Day before the first day of a Revolving Facility for a Loan denominated in Euro; or
(b)
the second Business Day before the first day of a Revolving Facility for a Loan denominated in any currency other than Euro.
“
Rating Agencies
” means Fitch, Moody’s and S&P and “
Rating Agency
” means any of them.
“
Real Property
” means:
(a)
any freehold, leasehold or immovable property; and
(b)
any buildings, fixtures, fittings, fixed plant or machinery from time to time situated on or forming part of that freehold, leasehold or immovable property.
“
Recovering Finance Party
” has the meaning given to Clause 34.1 (
Payments to Finance Parties
).
“
Regulation T
”, “
Regulation U
” or “
Regulation X
” means Regulation T, U or X, as the case may be, of the Board of Governors of the Federal Reserve System of the United States, as from time to time in effect and all official rulings and interpretations thereunder or thereof.
“
Related Fund
” in relation to a trust, fund or other entity (the “
first fund
”), means another trust, fund or other entity which has the same fund manager or asset manager as is owned by the same person as the first trust, fund or other entity.
“
Related Parties
” means, with respect to any person, such person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such person and of such person’s Affiliates.
“
Relevant Interbank Market
” means, in relation to Euro, the European interbank market and, in relation to any other currency, the London interbank market.
“
Relevant Jurisdiction
” means, in relation to an Obligor:
(a)
its jurisdiction of incorporation; and
(b)
any jurisdiction where it conducts its business.
“Relevant Sub-Participant”
means any sub-participant who, under Italian law or the application of the Organization for Economic Cooperation and Development’s guidance relating to the meaning of “beneficial ownership” as set out in the Organization for Economic Cooperation and Development’s Model Tax Convention (as amended from time to time), is
40
required to be treated for tax purposes as the beneficial owner of any interest payable under any Finance Document.
“
Relevant Tax Jurisdiction
” means, in relation to any Obligor, the jurisdiction where it is resident, or deemed to be resident for Tax purposes.
“
Renewal Request
” means a written notice delivered to the Agent in accordance with Clause 6.8 (
Renewal of a Letter of Credit
).
“
Repeating Representations
” means the representations in Clauses 25.2 (
Status
) to 25.7 (
Governing Law and enforcement
) (inclusive), Clause 25.10 (
No Default
), Clause 25.11 (
No Misleading information
), Clause 25.13 (
No proceedings pending or threatened
), Clause 25.16 (
US Government Regulations
), Clause 25.17 (
ERISA
), Clause 25.20 (
US Anti-Terrorism Laws
), Clause 25.21 (
US Margin Regulations
), Clause 25.22 (
Sanctions, Anti-Corruption and other laws
), and Clause 25.23 (
Gaming
).
“
Replacement Lender
” has the meaning given to it in Clause 42.3(c) (
Replacement of Lender
);
“
Representative
” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
“
Rescission Payments
” mean any payments which GTECH is required to make to its shareholders in connection with the exercise of the right of rescission (
recesso
) by its shareholders in the context of the Holdco Merger.
“
Resignation Letter
” means a letter substantially in the form set out in Schedule 7 (
Form of Resignation Letter
).
“
Restricted
Payment
” means a Distribution, a Share Buy Back or a Shareholder Payment.
“
Retiring Guarantor
” has the meaning given to it in Clause 24.9 (
Release of Guarantors’ right of contribution
).
“
Revolving Facility
” means Revolving Facility A or Revolving Facility B.
“
Revolving Facility A
” means the revolving credit facility made available under this Agreement as described in paragraph (a)(i) of Clause 2.1 (
The Facilities
).
“
Revolving Facility B
” means the revolving credit facility made available under this Agreement as described in paragraph (a)(ii) of Clause 2.1 (
The Facilities
).
“
Revolving Facility A Commitment
” means:
(a)
in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading “Revolving Facility A Commitment” in Part II (
The Original Lenders
) of Schedule 1 (
The Original Parties
) and the amount of any other Revolving Facility A Commitment transferred to it under this Agreement; and
(b)
in relation to any other Lender, the amount in the Base Currency of any Revolving Facility A Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
41
“
Revolving Facility A Loan
” means a loan made or to be made under Revolving Facility A or the principal amount outstanding for the time being of that loan.
“
Revolving Facility B Commitment
” means:
(a)
in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading “Revolving Facility B Commitment” in Part IIA or Part IIB (
The Original Lenders
) of Schedule 1 (
The Original Parties
) and the amount of any Revolving Facility B Commitment transferred to it under this Agreement; and
(b)
in relation to any other Lender, the amount in the Base Currency of any Revolving Facility B Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
“
Revolving Facility B Loan
” means a loan made or to be made under Revolving Facility B or the principal amount outstanding for the time being of that loan.
“
Revolving Facility Commitment
” means a Revolving Facility A Commitment or a Revolving Facility B Commitment;
“
Revolving Facility Loan
” means a Revolving Facility A Loan or a Revolving Facility B Loan.
“
Rollover Loan
” means one or more Loans:
(a)
made or to be made on the same day that:
(i)
a maturing Loan is due to be repaid; or
(ii)
a demand by the Agent pursuant to a drawing in respect of a Letter of Credit is due to be met;
(b)
the aggregate amount of which is equal to or less than the maturing Loan or the relevant claim in respect of that Letter of Credit;
(c)
in the same currency as the maturing Loan (unless Clause 10.2 (
Unavailability of a currency
) applies) or the relevant claim in respect of that Letter of Credit; and
(d)
made or to be made to the same Borrower for the purpose of:
(i)
refinancing that maturing Loan; or
(ii)
satisfying the obligations of the relevant Borrower to pay the amount of a claim under the Letter of Credit to the Agent for the Issuing Agent (as agent for each of the Lenders).
“
S&P
” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc.
“
Sanctions
” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by a Sanctions Authority.
42
“
Sanctions Authority
” means (i) the US government; (ii) the European Union; (iii) the United Kingdom; (v) the respective governmental institutions and agencies of any of the foregoing, including without limitation, OFAC, the US Department of State and Her Majesty’s Treasury; or (vi) the United Nations Security Council.
“
Sanctioned Country
” means, at any time, a country or territory which is itself the subject or target of any country-wide or territory-wide Sanctions (at the time of this Agreement, Cuba, Iran, North Korea, North Sudan, South Sudan and Syria).
“Sanctioned Person
” means, at any time, (a) any person listed in any Sanctions-related list of designated persons maintained by a Sanctions Authority, (b) any person operating, organized or resident in a Sanctioned Country or (c) any person owned or controlled by any such person or persons.
“
Screen Rate
” means:
(a)
in relation to LIBOR, the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for the relevant currency and period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate); and
(b)
in relation to EURIBOR, the euro interbank offered rate administered by the Banking Federation of the European Union (or any other person which takes over the administration of that rate) for the relevant period displayed on page EURIBOR01 of the Reuters screen (or any replacement Reuters page which displays that rate),
or in each case, on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Parent.
“
Security
” means a mortgage, charge, lien, encumbrance, pledge or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
“
Self-Declaration Form
” means the self-declaration form substantially in the form set out in Schedule 16 (
Self Declaration Form
) of this Agreement.
“
Security Documents
” has the meaning given to that term in Clause 28.23 (
Security following Date Ratings Decrease
).
“
Separate Loan
” has the meaning given to that term in Clause 9 (
Repayment
).
“
Share Buy Back
” means the redemption, repurchase, defeasement, retirement or repayment of any of the Parent’s share capital (including under any transaction pursuant to which shares issued to a third party are taken back into treasury) or the resolving to do so.
“
Shareholder Payment
” means the payment of any management, advisory or other fee to or to the order of any of the shareholders of the Parent.
43
“
Single Employer Plan
” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that:
(a)
is maintained for employees of any Obligor or any ERISA Affiliate and no person other than the Obligors and the ERISA Affiliates; or
(b)
was so maintained and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.
“
Special Notice Currency
” means, at any time, an Optional Currency other than the currency of a country that is a member of the Organization for Economic Cooperation and Development at such time located in North America or Europe.
“
Specified Lender
” means any Lender that notifies the relevant Borrower and the Agent that it is a Specified Lender.
“
Specified Time
” means a time
determined in accordance with Schedule 9 (
Timetables — Loans — Notices to the Agent
).
“
Structure Memorandum
” means the “Project Cleopatra Structure Memorandum”, together with the annexes, dated 31 October 2014, as may be updated from time to time to reflect the implementation of the Transactions subject to the provisions of Clause 28.26 (
Structure Memorandum
).
“
Subrogation Rights
” has the meaning given to it in paragraph (a)(ii) of Clause 24.8 (
Deferral of Guarantor’s rights
).
“
Subsidiary
” means, in relation to any company, corporation or other legal entity (a “
holding company
”), a company, corporation or other legal entity:
(a)
which is controlled, directly or indirectly, by the holding company;
(b)
more than half the issued share capital of which is beneficially owned directly or indirectly by the holding company;
(c)
which is a subsidiary of another Subsidiary of the holding company; or
(d)
whose financial statements are in accordance with applicable law and generally accepted accounting principles applicable to the Parent consolidated with those of that company or corporation.
For the purposes of this definition, a company or corporation shall be treated as being controlled by another entity if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) has the power to (a) appoint or remove all, or the majority, of its directors or other equivalent officers or (b) direct its operating and financial policies.
“
Super Majority Lenders
” means a Lender or Lenders whose Revolving Facility Commitments aggregate more than eighty five per cent. (85%) of the Total Facility Commitments (or, if the Total Facility Commitments have been reduced to zero, aggregated more than eighty five per cent. (85%) of the Total Facility Commitments immediately prior to that reduction).
44
“
Swap Obligation
” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“
Swingline
Agent’s Fee Letter
” means the fee letter dated on or about the date of this Agreement between the Swingline Agent and the Borrowers.
“
Target
” means International Game Technology, a corporation organised under the laws of Nevada.
“
Target Accession Date
” means such date on which, following the completion of the Mergers, Target accedes to this Agreement as an Additional Borrower pursuant to Clause 31.2 (
Additional Obligors
).
“
Target Merger
” means the series of transactions which consist principally of the merger of
Target Merger Sub
with and into Target, in accordance with the steps set out in the Structure Memorandum.
“
Target Merger Sub
” means Georgia Worldwide Corporation, a corporation organized under the laws of Nevada and a wholly owned Subsidiary of Holdco.
“
TARGET2
” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007.
“
TARGET Day
” means any day on which TARGET2 is open for the settlement of payment in Euro.
“
Tax
” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
“
Tax Credit
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Tax Deduction
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Tax Payment
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Term
” means each period determined under this Agreement for which the Issuing Agent (as agent for each of the Lenders) or any Lender is under a liability under a Letter of Credit.
“
Terminated Lender
” has the meaning given to it in paragraph (d) of Clause 12.6 (
Right of cancellation and repayment in relation to a single Lender or the Issuing Agent
)
.
“
Third Parties Act
” has the meaning given to it in Clause 1.3 (
Third Party Rights
).
“
Third Party Disposal
” means the disposal of an Obligor to a person which is not a member of the Group (and the Borrowers have confirmed this is the case) where that disposal is permitted under Clause 28.8 (
Disposals
) or made with the approval of the Majority Lenders.
“
Total Facility Commitments
” means the aggregate of the Revolving Facility Commitments, being US$1,800,000,000 and €1,050,000,000 at the date of this Agreement.
45
“
Total Net Debt
” has the meaning given to it in Clause 27.1 (
Financial definitions
).
“
Total Net Interest Costs
” has the meaning given to it in Clause 27.1 (
Financial definitions
).
“
Total US Dollar Swingline Commitments
” means the aggregate of the US Dollar Swingline Commitments, being US$100,000,000 at the date of this Agreement.
“
Transactions
” means the Italian Reorganisation and the Mergers.
“
Transfer Certificate
” means a certificate substantially in the form set out in Schedule 4 (
Form of Transfer Certificate
) or any other form agreed between the Agent and the Borrowers.
“
Transfer Date
” means, in relation to any assignment or transfer, the later of:
(a)
the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and
(b)
the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate.
“
Treasury Transaction
” means any derivative transaction entered into in connection with protection against or benefit from fluctuations in any rate or price including, for the avoidance of doubt, foreign exchange transactions; provided, however, that, with respect to any Guarantor, all obligations under Hedging Documents guaranteed by such Guarantor shall exclude all Excluded Swap Obligations.
“
Treaty Lender
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
UK Borrower
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
UK Non-Bank Lender
” has the meaning ascribed thereto in Clause 19.1 (Definitions).
“
UK Treaty Lender
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
UK Treaty State
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
United States Person
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
“
Unpaid Sum
” means any sum due and payable but unpaid by an Obligor under the Finance Documents.
“
US
” and “
United States
” means the United States of America, its territories and possessions.
“
USA Patriot Act
” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 of the United States.
“
US Bankruptcy Law
” means the United States Bankruptcy Code (Title 11 of the United States Code), any other United States federal or state bankruptcy, insolvency or similar law.
“
US Borrower
” has the meaning ascribed thereto in Clause 19.1 (
Definitions
).
46
“
US Dollars
” or “
US$
” means the lawful currency for the time being of the United States of America.
“
US Dollar Swingline Commitment
” means:
(a)
in relation to an Original US Dollar Swingline Lender, the amount in US Dollars set opposite its name under the heading “US Dollar Swingline Commitment” in Part IIB of Schedule 1 (
The Original Parties
) and the amount of any other US Dollar Swingline Commitment transferred to it under this Agreement; and
(b)
in relation to any other US Dollar Swingline Lender, the amount of any US Dollar Swingline Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
“
US Dollar Swingline Facility
” means the US Dollar swingline loan facility made available under this Agreement as described in Clause 11 (
US Dollar Swingline Facility
).
“
US Dollar Swingline Lender
” means:
(a)
an Original US Dollar Swingline Lender; or
(b)
any other person that becomes a US Dollar Swingline Lender after the date of this Agreement in accordance with Clause 30 (
Changes to the Lenders
),
which in each case has not ceased to be a Party in accordance with the terms of this Agreement.
“
US Dollar Swingline Loan
” means a loan made or to be made under the US Dollar Swingline Facility or the principal amount outstanding for the time being of that loan.
“
US Guarantor
” means a Guarantor that is organized, incorporated or formed under the laws of the United States or any State thereof (including the District of Columbia).
“
US Obligor
” means a US Borrower or a US Guarantor.
“
US Solvent
” means, with respect to any person on a particular date, that on such date:
(a)
the fair value of the property of such person and its Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including contingent liabilities, of such person and its Subsidiaries on a consolidated basis;
(b)
the present fair saleable value of the assets of such person and its Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the liability of such person and its Subsidiaries on a consolidated basis on their debts as they become absolute and matured;
(c)
such person and its Subsidiaries on a consolidated basis do not intend to, and do not believe that they will, incur debts or liabilities beyond the ability of such person and its Subsidiaries on a consolidated basis to pay such debts and liabilities as they mature; and
47
(d)
such person and its Subsidiaries on a consolidated basis are not engaged in business or a transaction, and are not about to engage in business or a transaction, for which the property of such person and its Subsidiaries on a consolidated basis would constitute an unreasonably small capital.
The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
For purposes of the foregoing, (i) “debt” means liability on a “claim” and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
“
US Tax Obligor
” means:
(a)
a Borrower which is resident for tax purposes in the US; or
(b)
an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
“
Utilisation
” means a Loan or a Letter of Credit (including a renewal of a Letter of Credit).
“
Utilisation Date
” means the date on which a Utilisation is made.
“
Utilisation Request
” means a notice substantially in the relevant form set out in Parts IA, IB or IC of Schedule 3 (
Requests
).
“
VAT
” means:
(a)
any tax imposed in compliance with the council directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112) (including, in relation to the United Kingdom, value added tax imposed by the Value Added Tax Act 1994 and supplemental legislation and regulations and, in relation to Italy, value add tax imposed by Presidential Decree No. 633 of 26 October 1972 and Legislative Decree No. 331 of 30 August 1993 and supplemental legislation and regulations); and
(b)
any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or elsewhere.
“
Website Lenders
” has the meaning given to it in Clause 37.7 (
Use of websites
).
“
Withdrawal Liability
” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.
1.2
Construction
(a)
Unless a contrary indication appears, a reference in this Agreement to:
48
(i)
the “
Agent
”, any “
Arranging Party
”, any “
Borrower
”, any “
Finance Party
”, any “
Guarantor
”, and “
Hedging Bank
”, the “
Issuing Agent
”, any “
Lender
”, any “
Obligor
”, any “
Party
”, any “
Swingline Agent
” or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees;
(ii)
a document in “
agreed form
” is a document which is on terms previously agreed in writing by or on behalf of the relevant Obligors and the Agent or, if not so agreed, is in the form agreed by or on behalf of the relevant Obligors and the Agent;
(iii)
“
assets
” includes present and future properties, revenues and rights of every description (including, without limitation shares and receivables);
(iv)
a “
Finance Document
” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;
(v)
“
guarantee
” means (other than in Clause 24 (
Guarantee and Indemnity
)) any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness;
(vi)
the words “
including
” and “
in particular
” shall be construed as illustrative and not as limiting the generality of any preceding words;
(vii)
“
indebtedness
” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(viii)
an “
Interest Period
” includes each period determined under this Agreement by reference to which interest on a US Dollar Swingline Loan is calculated;
(ix)
a “
Lender
” includes a US Dollar Swingline Lender unless the context otherwise requires;
(x)
a “
person
” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;
(xi)
“
prepay
” shall have the meaning given to it in Clause 6.1 (
General
);
(xii)
a “
regulation
” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation as well as guidelines or rules of conduct adopted by any member of the Group under applicable laws (including but not limited to “
Modelli di organizzazione e gestione
” and the
49
“
Codici Etici
” provided for under Legislative Decree no. 231 dated June 8, 2001 of Italy);
(xiii)
“
repay
” shall have the meaning given to it in Clause 6.1 (
General
);
(xiv)
a Borrower providing “
cash cover
” for a Letter of Credit means that Borrower paying an amount in the currency of the Letter of Credit to an interest-bearing account located in London or New York in the name of the relevant Borrower over which security has been granted for the benefit of the relevant Issuing Agent and the following conditions are met:
(A)
the account is with the Agent or an Affiliate (if the cash cover is to be provided for all the Lenders) or the Issuing Agent or an Affiliate; and
(B)
subject to paragraph (b) of Clause 8.6 (
Cash Cover by Borrower
) withdrawals from the account may only be made to pay the relevant Finance Party amounts due and payable to it under this Agreement in respect of that Letter of Credit until no amount is or may be outstanding under that Letter of Credit; and
(C)
the relevant Borrower has executed a security document, in form and substance satisfactory to the Agent or the Finance Party with which the account is held, creating a first ranking security interest over that account; and
unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at any such time,
provided however
,
that
with respect to any Letter of Credit that, by its terms, or the terms of any issuer document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time;
(xv)
the furtherance of any transaction that is not restricted under the terms of this Agreement shall, for the avoidance of doubt, be considered to fall within the general corporate purposes of the Group;
(xvi)
a provision of law or regulation or an accounting standard is a reference to that provision or accounting standard as amended, replaced or re-enacted from time to time under applicable law or regulation;
(xvii)
any reference to any consent to be given by any Finance Party shall be deemed to be given only to the extent the same is given in writing; and
(xviii)
a time of day is a reference to London time unless otherwise stated.
(b)
Section, Clause and Schedule headings are for ease of reference only.
(c)
Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
50
(d)
A Default or an Event of Default is “
continuing
” if it has not been remedied or waived.
1.3
Third party rights
(a)
Unless expressly provided to the contrary in a Finance Document, a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the “
Third Parties Act
”) to enforce or enjoy the benefit of any term of this Agreement.
(b)
Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.
2.
THE FACILITIES
2.1
The Facilities
(a)
Subject to the terms of this Agreement, the Lenders make available:
(i)
to GTECH Corporation and, (A) within ten (10) Business Days following completion of the Holdco Merger, and upon accession in accordance with Clause 31.2 (
Additional Obligors
), Holdco, and (B) within ten (10) Business Days following completion of the Target Merger and upon accession in accordance with Clause 31.2 (
Additional Obligors
), Target, a multicurrency revolving credit facility in an aggregate amount equal to the Revolving Facility A Commitments, being US$1,800,000,000 at the date of this Agreement; and
(ii)
to GTECH and, (A) within ten (10) Business Days following completion of the Italian Reorganisation and upon accession in accordance with Clause 31.2 (
Additional Obligors
), Italian Holdco, and (B) within ten (10) Business Days following completion of the Holdco Merger, and upon accession in accordance with Clause 31.2 (
Additional Obligors
), Holdco, a multicurrency revolving credit facility in an aggregate amount equal to the Revolving Facility B Commitments, being €1,050,000,000 at the date of this Agreement.
2.2
Finance Parties’ rights and obligations
(a)
The obligations of each Finance Party under the Finance Documents are several and not joint. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b)
The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.
(c)
A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.
51
2.3
Obligors’ Agent
(a)
Each Obligor (other than the Parent) by its execution of this Agreement or an Accession Letter irrevocably appoints the Parent to act on its behalf as the Obligors’ Agent in relation to the Finance Documents and irrevocably authorises:
(i)
the Obligors’ Agent on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions, to execute on its behalf any Accession Letter, to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Obligor notwithstanding that they may affect the Obligor, without further reference to or the consent of that Obligor; and
(ii)
each Finance Party to give any notice, demand or other communication to that Obligor pursuant to the Finance Documents to the Obligors’ Agent,
and in each case the Obligor shall be bound as though the Obligor itself had given the notices and instructions or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.
(b)
Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Obligors’ Agent or given to the Obligors’ Agent under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Obligors’ Agent and any other Obligor, those of the Obligors’ Agent shall prevail.
2.4
Lender Affiliates and Facility Office
(a)
In respect of a Utilisation or Utilisations to a particular Borrower (“
Designated Loans
”) a Lender (a “
Designating Lender
”) may at any time and from time to time designate (by written notice to the Agent and the Parent):
(i)
a substitute Facility Office from which it will make Designated Loans (a “
Substitute Facility Office
”); or
(ii)
nominate an Affiliate to act as the Lender of Designated Loans (a “
Substitute Affiliate Lender
”).
(b)
A notice to nominate a Substitute Affiliate Lender must be delivered in the form set out in Schedule 15 (
Form of Substitute Affiliate Lender Designation Notice
) and be countersigned by the relevant Substitute Affiliate Lender confirming that it will be bound as a Lender under this Agreement in respect of the Designated Loans in respect of which it acts as Lender.
(c)
The Designating Lender will act as the representative of any Substitute Affiliate Lender it nominates for all administrative purposes under this Agreement. The Obligors, the
52
Agent and the other Finance Parties will be entitled to deal only with the Designating Lender, except that payments will be made in respect of Designated Loans to the Facility Office of the Substitute Affiliate Lender. In particular the Revolving Facility Commitments of the Designating Lender will not be treated as reduced by the designation of the Substitute Affiliate Lender for voting purposes under this Agreement or the other Finance Documents.
(d)
Save as mentioned in paragraph (c) above, a Substitute Affiliate Lender will be treated as a Lender for all purposes under the Finance Documents and having a Commitment equal to the principal amount of all Designated Loans in which it is participating if and for so long as it continues to be a Substitute Affiliate Lender under this Agreement.
(e)
A Designating Lender may revoke its designation of an Affiliate as a Substitute Affiliate Lender by notice in writing to the Agent and the Parent;
provided that
such notice may only take effect when there are no Designated Loans outstanding to the Substitute Affiliate Lender. Upon such Substitute Affiliate Lender ceasing to be a Substitute Affiliate Lender the Designating Lender will automatically assume (and be deemed to assume without further action by any Party) all rights and obligations previously vested in the Substitute Affiliate Lender.
(f)
If a Designating Lender designates a Substitute Facility Office or Substitute Affiliate Lender in accordance with this Clause 2.4:
(i)
any Substitute Affiliate Lender shall be treated for the purposes of Clause 19.2(d)(i) (
Tax gross-up
) as having become a Lender on the date of this Agreement; and
(ii)
the provisions of Clause 30.2(e) (
Conditions of Assignment or Transfer
) shall not apply to or in respect of any Substitute Facility Office or Substitute Affiliate Lender.
3.
PURPOSE
3.1
Purpose
Each Borrower shall apply all amounts borrowed by it under the Facilities towards the general corporate purposes of the Group including, without limitation, the refinancing of Existing Indebtedness.
3.2
Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4.
CONDITIONS OF UTILISATION
4.1
Initial conditions precedent
(a)
Subject to paragraph (b) below, the Lenders will only be obliged to comply with Clause 5.4 (
Lenders’ participation
) in relation to any Utilisation if on or before the Utilisation Date for that Utilisation, the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 (
Conditions Precedent
) which documents,
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shall be in form and substance satisfactory to the Agent. The Agent shall notify each Borrower, the Parent and the Lenders promptly upon being so satisfied.
(b)
Without prejudice to paragraph (a) above, Wells Fargo Bank, NA will only be obliged to comply with Clause 5.4 (
Lenders’ participation
) in relation to any Utilisation if on or before the Utilisation Date for that Utilisation the Target Accession Date has occurred.
(c)
For the avoidance of doubt, save for the purposes of Clause 42.2 (
Exceptions
) and for the definition of “Original Lenders”, Wells Fargo Bank, NA will only be deemed to be a Lender for the purposes of this Agreement after the Target Accession Date has occurred and shall not have any liability in respect of any Utilisations requested prior to the Target Accession Date or any claims under any indemnity or loss sharing provisions under this Agreement in each case in relation to any Utilisations requested or made prior to the Target Accession Date.
4.2
Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 (
Lenders’ participation
), if on the date of the Utilisation Request and on the proposed Utilisation Date:
(a)
in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan, and in the case of any other Utilisation, no Default is continuing or would result from the proposed Utilisation; and
(b)
the Repeating Representations to be made by each Obligor are true in all material respects.
4.3
Conditions relating to Optional Currencies
(a)
A currency will constitute an Optional Currency in relation to a Revolving Facility A Utilisation if it is in Euro, Pounds Sterling or another currency agreed to by all Lenders.
(b)
A currency will constitute an Optional Currency in relation to a Revolving Facility B Utilisation if it is in US$, Pounds Sterling or another currency agreed to by all Lenders.
(c)
A currency will constitute an Optional Currency in relation to a Letter of Credit Utilisation if with respect to a Letter of Credit issued under Facility A, it is in Euro or Pounds Sterling, or, with respect to a Letter of Credit issued under Facility B, it is in US Dollars or Pounds Sterling, or in either case it has been approved by the Issuing Agent (acting on the instructions of all the Lenders) on or prior to receipt by the Agent of the relevant Utilisation Request for that Utilisation.
(d)
If the Issuing Agent has received a written request from a Borrower for a currency to be approved under paragraph (c) above, the Agent will confirm to such Borrower by the Specified Time:
(i)
whether or not the Lenders have granted their approval; and
(ii)
if approval has been granted, the minimum amount for any subsequent Utilisation in that currency.
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4.4
Maximum number of Utilisations
(a)
A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation 26 or more Revolving Facility A Utilisations or 26 or more Revolving Facility B Utilisations would be outstanding.
(b)
Any Loan made by a single Lender under Clause 10.2 (
Unavailability of a currency
) shall not be taken into account in this Clause 4.4.
(c)
Any Separate Loan shall not be taken into account in this Clause 4.4.
4.5
Conditions precedent to the signing date
Each Party acknowledges that it has received, on or prior to the signing date of this Agreement, notification from the Agent whereby the Agent confirms that it has received all of the documents and other evidence listed in Part III of Schedule 2 (
Conditions Precedent
) and that such documents and other evidence are in form and substance satisfactory to it.
5.
UTILISATION — REVOLVING FACILITY LOANS
5.1
Delivery of a Utilisation Request
The Borrowers may utilise a Revolving Facility by delivery to the Agent of a duly completed Utilisation Request, in each case not later than at the times specified below.
5.2
Completion of a Utilisation Request for Revolving Facility Loans
(a)
Each Utilisation Request for a Revolving Facility A Loan shall be made upon a Borrower’s notice to the Agent. Each such notice must be received by the Agent no later than 9:00 a.m. (New York time) three (3) Business Days prior to the requested date of any borrowing of Revolving Facility A Loans denominated in the Base Currency.
(b)
Each Utilisation Request for a Revolving Facility B Loan shall be made upon a Borrower’s notice to the Agent. Each such notice must be received by the Agent no later than 11:00 a.m. (London time) three (3) Business Days prior to the requested date of any borrowing of Revolving Facility B Loans denominated in the Base Currency.
(c)
Each Utilisation Request for a Revolving Facility Loan is irrevocable and will not be regarded as having been
duly completed unless:
(i)
it identifies the Facility to be utilised;
(ii)
the proposed Utilisation Date is a Business Day within the Availability Period applicable to that Facility;
(iii)
the currency and amount of the Utilisation comply with Clause 5.3 (
Currency and amount
);
(iv)
the proposed Interest Period complies with Clause 16 (
Interest Periods
); and
(v)
only one Utilisation may be requested in a Utilisation Request.
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5.3
Currency and amount
(a)
The
currency specified in a Utilisation Request must be in relation to the Facilities, the Base Currency or an Optional Currency.
(b)
The amount of the
proposed Utilisation is:
(i)
with respect to Revolving Facility A, if the currency selected is the Base Currency, a minimum of US$5,000,000 or, if the currency selected is an Optional Currency, the applicable equivalent of US$5,000,000 in the relevant Optional Currency, or, in either case, if less, the Available Revolving Facility; or
(ii)
with respect to Revolving Facility B, if the currency selected is the Base Currency, a minimum of €5,000,000 or, if the currency selected is an Optional Currency, the applicable equivalent of €5,000,000 in the relevant Optional Currency, or, in either case, if less, the Available Revolving Facility.
5.4
Lenders’ participation
(a)
If the conditions set out in this Agreement have been met, each Lender shall make its participation in
each
Revolving Facility Loan available by the Utilisation Date through its Facility Office not later than:
(i)
1:00 p.m. (London time) on the Utilisation Date for Revolving Facility Loans denominated in the Base Currency or an Optional Currency other than Dollars; or
(ii)
1:00 p.m. (New York time) on the Utilisation Date for Revolving Facility Loans denominated in Dollars.
(b)
The amount of each Lender’s participation in each Revolving Facility Loan will be equal to the
proportion borne by its Available Revolving Commitment to the Available Revolving Facility immediately prior to making the Revolving Facility Loan.
(c)
The Agent shall determine the Base Currency Amount of each Revolving Facility Loan which is to be made in
an Optional Currency and notify each Lender of the amount, currency and the Base Currency Amount of each Revolving Facility Loan and the amount of its participation in that Loan by the Specified Time.
6.
UTILISATION — LETTERS OF CREDIT
6.1
General
(a)
Any
reference
in this Agreement to:
(i)
the Interest Period of a Letter of Credit will be construed as a reference to the Term of that Letter of Credit;
(ii)
an amount borrowed includes any amount utilised by way of Letter of Credit;
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(iii)
a Utilisation made by or to be made to a Borrower includes a Letter of Credit issued (or renewed) on its behalf;
(iv)
a Lender funding its participation in a Utilisation includes a Lender participating in a Letter of Credit;
(v)
amounts outstanding under this Agreement include amounts outstanding under or in respect of any Letter of Credit;
(vi)
an outstanding amount of a Letter of Credit means at any time, unless otherwise specified herein, the US Dollar amount for Revolving Facility A and Euro amount for Revolving Facility B (or the equivalent amount thereof in US Dollars or Euro as determined by the Agent or the Issuing Agent for Revolving Facility A and Revolving Facility B, respectively, as the case may be, at such time on the basis of the Agent’s Spot Rate of Exchange for the purchase of US Dollars or Euro for Revolving Facility A and Revolving Facility B, respectively with such Optional Currency) the greater of the maximum amount that is or may be payable by the relevant Borrower, the Issuing Agent or the relevant Lenders, as the case may be under or in connection with that Letter of Credit at that time;
provided that
for the purposes of this calculation with respect to any Letter of Credit that, by its terms or the terms of any documents related thereto, provides for one or more automatic increases in the stated amount thereof, the notional amount of such Letter of Credit itself shall be deemed to be such US Dollars or Euro equivalent of the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time;
(vii)
“
L/C Participation Amount
” means, in relation to a Lender in respect of any Letter of Credit, the commitment of that Lender to the beneficiary under that Letter of Credit as defined in the relevant Letter of Credit.
(viii)
“
L/C Proportion
” means, in relation to a Lender in respect of any Letter of Credit, the proportion (expressed as a percentage) borne by such Lender’s Available Revolving Commitment to the Available Revolving Facility immediately prior to the issue of that Letter of Credit, adjusted to reflect any assignment or transfer under this Agreement to or by such Lender.
(ix)
“
L/C Schedule
” means a schedule or appendix to a Letter of Credit detailing the Lenders’ L/C Participation Amounts and Participation Percentages under that Letter of Credit as may be adjusted from time to time in accordance with Clause 6.9 (
Adjusted Letter of Credit Schedule
).
(x)
“
Loss Share Date
” means, at any time after any amount has become payable to the beneficiary under a Letter of Credit, any date on which any amount due and owing to a Lender in respect of a claim under a Letter of Credit in relation to that payment has not been repaid or discharged.
(xi)
“
Loss Share Proportion
” means, in respect of a Lender and a Loss Share Date, the aggregate of its L/C Participation Amounts under all outstanding Letters of Credit as a proportion of the aggregate of the L/C Participation Amounts of all Lenders under all outstanding Letters of Credit.
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(xii)
a Borrower “
repaying
” or “
prepaying
” a Letter of Credit means:
(A)
that Borrower providing cash cover for that Letter of Credit;
(B)
the maximum amount payable under the Letter of Credit being reduced in accordance with its terms; or
(C)
the Issuing Agent being satisfied that neither it (acting as agent for each of the Lenders) nor any Lender has any further liability under that Letter of Credit,
and the amount by which a Letter of Credit is repaid or prepaid under sub-paragraphs (xii)(A) and (xii)(B)above is the amount of the relevant cash cover or reduction.
(b)
Clause
5 (
Utilisation — Loans
) does not apply to a Utilisation by way of Letter of Credit.
(c)
In determining the amount of the Available Revolving Facility and a Lender’s L/C Proportion with respect to either Revolving Facility of a proposed Letter of Credit for the
purposes
of this Agreement the Available Revolving Commitment of a Lender will be calculated ignoring any cash cover provided for outstanding Letters of Credit and adjusting to reflect any assignment or transfer under this Agreement to or by the relevant Lender.
6.2
Guarantee Sub-limit
Each Revolving Facility may be utilised by way of Letters of Credit up to an aggregate maximum amount equal to the relevant Guarantee Sub-limit.
6.3
Delivery of a Utilisation Request for Letters of Credit
A Borrower may request a Letter of Credit to be issued by delivery to the Agent of a duly completed Utilisation Request substantially in the form of Part IB of Schedule 3 (
Utilisation Request - Letters of Credit
) not later than the Specified Time.
6.4
Completion of a Utilisation Request for Letters of Credit
Each Utilisation Request for a Letter of Credit under either Revolving Facility is irrevocable and will not be regarded as having been duly completed unless:
(a)
it specifies
that it is for a Letter of Credit;
(b)
it specifies the Revolving Facility to be utilised;
(c)
the proposed Utilisation
Date is a Business Day within the Availability Period;
(d)
the currency and
amount
of the Letter of Credit comply with Clause 6.5 (
Currency and amount
);
(e)
the form of Letter of
Credit
is attached;
(f)
the Expiry Date of the Letter of Credit falls on or before the date which is three hundred and sixty
five
(365) days after the Utilisation Date and in any event on or prior to the
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Final Maturity Date, which shall include Letters of Credit which are by their terms automatically renewable subject to Clause 6.8 (
Renewal of a Letter of Credit
);
(g)
the identity of the beneficiary is specified and such beneficiary is:
(i)
a beneficiary approved for this purpose by the Issuing Agent (acting on the instructions of all the Lenders under the Revolving Facility to be utilised, in turn acting reasonably); and
(ii)
incorporated in a country or otherwise exists under the laws of a country in respect of which there is no policy, law or regulation applicable to the Issuing Agent or any Lender which would restrict the Issuing Agent or any Lender from entering into and performing the transactions contemplated by the Letter of Credit;
(h)
the delivery instructions for the Letter of Credit are specified; and
(i)
such other matters as the Issuing Agent may require (acting reasonably) are included.
In the case of a request for an amendment of any outstanding Letter of Credit, such Utilisation Request shall specify (i) the Letter of Credit to be amended; (ii) the proposed date of amendment thereof (which shall be a Business Day); and (iii) the nature of the proposed amendment.
6.5
Currency and amount
(a)
The currency specified in a Utilisation Request must be the Base Currency or an Optional Currency.
(b)
The amount of the proposed Letter of Credit must be an amount that is not more than the Available Revolving Facility and which:
(i)
if the currency selected is US Dollars, is a minimum of US$50,000 for Revolving Facility A or, if less, the Available Revolving Facility A; or
(ii)
if the currency selected is Euro, is a minimum of €50,000 for Revolving Facility B or, if less, the Available Revolving Facility B; or
(iii)
if the currency selected is an Optional Currency other than US Dollars or Euro, is the minimum amount (and if required, integral multiple) specified by the Agent pursuant to paragraph (d)(ii) of Clause 4.3 (
Conditions relating to Optional Currencies
) or, if less, the Available Revolving Facility,
or such other amount as the Agent may agree.
(c)
The amount of a proposed Letter of Credit issued under Revolving Facility A must be an amount the Base Currency Amount of which is not more than the Available Revolving Facility for Facility A and which when aggregated with the Base Currency Amount of all other Letters of Credit then in issue under Revolving Facility A does not exceed the Guarantee Sub-limit.
(d)
The amount of a proposed Letter of Credit issued under Revolving Facility B must be an amount the Base Currency Amount of which is not more than the Available Revolving Facility for Facility B and when aggregated with the Base Currency Amount of all other
59
Letters of Credit then in issue under Revolving Facility B does not exceed the Guarantee Sub-limit.
6.6
Form of Letters of Credit
(a)
Letters of Credit may be in any form requested by a Borrower and agreed by the Issuing Agent from time to time;
provided that
if the form does not comply in substance with the minimum requirements set out in the following provisions of this Clause 6.6 then the form shall require the prior approval of all Lenders under the relevant Revolving Facility to be utilised.
(b)
The form of Letters of Credit must comply with the following minimum requirements:
(i)
it must specify the names, addresses and commitments of the Lenders and clearly state that it is issued and the relevant undertakings are given by the Lenders though the Letter of Credit may be signed or provided by the Issuing Agent as agent for the Lenders;
(ii)
it must specify the name of the applicant and the beneficiary, the maximum amount, the provisions for the delivery of demands and the Expiry Date;
(iii)
it must expressly provide that the obligations of the Lenders under the Letter of Credit are several, not joint, and no Lender shall be required to pay an amount exceeding its respective commitment set out in the Letter of Credit;
(iv)
it must expressly provide that the Issuing Agent signs the Letter of Credit as agent for the Lenders only and accordingly shall be under no obligation to the beneficiary thereunder; and
(v)
it must contain satisfactory provisions for expiry and release of the Lenders’ obligations under the Letter of Credit and, where appropriate, for return of the original instrument to the Issuing Agent.
6.7
Issue of Letters of Credit
(a)
If the conditions set out in this Agreement have been met (including those set out in Clause 4.2), the Issuing Agent (as agent and
mandatario con rappresentanza
for and on behalf of each of the Lenders) shall issue the Letter of Credit on the Utilisation Date.
(b)
The Issuing Agent will only be obliged to comply with paragraph (a) above if on the date of the Utilisation Request or Renewal Request and on the proposed Utilisation Date:
(i)
in the case of a Letter of Credit renewed in accordance with Clause 6.8 (
Renewal of a Letter of Credit
), no Event of Default is continuing or would result from the proposed Utilisation and, in the case of any other Utilisation, no Default is continuing or would result from the proposed Utilisation;
(ii)
the Repeating Representations to be made by each Obligor are true in all material respects.
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(c)
The amount of each Lender’s obligations under and participation in each Letter of Credit will be equal
to the proportion borne by its Available Revolving Commitment to the Available Revolving Facility immediately prior to the issue of the Letter of Credit.
(d)
The liability of the Lenders under a Letter of Credit is several and not joint in any way and no Lender shall be liable for the failure of any other Lender to perform its obligations under a Letter of Credit.
(e)
The Agent shall determine the Base Currency Amount of each Letter of Credit which is to be issued in an Optional Currency and shall notify the Issuing Agent and each Lender of the details of the requested Letter of Credit and its participation in that Letter of Credit by the Specified Time.
(f)
A Revolving Facility B Lender may issue and act as Lender in respect of a Letter of Credit by any Affiliate it nominates for this purpose in writing to the Issuing Agent. Where a Revolving Facility B Lender has so nominated an Affiliate, references in this Agreement to a Lender in relation to that Letter of Credit shall be deemed to be a reference to that Lender and its Affiliate or to that Lender or its Affiliate (as the context requires).
(g)
Wells Fargo Bank, NA will only be deemed to be a Lender for the purposes of this Clause 6.7 (
Issue of Letters of Credit
) after the Target Accession Date has occurred and shall not have any liability in respect of Letters of Credit issued prior to the Target Accession Date.
6.8
Renewal of a Letter of Credit
(a)
A Borrower may request any Letter of Credit issued on its behalf be renewed by delivery to the Agent of a Renewal Request by the Specified Time, and with respect to any Letter of Credit which is by its terms deemed to be automatically extended, such Letter of Credit shall be so renewed subject to the terms thereof.
(b)
The Finance Parties shall treat any Renewal Request in the same way as a Utilisation Request for a Letter of Credit except that the conditions set out in paragraphs (e) and (h) of Clause 6.4 (
Completion of a Utilisation Request for Letters of Credit
) shall not apply.
(c)
The terms of each renewed Letter of Credit shall be the same as those of the relevant Letter of Credit immediately prior to its renewal, except that:
(i)
its amount may be less than the amount of the Letter of Credit immediately prior to its renewal; and
(ii)
its Term shall start on the date which was the Expiry Date of the Letter of Credit immediately prior to its renewal, and shall end on the proposed Expiry Date specified in the Renewal Request.
(d)
Subject to paragraph (e) below, if the conditions set out in this Agreement have been met, the Issuing Agent shall amend and re-issue any Letter of Credit pursuant to a Renewal Request.
(e)
The Issuing Agent and the Lenders under the Revolving Facility to be utilised will be under no obligation to renew a Letter of Credit if they consider, acting reasonably, that the conditions or the process for renewal involve a risk of double exposure at any given time, in which case the Issuing Agent may require comfort (including in the form of the provision of
61
cash cover, counter-indemnities or return of the original instrument to the Issuing Agent) as a condition precedent to granting such renewal.
6.9
Adjusted Letter of Credit Schedule
(a)
The Issuing Agent is authorised and is instructed to deliver to the beneficiary an adjusted L/C Schedule for any Letter of Credit to reflect the obligations of a Lender in relation to an issued Letter of Credit including after any transfer or assignment under Clause 30 (
Changes to the Lenders
).
(b)
Any adjusted L/C Schedule provided to the beneficiary under paragraph (a) above shall be effective;
provided that
:
(i)
the aggregate L/C Participation Amounts are no less than the aggregate L/C Participation Amounts under the L/C Schedule which it replaces;
(ii)
no Lender’s exposure increases under any adjusted L/C Schedule unless such increase is in connection with an increase in its Revolving Facility Commitment (and Participation Amount) following an assignment or transfer under Clause 30 (
Changes to the Lenders
); and
(iii)
the adjusted L/C Schedule is dated and includes the reference number of the Letter of Credit to which it applies.
6.10
Revaluation of Letters of Credit
(a)
If any Letter of Credit is denominated in an Optional Currency, the Agent shall, at the end of each Financial Quarter, or on any other date as determined by the Issuing Agent, recalculate the Base Currency Amount of that Letter of Credit by notionally converting into the Base Currency the outstanding amount of that Letter of Credit on the basis of the Agent’s Spot Rate of Exchange on the date of calculation.
(b)
If, following any calculation of a Base Currency Amount under paragraph (a) above, the Revolving Facility Utilisations which are Letters of Credit exceed one hundred and two per cent. (102%) of the relevant Guarantee Sub-limit the Borrowers shall ensure that, by the last day of the shortest Interest Period currently applicable to any Loan following such adjustment to the Base Currency Amount, sufficient Letters of Credit are prepaid (by way of the provision of cash cover, such cash cover to be credited to the Cash Collateral Account, or reduction in the face-value amounts of Letters of Credit) so that the Base Currency Amount of the Revolving Facility Utilisations which are Letters of Credit under the affected Revolving Facility does not exceed one hundred per cent. (100%) of the relevant Guarantee Sub-limit.
7.
UTILISATION - US DOLLAR SWINGLINE LOANS
7.1
General
(a)
Clause 4.2 (
Further conditions precedent
) and Clause 4.34.3 (
Conditions relating to Optional Currencies
);
(b)
Clause 5 (
Utilisation — Revolving Facility Loans
);
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(c)
Clause 10 (
Optional Currencies
);
(d)
Clause 15 (
Interest
) as it applies to the calculation of interest on a Loan but not default interest on an overdue amount;
(e)
Clause 16 (
Interest Periods
); and
(f)
Clause 17 (
Changes to the calculation of interest
),
do not apply to US Dollar Swingline Loans.
7.2
Delivery of a Utilisation Request for US Dollar Swingline Loans
(a)
A Borrower may utilise the US Dollar Swingline Facility by delivery to the Agent and the Swingline Agent of a duly completed Utilisation Request not later than the Specified Time.
(b)
Each Utilisation Request for a US Dollar Swingline Loan must be sent to the Agent and the Swingline Agent to the address, fax number or, electronic mail address or other destination notified by the Agent and the Swingline Agent for this purpose with a copy to its address, fax number or electronic mail address or such other destination referred to in Clause 37 (
Notices
).
7.3
Completion of a Utilisation Request for US Dollar Swingline Loans
(a)
Each Utilisation Request for a US Dollar Swingline Loan is irrevocable and will not be regarded as having been duly completed unless:
(i)
it identifies the Borrower;
(ii)
it specifies that it is for a US Dollar Swingline Loan;
(iii)
the proposed Utilisation Date is a New York Business Day within the Availability Period applicable to Revolving Facility A;
(iv)
the US Dollar Swingline Loan is denominated in US Dollars;
(v)
the amount of the proposed US Dollar Swingline Loan is not more than the Available US Dollar Swingline Facility and is a minimum of US$5,000,000 or, if less, the Available US Dollar Swingline Facility; and
(vi)
the proposed Interest Period:
(A)
does not extend beyond the Termination Date applicable to Revolving Facility A;
(B)
is a period of not more than five (5) New York Business Days; and
(C)
ends on a New York Business Day.
(b)
Only one US Dollar Swingline Loan may be requested in each Utilisation Request.
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7.4
US Dollar Swingline Lenders’ participation
(a)
If the conditions set out in this Agreement have been met, each US Dollar Swingline Lender shall make its participation in each US Dollar Swingline Loan available to the Swingline Agent through its Facility Office.
(b)
The US Dollar Swingline Lenders will only be obliged to comply with paragraph (a) above if on the date of the Utilisation Request and on the proposed Utilisation Date:
(i)
no Default is continuing or would result from the proposed Utilisation; and
(ii)
the Repeating Representations to be made by each Obligor are true in all material respects.
(c)
The amount of each US Dollar Swingline Lender’s participation in each US Dollar Swingline Loan will be equal to the proportion borne by its Available US Dollar Swingline Commitment to the Available US Dollar Swingline Facility immediately prior to making the US Dollar Swingline Loan, adjusted to take account of any limit applying under Clause 7.5 (
Relationship with Revolving Facility A
)
.
(d)
The Swingline Agent shall notify the Agent and each US Dollar Swingline Lender of the amount of each US Dollar Swingline Loan and its participation in that US Dollar Swingline Loan by the Specified Time.
(e)
For the avoidance of doubt, nothing in this Agreement shall oblige the Swingline Agent to make a US Dollar Swingline Loan available to a Borrower on behalf of any US Dollar Swingline Lender that has failed to make its participation in such US Dollar Swingline Loan available to the Swingline Agent in accordance with this Clause 7.4.
(f)
The Swingline Agent shall inform the US Dollar Swingline Lenders and the Agent from time to time regarding the balance of the unutilised US Dollar Swingline Commitments and each US Dollar Swingline Lender shall provide the Swingline Agent and the Agent, upon its reasonable request, with confirmation of the amount of outstanding US Dollar Swingline Loans advanced by it at such time.
7.5
Relationship with Revolving Facility A
(a)
This Clause 7.5 applies when a US Dollar Swingline Loan is outstanding or is to be borrowed.
(b)
Revolving Facility A may be used by way of US Dollar Swingline Loans. The US Dollar Swingline Facility is not independent of Revolving Facility A.
(c)
Notwithstanding any other term of this Agreement a Lender is only obliged to participate in a Revolving Facility A Loan or a US Dollar Swingline Loan to the extent that it would not result in the Base Currency Amount of its participation and that of a Lender which is its Affiliate in the Revolving Facility A Loans and US Dollar Swingline Loans exceeding its Overall Facility A Commitment.
(d)
Where, but for the operation of paragraph (c) above, a Lender’s participation and that of a Lender which is its Affiliate in the Revolving Facility A Loans and US Dollar Swingline Loans would have exceeded its Overall Facility A Commitment, the excess will be
64
apportioned among the other Lenders required under this Agreement to make available a participation in the relevant Loan pro rata according to their relevant Commitments. This calculation will be applied as often as necessary until participations in the relevant Loan are apportioned among the relevant Lenders in a manner consistent with paragraph (c) above.
(e)
Nothing in this Clause 7.5 shall be construed so as to require a Lender that is not a US Dollar Swingline Lender to participate in a US Dollar Swingline Loan.
7.6
Cancellation of US Dollar Swingline Commitment
The US Dollar Swingline Commitments which, at that time, are unutilised shall be immediately cancelled at the end of the Availability Period for Revolving Facility A.
8.
LETTERS OF CREDIT
8.1
Immediately payable
If a Letter of Credit or any amount outstanding under a Letter of Credit becomes immediately payable, the relevant Borrower under the Revolving Facility to which such Letter of Credit relates shall repay or prepay that amount immediately.
8.2
Assignments and transfers
(a)
For the avoidance of doubt, the consent of the Issuing Agent is not required for any assignment or transfer of any Lender’s rights or obligations under a Revolving Facility.
(b)
If the conditions and procedure for transfer specified in Clause 30 (
Changes to the Lenders
) are satisfied, then on the Transfer Date the Issuing Agent and the New Lender shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights or obligations acquired or assumed by it as a result of the transfer and to that extent the Issuing Agent and the Existing Lender shall each be released from further obligations to each other under this Agreement.
8.3
Claims under a Letter of Credit
(a)
Where a claim is made or purported to be made under a Letter of Credit and which appears on its face to be in order (a “
Syndicated L/C Claim
”):
(i)
the Issuing Agent shall promptly and in any event within two (2) Business Days of the date of receipt of a Syndicated L/C Claim notify the relevant Borrower and each Lender of the final date on or before which payment of the demand is to be made and the aggregate amount of the Syndicated L/C Claim;
(ii)
each Lender (other than a Lender which has paid an amount equal to its Participation Amount (as defined in each case in the relevant Letter of Credit) to the beneficiary) shall immediately on demand pay (via the Issuing Agent) to the relevant beneficiary an amount equal to its Participation Amount (as defined in each case in the relevant Letter of Credit);
provided that
such amount shall not exceed the maximum amount payable by that Lender to such beneficiary pursuant to the terms of such Letter of Credit;
65
(iii)
the relevant Borrower irrevocably and unconditionally authorises the Lenders to pay such Syndicated L/C claim; and
(iv)
the relevant Borrower shall immediately on demand pay to the Issuing Agent for the Lenders an amount equal to the amount of any Syndicated L/C Claim. For the avoidance of doubt this obligation shall be unaffected by the Termination Date.
(b)
Each relevant Borrower acknowledges that the Issuing Agent and each Lender:
(i)
is not obliged to carry out any investigation or seek any confirmation from any other person before paying a claim; and
(ii)
deals in documents only and will not be concerned with the legality of a claim or any underlying transaction or any available set-off, counterclaim or other defence of any person.
(c)
The obligations of the Borrowers under this Clause 8.3 will not be affected by:
(i)
the sufficiency, accuracy or genuineness of any claim or any other document; or
(ii)
any incapacity of, or limitation on the powers of, any person signing a claim or other document.
8.4
Issuing Agent’s Authorisation
Each Lender hereby unconditionally and irrevocably authorises the Issuing Agent to prepare and complete each Letter of Credit, in the manner contemplated by the relevant Utilisation Request and this Agreement and substantially in the form attached to this Agreement, and to sign each Letter of Credit on its behalf and issue the same to the relevant beneficiary. Such authorisation shall be deemed to be confirmed in respect of each Letter of Credit issued, or to be issued, pursuant to this Agreement and in respect of each Lender on the date on which such Letter of Credit is issued.
8.5
Indemnities
Each Borrower shall immediately on demand indemnify the Issuing Agent and each Lender against any cost, loss or liability incurred by the Issuing Agent or by the Lender (in each case, otherwise than by reason of the Issuing Agent’s or Lender’s own gross negligence or wilful misconduct) in acting as the Issuing Agent or as a Lender (as the case may be) under any Letter of Credit issued under a Revolving Facility including, without limitation, arising in connection with:
(a)
issuing or maintaining outstanding a Letter of Credit;
(b)
funding, making arrangements to fund, or failing to fund or make arrangements to fund, payments under or in connection with a Letter of Credit; and
(c)
acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.
8.6
Cash cover by Borrower
(a)
If a Lender fails to honour its obligations under Clause 8.3 or notifies the Issuing Agent that it will not honour its obligations under Clause 8.3 (
Claims under a Letter of Credit
) and the
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Issuing Agent notifies the Parent (with a copy to the Agent) that it requires the relevant Borrower of the relevant Letter of Credit or proposed Letter of Credit to provide cash cover to an account with the Issuing Agent in an amount equal to such Lender’s L/C Proportion of the outstanding amount of that Letter of Credit and in the currency of that Letter of Credit then that Borrower shall do so within four (4) Business Days after the notice is given.
(b)
Notwithstanding paragraph (a)(vii) of Clause 6.1 (
General
), the Issuing Agent shall agree to the withdrawal of amounts up to the level of that cash cover from the account if the relevant Lender’s obligations in respect of the relevant Letter of Credit are transferred to a New Lender in accordance with the terms of this Agreement.
(c)
To the extent that a Borrower has complied with its obligations to provide cash cover in accordance with this Clause 8.6, the relevant Lender’s L/C Proportion in respect of that Letter of Credit will remain (but such Lender’s obligations in relation to that Letter of Credit may be satisfied in accordance with Clause 6.1 (
General
)). However, the relevant Borrower will be obliged to pay any Letter of Credit Fee in relation to the relevant letter of credit to the Agent (for the account of and for distribution to the relevant Lenders) but the relevant Borrower shall not be obliged to pay any Letter of Credit Fee in relation to the relevant letter of credit to the relevant Lender.
(d)
The relevant Issuing Agent shall promptly notify the Agent of the extent to which a Borrower provides cash cover pursuant to this Clause 8.6 and of any change in the amount of cash cover so provided.
8.7
Rights of contribution
No Obligor will be entitled to any right of contribution or indemnity from any Finance Party in respect of any payment it may make under this Clause 8.
8.8
Loss sharing
(a)
If, at any time after any amount has become payable to the beneficiary under a Letter of Credit, for any reason any amount due and owing to a Lender under the Finance Documents in respect of that claim has not been paid or discharged and any resulting unpaid amount is not shared among the Lenders of the relevant Revolving Facility pro rata to their Loss Share Proportions in respect of such Revolving Facility, the Lenders shall make such payments between themselves as the Agent shall require to ensure that, after taking into account such payments, any such amount is shared between the relevant Lenders pro rata to their Loss Share Proportions.
(b)
If a Lender (the “
Paying Bank
”) makes a payment to the Agent for distribution to one or more other Lenders under paragraph (a) above then, without double counting, the liability of the relevant Borrower to the Paying Bank shall be increased (or treated as not having been reduced) by an amount equal to the payment so made and the liability of such Borrower to the Lender(s) to which any such payment has been made shall be reduced (or treated as not having been increased) by an amount equal to the payment so made. Following any application of the provisions of paragraph (a) above the Agent is authorised and is instructed to deliver to the beneficiary an adjusted L/C Schedule or a new Letter of Credit, as the case may be, under the terms of this Agreement. Such adjusted L/C or new Letter of Credit shall reflect the L/C Commitments of the Lenders after the application of paragraph (a) above.
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(c)
Wells Fargo Bank, NA will only be deemed to be a Lender for the purposes of this Clause 8.8 (
Loss sharing
) after the Target Accession Date has occurred and shall not have any liability in respect of Letters of Credit issued prior to the Target Accession Date.
8.9
Role of the Issuing Agent
(a)
Nothing in this Agreement constitutes the Issuing Agent as a trustee or fiduciary of any other person.
(b)
The Issuing Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
(c)
The Issuing Agent may rely on:
(i)
any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and
(ii)
any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.
(d)
The Issuing Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.
(e)
The Issuing Agent may act in relation to the Finance Documents through its personnel and agents.
(f)
The Issuing Agent is not responsible for:
(i)
the adequacy, accuracy or completeness of any information (whether oral or written) provided by the Agent, any Party (including itself), or any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; or
(ii)
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.
8.10
Exclusion of liability
(a)
Without limiting paragraph (b) below, neither the Issuing Agent nor any Lenders in respect of Letters of Credit will be liable for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
(b)
No Party (other than the Issuing Agent or a Lender in respect of a Letter of Credit) may take any proceedings against any officer, employee or agent of the Issuing Agent or a Lender in respect of a Letter of Credit in respect of any claim it might have against the Issuing Agent or relevant Lender in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Issuing
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Agent or relevant Lender may rely on this Clause 8.10 subject to Clause 1.3 (
Third party rights
) and the provisions of the Third Parties Act.
8.11
Credit appraisal by the Lenders
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Issuing Agent that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including, but not limited to, those listed in paragraphs (a) through (d) of Clause 32.14 (
Non-Reliance on Agent and Other Finance Parties
).
8.12
Address for notices
The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of the Issuing Agent for any communication or document to be made or delivered under or in connection with the Finance Documents is that notified in writing to the Agent prior to the date of this Agreement or any substitute address, fax number or department or officer as the Issuing Agent may notify to the Agent by not less than five (5) Business Days’ notice.
8.13
Amendments and waivers
Notwithstanding any other provision of this Agreement, an amendment or waiver which relates to the rights or obligations of the Issuing Agent may not be effected without the consent of the Issuing Agent.
8.14
Applicability of ISP and UCP
Unless otherwise expressly agreed by the Issuing Agent and each Borrower when a Letter of Credit is issued, the rules of the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each commercial Letter of Credit.
9.
REPAYMENT
9.1
Repayment of Revolving Facility Loans
(a)
Each Borrower which has drawn a Revolving Facility Loan shall repay such Revolving Facility Loan on the last day of its Interest Period.
(b)
At any time when a Lender becomes a Defaulting Lender, the maturity date of each of the participations of that Lender in the Revolving Facility Loans then outstanding will be automatically extended to the Final Maturity Date in relation to the Revolving Facility and will be treated as separate Revolving Facility Loans (the “
Separate Loans
”) denominated in the currency in which the relevant participations are outstanding.
(c)
A Borrower to whom a Separate Loan is outstanding may prepay that Loan by giving five (5) Business Days’ prior notice to the Agent. The Agent will forward a copy of a
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prepayment notice received in accordance with this paragraph (c) to the Defaulting Lender concerned as soon as practicable on receipt.
(d)
Interest in respect of a Separate Loan will accrue for successive Interest Periods selected by the relevant Borrower by the time and date specified by the Agent (acting reasonably) and will be payable by that Borrower to the Defaulting Lender on the last day of each Interest Period of that Loan.
(e)
The terms of this Agreement relating to Revolving Facility Loans generally shall continue to apply to Separate Loans other than to the extent inconsistent with paragraphs (b) to (d) above, in which case those paragraphs shall prevail in respect of any Separate Loan.
10.
OPTIONAL CURRENCIES
10.1
Selection of currency
Each Borrower shall select the currency of a Revolving Facility Utilisation in the applicable Utilisation Request.
10.2
Unavailability of a currency
If before the Specified Time on any Quotation Day:
(a)
a
Lender notifies the Agent that the Optional Currency requested is not readily available to it in the amount required; or
(b)
a Lender notifies the Agent that compliance with its obligation to participate in a Loan in the proposed Optional
Currency would contravene a law or regulation applicable to it,
the Agent will give notice to the relevant Borrower to that effect by the Specified Time on that day. In this event, any Lender that gives notice pursuant to this Clause 10.2 will be required to participate in the Loan in the Base Currency (in an amount equal to such Lender’s proportion of the Base Currency Amount, or in respect of a Rollover Loan, an amount equal to such Lender’s proportion of the Base Currency Amount of the Rollover Loan that is due to be made) and its participation will be treated as a separate Loan denominated in the Base Currency during that Interest Period.
10.3
Agent’s calculations
Each Lender’s participation in a Loan will be determined in accordance with paragraph (b) of Clause 5.4 (
Lenders’ participation
).
11.
US DOLLAR SWINGLINE FACILITY
11.1
US Dollar Swingline
Subject to the terms of this Agreement, the US Dollar Swingline Lenders make available to the Swingline Agent, by the Specified Time, for the account of the relevant US Borrower a US Dollar swingline loan facility in an aggregate amount equal to the Total US Dollar Swingline Commitments.
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11.2
Purpose
Each Borrower shall apply all amounts borrowed by it under the US Dollar Swingline Facility for general corporate purposes. A US Dollar Swingline Loan may not be applied in repayment or prepayment of another US Dollar Swingline Loan.
11.3
Repayment
Each Borrower that has drawn a US Dollar Swingline Loan shall repay that US Dollar Swingline Loan on the last day of its Interest Period.
11.4
Voluntary prepayment of US Dollar Swingline Loans
(a)
A Borrower
to which a US Dollar Swingline Loan has been made may prepay at any time the whole of that US Dollar Swingline Loan.
(b)
Unless a contrary indication appears in this Agreement, any part of the US Dollar Swingline Facility which is prepaid or
repaid may be re-borrowed in accordance with the terms of this Agreement.
11.5
Interest
(a)
The rate of interest on each US Dollar Swingline Loan for any day during its Interest Period is the higher of:
(i)
the prime commercial lending rate in US Dollars announced by the Swingline Agent at the Specified Time and in force on that day; and
(ii)
zero and a half per cent. (0.50%) per annum over the rate per annum determined by the Swingline Agent to be the Federal Funds Rate (as published by the Federal Reserve Bank of New York) for that day.
(b)
The Swingline Agent shall promptly notify the Agent, the US Dollar Swingline Lenders and the relevant Borrower of the determination of the rate of interest under paragraph (a) above.
(c)
If any day during an Interest Period is not a New York Business Day, the rate of interest on a US Dollar Swingline Loan on that day will be the rate applicable to the immediately preceding New York Business Day.
(d)
Each Borrower shall pay accrued interest on each US Dollar Swingline Loan made to it on the last day of its Interest Period.
11.6
US Dollar Swingline Agent
(a)
The Swingline Agent may perform its duties in respect of the US Dollar Swingline Facility through an Affiliate acting as its agent.
(b)
Notwithstanding any other term of this Agreement and without limiting the liability of any Obligor under the Finance Documents, each Lender shall (in proportion to its share of the Total Facility A Commitments or, if the Total Facility A Commitments are then zero, to its share of the Total Facility A Commitments immediately prior to their reduction to zero) pay to or indemnify the Swingline Agent, within three (3) Business Days of demand, for or
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against any cost, loss or liability (including, without limitation, for negligence or any other category of loss whatsoever) incurred by the Swingline Agent or its Affiliate (other than by reason of the Swingline Agent’s or the Affiliate’s gross negligence or wilful misconduct) or, in the case of any cost, loss or liability pursuant to Clause 35.11 (
Disruption to Payment Systems etc
.) notwithstanding the Swingline Agent’s or the Affiliate’s negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Swingline Agent or the Affiliate in acting as Swingline Agent for the US Dollar Swingline Facility under the Finance Documents (unless the Swingline Agent or its Affiliate has been reimbursed by an Obligor pursuant to a Finance Document).
11.7
Interest Period — US Dollar Swingline Loans
(a)
Each US Dollar Swingline Loan has one Interest Period only.
(b)
The Interest Period for a US Dollar Swingline Loan must be selected in the relevant Utilisation Request.
11.8
Partial Payments
(a)
If the Swingline Agent or Agent receives a payment in respect of the US Dollar Swingline Facility that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents in respect of the US Dollar Swingline Facility, the Agent or the Swingline Agent (as applicable) shall apply that payment towards the obligations of that Obligor under the Finance Documents in respect of the US Dollar Swingline Facility in the following order:
(i)
first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Agent, the Swingline Agent or its Affiliate under the Finance Documents incurred in respect of the US Dollar Swingline Facility;
(ii)
secondly, in or towards payment
pro rata
of any accrued interest on a US Dollar Swingline Loan due but unpaid under this Agreement;
(iii)
thirdly, in or towards payment pro rata of the principal of any US Dollar Swingline Loan due but unpaid under this Agreement; and
(iv)
fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents in respect of the US Dollar Swingline Facility.
(b)
The Swingline Agent shall, if so directed by all the US Dollar Swingline Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.
(c)
Paragraphs (a) and (b) above will override any appropriation made by an Obligor and Clause 35.6 (
Partial payments
) does not apply to the US Dollar Swingline Facility.
11.9
Loss sharing
(a)
If a Revolving Facility A Loan (including a US Dollar Swingline Loan) or interest on a Revolving Facility A Loan (including a US Dollar Swingline Loan) is not paid in full on its due date, the Agent (if requested to do so in writing by any affected Lender) shall calculate the amount (if any) which needs to be paid or received by each Lender with a Revolving Facility A Commitment to place that Lender in the position it would have been in had each
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Lender (or its Affiliate) with a Facility A Commitment participated in that Loan in the proportion borne by its Facility A Commitment to the Total Facility A Commitments and, if the Total Facility A Commitments are then zero, the proportion borne by its Facility A Commitment to the Total Facility A Commitments immediately prior to their reduction to zero.
(b)
The calculation of the Agent is designed solely to allocate the unpaid amount proportionally among the Lenders with a Revolving Facility A Commitment according to their Revolving Facility A Commitments and will not take into account any commitment fee or other amount payable under the Finance Documents.
(c)
The Agent will set a date (the “
Loss Sharing Date
”) on which payments must be made under this Clause 11.9. The Agent shall give at least three (3) Business Days’ notice to each affected Lender of this date and the amount of the payment (if any) to be paid or received by it on this date.
(d)
On the Loss Sharing Date:
(i)
each affected Lender who has to make a payment shall pay to the Agent the relevant amount set out in the notice referred to in paragraph (c) above; and
(ii)
out of the amounts the Agent receives, the Agent shall pay to each affected Lender who is entitled to receive a payment the amount set out in that notice.
(e)
If the amount actually received by the Agent from the Lenders under paragraph (d) above is insufficient to pay the full amount required to be paid under that paragraph, the Agent shall distribute the amount it actually receives among the affected Lenders pro rata to the amounts they are entitled to receive under that paragraph.
(f)
If a Lender makes a payment to the Agent under this Clause 11.9 then, to the extent that that payment is distributed by the Agent under paragraphs (d) or (e) above, as between the relevant Obligor and that Lender an amount equal to the amount of that distributed payment will be treated as not having been paid by the relevant Obligor.
(g)
Any payment under this Clause 11.9 will not reduce the obligations in aggregate of any Obligor.
(h)
Wells Fargo Bank, NA will only be deemed to be a Lender for the purposes of this Clause 11.9 (
Loss Sharing
) after the Target Accession Date has occurred and shall not have any liability in respect of Revolving Facility A Loans drawn prior to the Target Accession Date.
12.
ILLEGALITY, VOLUNTARY PREPAYMENT AND CANCELLATION
12.1
Illegality
Subject to Clause 12.2 (
Illegality in relation to the Issuing Agent
), if it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund, issue or maintain its participation in any Utilisation:
(a)
such Lender shall promptly notify the Agent upon becoming aware of that event;
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(b)
upon the Agent notifying each Borrower, the Revolving Facility Commitments of such Lender and of any Affiliate of that Lender which is a US Dollar Swingline Lender will be immediately cancelled; and
(c)
the relevant Borrower shall repay such Lender’s (and any such Affiliate’s) participation in the Utilisations made to that Borrower on the last day of the Interest Period for each Utilisation occurring after the Agent has notified that Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).
12.2
Illegality in relation to the Issuing Agent
If it becomes unlawful for an Issuing Agent or any Lender to issue or leave outstanding any Letter of Credit or otherwise to perform any of its obligations in respect of Letters of Credit or to fund or maintain its participation in any Utilisation by way of Letter of Credit as contemplated by this Agreement, then:
(a)
that Issuing Agent or such Lender shall promptly notify the Agent upon becoming aware of that event;
(b)
the Issuing Agent or such Lender shall not be obliged to issue or participate in (as the case may be) any Letter of Credit;
(c)
each Borrower shall use all reasonable endeavours to procure the release of each Letter of Credit issued by that Issuing Agent or in which such Lender participates and which is outstanding at such time. If a Borrower fails to procure the release of a Letter of Credit it will be obliged to prepay that Letter of Credit; and
(d)
in the case of illegality affecting the Issuing Agent, unless any other Lender has agreed to be an Issuing Agent pursuant to the terms of this Agreement, then the Revolving Facility shall cease to be available for the issue of Letters of Credit.
Nothing in this Clause 12.2 shall prevent a Borrower from utilising a Revolving Facility to prepay a Letter of Credit in accordance with paragraph (c) above.
12.3
Voluntary cancellation
(a)
The relevant Borrower may, if it gives the Agent not less than five (5) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of US$5,000,000 for Revolving Facility A and €5,000,000 for Revolving Facility B) of an Available Revolving Facility.
(b)
The relevant Borrower may not make a cancellation pursuant to paragraph (a) above to the extent that that cancellation would result in a Lender (or its Affiliate) failing to meet the requirement set out in paragraph (g) of Clause 30.2 (
Conditions of assignment or transfer
).
(c)
Any cancellation under this Clause 12.3 shall reduce the Revolving Facility Commitments of the Lenders rateably under that Facility.
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12.4
Voluntary prepayment of Loans
Each Borrower may, if it gives the Agent not less than five (5) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Loan drawn by it under the Facility made available to it (but, if in part, being an amount that reduces that Loan by a minimum amount of US$5,000,000 for Revolving Facility A and €5,000,000 for Revolving Facility B).
12.5
Voluntary prepayment of Letters of Credit
Each Borrower may, if it gives the Agent not less than five (5) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Letter of Credit requested by it under a Revolving Facility made available to it.
12.6
Right of cancellation and repayment in relation to a single Lender or the Issuing Agent
(a)
If:
(i)
any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 19.2 (
Tax gross-up
); or
(ii)
any Lender or the Issuing Agent claims indemnification from the Parent or an Obligor under Clause 19.3 (
Tax indemnity
) or Clause 20.1 (
Increased costs
); or
(iii)
any Lender is a Defaulting Lender,
(iv)
any amount payable to any Lender by an Italian Obligor under a Finance Document is not, or will not be treated as a deductible charge or expense for Italian Tax purposes for that Italian Obligor by reason of that amount originating from transactions occurred with Blacklisted Resident Entities, other than where any limitation in the deduction of that amount results from any inaction of the Italian Obligor which is not the consequence of the lack of cooperation of the entity residing or localized in a Blacklisted Jurisdiction in providing the documentation necessary for that Obligor to treat the payment as a deductible charge or expense; or
the Parent (on behalf of each Borrower) may (but shall not be obligated to), whilst the circumstance giving rise to the events referred to above continues, give the Agent notice :
(A)
(if such circumstances relate to a Lender or any Affiliate of a Lender) of cancellation of the Revolving Facility Commitment of such Lender and of any Affiliate of that Lender which is a US Dollar Swingline Lender or its intention to procure the repayment of such Lender’s and any such Affiliate’s participation in the Utilisations or give the Agent notice of its intention to replace that Lender (together with any Affiliate of that Lender) in accordance with paragraph (c) below; or
(B)
(if such circumstances relate to a Lender or to the Issuing Agent) of repayment of any outstanding Letter of Credit issued by it and cancellation of its appointment as an Issuing Agent or Lender under this Agreement in relation to any Letters of Credit to be issued in the future.
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(b)
On receipt of a notice referred to in paragraph (a) above in relation to a Lender or an Affiliate of a Lender, the Available Revolving Commitment of such Lender and any such Affiliate shall immediately be reduced to zero. The Parent shall ensure that a Borrower to which a Utilisation is outstanding shall promptly, and in any event within five (5) Business Days, repay such Lender’s and any such Affiliate’s participation in each Loan and Letter of Credit together with all interest and other amounts accrued under the Finance Documents.
(c)
In lieu of the cancellations referred to in Clause 12.1 (
Illegality
) and above in this Clause 12.6, each Borrower shall have the right, but not the obligation, at its own expense, upon notice from that Borrower to such Lender (the “
Terminated Lender
”) and the Agent, to replace such Terminated Lender (together with any Affiliate of that Terminated Lender) with a New Lender (in accordance with and subject to the restrictions contained in Clause 30 (
Changes to Lenders
)) approved by the Agent, the Swingline Agent and the Issuing Agent, and such Terminated Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Clause 30 (
Changes to Lenders
)) all its interests, rights and obligations under this Agreement to such assignee;
provided that
no Terminated Lender shall be obligated to make any such assignment:
(i)
unless such assignee or that Borrower shall pay to the affected Terminated Lender such Terminated Lender’s and such Affiliate’s participation in all Utilisations together with all interest and other amounts accrued under the Finance Documents; and
(ii)
if to make such transfer or assignment would cause such Terminated Lender or such Affiliate to breach, or such transfer or assignment is of and in itself in breach of, in each case, any provision of law or regulation.
(d)
A Terminated Lender shall not be obliged to transfer its rights and obligations pursuant to paragraph (c) above to the extent that the transfer would result in that Terminated Lender (or its Affiliate) failing to meet the requirement set out in paragraph (g) of Clause 30.2 (
Conditions of assignment or transfer
).
13.
MANDATORY PREPAYMENT
13.1
Change of Control or Sale
(a)
Upon the occurrence of:
(i)
a Change of Control; or
(ii)
the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions (other than as a result of a Permitted Transaction):
(A)
a Lender shall not be obliged to fund a Utilisation (except for a Rollover Loan); and
(B)
the Agent shall, upon written instructions from an individual Lender and, by not less than thirty (30) days’ notice, cancel the Revolving Facility Commitment of such Lender and of any Affiliate of that Lender which is a US Dollar Swingline Lender and require repayment of the participation of such Lender in the Loans, whereupon the Revolving Facility Commitment of
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such Lender and of any such Affiliate will be cancelled and all outstanding participations of such Lender and of any such Affiliate, together with accrued interest, and all other amounts accrued under the Finance Documents and owing to such Lender and of any such Affiliate, shall become immediately due and payable and the Borrowers shall repay or prepay such amounts.
14.
RESTRICTIONS
14.1
Notices of cancellation or prepayment
Any notice of cancellation, prepayment, authorisation or other election given by any Party under Clause 12 (
Illegality, voluntary prepayment and cancellation
) shall (subject to the terms of those Clauses) be irrevocable and, unless a contrary indication appears in this Agreement, any such notice shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.
14.2
Interest and other amounts
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.
14.3
Reborrowing of Loans; Reutilisation of Facility
Unless a contrary indication appears in this Agreement, any part of the Revolving Facility which is prepaid by the Borrower to which such Revolving Facility has been made available, in accordance with Clause 12.4 (
Voluntary prepayment of Loans
) or Clause 12.5 (
Voluntary prepayment of Letters of Credit
) may be reborrowed (in the case of Loans) or reutilised (in the case of Letters of Credit) by the relevant Borrower in accordance with the terms of this Agreement.
14.4
Prepayment in accordance with Agreement
The Borrowers shall not repay or prepay all or any part of the Utilisations or cancel all or any part of the Revolving Facility Commitments except at the times and in the manner expressly provided for in this Agreement.
14.5
No reinstatement of Commitments
No amount of the Total Facility Commitments cancelled under this Agreement may be subsequently reinstated.
14.6
Agent’s receipt of notices
If the Agent receives a notice under Clause 12 (
Illegality, Voluntary Prepayment and Cancellation
), it shall promptly forward a copy of that notice or election to either the Borrowers or the affected Lender, as appropriate.
15.
INTEREST
15.1
Calculation of interest
The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
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(a)
Margin;
(b)
LIBOR or, in relation to any Loan in Euro, EURIBOR.
15.2
Usury Cap
Notwithstanding any other provision of this Agreement, if at any time the rate of interest applicable to a Loan made available under this Agreement to any Borrower incorporated in Italy (including the relevant component of any applicable fee and expense) exceeds the maximum rate permitted by the Italian law 7 March 1996 no. 108 and related implementation regulations (the “
Italian Usury Legislation
”), the rate of interest payable by the relevant Borrower shall be deemed to be automatically reduced, for the shortest possible period, to the maximum rate permitted under the Italian Usury Legislation.
15.3
Payment of interest
Each Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than six (6) Months, on the dates falling at six (6) Monthly intervals after the first day of the Interest Period).
15.4
Default interest
(a)
If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is one per cent. (1%) higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 15.4 shall be immediately payable by the Obligor on demand by the Agent.
(b)
If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:
(i)
the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and
(ii)
the rate of interest applying to the overdue amount during that first Interest Period shall be one per cent. (1%) higher than the rate which would have applied if the overdue amount had not become due.
(c)
Default interest (if unpaid) arising on an overdue amount will be compounded (to the extent permitted under any applicable law and regulation, including article 1283 of the Italian Civil Code, as amended, supplemented or implemented from time to time) with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
15.5
Notification of rates of interest
The Agent shall promptly notify the Lenders and the relevant Borrower of the determination of a rate of interest under this Agreement.
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15.6
Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Utilisation by a US Borrower, together with all fees, charges and other amounts which are treated as interest on such Utilisation under applicable law (collectively the “
Charges
”), shall exceed the maximum lawful rate (the “
Maximum Rate
”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Utilisation in accordance with applicable law, the rate of interest payable in respect of such Utilisation, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Utilisation but were not payable as a result of the operation of this Clause 15.6 shall be cumulated and the interest and Charges payable to such Lender in respect of other Utilisation or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Margin to the date of repayment, shall have been received by such Lender.
16.
INTEREST PERIODS
16.1
Selection of Interest Periods and Terms
(a)
Each Borrower may select an Interest Period for a Revolving Facility Loan in the Utilisation Request for that Revolving Facility Loan.
(b)
Subject to this Clause 16 each Borrower may select an Interest Period of one (1), three (3) or six (6) Months or (in the case of the Swingline Facility) one (1) through five (5) New York Business Day(s) in relation to the Facility made available to it or any other period agreed between the relevant Borrower and the Agent (acting on the instructions of all the Lenders under the relevant Facility).
(c)
An Interest Period for a Revolving Facility Loan shall not extend beyond the Final Maturity Date applicable to its Facility.
(d)
A Revolving Facility Loan and a US Dollar Swingline Loan have one Interest Period only.
(e)
The Parent and the Agent may select an Interest Period of two (2) weeks (or a shorter period) for the purpose of aligning the Interest Period with the effective date of the Holdco Merger.
16.2
Non-Business Days
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
17.
CHANGES TO THE CALCULATION OF INTEREST
17.1
Absence of quotations
(a)
Subject to Clause 17.2 (
Market disruption
) if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Base Reference Banks but a Base Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, then the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Base Reference Banks.
79
(b)
If a Market Disruption Event occurs, then the Agent shall, as soon as is practicable, notify the Parent.
17.2
Market disruption
(a)
If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender’s share of that Loan for the Interest Period shall be the percentage rate per annum which is the sum of:
(i)
the Margin; and
(ii)
the rate notified to the Agent by such Lender, as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to such Lender of funding its participation in that Loan from whatever source it may reasonably select;
(b)
In this Agreement “
Market Disruption Event
” means:
(i)
at or about noon on the Quotation Day for the relevant Interest Period (i) the Screen Rate is not available or (ii), LIBOR or, if available, EURIBOR is to be determined by reference to the Base Reference Banks and none or only one of the Base Reference Banks supplies a rate to the Agent to determine LIBOR or, if applicable, EURIBOR for the relevant currency and Interest Period; or
(ii)
before close of business in New York on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed thirty-five per cent. (35%) of that Loan) that the cost to it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable, EURIBOR.
17.3
Alternative basis of interest or funding
(a)
If a Market Disruption Event occurs and the Agent or a Borrower so requires, the Agent and that Borrower shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest.
(b)
Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the relevant Borrower, be binding on all Parties.
17.4
Break Costs
(a)
Each Borrower shall, within three (3) Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.
(b)
Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.
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18.
FEES
18.1
Commitment fee
(a)
The Borrowers under each Facility (as applicable) shall pay to the Agent (for the account of each Lender):
(i)
a fee in US Dollars in respect of Revolving Facility A, and, as applicable, a fee in Euro in respect of Revolving Facility B, computed at the rate of thirty five per cent. (35%) of the relevant Margin per annum on such Lender’s Available Revolving Commitment under the relevant Facility from the date of this Agreement to the end of the Availability Period applicable to the relevant Facility;
provided that
the Public Debt Ratings are higher than BB (with at least a stable outlook) and Ba2 (with at least a stable outlook) and
provided further that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being higher than BB (with at least a stable outlook) or Ba2 (with at least a stable outlook) as applicable; or
(ii)
a fee in US Dollars in respect of Revolving Facility A and, as applicable a fee in Euro in respect of Revolving Facility B, computed at the rate of thirty seven and one half per cent. (37.5%) of the relevant Margin per annum on such Lender’s Available Revolving Commitment under the relevant Facility from the date of this Agreement until the end of the Availability Period applicable to the relevant Facility;
provided that
the Public Debt Ratings are equal or lower than BB (with a stable outlook) or Ba2 (with a stable outlook)
provided further that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (ii) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or lower than BB or Ba2 as applicable;
provided that
:
(A)
in the event that the Public Debt Ratings differ such that the applicable rate cannot be determined for purposes of both (i) and (ii) above, the rate used to calculate the commitment fee shall be the average of the two (or three, as applicable) applicable rates specified in (i) and (ii) above;
(B)
in the event of withdrawal of a Public Debt Rating, the rate used to calculate the commitment fee shall be such rate which is the average of the applicable rate or rates (as the case may be) for the remaining Public Debt Rating as specified in (i) or (ii) above and thirty seven and one half per cent. (37.5%); and
(C)
in the event of withdrawal of all Public Debt Ratings, the rate used to calculate the commitment fee shall be thirty seven and one half per cent. (37.5%).
(b)
Starting on the date of this Agreement, the accrued commitment fee calculated in accordance with paragraph (a) above is payable on the last day of each successive period of three (3) Months which ends during the relevant Availability Period, on the last day of the Availability
81
Period and, if cancelled in full, on the cancelled amount of the relevant Lender’s Commitment at the time the cancellation is effective.
(c)
No commitment fee is payable to the Agent (for the account of a Lender) on any Available Revolving Commitment of such Lender for any day on which such Lender is a Defaulting Lender.
18.2
Arrangement fee
The Parent shall pay to the relevant Arranging Parties an arrangement fee for the purposes of remunerating their activities as Arranging Parties in the amount and at the times agreed in each Arrangement Fee Letter(s).
18.3
Agency fee
The Parent shall pay to the Agent (for its own account) an agency fee to remunerate its activities as Agent in the amount and at the times agreed in the Agent’s Fee Letter.
18.4
Swingline Agency fee
GTECH Corporation shall pay to the Swingline Agent (for its own account) an agency fee to remunerate its activities as Swingline Agent in the amount and at the times agreed in the Swingline Agent’s Fee Letter.
18.5
Utilisation fee
(a)
The Borrowers shall pay a utilisation fee calculated by reference to the daily amount outstanding under the Facilities during each consecutive period of three (3) Months (the first of such period beginning on the date of this Agreement) multiplied by the percentage as set out in the table below:
|
Utilisation level
|
|
Utilisation fee (per annum)
|
|
|
Less than or equal to 33
1
/
3
per cent. of the aggregate Revolving Facility Commitments from time to time
|
|
0.15
|
%
|
|
|
|
|
|
|
Higher than 33
1
/
3
per cent. but less than or equal to 66
2
/
3
per cent. of the aggregate Revolving Facility Commitments from time to time
|
|
0.30
|
%
|
|
|
|
|
|
|
Higher than 66
2
/
3
per cent. of the aggregate Revolving Facility Commitments from time to time
|
|
0.60
|
%
|
(b)
The accrued utilisation fee with respect to Revolving Facility A shall be payable in US Dollars and the accrued utilisation fee with respect to Revolving Facility B shall be payable in Euro in each case starting from the date of first Utilisation under the Facilities, quarterly in arrears and on the date on which all outstanding amounts under the Facilities are prepaid and the Facilities are cancelled in full.
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18.6
Fees payable in respect of Letters of Credit
(a)
The applicable Borrowers shall pay to the Agent (for the account of each Lender participating in the relevant Revolving Facility) a Letter of Credit Fee in the Base Currency (computed at the rate equal to the Margin from time to time applicable to a Loan) on the outstanding amount of each Letter of Credit requested by it for the period from the issue of that Letter of Credit until its Expiry Date. The Letter of Credit Fee shall be distributed according to each such Lender’s L/C Proportion of that Letter of Credit.
(b)
The accrued issuing agency fee and the accrued Letter of Credit Fee on a Letter of Credit shall be payable on the last day of each successive period of three (3) Months ending on each 31 March, 30 June, 30 September and 31 December in each year (or such shorter period as shall end on the Expiry Date for that Letter of Credit) starting on the date of issue of that Letter of Credit. The accrued issuing agency fee and the accrued Letter of Credit Fee is also payable to the Agent on the cancelled amount of any Lender’s Revolving Facility Commitment at the time the cancellation is effective if that Commitment is cancelled in full and the Letter of Credit are prepaid or repaid in full.
18.7
Fees payable in respect of Wells Fargo Bank, NA
Any fees payable under this Clause 18 with respect to Wells Fargo Bank, NA shall only accrue from and including the Target Accession Date.
19.
TAX GROSS UP AND INDEMNITIES
19.1
Definitions
In this Agreement:
“Borrower DTTP Filing
” means an HM Revenue & Customs’ Form DTTP2 duly completed and filed by the relevant Borrower, which:
(a)
where it relates to a UK Treaty Lender that is an Original Lender, contains the scheme reference number and jurisdiction of tax residence stated opposite such Lender’s name in Part II of Schedule 1 (
The Original Parties
) or (in the case of the scheme reference number, that is subsequently communicated to the Agent and the relevant Borrower promptly upon it becoming available), and
(i)
where the Borrower is an Original Borrower, is filed with HM Revenue & Customs within thirty (30) days of the date of this Agreement; or
(ii)
where the Borrower is an Additional Borrower, is filed with HM Revenue & Customs within thirty (30) days of the date on which that Borrower becomes an Additional Borrower; or
(b)
where it relates to a UK Treaty Lender that is a New Lender, contains the scheme reference number and jurisdiction of tax residence stated in respect of such Lender in the relevant Transfer Certificate or Assignment Agreement, and
(i)
where the Borrower is a Borrower as at the relevant Transfer Date, is filed with HM Revenue & Customs within thirty (30) days of that Transfer Date; or
83
(ii)
where the Borrower is not a Borrower as at the relevant Transfer Date, is filed with HM Revenue & Customs within thirty (30) days of the date on which that Borrower becomes an Additional Borrower.
“
Change of Tax Law
” means with respect to the Lender, any change in, or in the published interpretation, administration or the application of, any law or regulation or Double Taxation Treaty or any published practice or published concession of any relevant taxing authority.
“
Exempt Lender
” means a Lender that is a financial institution or any other entity (including, any entity included in the provision of article 26, paragraph 5-bis, of Presidential Decree No. 600 of 29 September 1973 as introduced by the Law Decree No. 91 of 24 June 2014, converted into law by the Law No. 116 of 11 August 2014 and subsequently amended by Law Decree No.133 of 29 September 2014) which is authorised to provide finance to an Italian Borrower and to which any payment of interest under the Finance Documents can be made without a Tax Deduction in respect of Tax being imposed by the Republic of Italy;
provided that
such Lender is not a Blacklisted Resident Entity.
“
Italian Qualifying Lender
” means:
(a)
a bank or financial institution duly authorised or licensed to carry out banking activity in Italy pursuant to Legislative Decree No. 385 dated 1 September 1993 that is a resident of Italy for Tax purposes pursuant to article 73 of Italian Presidential Decree No. 917 of 22 December 1986 not acting for the purposes of the Finance Document through a Facility Office qualifying as a Permanent Establishment, or in any case a Permanent Establishment, located outside of Italy; or
(b)
a Facility Office qualifying as a Permanent Establishment, or in any case a Permanent Establishment, in Italy of a bank or financial institution duly authorised or licensed to carry out banking activity in Italy - other than a Blacklisted Resident Entity - for which any payment received under the Finance Document is business income (
reddito di impresa
) pursuant to article 81, 151 and 152, paragraph 1, of Italian Presidential Decree No. 917 of 22 December 1986.
“
Italian Treaty Lender
” means a Lender which:
(a)
is resident for Tax purposes in a country which has a Double Taxation Treaty in force with Italy, pursuant to which no withholding on account of Tax is required to be made on the interest and similar payments deriving from Italy;
(b)
is entitled to benefit of such Double Taxation Treaty and consequently (subject to the completion of procedural formalities) such full exemption from Tax;
(c)
does not carry on business in Italy through a Permanent Establishment with which any payment under the Finance Document is effectively connected; and
(d)
it is not a Blacklisted Resident Entity.
“
Protected Party
” means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
84
“
Qualifying Lender
” means a Lender:
(a)
in respect of any payment under or in connection with a Loan made to an Italian Borrower, which is beneficially entitled to interest payable to such Lender in respect of such Loan and, at any time, is a Lender which is:
(i)
an Exempt Lender;
(ii)
an Italian Qualifying Lender; or
(iii)
an Italian Treaty Lender;
and
(b)
in respect of any payment under or in connection with a Loan made to a UK Borrower, which is beneficially entitled to interest payable to such Lender in respect of such Loan and, at any time is:
(i)
a Lender:
(A)
which is a bank (as defined for the purpose of section 879 of the ITA) making such Loan and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance or would be within such charge as respects such payments apart from section 18A of the CTA; or
(B)
which was a bank (as defined for the purpose of section 879 of the ITA) at the time that that Loan was made and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or
(ii)
(A)
a company resident in the United Kingdom for United Kingdom tax purposes;
(B)
a partnership each member of which is:
(i)
a company so resident in the United Kingdom; or
(ii)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of Section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(C)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of Section 19 of the CTA) of that company;
85
(iii)
a Lender which is a UK Treaty Lender; or
(iv)
a Lender which is a building society (as defined for the purpose of Section 880 of the ITA) making an advance under a Finance Document;
and
(c)
in respect of any payment under or in connection with a Loan made to a US Borrower, which is beneficially entitled to interest payable to such Lender in respect of such Loan and, at any time, is a Lender which is:
(i)
a United States Person; or
(ii)
not a United States Person but is entitled to complete exemption from withholding of United States federal income tax on all payments made pursuant to this Agreement;
and
(d)
in relation to any other payment, any Lender.
“
Tax Confirmation
” means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
(a)
a company resident in the United Kingdom for United Kingdom tax purposes; or
(b)
a partnership each member of which is:
(i)
a company so resident in the United Kingdom; or
(ii)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of Section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(c)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of Section 19 of the CTA) of that company.
“
Tax Credit
” means a credit against, relief or remission for, or repayment of any Tax.
“
Tax Deduction
” means a deduction or withholding for or on account of Tax from a payment or a deemed payment under a Finance Document, other than a FATCA Deduction.
“
Tax Payment
” means either the increase in a payment made by an Obligor to a Finance Party under Clause 19.2 (
Tax gross-up
) or a payment under Clause 19.3 (
Tax indemnity
).
“
Treaty Lender
” means an Italian Treaty Lender or a UK Treaty Lender.
“
UK Borrower
” means a Borrower which is incorporated in the United Kingdom.
86
“
UK Non-Bank Lender
” means a Lender which gives a Tax Confirmation in the Assignment Agreement or Transfer Certificate which it executes on becoming a Party.
“
UK Treaty Lender
”
means a Lender which:
(a)
is treated as a resident of a UK Treaty State for the purposes of the UK Treaty; and
(b)
does not carry on a business in the United Kingdom through a permanent establishment with which that Finance Party’s participation in the Loans is effectively connected; and
(c)
fulfils any conditions which must be fulfilled under the Treaty by residents of that Treaty State for such residents to obtain full exemption from taxation on interest imposed by the United Kingdom, subject to the completion of procedural formalities.
“
UK Treaty State
” means a jurisdiction having a double taxation agreement with the United Kingdom (a “
UK Treaty
”) which makes a provision for full exemption from tax imposed by the United Kingdom on interest.
“
United States Person
” means a United States Person as defined in Section 7701(a)(30) of the Code and includes an entity that is disregarded as separate from a United States Person (as defined in such Section) for United States federal income tax purposes.
“
US Borrower
” means any Borrower whose jurisdiction of formation or organisation is a state in the United States of America or the District of Colombia or, for the purposes of this Clause 19 (
Tax Gross Up and Indemnities
) a Borrower that is a United States Person.
Unless a contrary indication appears, in this Clause 19 a reference to “determines” or “determined” means a determination made in the sole discretion of the person making the determination.
19.2
Tax gross-up
(a)
Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.
(b)
A Borrower shall promptly upon becoming aware that an Obligor must make a Tax Deduction from any payment made under a Finance Document (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent of (i) the Lender with respect to which such Tax Deduction applies and (ii) the rate at which such Tax Deduction is required to be made. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to such Lender. If the Agent receives such notification from a Lender it shall promptly notify the Borrowers and, if necessary, any Obligors making the payment.
(c)
Except as provided in this Clause 19.2 and subject to paragraph (d) below, if a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d)
An Obligor is not required to make an increased payment to a Lender under paragraph (c) above for a Tax Deduction from any payment under this Agreement if on the date on which the payment falls due:
87
(i)
with reference to any payment made under the Finance Document by any Borrower, the payment could have been made to the relevant Lender without a Tax Deduction, other than with respect to any US federal withholding Tax, if the Lender had been a Qualifying Lender in relation to that payment, but on that date such Lender is not or has ceased to be a Qualifying Lender in relation to that payment other than as a result of:
(A)
any Change of Tax Law; or
(B)
a change in the jurisdiction in which an Obligor is established or resident for tax purposes at the date it becomes an Obligor under this Agreement other than as a result of a Permitted Merger;
(ii)
a Tax Deduction is required to be made in respect of any payment under or in connection with a Loan made to a US Borrower for United States federal withholding tax, other than any such Tax Deduction that is required as a result of any Change of Tax Law occurring after the date the relevant Lender becomes a Lender under this Agreement.
(iii)
the relevant Lender is an Exempt Lender, an Italian Treaty Lender or a UK Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without a Tax Deduction had such Lender complied with its obligations under paragraph (f) below;
(iv)
with reference to any payment made under the Finance Document by any US Borrower, the Tax Deduction would not be required but for the Lender’s failure to comply with paragraph (i)(iv) below;
(v)
the relevant Lender is a Qualifying Lender in relation to the payment solely by virtue of sub-paragraph (b)(ii) of the definition of Qualifying Lender and:
(A)
an officer of Her Majesty’s Revenue & Customs has given (and not revoked) a direction (a “
Direction
”) under section 931 of the ITA which relates to the payment and that Lender has received from the Obligor making the payment or from the Parent a certified copy of that Direction; and
(B)
the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made; or
(vi)
the relevant Lender is a Qualifying Lender in relation to the payment solely by virtue of sub-paragraph (b)(ii) of the definition of Qualifying Lender and:
(A)
the relevant Lender has not given a Tax Confirmation to the Obligor; and
(B)
the payment could have been made to the Lender without any Tax Deduction if the Lender had given a Tax Confirmation to the Obligor, on the basis that the Tax Confirmation would have enabled the Obligor to have formed a reasonable belief that the payment was an “excepted payment” for the purpose of section 930 of the ITA.
(e)
If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time
88
allowed and in the
minimum
amount required by law. Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
(f)
A Lender and each Obligor which makes a payment to which that Lender is entitled, shall cooperate in completing any procedural formalities, from time to time required or necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction, or with a reduced Tax Deduction, including, but not limited to, the provision of the information and documentation specified in the following paragraphs (g), (h) and (i) of this Clause 19.2 to the extent applicable.
(g)
With respect to each Italian Obligor, each Italian Treaty Lender, each Lender requiring the application of a Double Taxation Treaty with respect to any interest payable by such Italian Obligor and each Exempt Lender agree to provide the Italian Obligor with an Affidavit, any Self-Declaration Form or any other form necessary for that Obligor to be entitled to make any payment under this Agreement without a Tax Deduction on a date which falls, in case of any interest payment made by an Italian Borrower, at least ten (10) Business Days prior to the date upon which interest is first due to be paid to it or, in case of any payment made by an Italian Guarantor, upon ten (10) Business Days of request by a such Italian Obligor, and thereafter: (i) within the end of January of any subsequent calendar year (or, if earlier, within at least five (5) Business Days prior to the subsequent date upon which the interest is due to be paid) and, (ii) whenever there is a change in the Lender’s status under a Double Taxation Treaty (including if it changes its tax residence) within twenty (20) Business Days from the time such change is effective (or, if earlier, within at least five (5) Business Days prior to the subsequent date upon which interest is due to be paid by an Italian Obligor).
(h)
With respect to each UK
Borrower
:
(i)
(A)
a Lender which becomes a Party on the day on which this Agreement is entered into that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence opposite its name in Part II of Schedule 1 (
The Original Parties
); and
(B)
a New Lender that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence in the Transfer Certificate or Assignment Agreement which it executes, and, having done so, such Lender shall be under no obligation pursuant to paragraph (f) above.
(ii)
If a Lender has confirmed its scheme reference number and its jurisdiction of tax residence in accordance with paragraph (h)(i) above and:
(A)
a Borrower making a payment to such Lender has not made a Borrower DTTP Filing in respect of such Lender; or
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(B)
a Borrower making a payment to such Lender has made a Borrower DTTP Filing in respect of such Lender but:
(1)
such Borrower DTTP Filing has been rejected by HM Revenue & Customs; or
(2)
HM Revenue & Customs has not given such Borrower authority to make payments to such Lender without a Tax Deduction within sixty (60) Business Days of the date of the Borrower DTTP Filing,
and in each case, such Borrower has notified such Lender in writing, such Lender and such Borrower shall co-operate in completing any additional procedural formalities necessary for such Borrower to obtain authorisation to make that payment without a Tax Deduction;
(iii)
if a Lender has not confirmed its scheme reference number and jurisdiction of tax residence in accordance with paragraph (h)(ii) above, no Obligor shall make a Borrower DTTP Filing or file any other form relating to the HMRC DT Treaty Passport scheme in respect of such Lender’s Commitment(s) or its participation in any Loan unless the Lender otherwise agrees;
(iv)
an Obligor shall, promptly on making a Borrower DTTP Filing, deliver a copy of that Borrower DTTP Filing to the Agent for delivery to the relevant Lender;
(v)
a UK Non-Bank Lender which becomes a Party on the day on which this Agreement is entered into gives a Tax Confirmation to the Parent by entering into this Agreement; and
(vi)
a UK Non-Bank Lender shall promptly notify the Parent and the Agent if there is any change in the position from that set out in the Tax Confirmation.
(i)
With respect to each US Borrower:
(i)
with respect to a Tax Deduction made on account of Tax imposed by the United States, the Obligor shall certify (under the signature of either its Director, International Tax or another Director or superior officer) on the GTECH Withholding Schedule (as defined in paragraph (j) below) for the immediately succeeding payment period and within the time period specified therefor, the amount of each (if any) Tax Deduction that has been made with respect to a payment made on behalf of any Finance Party and the amount of the related payment made to the relevant taxing authority on account of such Tax Deduction in each case with respect to the immediately preceding payment period; and
(ii)
the Obligor will provide the relevant Finance Party with IRS Forms 1042-S and 1099, as applicable (and relevant) (or any successor form or forms) relating to such Tax Deduction in a manner and at a time in accordance with United States law, and in any case as soon as practicable following the close of the Obligor’s taxable year, and will simultaneously provide the Agent with a copy thereof. With respect to a Tax Deduction on account of non-United States Taxes, within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment an original receipt (or certified copy thereof),
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or if unavailable, evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority;
(iii)
in the case of any payment of interest hereunder by or on behalf of an Obligor through an account or branch outside the United States or by or on behalf of an Obligor by a payer that is not a United States Person (other than a payment made pursuant to a Guarantee), if such Obligor determines that no Taxes are payable in respect thereof, such Obligor shall furnish, or shall cause such payer to furnish, to the Agent, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes; and
(iv)
promptly after becoming a Party to this Agreement, but in any event before a payment pursuant to this Agreement is due, each Lender will provide, as relevant, to each US Borrower two original executed IRS forms or certifications that establish the Lender is entitled to a complete exemption or reduction (as applicable) from US withholding Taxes on all payments made pursuant to this Agreement and in the case of a Lender claiming the portfolio interest exemption, IRS Form W-8BEN-E (or any successor form) together with a statement certifying that such Lender is not (i) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (ii) a “10 percent shareholder” of the relevant US Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (iii) a “controlled foreign corporation” that is related to such US Borrower within the meaning of Section 881(c)(3)(C) of the Code. Upon a change of facts which causes the prior forms to no longer be valid or upon the reasonable request of a US Borrower, a Lender shall again provide the forms and documents described above unless it is unable to do so because of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or treaty, or any published practice or concession of any relevant taxing authority; if a Lender is unable to provide such forms and documents, then such Lender shall provide such other forms and certifications to establish any exemption or reduction from US withholding Taxes for which such Lender is eligible.
(j)
At least three (3) Business Days prior to the due date of any amount payable by an Obligor under any Finance Document, the Agent shall provide to each Borrower by pdf or facsimile a schedule setting forth the portion of the total amount of such payment that will be payable to each Lender on such due date. Within a reasonable amount of time prior to the close of business on the date on which such scheduled amount becoming payable by an Obligor under any Finance Document, each Borrower shall provide to the Agent by pdf or facsimile a reciprocal schedule setting forth the amount of any Tax Deduction that the Obligor will withhold from each payment to be made to each Lender included on such schedule on the due date for such payment (the “
GTECH Withholding Schedule
”). No failure or delay of the Agent to provide the Borrowers with the schedule contemplated hereunder shall affect the obligation of any Obligor to make the payments otherwise required to be made by them under this Agreement.
(k)
Any Lender which enters into any sub-participation or other risk sharing arrangement with a Relevant Sub-Participant shall only be entitled to receive payments under this Clause 19.2 with reference to any interest paid on the sub-participated commitment (i) to the same extent as such Lender would have been if it had not entered into such sub-participation or (ii) for an amount equivalent to the Tax Deduction required by law to be applied on any
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payment made under this Agreement and beneficially owned by the Relevant Sub-Participant, if lower;
provided that
this paragraph (k) shall not apply to limit any entitlement to receive payments under this Clause 19.2 if the right to receive a greater payment results from a Change of Tax Law that occurs after the Relevant Sub-Participant acquired the applicable sub-participated commitment.
19.3
Tax indemnity
(a)
The relevant Obligor shall (within five (5) Business Days of demand by the Agent) pay (or cause to be paid) to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document (and for which it has provided, or will provide, documentary evidence).
(b)
Paragraph (a) above shall not apply:
(i)
with respect to any Tax assessed on a Finance Party:
(A)
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident or engaged in a trade or business for tax purposes; or
(B)
under the law of the jurisdiction in which that Finance Party’s Permanent Establishment or Facility Office is located in respect of amounts received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable, including for the avoidance of any doubt the value of production determined for IRAP purposes (but not any sum deemed to be received or receivable) by that Finance Party, including branch profits tax and
minimum
tax; or
(ii)
to the extent a loss, liability or cost:
(A)
is compensated for by an increased payment under Clause 19.2 (
Tax gross-up
); or
(B)
would have been compensated for by an increased payment under Clause 19.2 (
Tax gross-up
) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 19.2 (
Tax gross-up
) applied; or
(C)
is compensated for by Clause 19.6 (
Stamp taxes
) (or would have been so compensated for under that Clause but was not so compensated solely because any of the exceptions set out therein applied); or
(D)
relates to a FATCA Deduction required to be made by a Party.
(c)
A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the relevant Obligor.
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(d)
Such claim and Agent notification shall set forth in reasonable detail the basis for the claim being made by the relevant Finance Party and appropriate documentation supporting such claim.
(e)
A Protected Party shall, on receiving a payment from an Obligor under this Clause 19.3 notify the Agent.
19.4
Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
(a)
a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and
(b)
that Finance Party has obtained, utilised and fully retained that Tax Credit on an affiliated group basis,
the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.
19.5
Lender Status Confirmation
(a)
In respect of an Italian Obligor, each Lender which becomes a Party to this Agreement after the date of this Agreement (or which enters into any sub-participation or other risk sharing arrangement with a Relevant Sub-Participant) shall indicate in the Transfer Certificate or Assignment Agreement which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it (or the Relevant Sub-Participant, if on the date of the Sub-Participation or risk arrangement, such Relevant Sub-Participant was treated as if it were a Lender under this Agreement) falls in:
(i)
an Exempt Lender;
(ii)
an Italian Qualifying Lender;
(iii)
an Italian Treaty Lender; or
(iv)
not a Qualifying Lender.
(b)
In respect of a UK Borrower, each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate or Assignment Agreement which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it falls in:
(i)
not a Qualifying Lender;
(ii)
a Qualifying Lender other than a UK Treaty Lender; or
(iii)
a UK Treaty Lender.
(c)
In respect of a US Borrower, each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate or Assignment
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Agreement which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it falls in:
(i)
not a Qualifying Lender; or
(ii)
a Qualifying Lender within paragraph 19.5.
(d)
If a New Lender fails to indicate its status in accordance with this Clause 19.5 then such New Lender shall be treated for the purposes of this Agreement (including by each Obligor) as if it is not a Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Obligors). If in respect of an Italian Obligor, any Lender fails to indicate the status of the Relevant Sub-Participant or the Relevant Sub-Participant fails to provide the Agent with any Affidavit possibly required or necessary in accordance with this Clause 19.5, then such Lender shall with respect to the Relevant Sub-Participant be treated for the purposes of this Agreement (including by each Obligor) as if it is not an Italian Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Borrower) or the Relevant Sub-Participant provides the Agent with such Affidavit.
(e)
For the avoidance of doubt, a Transfer Certificate or Assignment Agreement shall not be invalidated by any failure of any Lender to comply with this Clause 19.5.
19.6
Stamp taxes
The relevant Borrower shall, or shall procure that an Obligor shall, pay and, within ten (10) Business Days of demand, indemnify each Finance Party against any duly documented liability, loss, cost or expense that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document;
provided that
no Obligor shall be liable for the aforementioned liability, loss, cost or expense:
(a)
in relation to any such Taxes payable in respect of an assignment, transfer or sub-participation by a Finance Party, unless that assignment, transfer or sub-participation is carried out at the request of any Obligor and the Finance Party agrees to such request voluntarily (in circumstances where it is not required to agree to such request on the terms of this Agreement);
(b)
to the extent that such Taxes become payable upon a voluntary registration made by any Finance Party if such registration is not necessary to evidence, prove, maintain, enforce, compel or otherwise assert the rights of such Party or obligations of any Party under an Finance
Document or when such registration is necessary in order to produce or rely on such document for any other purposes; or
(c)
in case it arises as a consequence of, or in connection to, any claims by any authority, including, but not limited to, any Tax authority, and the Lender has not provided the relevant Borrower with copies of any relevant written communications relating to the Finance Document, including, but not limited to, any notices of payment, (the “
Tax Notice
”) received from that authority within fifteen (15) Business Days from receipt (the “
Tax Notice Term
”). If the Lender notifies the relevant Borrower with the Tax Notice within the Tax Notice Term, then the Parties will agree, without prejudice of any rights of the relevant Lender, including the right to be indemnified, under this Clause 19.6, as far as reasonably
94
practicable acting in good faith, possible defensive strategies and the substance and conduct of such defensive strategies and such Lender will, as far as reasonably practicable acting in good faith, share in a timely fashion any relevant information for the relevant Borrower in relation to the development of any litigation proceedings or any settlement or other procedures which may be in progress as the result of the implementation of such defensive strategies.
19.7
Value added tax
(a)
All amounts set out, or expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on each supply, and accordingly, subject to paragraph (b) below, if VAT is chargeable on any supply made by any Finance Party to any Party under a Finance Document and such Finance Party is required to account for the VAT to the relevant Tax Authority that Party shall pay to the Finance Party (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).
(b)
If VAT is or becomes chargeable on any supply made by any Finance Party (the
“Supplier”
) to any other Finance Party (the “
Recipient
”) under a Finance Document, and any Party other than the Recipient (the “
Relevant Party
”) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):
(i)
(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this paragraph (i) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and
(ii)
(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.
(c)
Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any costs or expenses, that Party shall reimburse or indemnify the Finance Party in respect of the full amount of such costs or expenses, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment from the relevant tax authority in respect of such VAT.
(d)
Any reference in this Clause 19.7 to any Party shall, at any time when such Party is treated as a member of a group or unity (or fiscal unity) for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the person who is treated at that time as making the supply, or (as appropriate) receiving the supply, under the grouping rules (provided for in Article 11 of Council Directive 2006/112/EC (or as
95
implemented by the relevant member state of the European Union) or any other similar provision in any jurisdiction which is not a member state of the European Union) so that a reference to a Party shall be construed as a reference to that Party or the relevant group or unity (or fiscal unity) of which that Party is a member for VAT purposes at the relevant time or the relevant representative member (or head) of that group or unity (or fiscal unity) at the relevant time (as the case may be).
(e)
In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party’s VAT registration and such other information as is reasonably requested in connection with such Finance Party’s VAT reporting requirements in relation to such supply.
19.8
No application of the Imposta Sostitutiva
The Parties hereby acknowledge that this Agreement was negotiated and is executed outside the Republic of Italy, and therefore the requirements provided for by article 15 and subsequent of Italian Presidential Decree No. 601 of 1973 as amended and supplemented from time to time (“
D.P.R. 601/1973
”) for the application of the Imposta Sostitutiva on medium term financing are not met. Accordingly, the Lenders cannot exercise, at the request of a Borrower, any option for the application to this Agreement of the Imposta Sostitutiva pursuant to article 15 and subsequent of the D.P.R. 601/1973
.
19.9
FATCA Information
(a)
Subject to paragraph (c) below, each Party shall, within ten (10) Business Days of a reasonable request by another Party:
(i)
confirm to that other Party whether it is:
(A)
a FATCA Exempt Party; or
(B)
not a FATCA Exempt Party;
(ii)
supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party’s compliance with FATCA;
(iii)
supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party’s compliance with any other law, regulation, or exchange of information regime.
(b)
If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c)
Paragraph (a) above shall not oblige any Finance Party to do anything, and paragraph (a)(iii) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:
(i)
any law or regulation;
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(ii)
any fiduciary duty; or
(iii)
any duty of confidentiality.
(d)
If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
(e)
If a Borrower is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within ten (10) Business Days of:
(i)
where an Original Borrower is a US Tax Obligor and the relevant Lender is an Original Lender, the date of this Agreement;
(ii)
where a Borrower is a US Tax Obligor on a Transfer Date and the relevant Lender is a New Lender, the relevant Transfer Date;
(iii)
the date a new US Tax Obligor accedes as a Borrower; or
(iv)
where a Borrower is not a US Tax Obligor, the date of a request from the Agent,
supply to the Agent:
(A)
a withholding certificate on Form W-8, Form W-9 or any other relevant form; or
(B)
any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation.
(f)
The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) above to the relevant Borrower.
(g)
If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, such Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the relevant Borrower.
(h)
The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) or (g) above without further verification. The Agent shall not be liable for any action taken by it under or in connection with paragraph (e), (f) or (g) above.
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19.10
FATCA Deduction
(a)
Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(b)
Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify the Parent and the Agent and the Agent shall notify the other Finance Parties.
20.
INCREASED COSTS
20.1
Increased Costs
(a)
Subject to Clause 20.3 (
Exceptions
) the Obligors shall, within three (3) Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation; (ii) compliance with any law or regulation (
provided that
, notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder issued in connection therewith or in implementation thereof shall be deemed to be a “change in law”, regardless of the date enacted, adopted, issued or implemented) made after the date of this Agreement or (iii) the implementation or application of or compliance with Basel III or CRD IV or any law or regulation that implements or applies Basel III or CRD IV.
(b)
In this Agreement:
“
Basel III
” means:
(i)
the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;
(ii)
the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement — Rules text” published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and
(iii)
any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”.
“
CRD IV
” means:
(i)
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms; and
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(ii)
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.
“
Increased Costs
” means:
(i)
a reduction in the rate of return from a Facility or on a Finance Party’s (or its Affiliate’s) overall capital;
(ii)
an additional or increased cost; or
(iii)
a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Revolving Facility Commitment or a US Dollar Swingline Commitment or funding or performing its obligations under any Finance Document or Letter of Credit.
20.2
Increased Cost claims
(a)
A Finance Party intending to make a claim pursuant to Clause 20.1 (
Increased Costs
) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers.
(b)
Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
20.3
Exceptions
Clause 20.1 (
Increased Costs
) does not apply to the extent any Increased Cost is:
(a)
attributable to a Tax Deduction required by law to be made by an Obligor;
(b)
compensated for by Clause 19.3 (
Tax indemnity
) (or would have been compensated for under Clause 19.3 (
Tax indemnity
) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 19.3 (
Tax indemnity
) applied);
(c)
attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation;
(d)
attributable to the implementation or application of or compliance with the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (but excluding any amendment arising out of Basel III) (“
Basel II
”) or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates); or
(e)
attributable to a FATCA Deduction required to be made by a Party.
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21.
OTHER INDEMNITIES
21.1
Currency indemnity
(a)
If any sum due from an Obligor under the Finance Documents (a “
Sum
”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “
First Currency
”) in which that Sum is payable into another currency (the “
Second Currency
”) for the purpose of:
(i)
making or filing a claim or proof against that Obligor; or
(ii)
obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall as an independent obligation, within three (3) Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b)
Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.
21.2
Other indemnities
Each Borrower shall (or shall procure that an Obligor will), within three (3) Business Days of demand, indemnify the Arranging Parties and each other Finance Party against any cost, loss or liability incurred by it as a result of:
(a)
the occurrence of any Event of Default;
(b)
a failure by an Obligor to pay any amount due under a Finance Document on its due date, including, without limitation, any cost, loss or liability arising as a result of Clause 34 (
Sharing among the Finance Parties
);
(c)
funding, or making arrangements to fund, its participation in a Utilisation requested by it in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or
(d)
a Utilisation (or part of a Utilisation) not being prepaid in accordance with a notice of prepayment given by it.
21.3
Indemnity to the Agent
Each Borrower shall promptly indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:
(a)
investigating any event which it reasonably believes is a Default;
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(b)
entering into or performing any foreign exchange contract for the purposes of paragraph (b) of Clause 35.10 (
Change of currency
); or
(c)
acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.
22.
MITIGATION
22.1
Mitigation by the Lenders
(a)
Each Finance Party shall, in consultation with the Parent, take all reasonable steps, including to the extent possible, but not limited to, making any Utilisation available from an Affiliate, to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 12.1 (
Illegality
) (or, in respect of the Issuing Agent, Clause 12.2 (
Illegality in relation to the Issuing Agent
)), Clause 19 (
Tax Gross Up and Indemnities
) or Clause 20.1 (
Increased Costs
) or in any amount payable under a Finance Document by an Italian Obligor becoming not deductible from that Italian Obligor’s taxable income for Italian tax purposes by reason of that amount originating from transactions occurred with Blacklisted Resident Entities including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.
(b)
Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.
22.2
Mitigation by the Obligors
Should a Finance Party become subject to Taxes because of its failure to deliver a form, certificate or other document required under Clause 19.2
Tax gross-up
), the Obligors shall take such steps as such Finance Party shall reasonably request to assist such Finance Party to recover such Taxes.
22.3
Limitation of liability
(a)
Each Borrower shall indemnify each Finance Party, for all costs and expenses reasonably incurred by that party as a result of steps taken by it under Clause 22.1 (
Mitigation by the Lenders
).
(b)
A Finance Party is not obliged to take any steps under Clause 22.1 (
Mitigation by the Lenders
) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
23.
COSTS AND EXPENSES
23.1
Transaction expenses
The Borrowers shall within ten (10) Business Days of demand pay each Finance Party the amount of all reasonable and documented out-of-pocket costs and expenses (including legal fees up to the amount agreed with the Parent) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication (and previously approved by the Borrowers) and perfection of:
(a)
this Agreement and any other documents referred to in this Agreement; and
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(b)
any other Finance Documents executed after the date of this Agreement, and
if, requested, the Borrowers shall pay directly the relevant advisers upon receipt of the relevant reasonably detailed invoice;
provided that
there shall be no double recovery under this Clause 23.1 and paragraph 6 of the Mandate Letter.
23.2
Amendment costs
If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 35.10 (
Change of currency
), the Borrowers shall, within three (3) Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with that request or requirement.
23.3
Enforcement and preservation costs
The Borrowers shall, within three (3) Business Days of demand, pay to the Arranging Parties and each other Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of or the preservation of any rights under any Finance Document and any proceedings instituted by or against the Agent as a consequence of taking or holding or enforcing these rights.
24.
GUARANTEE AND INDEMNITY
24.1
Guarantee and indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
(a)
guarantees to each Finance Party and each Hedging Bank as primary obligor the punctual performance by a member of the Group of all of such member of the Group’s obligations under the Finance Documents and Hedging Documents and the punctual payment when due by such member of the Group of all sums payable under the Finance Documents and Hedging Documents;
(b)
undertakes with each Finance Party and each Hedging Bank that whenever a member of the Group fails to perform any obligation or pay any of the indebtedness referred to in paragraph (a) above, it will perform such obligation or pay to such Finance Party or Hedging Bank such sum on demand, in each case, as if it were the primary obligor; and
(c)
indemnifies, as an independent and primary obligation, each Finance Party and each Hedging Bank immediately on demand against any cost, loss or liability suffered by that Finance Party or Hedging Bank if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Finance Party or Hedging Bank would otherwise have been entitled to recover.
24.2
Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents and Hedging Documents, regardless of any intermediate payment or discharge in whole or in part.
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24.3
Reinstatement
If any payment by an Obligor or any discharge given by a Finance Party or a Hedging Bank (whether in respect of the obligations of any Obligor or any Security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:
(a)
the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and
(b)
each Finance Party and each Hedging Bank shall be entitled to recover the value or amount of such Security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.
24.4
Waiver of defences
The obligations of each Guarantor under this Clause 24 will not, to the extent permitted under mandatory law, be affected by an act, omission, matter or thing which, but for this Clause 24, would reduce, release or prejudice any of its obligations under this Clause 24 (without limitation and whether or not known to it or any Finance Party or any Hedging Bank) including:
(a)
any time, waiver or consent granted to, or composition with, any Obligor or other person;
(b)
the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
(c)
the making or absence of any demand on a member of the Group or any other person (other than the notice referred to in Clause 24.1(b) (
Guarantee and indemnity
)) for payment or performance of any other obligations, or the application of any moneys at any time received from a member of the Group or any other person;
(d)
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or Security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any Security;
(e)
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
(f)
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document, Hedging Document, or any other document or Security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or Hedging Document or other document or Security;
(g)
any unenforceability or illegality or invalidity of any obligation of any person under any Finance Document, Hedging Document or any other document or Security; or
(h)
any insolvency or similar proceedings,
(other than the irrevocable payment in full of such obligations).
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24.5
Guarantor intent
Without prejudice to the generality of Clause 24.4 (
Waiver of defences
), each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Finance Documents or any of the Hedging Documents or any facility or amount made available under any of the Finance Documents or Hedging Documents for the purposes of or in connection with any of the following: acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs or expenses associated with any of the foregoing.
24.6
Immediate recourse
Each Guarantor waives any right it may have of first requiring any Finance Party or any Hedging Bank (or any trustee or agent on its behalf) to proceed against or enforce any other rights or Security or claim payment from any person before claiming from that Guarantor under this Clause 24. This waiver applies irrespective of any law or any provision of a Finance Document or Hedging Document to the contrary.
24.7
Appropriations
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents and Hedging Documents have been irrevocably paid in full, each Finance Party and each Hedging Bank (or any trustee or agent on its behalf) may:
(a)
refrain from applying or enforcing any other moneys, Security or rights held or received by that Finance Party or Hedging Bank (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise), and no Guarantor shall be entitled to the benefit of the same; and
(b)
hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 24.
24.8
Deferral of Guarantors’ rights
(a)
Each Obligor acknowledges and agrees with each Guarantor that, subject to the terms and conditions of this Clause 24.8 and to the extent permitted by applicable law, upon the payment by the Guarantors of any of their obligations under this guarantee (whether pursuant to the guarantees, undertakings or indemnities given in Clause 24.1 (
Guarantee and indemnity
) or otherwise):
(i)
each Obligor shall indemnify the Guarantors for the full amount of such payment; and
(ii)
the Guarantors shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment (such rights of indemnification and subrogation, together with all other rights of the Guarantors, by reason of the performance of any of their obligations under this guarantee, or any action taken pursuant to any rights conferred by or pursuant to this guarantee, to be
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indemnified by any person, to prove in respect of any liability in the winding-up of any person or to take the benefit of or enforce any Security or guarantees or to exercise any rights of contribution are, collectively, the “
Subrogation Rights
”).
(b)
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents or Hedging Documents have been irrevocably paid in full, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or the Hedging Documents:
(i)
to be indemnified by an Obligor;
(ii)
to claim any contribution from any other Guarantor of any Obligor’s obligations under the Finance Documents or the Hedging Documents; or
(iii)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties or the Hedging Banks under the Finance Documents or of any other guarantee or Security taken pursuant to, or in connection with, the Finance Documents or Hedging Documents by any Finance Party or Hedging Bank.
From and after the date when all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents and Hedging Documents have been irrevocably paid in full, the Subrogation Rights of the Guarantors may be exercised and enforced by the Guarantors in their sole discretion.
24.9
Release of Guarantors’ right of contribution
If any Guarantor (a “
Retiring Guarantor
”) ceases to be a Guarantor in accordance with the terms of the Finance Documents or Hedging Documents for the purpose of any sale or other disposal of that Retiring Guarantor, then on the date such Retiring Guarantor ceases to be a Guarantor:
(a)
that Retiring Guarantor is released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents or Hedging Documents; and
(b)
each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Finance Documents or Hedging Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties or Hedging Banks under any Finance Document or any Hedging Document or of any other Security taken pursuant to, or in connection with, any Finance Document or Hedging Document where such rights or Security are granted by or in relation to the assets of the Retiring Guarantor.
24.10
Additional security
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or Security now or subsequently held by any Finance Party or Hedging Bank.
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24.11
Limitations on US Guarantees
(a)
Each US Guarantor acknowledges that it will receive valuable direct or indirect benefits as a result of the transactions contemplated by the Finance Documents and the Hedging Documents (including utilisations thereunder).
(b)
Each US Guarantor represents, warrants and agrees that:
(i)
it is US Solvent; and
(ii)
it has not made a transfer or incurred any obligation under any Finance Document or Hedging Document with the intent to hinder, delay or defraud any of its present or future creditors.
(c)
Notwithstanding anything to the contrary contained herein or in any other Finance Document or Hedging Document:
(i)
each Finance Party and Hedging Bank agrees that the maximum liability of each US Guarantor under Clause 24 (
Guarantee and indemnity
) shall in no event exceed an amount equal to the greatest amount that would not render such US Guarantor’s obligations hereunder and under the other Finance Documents and Hedging Documents subject to avoidance under US Bankruptcy Law or to being set aside, avoided or annulled under any Fraudulent Transfer Law, in each case after giving effect to
(A)
all other liabilities of such US Guarantor, contingent or otherwise, that are relevant under such Fraudulent Transfer Law (specifically excluding, however, any liabilities of such US Guarantor in respect of intercompany indebtedness to any Borrower to the extent that such Financial Indebtedness would be discharged in an amount equal to the amount paid by such US Guarantor hereunder) and
(B)
the value as assets of such US Guarantor (as determined under the applicable provisions of such Fraudulent Transfer Law) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights held by such US Guarantor pursuant to
(1)
applicable law or
(2)
any other agreement providing for an equitable allocation among such US Guarantor and the Borrowers and other Guarantors of obligations arising under this Agreement or other guarantees of such obligations by such parties: and
(ii)
each party agrees that, in the event any payment or distribution is made on any date by a Guarantor under this Clause 24, each such Guarantor shall be entitled to be indemnified from each other Guarantor in an amount equal to such payment, in each case multiplied by a fraction of which the numerator shall be the net worth of the contributing Guarantor and the denominator shall be the aggregate net worth of all the Guarantors.
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24.12
Controlled Foreign Corporations
Notwithstanding any term or provision of this Clause 24 or any other term in this Agreement or any Finance Document:
(a)
no member of the Group that is a controlled foreign corporation for US federal income tax purposes (a “
CFC
”) will have any obligation or liability, directly or indirectly, as guarantor or otherwise under this Agreement or any Finance Document with respect to any obligation or liability arising under any Finance Document of a US Borrower (a “
US Obligation
”); and
(b)
not more than sixty-five per cent. (65%) of the stock or other equity interests (measured by the total combined voting power of the issued and outstanding voting stock or other equity interests) of, and none of the assets or property of, a person that is a CFC will be required to be pledged directly or indirectly as Security for any US Obligations.
24.13
Guarantee limitations applicable to GTECH as Parent
Pursuant to article 1938 of the Italian Civil Code, for as long as GTECH is the Parent, the maximum aggregate amount that GTECH may be required to pay in respect of its obligations under this Clause 24 shall not exceed an amount equal to US$1,980,000,000 in respect of Revolving Facility A and €1,155,000,000 in respect of Revolving Facility B (the “
Maximum Amount
”). Subject to and without prejudice to Clause 24.2 (
Continuing guarantee
) and 24.3 (
Reinstatement
), the Maximum Amount shall be reduced by the amount of any cancellation of the Facility Commitments.
24.14
Italian guarantee limitations
(a)
In the case of any Guarantor incorporated in Italy (other than GTECH for such time as it is the Parent) (an “
Italian Guarantor
”), its liability as Guarantor under this Clause 24 shall not exceed, at any time, the aggregate at that time of:
(i)
the highest outstanding principal amount at any time of the indebtedness of such Italian Guarantor (or any of its direct or indirect Subsidiaries) as a Borrower under any Facility; and
(ii)
the highest outstanding principal amount at any time of all inter-company loans advanced (or granted) to such Italian Guarantor (or any of its direct or indirect Subsidiaries) by any Obligor or any other member of the Group after the date of this Agreement.
(b)
In any event, pursuant to article 1938 of the Italian Civil Code, the maximum amount an Italian Guarantor may be required to pay in respect of its obligations as Guarantor under this Agreement shall not exceed the amount equal to US$1,980,000,000 in respect of Revolving Facility A and €1,155,000,000 in respect of Revolving Facility B.
24.15
Keepwell
Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other member of the Group to honour all of its obligations under its guaranty in respect of Swap Obligations, subject to the limitation otherwise set forth herein. The obligations of each
107
Qualified ECP Guarantor under this Clause 24.15 shall remain in full force and effect until discharged in accordance with the provisions of its guarantee. Each Qualified ECP Guarantor intends that this Clause 24.15 constitute, and this Clause shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other member of the Group for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
25.
REPRESENTATIONS
25.1
General
On the date of this Agreement and at the times set out in Clause 25.25 (
Repetition
) each Obligor makes the representations and warranties set out in this Clause 25 to each Finance Party.
25.2
Status
(a)
It and each of its Material Subsidiaries is a limited liability corporation, duly incorporated or organised (as applicable) and validly existing under the law of its jurisdiction of incorporation.
(b)
It and each of its Material Subsidiaries has the power to own its material assets and carry on its business as it is being conducted.
25.3
Binding obligations
Subject to the Legal Reservations, the obligations expressed to be assumed by it in each Finance Document to which it is a party and which have been executed by it are legal, valid, binding and enforceable obligations.
25.4
Non-conflict with other obligations
The entry into and performance by it of its obligations under, and the transactions contemplated by, the Finance Documents, to which it is a party do not and will not conflict with:
(a)
any law or regulation applicable to it;
(b)
its constitutional documents; or
(c)
any agreement or instrument binding upon it or any of its assets or constitute a default or termination event (however described) under any such agreement or instrument, unless any such conflict does not and is not reasonably likely to have a Material Adverse Effect.
25.5
Power and authority
(a)
It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.
(b)
No limit on its powers will be exceeded as a result of the borrowing or giving of guarantees or indemnities contemplated by the Finance Documents to which it is a party.
25.6
Validity and admissibility in evidence
(a)
All Authorisations required:
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(i)
to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and
(ii)
to make the Finance Documents to which it is a party admissible in evidence in its jurisdictions of incorporation,
have been obtained or effected and are in full force and effect.
(b)
All Authorisations necessary for the conduct of the business, trade and ordinary activities of members of the Group have been obtained or effected and are in full force and effect other than those Authorisations the failure of which to obtain or effect has not and is not reasonably likely to have a Material Adverse Effect.
25.7
Governing law and enforcement
(a)
Subject to the Legal Reservations, the choice of governing law of the Finance Documents will be recognised and enforced in its Relevant Jurisdictions.
(b)
Subject to the Legal Reservations, any judgment obtained in relation to a Finance Document in the jurisdiction of the governing law of that Finance Document will be recognised and enforced in its Relevant Jurisdictions.
25.8
Deduction of Tax
It is not required to make any Tax Deduction from any payment it may make under any Finance Document to a Lender which is:
(a)
a Qualifying Lender,
(i)
falling within paragraphs (a)(i), (a)(ii), (b)(i), (b)(iv), (c) or (d) of the definition of Qualifying Lender; or
(ii)
except where a Direction has been given under section 931 of the ITA in relation to the payment concerned, falling within paragraph (b)(ii) of the definition of Qualifying Lender; or
(b)
a Treaty Lender;
provided that
in the case of a UK Treaty Lender the payment is one specified in a direction given by the Commissioners of Revenue and Customs under Regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488) and in the case of a US Borrower the Lender has satisfied its obligations under Clause 19.2(i)(iv) (
Tax gross-up
).
25.9
No filing or stamp taxes
Under the laws of its Relevant Jurisdictions it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, subject always to the Legal Reservations, except with reference to Italy:
(a)
where any Finance Document is executed before or deposited with an Italian notary public or in any case formed and executed within the Italian territory in the form of a deed;
109
(b)
on voluntarily registration of any Finance Document with the Italian tax authority;
(c)
in any “case of use” (
caso d’uso
), including the filing, recording or enrolment of any Finance Document with any Italian judicial authority (when carrying out any administrative activity) or administrative authority (unless such filing is mandatory at law);
(d)
in the event any of the provisions of the Finance Document is mentioned (according to the
enunciazione
principle) in any separate document entered into between the same parties (alone or together with other parties) which have not been previously registered and in respect of which any of the conditions described at paragraphs (a) through (c) above is met; or
(e)
if any Finance Document is enforced in Italy either by way of a direct court judgment or an exequatur of a
judgment
rendered outside Italy.
25.10
No default
(a)
No Event of Default or Default is continuing or will result from the making of any Utilisation or the entry into, the performance of, or any transaction contemplated by any Finance Document.
(b)
No other event or circumstance is outstanding which constitutes a default or termination event (however described) under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries’) assets are subject which has had or is reasonably likely to have a Material Adverse Effect.
25.11
No misleading information
All of the written factual information supplied by each of the Original Obligors in connection with the Finance Documents and the matters contemplated therein was (to the best of its knowledge after due and careful enquiry) true, complete and accurate in all material respects as at the date it was given and was not misleading in any material respect.
25.12
Financial statements
(a)
The Original Financial Statements were prepared in accordance with the Accounting Principles consistently applied unless expressly disclosed therein or otherwise disclosed to the Agent in writing to the contrary prior to the date of this Agreement.
(b)
Its Original Financial Statements give a true and fair view of its financial condition and results of operations during the relevant Financial Year unless expressly disclosed therein to the contrary or otherwise disclosed to the Agent in writing to the contrary prior to the date of this Agreement.
25.13
No proceedings pending or threatened
No litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency which are reasonably likely, if adversely determined, to have a Material Adverse Effect (to the best of the Parent’s knowledge and belief) have been started or threatened against it or any of its Subsidiaries.
110
25.14
Security
No Security or Quasi-Security exists over all or any of the present or future assets of any member of the Group other than as permitted by this Agreement.
25.15
Pari Passu Ranking
Its payment obligations under the Finance Documents rank at least
pari passu
with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
25.16
US Government Regulations
(a)
It is not a “public utility” within the meaning of, or subject to regulation under, the United States Federal Power Act of 1920 (16 U.S.C. §§791 et seq.).
(b)
It is not an “investment company” as defined in, or subject to regulation under, the United States Investment Company Act of 1940 (15 U.S.C. §§ 80a-1 et seq.) or in violation of regulation under any United States federal or state law or regulation that limits its ability to incur or guarantee indebtedness.
(c)
It has not made (or attempted to make) an “unlawful payment” within the meaning of, and is not in any other way in violation of, the Foreign Corrupt Practices Act (15 U.S.C. §§ 78dd-1 et seq.) or any similar laws.
25.17
ERISA
(a)
No ERISA Event has occurred or is reasonably expected to occur that has resulted in or is reasonably expected to result in a material liability of it or its Subsidiaries or any ERISA Affiliate.
(b)
Schedule B (
Actuarial Information
) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service of the United States of America, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status.
(c)
Neither it, nor any of its Subsidiaries, nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan.
(d)
Neither it, nor any of its Subsidiaries, nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganisation or has been terminated, within the meaning of Title IV of ERISA, and to the best of its knowledge, no such Multiemployer Plan is reasonably expected to be in reorganisation or to be terminated, within the meaning of Title IV of ERISA.
(e)
Except as does not have and could not reasonably be expected to have, a Material Adverse Effect, and except to the extent required under Section 4980B of the Code, no Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of the Obligors, any of their Subsidiaries or any of their respective ERISA Affiliates.
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25.18
Solvency (US Obligors)
GTECH Corporation is, on a consolidated basis, as of the date hereof, US Solvent.
25.19
Material Adverse Effect
No Material Adverse Effect has occurred since the date of the most recent financial statements delivered pursuant to Clause 26.1 (
Financial statements
).
25.20
US Anti-Terrorism laws
It, and to the best of its knowledge, each of its Material Subsidiaries:
(a)
has taken reasonable measures to ensure compliance with Anti-Terrorism Laws;
(b)
is not a Designated Person; and
(c)
does not deal in any property or interest in property known by it to be blocked pursuant to any Anti-Terrorism Law.
25.21
US Margin Regulations
No part of the proceeds of any Utilisation will be used (i) in contravention of Regulation T, U or X of the Federal Reserve Board, or (ii) for “buying” or “carrying” (within the meaning of Regulation T, U or X) any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock, other than in the case of clause (ii), that a portion of the proceeds of any Utilisation may be used to make Restricted Payments permitted under paragraph (e) of the definition of Permitted Restricted Payments or as consideration to finance Permitted Acquisitions. Following the application of the proceeds of each Utilisation, not more than twenty five per cent. (25%) of the value of the assets of the Obligors subject to any restriction contained in this Agreement or any other agreement or instrument between the Obligors, on the one hand, and any Lender or Affiliate of any Lender, on the other hand, relating to Financial Indebtedness will be Margin Stock.
25.22
Sanctions,
Anti-Corruption and other laws
The Parent represents that:
(a)
each member of the Group has implemented and maintains in effect policies and procedures designed to promote and achieve compliance by each such member and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each member of the Group and their respective directors and officers and, to the knowledge of the Parent, their respective employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in a Borrower being designated as a Sanctioned Person;
(b)
none of (a) the Parent, any member of the Group or any of their respective directors, officers or employees, or (b) to the knowledge of the Parent, any agent of the Parent or any member of the Group that will act in any capacity in connection with or benefit from the Facilities, is a Sanctioned Person; and
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(c)
no Utilisation, use of proceeds or issuance of Letter of Credit pursuant to this Agreement will violate Anti-Corruption Laws or applicable Sanctions.
Notwithstanding anything to the contrary contained in this Agreement or in any other Finance Document, the representations and warranties under this Clause 25.22 shall not be made to or for the benefit of any Specified Lender, no Specified Lender shall have any rights under this Clause 25.22 and each Specified Lender shall be deemed not to be a Lender solely for purposes of calculating any consent or vote of the Majority Lenders under Clause 29.16 (
Acceleration
) with respect to any breach of this Clause 25.22 (but in each case without prejudice to any other rights or obligations of any Specified Lender as a consequence of any Default occurring as a result of any breach of this Clause 25.22).
25.23
Gaming
(a)
Each member of the Group complies in the jurisdiction in which it operates and conducts its business and operations:
(i)
where applicable, with the laws of the United States of America that prohibit internet gambling, including, but not limited to, the US Wire Wager Act (18 U.S.C. §1084);
(ii)
based on advice of reputable and experienced counsel, in all material respects with the laws that prohibit, or are reasonably capable of enforcing against any member of the Group prohibitions on, internet gambling of all other Prohibited Jurisdictions; and
(iii)
in all material respects with all gaming and internet gaming laws that are applicable in the jurisdictions in which it operates and conducts its business and operations.
(b)
The Group has implemented and maintains reasonable safeguards and procedures to determine whether any additional jurisdictions should be included within the category of Prohibited Jurisdictions and exclude persons in the Prohibited Jurisdictions from placing wagers on any of the Group’s internet websites and will continue to maintain such safeguards and procedures until the Final Maturity Date or until, in respect of any Prohibited Jurisdiction, such time as it ceases to be a Prohibited Jurisdiction and the Group has received advice to this effect from reputable and experienced counsel.
25.24
Compliance with laws
Each Obligor complies in all respects with all laws to which it may be subject to the extent that failure so to comply would have or would be reasonably likely to have a Material Adverse Effect.
25.25
Repetition
(a)
The Repeating Representations are deemed to be made by each Obligor by reference to the facts and circumstances then existing on:
(i)
the date of each Utilisation Request and the first day of each Interest Period; and
(ii)
in the case of an Additional Obligor, the day on which the company becomes (or it is proposed that the company becomes) an Additional Obligor.
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(b)
Each representation or warranty deemed to be made after the date of this Agreement shall be deemed to be made by reference to the facts and circumstances existing at the date the representation or warranty is deemed to be made.
26.
INFORMATION UNDERTAKINGS
The undertakings in this Clause 26 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
26.1
Financial statements
The Parent shall supply to the Agent, who will distribute to each Lender, each of the following:
(a)
within one hundred twenty (120) days after the end of each of its Financial Years, its annual audited consolidated financial statements by making the same available on the Parent’s public website;
(b)
as soon as they become available but in any event within seventy-five (75) days after the end of each of its financial half years its consolidated financial statements for its financial half year by making the same available on the Parent’s public website;
(c)
as soon as they are available, but in any event within sixty (60) days after the end of the first and third Financial Quarter of each of its Financial Years, its consolidated financial statements for those Financial Quarters by making the same available on the Parent’s public website; and
(d)
as soon as the same become available, but in any event within one hundred and twenty (120) days after the end of each of its financial years, the balance sheet and income statement or, if available, audited financial statements of each Guarantor other than the Parent.
26.2
Provision and contents of Compliance Certificate
(a)
The Parent shall supply to the Agent, who will distribute to each Lender:
(i)
with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 26.1 (
Financial statements
) if the Public Debt Ratings are equal to or higher than BBB- and Baa3 (with at least a stable outlook);
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BBB- or Baa3 as applicable; or
(ii)
otherwise with each set of financial statements delivered pursuant to paragraphs (a), (b) and (c) of Clause 26.1 (
Financial statements
),
a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 27 (
Financial Covenants
) as at the date as at which those financial statements were prepared, including, prior to the completion of the Mergers, an explanation as to how the average US$/€ rate has been calculated and disclosure of items included in EBITDA, Total Net Debt and Total Net Interest Costs with an indication of the value of each item expressed as per the consolidated financial statements.
114
(b)
Commencing with the Compliance Certificate that is deliverable with respect to the Financial Quarter ending on 31 December 2014, the Compliance Certificate delivered in respect of the Financial
Quarters
ending in June and December in each Financial Year shall set out (in reasonable detail) computations as to compliance with Clause 28.24 (
Guarantor Threshold Test and Additional Guarantors
).
(c)
Commencing with the Compliance Certificate that is deliverable with respect to the Financial Quarter ending on 31 December 2014, the Compliance Certificate delivered in respect of the Financial Quarters ending December in each Financial Year shall list the Material Subsidiaries or confirm that there has been no change to the list of Material Subsidiaries since the previous Compliance Certificate for the Financial Quarter ending 31 December.
(d)
Each Compliance Certificate shall be signed by duly authorised signatory of the Parent and shall be reported on by the Auditors with respect to the information provided pursuant to Clause 26.2(a) (in the form agreed by the Auditors) when the audited consolidated Financial Statements for the Group are delivered pursuant to paragraph (a) of Clause 26.1 (
Financial statements)
.
26.3
Requirements as to financial statements
The Parent shall procure that each set of financial statements delivered pursuant to Clause 26.1 (
Financial statements
) is prepared using the Accounting Principles and financial reference periods consistent with those applied in the presentation of the Original Financial Statements for the Parent unless, in relation to any set of financial statements, the Parent notifies the Agent that there has been a change in the Accounting Principles or the accounting practices and its Auditors deliver to the Agent, who will distribute to each Lender:
(a)
a description of any change necessary for those financial statements to reflect the Accounting Principles or accounting practices upon which the Parent’s Original Financial Statements were prepared; and
(b)
sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 27 (
Financial Covenants
) has been complied with, to determine the Margin as set out in the definition of “Margin”, and to make an accurate comparison between the financial position indicated in those financial statements.
Any reference in this Agreement to any financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements of the Parent were prepared.
26.4
Information: miscellaneous
The Parent shall supply to the Agent who will distribute to each Lender and, in the case of paragraph (b) below, GTECH Corporation shall also supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests) who will distribute to each Lender:
(a)
promptly, copies of all documents dispatched by the Parent to its shareholders generally (or any class of them) or dispatched by any Obligor to its creditors generally (or any class of them);
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(b)
promptly upon becoming aware of them, the details of any ERISA Events, material environmental issues, material litigation, arbitration or administrative proceedings which are, in each case, current, threatened or pending against any member of the Group, which if adversely determined has or is reasonably likely to have a Material Adverse Effect;
(c)
promptly upon it becoming
publicly available information, notice of any change to, or withdrawal of, any Public Debt Rating;
(d)
promptly
upon completion, notice that the Transactions are completed;
(e)
promptly upon termination or upon publication (as the case may be), notice that the Merger Agreement has been terminated or that the Parent has disclosed publicly that it no longer intends to proceed with the completion of the Mergers; and
(f)
promptly on request, such further information regarding the financial condition, assets and operations of the Group or any member of the Group as any Finance Party through the Agent may reasonably request,
it being understood that the Parent and GTECH Corporation may satisfy their obligations under this Clause 26.4 by publishing the relevant information to its website and notifying the Agent in writing that the relevant information has been so published.
26.5
Notification of Default
Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).
26.6
“
Know your customer
”
checks
(a)
If:
(i)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
(ii)
any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this Agreement; or
(iii)
a proposed assignment or transfer by a Lender of any of its rights or obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent, the Swingline Agent, the Issuing Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent, the Swingline Agent, the Issuing Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent, the Swingline Agent or the Issuing Agent (in each case for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent, the Swingline Agent, the Issuing Agent such Lender or, in the case of the event described in paragraph (iii) above, any prospective
116
new Lender to carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any relevant person pursuant to the transactions contemplated in the Finance Documents.
(b)
Each Lender shall promptly upon the request of the Agent, the Swingline Agent or the Issuing Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent, the Swingline Agent or the Issuing Agent (in each case for itself) in order to carry out and be satisfied with the results of all necessary “know your customer” or other checks on Lenders or prospective new Lenders pursuant to the transactions contemplated in the Finance Documents.
(c)
The Parent shall, by not less than ten (10) Business Days’ prior written notice to the Agent, notify the Agent (which shall promptly notify the Lenders) of its intention to request that one of its Subsidiaries becomes an Additional Guarantor or Additional Borrower pursuant to Clause 31 (
Changes to the Obligors
).
(d)
Following the giving of any notice pursuant to paragraph (c) above, if the accession of such Additional Guarantor or Additional Borrower obliges the Agent, the Swingline Agent, the Issuing Agent or any Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Parent shall promptly upon the request of the Agent, the Swingline Agent, the Issuing Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent, the Swingline Agent or the Issuing Agent (in each case for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent, the Swingline Agent, the Issuing Agent or such Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other checks in relation to any relevant person pursuant to the accession of such Subsidiary to this Agreement as an Additional Guarantor or as the case may be, an Additional Borrower.
26.7
Posting on electronic system
Each of the Borrowers hereby acknowledges that (a) the Agent or the Global Coordinators will make available to the other Finance Parties materials or information provided by or on behalf of the Borrowers hereunder (collectively, “
Borrower Materials
”) by posting the Borrower Materials on Debt Domain (the “
Platform
”) and (b) certain of the Lenders may be “public-side” Lenders (
i.e
., Lenders that do not wish to receive material non-public information with respect to the Borrowers or their securities) (each, a “
Public Lender
”). Each Borrower hereby agrees that so long as such Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities; (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC”, the Borrowers shall be deemed to have authorised the Finance Parties to treat such Borrower Materials as not containing any material non-public information with respect to the Borrowers or their securities for purposes of United States Federal and state securities laws (
provided that
such Borrower Materials shall be treated as set forth in Clause 44 (
Confidentiality
)); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor”; and (z) the Agent and the Global Coordinators shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a
117
portion of the Platform not designated “Public Investor”. Notwithstanding the foregoing, each Borrower shall not be under any obligation to mark any Borrower Materials “PUBLIC”.
27.
FINANCIAL COVENANTS
27.1
Financial definitions
In this Clause 27:
“
Calculation Date
” means (i) at any time the Public Debt Ratings are equal to or higher than BBB- (with at least a stable outlook) and Baa3 (with at least a stable outlook) 30 June and 31 December of each year (
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BBB- (with at least a stable outlook) or Baa3 (with at least a stable outlook) as applicable) and (ii) at any time any Public Debt Rating is lower than BBB- (with at least a stable outlook) or Baa3 (with at least a stable outlook), or any Public Debt Rating is withdrawn, 31 March, 30 June, 30 September and 31 December of each year (
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being lower than BBB- (with at least a stable outlook) or Baa3 (with at least a stable outlook) as applicable).
“
Consolidated Interest Expense
” means the amount of interest, discount, acceptance and commitment fees, amounts payable under interest rate hedging agreements and the interest element of payments under finance leases, including, for the avoidance of doubt, interest payable on the Capital Securities.
“
EBITDA
” means the amount of the consolidated operating income of the Group:
(a)
plus
depreciation, amortization and impairment loss; and
(b)
plus
extraordinary and non-cash items of expense but only to the extent such items have been deducted in the determination of operating income; and
(c)
minus
extraordinary and non-cash items of income, but only to the extent such items are included in operating income; and
(d)
minus
amounts attributable to minority interests in excess of US$60,000,000.
“
Relevant Period
” means a period of twelve (12) months ending on the last day of a Financial Year or half year or, as the case may be, financial quarter of the Parent.
“
Total Net Debt
” means the total Financial Indebtedness of the Group (including, for the avoidance of doubt, the outstanding amount of the Capital Securities and excluding, for the avoidance of doubt, any accrued Consolidated Interest Expense)
minus
the aggregate amount of cash and Cash Equivalent Investments held by the Group.
“
Total Net Interest Costs
” means Consolidated Interest Expense of the Group less interest received and amounts received under interest rate hedging agreements less capitalised up-front debt issuance costs recorded as interest expense.
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27.2
Financial condition
The Parent shall ensure that:
(a)
EBITDA to Total Net Interest Costs
: EBITDA to Total Net Interest Costs at each Calculation Date shall not be less than the ratio set out next to the relevant Calculation Date in the table below:
|
EBITDA to
Total Net
Interest
Costs
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
March
|
|
—
|
|
2.75:1.00
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
June
|
|
—
|
|
2.75:1.00
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
September
|
|
—
|
|
2.75:1.00
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
December
|
|
2.75:100
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
(b)
Total Net Debt to EBITDA
: Total Net Debt to EBITDA at each Calculation Date shall:
(i)
if the Mergers are not completed, not be greater than 4.00:1.00 as tested at each Calculation Date in accordance with Clause 27.3 (
Financial testing
) below; and
(ii)
if the Mergers are completed, not be greater than the ratio set out next to the relevant Calculation Date in the table below:
|
Total Net
Debt to
EBITDA
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
March
|
|
—
|
|
5.50:1.00
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.50:1.00
|
|
4.25:1.00
|
|
June
|
|
—
|
|
5.50:1.00
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.50:1.00
|
|
4.00:1.00
|
|
September
|
|
—
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.75:1.00
|
|
4.25:1.00
|
|
4.00:1.00
|
|
December
|
|
5.50:1.00
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.75:1.00
|
|
4.25:1.00
|
|
4.00:1.00
|
27.3
Financial testing
The financial covenants set out in Clause 27.2 (
Financial condition
) shall be calculated in accordance with the Accounting Principles and tested in relation to the Group on a consolidated basis by reference to each Compliance Certificate delivered in accordance with Clause 26.2 (
Provision and contents of Compliance Certificate
).
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28.
GENERAL UNDERTAKINGS
The undertakings in this Clause 28 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
28.1
Authorisations
Each Obligor shall promptly:
(a)
obtain, comply with and do all that is necessary to maintain in full force and effect; and
(b)
supply certified copies to the Agent (at its request) of, any Authorisation required under any law or regulation of a Relevant Jurisdiction to:
(i)
enable it to perform its obligations under the Finance Documents; and
(ii)
ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document to which it is a party.
28.2
Compliance with laws
(a)
Each Obligor shall (and the Obligors shall ensure that each member of the Group will) comply in all respects with all laws to which it may be subject, if (except as regards (i) Sanctions, to which Clause 28.20 (
Use of proceeds and Sanctions
) below applies, and (ii) Anti-Corruption Laws, to which Clause 28.21 (
Anti-Corruption
) below applies) failure so to comply has or is reasonably likely to have a Material Adverse Effect.
(b)
The Borrowers will maintain in effect and enforce policies and procedures designed to promote and achieve compliance by the Borrowers, their Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
28.3
Merger
No Obligor shall (and the Obligors shall ensure that no other member of the Group will) enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction other than a Permitted Merger or Permitted Acquisition.
28.4
Change of business
The Obligors shall ensure that no substantial change is made to the general nature of the business of the Group from the Business.
28.5
Acquisitions
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no other member of the Group will):
(i)
acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them); or
(ii)
incorporate a company.
120
(b)
Paragraph (a) above does not apply to an acquisition of a company, of shares, securities or a business or undertaking (or, in each case, any equity or partnership interest in any of them), or the incorporation of a company or Joint Venture which is a Permitted Acquisition.
28.6
Pari passu ranking
Each Obligor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party against it under the Finance Documents rank at least
pari passu
with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
28.7
Negative pledge
(a)
In this Clause 28.7, “
Quasi-Security
” means a transaction described in paragraph (b) below.
(b)
Except as permitted under paragraph (c) below:
(i)
No Obligor shall (and the Obligors shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.
(ii)
No Obligor shall (and the Obligors shall ensure that no other member of the Group will):
(A)
sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;
(B)
sell, transfer or otherwise dispose of any of its receivables on recourse terms (it being understood for the avoidance of doubt that a member of the Group may sell, transfer or otherwise dispose of its receivables on non-recourse terms);
(C)
enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
(D)
enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c)
Paragraphs (a) and (b) above do not apply to any Security or (as the case may be) Quasi-Security, which is Permitted Security.
28.8
Disposals
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no member of the Group will) enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset.
121
(b)
Paragraph (a) above does not apply to any sale, lease, transfer or other disposal which is a Permitted Disposal.
28.9
Loans or credit
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no member of the Group will) be a creditor in respect of any Financial Indebtedness.
(b)
Paragraph (a) above does not apply to a Permitted Loan.
28.10
No Guarantees or indemnities
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no member of the Group will) incur or allow to remain outstanding any guarantee in respect of any obligation of any person.
(b)
Paragraph (a) does not apply to a guarantee which is a Permitted Guarantee.
28.11
Dividends and share redemption
(a)
The Parent shall not declare, make or pay or allow any member of the Group to declare, make or pay any Restricted Payment.
(b)
Paragraph (a) does not apply to a Restricted Payment which is a Permitted Restricted Payment and, for the avoidance of doubt, does not prohibit the Merger Capital Reduction.
28.12
Priority Financial Indebtedness
The Obligors shall ensure that at no time will Financial Indebtedness incurred or allowed to remain outstanding by all members of the Group (including non-Guarantors) that are not Obligors exceed in the aggregate five per cent. (5%) of the consolidated total assets of the Group.
28.13
Pensions and employee benefit schemes
(a)
The Parent shall ensure that all pension schemes operated or maintained for the benefit of members of the Group or any of its employees are maintained and fully funded on the basis of reasonable actuarial assumptions and valuations prepared by actuaries of recognised standing most recently used to account for such obligations in accordance with the Accounting Principles and, in any case, in compliance with applicable law and the contracts governing their provision and that no action or omission is taken by any member of the Group in relation to such a pension scheme which has or is reasonably likely to have a Material Adverse Effect.
(b)
The Parent shall ensure that no member of the Group establishes any defined benefit occupational pension scheme.
(c)
The Parent shall deliver to the Agent copies of any actuarial reports prepared in relation to the pension schemes for the time being operated by or maintained for the benefit of members of the Group or any of its employees promptly after those reports are prepared in
122
order to comply with the then current statutory or auditing requirements (as applicable either to the trustees of any relevant schemes or to the Parent) or otherwise.
(d)
The Parent shall promptly notify the Agent of any material change in the rate of contributions to any pension schemes referred to in paragraph (a) above paid or recommended to be paid (whether by the scheme actuary or otherwise) or required (by law or otherwise).
(e)
The Parent shall (and shall ensure that each of its Subsidiaries incorporated in Italy will):
(i)
fully and timely pay and discharge all mandatory and supplementary social security and health care assistance contributions (including interest and penalties) which the same companies are requested to pay under applicable laws, regulations, by-laws and any agreement entered into by the same companies;
(ii)
duly and timely file or cause to be filed, according to applicable law, all social security returns and social security reports which are required to be filed by same companies;
(iii)
properly and entirely accrue in the financial statements the TFR (
Trattamento di fine rapporto
) with regard to all its employees according to the applicable laws; and
(iv)
make adequate provisions in their accounts, pertaining to mandatory and supplementary social security and health care contributions which have not been paid because they are not yet due under the terms of any applicable laws, regulations, by-laws and any agreement entered into by the same companies.
28.14
Intellectual Property
Each Obligor shall (and the Obligors shall procure that each Group member will):
(a)
preserve and maintain the subsistence and validity of the Intellectual Property necessary for the business of the relevant Group member;
(b)
use reasonable endeavours to prevent any infringement in any material respect of the Intellectual Property;
(c)
make registrations and pay all registration fees and taxes necessary to maintain the Intellectual Property in full force and effect and record its interest in that Intellectual Property;
(d)
not use or permit the Intellectual Property to be used in a way or take any step or omit to take any step in respect of that Intellectual Property which may materially and adversely affect the existence or value of the Intellectual Property or imperil the right of any member of the Group to use such property; and
(e)
not discontinue the use of the Intellectual Property,
where failure to do so, in the case of paragraphs (a), (b) and (c) above, or in the case of paragraphs (d) and (e) above, such use, permission to use, omission or discontinuation, is reasonably likely to have a Material Adverse Effect.
123
28.15
No speculative Hedging Arrangements
No Borrower shall enter into any derivative transaction other than any derivative transaction entered into in connection with protection against or benefit from fluctuations in any rate or price.
28.16
ERISA reporting requirements
Each Obligor shall (and the Parent shall ensure that each relevant member of the Group will):
(a)
ERISA Events and ERISA Reports
(i)
promptly and in any event within ten (10) days after such Obligor or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, deliver to the Agent a statement of the finance director of the Parent describing such ERISA Event and the action, if any, that such Obligor or such ERISA Affiliate has taken and proposes to take with respect thereto; and
(ii)
on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information;
(b)
Plan Terminations
: promptly and in any event within five (5) Business Days after receipt thereof by any Obligor or any ERISA Affiliate, deliver to the Agent copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan;
(c)
Plan Annual Reports
: promptly upon the written request of the Agent, deliver to the Agent copies of each Schedule B (
Actuarial Information
) to the annual report (Form 5500 Series) most recently filed by it with the Employee Benefits Security Administration of the United States with respect to each Plan; and
(d)
Multiemployer Plan notices
: promptly and in any event within five (5) Business Days after receipt thereof by it or any ERISA Affiliate from the sponsor of a Multiemployer Plan, deliver to the Agent copies of each notice concerning:
(i)
the imposition of Withdrawal Liability by any such Multiemployer Plan;
(ii)
the reorganisation or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan; or
(iii)
the amount of liability incurred, or that may be incurred, by such Obligor or any ERISA Affiliate in connection with any event described in paragraph (i) or (ii) above.
28.17
Italian segregation of assets or finanziamenti destinati
No Italian Obligor shall:
(a)
segregate assets or revenues pursuant to Article 2447 bis (
Patrimoni Destinati ad uno Specifico Affare
) of the Italian Civil Code;
124
(b)
enter into any transaction which could qualify as a
finanziamento destinato
pursuant to article 2447-decies;
(c)
issue any class of stock or any other financial instruments under article 2447-ter of the Italian Civil Code, or
(d)
in each case, without the prior written consent of the Agent (acting on the instructions of the Majority Lenders).
28.18
US Anti-Terrorism Laws
(a)
No Obligor shall engage in any transaction that violates any of the applicable prohibitions set forth in any Anti-Terrorism Law.
(b)
None of the funds or assets of such Obligor or its Subsidiaries that are used to repay the Facilities shall constitute property of, or shall be beneficially owned by, any Designated Person or be derived from transactions known to an Obligor to violate the prohibitions set forth in any Anti-Terrorism Law, and no Designated Person shall have any direct or indirect interest in such Obligor that would constitute a violation of any Anti-Terrorism Laws.
28.19
US Margin Regulations
No part of the proceeds of any Utilisation will be used (i) in contravention of Regulation T, U or X of the Federal Reserve Board, or (ii) for “buying” or “carrying” (within the meaning of Regulation T, U or X) any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock, other than in the case of clause (ii), that a portion of the proceeds of any Utilisation may be used to make Restricted Payments permitted under paragraph (e) of the definition of Permitted Restricted Payments or as consideration to finance Permitted Acquisitions. Following the application of the proceeds of each Utilisation, not more than twenty five per cent. (25%) of the value of the assets of the Obligors subject to any restriction contained in this Agreement or any other agreement or instrument between the Obligors, on the one hand, and any Lender or Affiliate of any Lender, on the other hand, relating to Financial Indebtedness will be Margin Stock.
28.20
Use of proceeds and Sanctions
(a)
The
undertakings
in this Clause 28.20 remain in force from the date of this Agreement for as long as any amount is outstanding under the Finance Documents or any Commitment is in force:
(i)
a Borrower will not request any Utilisation, and a Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Utilisation (A) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (B) in any manner that would result in the violation of any Sanctions applicable to any party hereto. Each Obligor shall, and shall procure that each other member of the Group shall, not knowingly use any revenue or
benefit
derived from any activity or dealing with a Sanctioned Person to be used in discharging any obligation due or owing to the Finance Parties; and
(ii)
each Obligor shall, and shall procure that each other member of the Group shall, to the extent permitted by law promptly upon becoming aware of them supply to the
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Agent, who will distribute to each Lender, details of any claim, action, suit, proceedings or investigation against it with respect to Sanctions by any Sanctions Authority.
(b)
Notwithstanding anything to the contrary contained in this Agreement or in any other Finance Document, the undertakings in this Clause 28.20 shall not be made to or for the benefit of any Specified Lender, no Specified Lender shall have any rights under this Clause 28.20 and each Specified Lender shall be deemed not to be a Lender solely for purposes of calculating any consent or vote of the Majority Lenders under Clause 29.16 (
Acceleration
) with respect to any breach of this Clause 28.20 (but in each case without prejudice to any other rights or obligations of any Specified Lender as a consequence of any Default occurring as a result of any breach of this Clause 28.20).
28.21
Anti-Corruption
(a)
Neither the
Parent nor any Obligor shall (and the Parent shall ensure that no other member of the Group will) directly or indirectly use the proceeds of the Facilities in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any Anti-Corruption Laws.
(b)
The Parent and each Obligor shall
(and the Parent shall ensure that each other member of the Group will)
not violate applicable Anti-Corruption Laws and Sanctions in any material respect.
28.22
Existing Target Facility Repayment
The Parent shall procure that following the completion of the Mergers and the accession of Target to this Agreement pursuant to Clause 31.2 (
Additional Obligors
) any amounts outstanding under the Existing Target Facility shall be promptly repaid, cancelled and discharged in full and any guarantees with respect to the Existing Target Facility shall be released.
28.23
Security following Debt Ratings decrease
(a)
If following completion of the Mergers:
(i)
any two Public Debt Ratings (or any Public Debt Rating, if two Public Debt Ratings are issued) are either equal to BB or Ba2 or lower or have been withdrawn, then the Parent shall procure that, as soon as practicable and in any event within ninety (90) days after the relevant Public Debt Rating(s) or Public Debt Rating withdrawal(s) or reduction(s) become(s) public, Security:
(A)
is granted in favour of the Finance Parties and each Hedging Bank by Holdco over the shares of the Target and the quotas of Italian Holdco;
(B)
is granted in favour of the Finance Parties and each Hedging Bank by:
(1)
each Obligor over each intercompany note or loan in excess of US$10,000,000 (or its equivalent in any other currency or currencies) between the Obligor as creditor and a member of the Group as debtor; and
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(2)
each member of the Group over each intercompany note or loan in excess of US$10,000,000 (or its equivalent in any other currency or currencies) between such member of the Group as creditor and an Obligor as debtor,
whether documented by a promissory note or otherwise and including any such intercompany note or loan between Holdco and any of the Target, Italian Holdco or GTECH Corporation at completion of the Transaction; and
(ii)
any Public Debt Rating is equal to BB- or Ba3 or lower (in circumstances where the remaining Public Debt Ratings are equal to BB+ or Ba1 or lower) or any Public Debt Rating has been withdrawn, then the Parent shall procure that, as soon as practicable and in any event within ninety (90) days after the relevant Public Debt Rating(s) or Public Debt Rating withdrawal(s) or reduction(s) become(s) public, Security is granted in favour of the Finance Parties and each Hedging Bank over:
(A)
the assets referred to in paragraph (a)(i) above, to the extent it has not already been granted in favour of the Finance Parties and each Hedging Bank; and
(B)
all of the accounts receivable under contracts for the supply of goods and services to customers of the Material Subsidiaries,
it being understood that granting of Security under this paragraph (a)(ii) will not be required to the extent that it would cause a default (however defined) under any “equal and rateable security” or “most favoured nation” provisions (or other provisions of equivalent effect) under the Pari Passu Indebtedness due to an inability (despite the exercise of reasonable commercial endeavours) to overcome any obstacle to compliance with such provisions.
(b)
If at any time after the date of this Agreement:
(i)
any new Security or Quasi-Security is granted over assets of the Group in favour of the holders or creditors of Pari Passu Indebtedness; or
(ii)
any existing Security or Quasi Security is amended on terms favourable to the holders or creditors of Pari Passu Indebtedness;
then, at the same time any such grant or amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including accessions
pursuant to Clause 31 (
Changes to the Obligors
)) to procure that the Finance Parties and each Hedging Bank receive the benefit of the same or substantially the same new Security or Quasi-Security (on the same or substantially the same terms and conditions) or receive the benefit of the same or substantially the same amended terms (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(c)
With respect to any Security or Quasi-Security granted or to be granted by any member of the Group pursuant to paragraphs (a) and (b) above (the “
Transaction Security
”), each Obligor shall, as soon as reasonably practicable following the relevant public announcement (or in the case of any Transaction Security granted to holder of Pari Passu Indebtedness, at the same time as such Transaction Security is so granted), do all such acts or execute all such documents as the Agent may reasonably specify (and in such form as the Agent may reasonably require) to grant and perfect the Transaction Security created or intended to be
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created under or evidenced by the relevant security documents entered into with respect to the Transaction Security (the “
Security Documents
”) and shall thereafter take all such action as is available to it (including making all filings and registrations and entering into any deeds of confirmation) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Transaction Security conferred or intended to be conferred by or pursuant to the Security Documents, in each case promptly following a reasonable request of the Agent (including without limitation following the completion of any Permitted Merger).
(d)
With respect to the granting of any Security or Quasi-Security granted or to be granted by any member of the Group pursuant to paragraphs (a) and (b) above, the obligation shall be subject always to the Agreed Security Principles. With respect to the granting of Security over accounts receivable referred to in paragraph (b) above in circumstances where Agreed Security Principle 2.1(d) relating to third party arrangements would apply due to the requirement of third party consent, then the Parent shall request such consent within the applicable timeframe in respect of accounts receivable that together, at that time, constitute a percentage of consolidated Group revenues that is at least the greater of (i) the percentage of revenues represented by the ten (10) largest relevant contracts by revenue and (ii) twenty five per cent. (25%).
(e)
In this Agreement, “
Pari Passu Indebtedness
” means any Financial Indebtedness incurred by any member of the Group pursuant to any loan, facility, any public or private financing in the domestic or international debt capital markets (including any public or private bond issue, placement or note, security or other debt issuance or indebtedness), in each case incurred by any member of the Group (including, without limitation, the Bridge Facilities and the Existing GTECH Notes) as well as any Financial Indebtedness incurred by any member of the Group for the purposes of refinancing any of the aforementioned Financial Indebtedness but excludes Financial Indebtedness which is secured by Security that falls within the basket set out in paragraph (o) of the definition of “Permitted Security”.
(f)
The provisions of Clause 28.23 (
Security following Debt Ratings decrease
) shall continue with full force and effect notwithstanding any intervening application of Clause 42.7 (
Release of Security on Permitted Disposal and Investment Grade Rating
) and in the event that the relevant trigger conditions are met subsequently, the Parent shall again be obliged to procure the granting of Security in accordance with this Clause 28.23.
28.24
Guarantor Threshold Test and Additional Guarantors
(a)
Subject in each case to the Agreed Security Principles, the Parent shall
do all acts and deliver all documents as are necessary, including
procuring accessions pursuant to Clause 31 (
Changes to the Obligors
), to ensure that commencing from 31 December 2014, and by reference to the Compliance Certificate and accompanying financial statements to be delivered pursuant to Clause 26.2(b) (
Provision and contents of Compliance Certificate
): (i) the ratio of (A) the aggregate of the total unconsolidated assets of the Guarantors excluding the Excluded Assets to (B) the consolidated total assets of the Group excluding Excluded Assets is greater than or equal to eighty five per cent. (85%) and (ii) the ratio of (A) the unconsolidated aggregate earnings before interest, taxes, depreciation and amortisation (calculated on the same basis as EBITDA is calculated but excluding the Excluded EBITDA Entries) of the Guarantors to (B) EBITDA of the Group excluding Excluded EBITDA Entries is greater than or equal to eighty five per cent. (85%).
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(b)
For the purposes of paragraph (a) above,
the consolidated total assets and EBITDA of the Group (i) may exclude the total assets and EBITDA of Subsidiaries with negative assets or negative EBITDA and (ii) shall exclude the total assets and EBITDA of all Subsidiaries which the Agent (acting reasonably) is satisfied are either not eligible (on the basis of the Agreed Security Principles) to be Guarantors or over whose shares (on the basis of the Agreed Security Principles) no Security is required to be granted
.
(c)
If at any time after the date of this Agreement:
(i)
any new guarantee is granted in favour of any holder or creditor of Pari Passu Indebtedness; or
(ii)
any guarantee is amended on terms favourable to the holders or creditors of Pari Passu Indebtedness;
then, at the same time any such grant or amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including accessions
pursuant to Clause 31 (
Changes to the Obligors
)) to procure that the Finance Parties receive the benefit of the same or substantially the same new guarantee (on the same or substantially the same terms and conditions) or receive the benefit of the same or substantially the same amended terms (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(d)
With respect to any guarantee granted or to be granted by any member of the Group pursuant to paragraph (c) above, the obligation shall be subject always to the Agreed Security Principles.
28.25
MFN to Financial Covenants and Mandatory Prepayments
(a)
If at any time:
(i)
any new financial covenant is put in place in favour of any holder or creditor of Pari Passu Indebtedness; or
(ii)
the levels of any financial covenant in favour of the holders or creditors of Pari Passu Indebtedness is or is amended to become more stringent than the levels of the same or an equivalent financial covenant in favour of the Finance Parties under this Agreement;
then, at the same time any such financial covenant is put in place, becomes more stringent or such amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including entering into an amendment and restatement of this Agreement) to procure that the Finance Parties receive the benefit of the same or substantially the same financial covenants (on the same or substantially the same terms and conditions and at substantially the same levels) (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(b)
If at any time:
(i)
any new mandatory prepayment provision is put in place in favour of any holder or creditor of Pari Passu Indebtedness; or
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(ii)
any mandatory prepayment provision in favour of the holders or creditors of Pari Passu Indebtedness is or is amended to become more favourable than any mandatory prepayment provision in favour of the Finance Parties under this Agreement;
then, at the same time any such mandatory prepayment provision is put in place, or such amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including entering into an amendment and restatement of this Agreement) to procure that the Finance Parties receive the benefit of the same or substantially the same mandatory prepayment provisions (on the same or substantially the same terms and conditions subject to paragraph (c) below) (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(c)
For the purposes of paragraph (b) above, it is acknowledged and agreed that any such mandatory prepayment provision introduced into this Agreement as a result shall provide for prepayment of the Facilities without cancellation such that the amount prepaid may subsequently be re-drawn (thought it is understood that the amount redrawn may not be used to finance, directly or indirectly, the equivalent mandatory prepayment of Pari Passu Indebtedness).
28.26
Structure Memorandum
The Parent shall not amend the Structure Memorandum in a way that is reasonably likely to be materially prejudicial to the interests of the Lenders without the consent of the Majority Lenders (acting reasonably).
29.
EVENTS OF DEFAULT
Each of the events or circumstances set out in this Clause 29 is an Event of Default.
29.1
Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless such failure to pay is due to administrative or technical error and payment is made within three (3) Business Days of its due date.
29.2
Financial covenants and other obligations
Any requirement of Clause 27 (
Financial Covenants
) is not satisfied or an Obligor does not comply with the provisions of Clauses 28.7 (
Negative pledge
), 28.8 (
Disposals
), 28.20 (
Use of proceeds and Sanctions
), 28.21 (
Anti-Corruption
),
28.11
(
Dividends and share redemption
) or Clause
28.12
(
Priority Financial Indebtedness
).
29.3
Other obligations
(a)
An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 29.1 (
Non-payment
) and Clause 29.2 (
Financial covenants and other obligations
)).
(b)
No Event of Default under paragraph (a) above will occur if (i) the failure to comply is capable of remedy and is remedied within twenty (20) Business Days of the Agent giving
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notice to the Parent or relevant Obligor or the Parent or an Obligor becoming aware of the failure to comply.
29.4
Misrepresentation
Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made and, if capable of cure, is not cured within twenty (20) Business Days.
29.5
Cross-default
(a)
Any Financial Indebtedness of any member of the Group is not paid when due nor within any originally applicable grace period.
(b)
Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
(c)
Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).
(d)
Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).
(e)
No Event of Default will occur under this Clause 29.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) through (d) above is less than €50,000,000 or its equivalent in any other currency or currencies (or, following completion of the Mergers, US$75,000,000 or its equivalent in any other currency or currencies).
29.6
Insolvency
(a)
An Obligor or Material Subsidiary is unable or admits inability to pay its debts as they fall due or is deemed to or declared to be unable to pay its debts under applicable law, suspends or threatens to suspend making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
(b)
The value of the assets of any Obligor (other than the Parent) or Material Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities) and such circumstances continue for sixty (60) days commencing on the earlier of the date when the directors of such Obligor acknowledge or have evidence that such circumstances exist; or
(c)
Any circumstance contemplated under Section 2447 of the Italian Civil Code occurs in relation to the Parent and:
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(i)
no shareholders meeting takes place for the recapitalisation of the Parent; or
(ii)
the recapitalisation of the Parent is not completed,
in each case within sixty (60) days of the earlier of the date when the directors of the Parent acknowledge or have evidence that the aforementioned circumstance is in existence.
(d)
A moratorium is declared in respect of any indebtedness of an Obligor or Material Subsidiary. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.
29.7
Insolvency proceedings
(a)
Any corporate action, legal proceedings or other procedure or step (including a petition or a judicial or court order) is taken or filed in relation to:
(i)
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, bankruptcy, other insolvency proceedings or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of an Obligor (other than the Parent) or Material Subsidiary;
(ii)
a composition, compromise, assignment or arrangement with any creditor of an Obligor (other than the Parent) or Material Subsidiary;
(iii)
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of an Obligor (other than the Parent) or Material Subsidiary or any of its assets;
(iv)
enforcement of any Security over any assets of an Obligor (other than the Parent) or Material Subsidiary;
(v)
enforcement of any Security over any asset or assets of the Parent having an aggregate value greater than or equal to €50,000,000 or its equivalent in any other currency or currencies (or, following completion of the Mergers, US$75,000,000 or its equivalent in any other currency or currencies); or
(vi)
Italian Insolvency Proceedings,
or any analogous procedure or step is taken in any jurisdiction.
(b)
Paragraph (a) shall not apply to:
(i)
any winding-up petition against any Obligor (other than the Parent) or Material Subsidiary which is frivolous or vexatious and is discharged, stayed or dismissed within sixty (60) days of commencement or, if earlier, the date on which it is advertised; or
(ii)
any petition filed by creditors against the Parent in respect of an Italian Insolvency Proceeding to the extent that (a) the Parent is contesting in good faith and by appropriate means such petition, (b) the Parent provides evidence to the Lenders that
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it is reasonably likely that such petition will be discharged within ninety (90) days of its filing and (c) such petition is discharged within ninety (90) days of its filing.
29.8
Creditors’ process
Pursuant to any creditor’s process, any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of an Obligor or Material Subsidiary having an aggregate value greater than or equal to €25,000,000 or its equivalent in any other currency or currencies (or, following completion of the Mergers, US$35,000,000 or its equivalent in any other currency or currencies) and is not discharged within sixty (60) days.
29.9
Unlawfulness and invalidity
(a)
It is or becomes unlawful for an Obligor to perform any of its material obligations under the Finance Documents.
(b)
Any obligation or obligations of any Obligor under any Finance Documents are not or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lenders under the Finance Documents.
(c)
Any Finance Document ceases to be in full force and effect in any material respect ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to it (other than a Finance Party) to be ineffective.
29.10
Cessation of business
Any Obligor or any Material Subsidiary suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a substantial part of its business except as a result of a Permitted Disposal or a Permitted Merger.
29.11
Repudiation and rescission of agreements
An Obligor (or any other relevant party) rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or a material provision thereof or evidences an intention to rescind or repudiate a Finance Document or a material provision thereof.
29.12
Litigation
Any litigation, or administrative, proceedings are commenced or threatened in writing against an Obligor or any Material Subsidiary which have been adversely determined, or would be reasonably likely to be adversely determined and if so determined, be reasonably likely to have, a Material Adverse Effect.
29.13
Material adverse change
Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.
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29.14
ERISA Events of Default
(a)
Any ERISA Event shall have occurred with respect to a Plan and such ERISA Event taken together with the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Obligors and the ERISA Affiliates related to such ERISA Event) and shall have caused, or shall reasonably be expected to cause, a Material Adverse Effect.
(b)
Any ERISA Event shall have occurred with respect to a plan that shall have caused or shall be reasonably be expected to have a Material Adverse Effect.
(c)
Any Obligor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Obligors and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), shall be reasonably expected to cause a Material Adverse Effect.
(d)
Any Obligor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is being terminated, within the meaning of title IV of ERISA, and as a result of such termination the aggregate annual contributions of the Obligors and the ERISA Affiliates to all Multiemployer Plans that are then in reorganisation or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer plans immediately preceding the plan year in which such termination occurs by an amount that shall be reasonably expected to cause a Material Adverse Effect.
29.15
US Insolvency Proceedings
(a)
An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction in the United States seeking:
(i)
relief in respect of any Obligor or Material Subsidiary, or of a substantial part of the property or assets of any Obligor or Material Subsidiary, under US Bankruptcy Law;
(ii)
the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or Material Subsidiary or for a substantial part of the property or assets of any Obligor or Material Subsidiary; or
(iii)
the winding-up or liquidation of any Obligor or Material Subsidiary,
and such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered.
(b)
Any Obligor or Material Subsidiary shall:
(i)
voluntarily commence any proceeding or file any petition seeking relief under US Bankruptcy Law; or
(ii)
apply for or consent to the appointment, pursuant to the laws of the United States or any state thereof, of a receiver, trustee, custodian, sequestrator, conservator or
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similar official for any Obligor or Material Subsidiary or for a substantial part of the property or assets of any Obligor or Material Subsidiary.
29.16
Acceleration
(a)
On and at any time after the occurrence of an Event of Default, other than an Event of Default referred to in paragraph (b) below, which is continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to the Parent:
(i)
cancel the Total Facility Commitments or US Dollar Swingline Commitments or both at which time they shall immediately be cancelled;
(ii)
declare that all or part of the Utilisations, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, at which time they shall become immediately due and payable;
(iii)
declare that all or part of the Utilisations be payable on demand, at which time they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders;
(iv)
declare that cash cover in respect of each Letter of Credit is immediately due and payable at which time it shall become immediately due and payable;
(v)
declare that cash cover in respect of each Letter of Credit is payable on demand at which time it shall immediately become due and payable on demand by the Agent on the instructions of the Majority Lenders;
(vi)
declare all or any part of the amounts outstanding under the US Dollar Swingline Facility to be immediately due and payable, at which time they shall become immediately due and payable;
(vii)
declare that all or any part of the amounts outstanding under the US Dollar Swingline Facility be payable on demand, at which time they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders; or
(viii)
exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.
(b)
If an Event of Default occurs under Clause 29.15 (
US Insolvency Proceedings
) in respect of an Obligor:
(i)
the Facility Commitments shall immediately be cancelled; and
(ii)
all of the Loans, together with accrued interest, and all other amounts accrued under the Finance Documents shall be immediately due and payable;
in each case automatically and without any direction, notice, declaration or other act.
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30.
CHANGES TO THE LENDERS
30.1
Assignments and transfers by the Lenders
Subject to this Clause 30.1, a Lender (the “
Existing Lender
”) may:
(a)
assign any of its rights; or
(b)
transfer by novation any of its rights and obligations,
under any Finance Document to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “
New Lender
”) and in the case of a Revolving Facility made available to the Parent or any other Italian Borrower, it is (i) not a Blacklisted Resident Entity and (ii) a person authorised under applicable Italian law or regulation to (x) make loans to a borrower incorporated in Italy; or (y) acquire participations in or provide guarantees or cash cover in relation to loans made to a borrower incorporated in Italy.
30.2
Conditions of assignment or transfer
(a)
Except where such assignment or transfer is from a Lender to an Affiliate, another Lender or a Related Fund, the minimum amount of any assignment or transfer undertaken pursuant to this Clause 30 must be greater than or equal to the Base Currency Amount of US$5,000,000 with respect to Revolving Facility A and €5,000,000 with respect to Revolving Facility B.
(b)
The consent of the Parent shall be required for any assignment or transfer by an Existing Lender of any of such Existing Lender’s rights or obligations under this Agreement, unless the transfer or assignment is:
(i)
to another Lender or an Affiliate of a Lender; or
(ii)
following an Event of Default which is continuing.
Where the consent of the Parent is required it shall not be unreasonably withheld or delayed, and shall be deemed to have been given if no response has been received from the Parent within five (5) Business Days of the date of the request for its consent.
(c)
An assignment will only be effective on:
(i)
receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties and the other Secured Parties as it would have been under if it had been an Original Lender;
(ii)
the recordation of such assignment on the Register; and
(iii)
the performance by the Agent of all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Lender and the New Lender.
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(d)
If:
(i)
a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(ii)
as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 19 (
Tax Gross Up and Indemnities
) or Clause 20.1 (
Increased costs
),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This paragraph (e) shall not apply in relation to Clause 19.2 (
Tax gross-up
), to a Treaty Lender that has included a confirmation of its scheme reference number and its jurisdiction of tax residence in accordance with paragraph (h)(ii)(B) of Clause 19.2 (
Tax gross-up
) if the Obligor making the payment has not made a Borrower DTTP Filing in respect of that Treaty Lender.
(e)
Any Lender may, without the consent of any Obligor, at any time sub-participate or sub-contract any of its rights or obligations under the Finance Documents.
(f)
By becoming party to this Agreement each Obligor expressly grants its consent to any assignment or transfer of the rights and obligations from an Existing Lender to a New Lender for the purposes of article 1407 of the Italian Civil Code.
(g)
Notwithstanding any other term of this Agreement, each Lender shall ensure that at all times its Overall Facility A Commitment is not less than:
(i)
its US Dollar Swingline Commitment; or
(ii)
if it does not have a US Dollar Swingline Commitment, the US Dollar Swingline Commitment of a Lender which is its Affiliate.
30.3
Assignment or transfer fee
Unless the Agent otherwise agrees and excluding an assignment or transfer (i) to an Affiliate of a Lender, (ii) to a Related Fund or (iii) made in connection with primary syndication of the Facilities, the New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of €1,500 (or, following completion of the Mergers, US$2,000).
30.4
Limitation of responsibility of Existing Lenders
(a)
Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
(i)
The legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;
(ii)
the financial condition of any Obligor;
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(iii)
the performance and observance by any Obligor or any other member of the Group of its obligations under the Finance Documents or any other documents; or
(iv)
the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,
and any representations or warranties implied by law are excluded.
(b)
Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
(i)
has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any other Finance Party in connection with any Finance Document; and
(ii)
will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
(c)
Nothing in any Finance Document obliges an Existing Lender to:
(i)
accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 30; or
(ii)
support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.
30.5
Procedure for transfer
(a)
Subject to the conditions set out in Clause 30.2 (
Conditions of assignment or transfer
), a transfer is effected in accordance with paragraph (c) below when:
(i)
the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender; and
(ii)
the transfer is recorded on the Register.
The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate and record the transfer on the Register.
(b)
The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender upon its completion of all “know your customer” or other checks relating to any person that it is required to carry out in relation to the transfer to such New Lender.
(c)
Subject to Clause 30.9 (
Pro rata interest settlement
) on the Transfer Date:
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(i)
to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the “
Discharged Rights and Obligations
”);
(ii)
each of the Obligors and the New Lender shall assume obligations towards one another or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor or other member of the Group and the New Lender have assumed or acquired the same in place of that Obligor and the Existing Lender;
(iii)
the Agent, the Global Coordinators, the Bookrunners, the New Lender, the other Lenders, the Swingline Agent and the Issuing Agent and any relevant US Dollar Swingline Lender shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights, or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Global Coordinators, the Bookrunners, the Swingline Agent, the Issuing Agent and any relevant US Dollar Swingline Lender and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and
(iv)
the New Lender shall become a Party as a “
Lender
”.
30.6
Procedure for assignment
(a)
Subject to the conditions set out in Clause 30.2 (
Conditions of assignment or transfer
) an assignment may be effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.
(b)
The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.
(c)
Subject to Clause 30.9 (
Pro rata interest settlement
), on the Transfer Date:
(i)
the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents expressed to be the subject of the assignment in the Assignment Agreement;
(ii)
the Existing Lender will be released from the obligations (the “
Relevant Obligations
”) expressed to be the subject of the release in the Assignment Agreement; and
(iii)
the New Lender shall become a Party as a “Lender” and will be bound by obligations equivalent to the Relevant Obligations.
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(d)
Lenders may utilise procedures other than those set out in this Clause 30.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with Clause 30.5 (
Procedure for transfer
), to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender);
provided that
they comply with the conditions set out in Clause 30.2 (
Conditions of assignment or transfer
).
30.7
Copy of Transfer Certificate or Assignment Agreement to Parent
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Parent a copy of that Transfer Certificate or Assignment Agreement.
30.8
Security over Lenders’ rights
In addition to the other rights provided to Lenders under this Clause 30, each Lender may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of such Lender including, without limitation:
(a)
any charge, assignment or other Security to secure obligations to a federal reserve or central bank; and
(b)
in the case of any Lender which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by such Lender as Security for those obligations or securities,
except that no such charge, assignment or Security shall:
(i)
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Lender as a party to any of the Finance Documents; or
(ii)
require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents.
30.9
Pro rata interest settlement
If the Agent has notified the Lenders that it is able to distribute interest payments on a “
pro rata
basis” to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 30.5 (
Procedure for transfer
) or any assignment pursuant to Clause 30.6 (
Procedure for assignment
) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):
(a)
any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date (“
Accrued Amounts
”) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six (6) Months, on the next of the dates which falls at six (6) Monthly intervals after the first day of that Interest Period); and
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(b)
the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:
(i)
when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and
(ii)
the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 30.9, have been payable to it on that date, but after deduction of the Accrued Amounts.
30.10
Disclosure to numbering service providers
(a)
Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facilities and one or more Obligors the following information:
(i)
names of Obligors;
(ii)
country of domicile of Obligors;
(iii)
place of incorporation of Obligors;
(iv)
date of this Agreement;
(v)
the names of the Agent, the Swingline Agent, the Issuing Agent and the Arrangers;
(vi)
date of each amendment and restatement of this Agreement;
(vii)
amount of Total Facility Commitments;
(viii)
currencies of the Facilities;
(ix)
type of Facilities;
(x)
ranking of Facilities;
(xi)
Final Maturity Date for Facilities;
(xii)
changes to any of the information previously supplied pursuant to paragraphs (i) to (xi) above; and
(xiii)
such other information agreed between such Finance Party and the Parent,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
(b)
The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facilities and one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.
(c)
Each Obligor represents that none of the information set out in paragraphs (i) to (xiii) of paragraph (a) above is, nor will at any time be, unpublished price-sensitive information.
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(d)
The Agent shall notify the Parent and the other Finance Parties of:
(i)
the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facilities and one or more Obligors; and
(ii)
the number or, as the case may be, numbers assigned to this Agreement, the Facilities and one or more Obligors by such numbering service provider.
30.11
The Register
(a)
The Agent, acting solely for this purpose as the agent of the Obligors (and to the extent necessary for the Facilities to be considered as being in registered form for US federal income tax purposes), shall maintain at its address referred to in Clause 37 (
Notices
):
(i)
a copy of each notice and written confirmation referred to in Clause 30.2 (
Conditions of assignment or transfer
) and in Clause 30.5 (
Procedure for transfer
) delivered to and accepted by it; and
(ii)
with respect to each Facility, a register for the recordation of the names and addresses of the Lenders and the Revolving Facility Commitments of, and principal amounts (and related interest amounts) owing to, each Lender from time to time (the “
Register
”) under such Facility.
The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Obligors, the agents and the Lenders shall treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Obligor at any reasonable time and from time to time upon reasonable prior notice. This Clause (a) shall be construed so that each Facility is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any other relevant or successor provisions of the Code or of such Treasury regulations).
(b)
Each Party to this Agreement irrevocably authorises the Agent to make the relevant entry in the Register on its behalf for the purposes of this Clause 30.11 without any further consent of, or consultation with, such Party.
30.12
Accession, assignments and transfers by Hedging Banks
(a)
No Affiliate of a Lender may become a Hedging Bank unless and until the proposed Hedging Bank accedes to this Agreement as a Hedging Bank by delivering to the Agent a duly completed and signed Accession Letter.
(b)
No Hedging Bank may assign any of its rights or transfer any of its rights or obligations as Hedging Bank under this Agreement or any Hedging Document to any person:
(i)
except as permitted under the relevant Hedging Document; and
(ii)
unless and until the proposed Hedging Bank accedes to this Agreement as a Hedging Bank by delivering to the Agent a duly completed and signed Accession Letter, save where it is already party to this Agreement as a Hedging Bank.
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30.13
Participant
Register
The applicable Lender, acting solely for this purpose as a non-fiduciary agent of the Obligors (and to the extent necessary for the Facilities to be considered as being in registered form for US federal income tax purposes), shall maintain a register on which it enters the name and address of each Relevant Sub-Participant, and the amount of each such Relevant Sub-Participant’s interest in such Lender’s rights and/or obligations under this Agreement (the “
Participant Register
”);
provided that
no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Relevant Sub-Participant or any information relating to a Relevant Sub-Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Finance Document) to any Person except to the extent that such disclosure is necessary in connection with a Tax audit or other proceeding to establish that such Facilities or other obligation is in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any successor provisions of the Code or of such Treasury regulations). The entries in the Participant Register shall be conclusive absent manifest error, and the Obligor (to the extent it has been notified of such entry) and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of the applicable rights and/or obligations of such Lender under this Agreement, notwithstanding notice to the contrary.
31.
CHANGES TO THE OBLIGORS
31.1
Assignment and transfers by Obligors
Save in the context of a Permitted Merger, no Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
31.2
Additional Obligors
(a)
Subject to compliance with the provisions of paragraphs (b) and (c) of Clause 26.6 (
“Know your customer” checks
), the Parent may request that any of its wholly owned Subsidiaries become a Guarantor or a Borrower (each an “
Additional Obligor
”).
(b)
Subject always to the provisions of Clause 28.24 (
Guarantor Threshold Test and Additional Guarantors
), the Parent shall procure that:
(i)
within ten (10) Business Days following completion of the Italian Reorganisation, Italian Holdco will accede to this Agreement as an Additional Borrower and an Additional Guarantor;
(ii)
within ten (10) Business Days following completion of the Holdco Merger, Holdco will accede to this Agreement as an Additional Borrower and an Additional Guarantor;
(iii)
within ten (10) Business Days following completion of the Target Merger, Target will accede to this Agreement as an Additional Borrower and an Additional Guarantor; and
(iv)
from time to time thereafter, each member of the Group required to comply with Clause 28.24 (
Guarantor Threshold Test and Additional Guarantors
) will accede to this Agreement as an Additional Guarantor,
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in each case subject to delivery of the documentation referred to in paragraph (c)(iii) below
(c)
A member of the Group which is a wholly owned Subsidiary of the Parent shall become an Additional Obligor if:
(i)
other than with respect to those Additional Obligors set out at paragraph (b) above, all Lenders (in the case of a proposed Additional Borrower) or the Majority Lenders (in the case of a proposed Additional Guarantor) have approved that member of the Group;
(ii)
the Parent and the proposed Additional Guarantor or the proposed Additional Borrower deliver to the Agent a duly completed and executed Accession Letter; and
(iii)
the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (
Conditions Precedent
) in relation to that Additional Obligor, each in form and substance satisfactory to the Agent.
(d)
In the case of an Additional Borrower under Revolving Facility B or an Additional Guarantor incorporated in Italy, the Parties have agreed to make an appropriate increase to the guarantee limitation set out in Clause 24.12 (
Guarantee limitations applicable to GTECH as Parent
) or Clause 24.14 (
Italian guarantee limitations
).
(e)
Notwithstanding anything else in this Agreement, no Subsidiary of the Parent may become or remain a Borrower at any time unless, at that time, it is also a Guarantor.
(f)
The Agent shall notify the Parent and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in
Part
II of Schedule 2 (
Conditions Precedent
).
(g)
Notwithstanding anything to the contrary in this Agreement, a Subsidiary of the Parent that is a controlled foreign corporation (as such term is defined in Section 957 of the Code) may not (and shall not be obligated to) become a Guarantor for purposes of the Finance Documents.
31.3
Resignation of an Obligor
(a)
The Parent may request that a Guarantor (other than the Parent or GTECH Corporation) or a Borrower (other than the Parent or GTECH Corporation) ceases to be a Guarantor or, as the case may be, Borrower by delivering to the Agent a Resignation Letter if:
(i)
that Guarantor (other than a Guarantor which is also an Original Borrower) or a Borrower is being disposed of by way of a Third Party Disposal and the Parent has confirmed this is the case;
(ii)
following the completion of any Permitted Transaction, any Guarantor (other than a Guarantor which is also an Original Borrower) ceases to be a Material Subsidiary; or
(iii)
all the Lenders have consented to the resignation of that Guarantor.
(b)
The Agent shall accept a Resignation Letter and notify the Parent and the Lenders of its acceptance if:
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(i)
the Parent has confirmed that no Default is continuing or would result from the acceptance of the Resignation Letter; and
(ii)
no payment is due from the Guarantor under Clause 24.1 (
Guarantee and indemnity
) or from a Borrower under Clause 11.3 (
Repayment
) or Clause 15.3 (
Payment of interest
).
(c)
The resignation of that Guarantor shall not be effective until the date of the relevant Third Party Disposal at which time that company shall cease to be a Guarantor and shall have no further rights or obligations under the Finance Documents as a Guarantor.
31.4
Repetition of Representations
Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the representations and warranties referred to in paragraph (a)(ii) of Clause 25.25 (
Repetition
) are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.
32.
ROLE OF THE AGENT, THE ARRANGING PARTIES, THE GLOBAL COORDINATORS, THE SWINGLINE AGENT, THE ISSUING AGENT AND OTHERS
32.1
Appointment
(a)
Each of the Arranging Parties, the Lenders and the Issuing Agent hereby irrevocably appoints The Royal Bank of Scotland plc to act on its behalf as the Agent (and, in particular, for the purposes of Italian law, as
mandatario con rappresentanza
(common representative)) hereunder and under the other Finance Documents and authorises the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(b)
Each of the US Dollar Swingline Lenders hereby irrevocably appoint KeyBank National Association to act on its behalf as the Swingline Agent (and, in particular, for the purposes of Italian law, as
mandatario con rappresentanza
(common representative)) hereunder and under the other Finance Documents and authorises the Swingline Agent to take such actions on its behalf
and
to exercise such powers as are delegated to the Swingline Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(c)
Each of the Arranging Parties, the Lenders and the Issuing Agent authorises the Global Coordinators, Bookrunners and Mandated Lead Arrangers to exercise the rights, powers, authorities and discretions specifically given to the Global Coordinators, Bookrunners and Mandated Lead Arrangers under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
(d)
Unless otherwise expressly stated, the provisions of this Clause 32 are solely for the benefit of the Agent, the Arranging Parties, the Lenders, the Swingline Agent and the Issuing Agent and no Obligor shall have rights as a third party beneficiary of any of such provisions.
32.2
Rights as a Lender
The person serving as the Agent, the Swingline Agent or the Issuing Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the
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same as though it were not the Agent, the Swingline Agent or the Issuing Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the person serving as the Agent, the Swingline Agent or the Issuing Agent hereunder in its individual capacity. Such person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if such person were not the Agent, the Swingline Agent or the Issuing Agent hereunder and without any duty to account therefor to the Lenders.
32.3
Duties of the Agent, the Swingline Agent and the Issuing Agent
(a)
The Agent, the Swingline Agent and the Issuing Agent shall promptly forward to a Party the original or a copy of any document which is delivered to it for that Party by any other Party.
(b)
Without prejudice to Clause 30.7 (
Copy of Transfer Certificate or Assignment Agreement to Parent
), paragraph (a) above shall not apply to any Transfer Certificate or Assignment Agreement.
(c)
Except where a Finance Document specifically provides otherwise, the Agent, the Swingline Agent or the Issuing Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(d)
If the Agent, the Swingline Agent or the Issuing Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(e)
If the Agent, the Swingline Agent or the Issuing Agent (as applicable) is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Arrangers) under this Agreement, it shall promptly notify the other Finance Parties.
(f)
The duties of the Agent, the Swingline Agent and the Issuing Agent under the Finance Documents are solely mechanical and administrative in nature.
(g)
The Agent, acting solely for this purpose as agent of the Obligors, shall maintain the Register referred to in Clause 30.11 (
The Register
).
(h)
Notwithstanding any other provision of any Finance Document to the contrary, none of the Agent, the Arranging Parties, the Swingline Agent, the Issuing Agent or the Bookrunners is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law, regulation or a breach of a fiduciary duty or duty of confidentiality.
32.4
Roles of the Global Coordinators and Bookrunners
Except as specifically provided in the Finance Documents, the Global Coordinators and the Bookrunners have no obligations of any kind to any other Party under or in connection with any Finance Document.
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32.5
No fiduciary duties
(a)
Nothing in this Agreement constitutes the Agent, the Global Coordinators, Bookrunners and Mandated Lead Arrangers, the Swingline Agent or the Issuing Agent as a trustee or fiduciary of any other person.
(b)
None of the Agent, the Global Coordinators, the Bookrunners and Mandated Lead Arrangers or the Swingline Agent, the Issuing Agent or any US Dollar Swingline Lender shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.
32.6
Business with the Group
The Agent, the Global Coordinators, Bookrunners and Mandated Lead Arrangers, the Swingline Agent, the Issuing Agent and each US Dollar Swingline Lender may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
32.7
Rights and discretions of the Agent, the Swingline Agent and the Issuing Agent
The Agent, the Swingline Agent and the Issuing Agent:
(a)
may rely on any representation, notice or document believed by them to be genuine, correct and appropriately authorised;
(b)
may rely on any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and
(c)
may disclose the identity of a Defaulting Lender to the other Finance Parties and the Parent and shall disclose the same upon the written request of the Parent or the Majority Lenders.
32.8
Majority Lenders’ instructions
(a)
Unless a contrary indication appears in a Finance Document, the Agent shall exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent).
(b)
Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.
(c)
The Agent is not authorised to act on behalf of a Lender (without first obtaining such Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.
(d)
In making any determination with a view to granting or refusing a consent under this Agreement, the Majority Lenders shall act reasonably in making such determination.
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32.9
Exculpatory Provisions
The Agent, the Swingline Agent and the Issuing Agent shall not have any duties or obligations except those expressly set forth herein and in the other Finance Documents. Without limiting the generality of the foregoing, the Agent, the Swingline Agent and the Issuing Agent:
(a)
shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b)
shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Finance Documents that it is required to exercise as directed in writing by the Majority Lenders (or such other number of percentage of the Lenders as shall be expressly provided for herein or in the Finance Documents);
provided that
it shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose it to liability or that is contrary to any Finance Document or applicable law;
(c)
shall not, except as expressly set forth herein and in the other Finance Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to a Borrower or any of its Affiliates that is communicated to or obtained by the person serving as the Agent or any of its Affiliates in any capacity;
(d)
shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as it shall believe in good faith shall be necessary, under the circumstances as provided in Clauses 42.1 (
Required consents
) and 29.16 (
Acceleration
)) or (ii) in the absence of its own gross negligence or wilful misconduct. The Agent, the Swingline Agent and the Issuing Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to it by the Borrowers, a Lender or another agent of the Finance Parties under this Agreement; and
(e)
shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Finance Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Finance Document or any other agreement, instrument or document.
32.10
Reliance by the Agent, the Swingline Agent and the Issuing Agent
(a)
The Agent, the Swingline Agent and the Issuing Agent shall each be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person.
(b)
The Agent, the Swingline Agent and the Issuing Agent also may each rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon.
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(c)
In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender, the Swingline Agent or the Issuing Agent, the Agent may presume that such condition is satisfactory to such Lender, the Swingline Agent or the Issuing Agent unless the Agent shall have received notice to the contrary from such Lender or the Issuing Agent prior to the making of such Loan, US Dollar Swingline Loan or the issuance of such Letter of Credit.
(d)
The Agent, the Swingline Agent and the Issuing Agent may each consult with legal counsel (who may be counsel for a Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
32.11
Replacement of the Agent, the Swingline Agent or the Issuing Agent
(a)
After consultation with the Parent, the Majority Lenders may, by giving thirty (30) days’ notice to the Agent, the Swingline Agent or the Issuing Agent (or, where any one of them is an Impaired Agent, by giving such shorter notice agreed to by the Majority Lenders), replace the Agent, the Swingline Agent or the Issuing Agent (as applicable) by appointing a successor which shall be a bank with offices in the United States and Italy, or an Affiliate of any such bank with offices in the United States and Italy.
(b)
The retiring Agent, the Swingline Agent or the Issuing Agent(as applicable) shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent, the Swingline Agent or the Issuing Agent (as applicable) such documents and records and provide such assistance as the successor Agent, the Swingline Agent or the Issuing Agent (as applicable) may reasonably request for the purposes of performing its functions as Agent, the Swingline Agent or the Issuing Agent (as applicable) under the Finance Documents.
(c)
The appointment of the successor Agent, the Swingline Agent or the Issuing Agent (as applicable) shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent, the Swingline Agent or the Issuing Agent (as applicable) shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 32 (and any agency fees for the account of the retiring Agent, the Swingline Agent or the Issuing Agent (as applicable) shall cease to accrue from (and shall be payable on) that date).
(d)
Any successor Agent, the Swingline Agent or the Issuing Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
32.12
Delegation of Duties
(a)
The Agent, the Swingline Agent or the Issuing Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Finance Document by or through any one or more sub-agents appointed by the Agent, the Swingline Agent or the Issuing Agent.
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(b)
The Agent, the Swingline Agent and the Issuing Agent and any such sub-agent may perform all of its duties and exercise its rights and powers by or through their respective Related Parties.
(c)
The provisions of Clause 32.9 (
Exculpatory Provisions
) shall apply to any such sub-agent and to the Related Parties of the Agent, the Swingline Agent, the Issuing Agent and any such sub-agent and shall apply to their respective activities in connection with the syndication of the Facilities provided for herein as well as activities as the Agent, the Swingline Agent or the Issuing Agent.
32.13
Resignation of the Agent, the Swingline Agent or the Issuing Agent
(a)
The Agent, the Swingline Agent or the Issuing Agent may at any time give notice of its resignation to the Lenders, the other agents to the Finance Parties under this Agreement and the Borrowers.
(b)
Upon receipt of any such notice of resignation, the Majority Lenders shall have the right, in consultation with the Borrowers, to appoint a successor, which shall be a bank with offices in the United States and Italy, or an Affiliate of any such bank with offices in the United States and Italy.
(c)
If no such successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation, then the retiring agent may on behalf of the Lenders and the other agents to the Finance Parties under this Agreement, appoint a successor agent meeting the qualifications set forth above and any such appointment made by the agent shall be deemed to be accepted by the Lenders and the relevant agents.
(d)
Upon the acceptance of a successor’s appointment as the Agent, the Swingline Agent or the Issuing Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) agent, and the retiring agent shall be discharged from all of its duties and obligations hereunder or under the other Finance Documents.
(e)
The fees payable by the Borrowers to a successor agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor.
(f)
After the retiring agent’s resignation hereunder and under the other Finance Documents, the provisions of this Clause 32 and Clause 23 (
Costs and Expenses
) shall continue in effect for the benefit of such retiring agent and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring agent was acting as agent.
(g)
Upon the acceptance of a successor’s appointment as the Agent, the Swingline Agent or the Issuing Agent hereunder, (i) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring agent, (ii) the retiring agent shall be discharged from all of its respective duties and obligations hereunder or under the other Finance Documents and (iii) in the case of the Issuing Agent, the successor Issuing Agent shall issue Letters of Credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the retiring Issuing
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Agent to effectively assume the obligations of the retiring Issuing Agent with respect to such Letters of Credit.
(h)
The retiring agent shall, at its own cost, make available to the successor agent such documents and records and provide such assistance as the successor agent may reasonably request for the purposes of performing its functions under the Finance Documents.
(i)
The Agent shall resign in accordance with paragraph (a) and (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the date which is three (3) months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:
(i)
the Agent fails to respond to a request under Clause 19.9 (
FATCA Information
) and the Parent or a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(ii)
the information supplied by the Agent pursuant to Clause 19.9 (
FATCA Information
) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(iii)
the Agent notifies the Parent and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) the Parent or a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and the Parent or such Lender, by notice to the Agent, requires it to resign.
32.14
Non-Reliance on the Agent and the Other Finance Parties
Each Lender, the Swingline Agent and the Issuing Agent acknowledges that it has, independently and without reliance upon the Agent or any other Finance Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender, the Swingline Agent and the Issuing Agent acknowledges that it will, independently and without reliance upon the Agent or any other Finance Party or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Finance Document or any related agreement or any document furnished hereunder or thereunder and that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including:
(a)
the financial condition, status and nature of each member of the Group;
(b)
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;
(c)
whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement,
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arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and
(d)
the adequacy, accuracy or completeness of any other information provided by the Agent, any Party or any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.
32.15
Responsibility for documentation
None of the Agent, the Global Coordinators, Bookrunners and Mandated Lead Arrangers or the Swingline Agent and the Issuing Agent:
(a)
is responsible for the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Agent, the Global Coordinators, Bookrunners and Mandated Lead Arrangers, the Swingline Agent, the Issuing Agent, a US Dollar Swingline Lender, an Obligor or any other person given in or in connection with any Finance Document or the transactions contemplated in the Finance Documents; or
(b)
is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document.
32.16
Exclusion of liability
(a)
Without limiting paragraph (b) below (and without prejudice to the provisions of paragraph (e) of Clause 35.11 (
Disruption to Payment Systems, etc.
)), none of the Agent, the Swingline Agent or the Issuing Agent will be liable (including, without limitation, for negligence or any other category of liability whatsoever) for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
(b)
No Party (other than the Agent, the Swingline Agent or the Issuing Agent (as applicable)) may take any proceedings against any officer, employee or agent of the Agent, the Swingline Agent or the Issuing Agent in respect of any claim it might have against the Agent, the Swingline Agent or the Issuing Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent, the Swingline Agent or the Issuing Agent may rely on this Clause 32.16 subject to Clause 1.3 (
Third party rights
) and the provisions of the Third Parties Act.
(c)
The Agent, the Swingline Agent and the Issuing Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by it if it has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the relevant agent for that purpose.
(d)
Nothing in this Agreement shall oblige the Agent, the Swingline Agent, the Issuing Agent or the Global Coordinators, Bookrunners and Mandated Lead Arrangers to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender, and each Lender confirms to the Agent, the Swingline Agent, the Issuing Agent and the
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Global Coordinators, Bookrunners and Mandated Lead Arrangers that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent, the Swingline Agent, the Issuing Agent or the Global Coordinators, Bookrunners or Mandated Lead Arrangers.
32.17
Lenders’ indemnity to the Agent
(a)
Each Lender shall (in proportion to its share of the Total Facility Commitments or, if the Total Facility Commitments are then zero, to its share of the Total Facility Commitments immediately prior to their reduction to zero) indemnify the Agent, the Swingline Agent and the Issuing Agent, within three (3) Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by that agent (otherwise than by reason of the agent’s gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 35.11 (
Disruption to Payment Systems, etc.
), notwithstanding the agent’s negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the relevant agent) in acting as the Agent, the Swingline Agent or the Issuing Agent (as applicable) under the Finance Documents (unless the relevant agent has been reimbursed by an Obligor pursuant to a Finance Document).
(b)
Wells Fargo Bank, NA will only be deemed to be a Lender for the purposes of the indemnity in paragraph (a) after the Target Accession Date has occurred.
32.18
Confidentiality
(a)
In acting as agent for the Finance Parties, the Agent, the Swingline Agent and the Issuing Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b)
If information is received by another division or department of the Agent, the Swingline Agent or the Issuing Agent it may be treated as confidential to that division or department, and the relevant agent shall not be deemed to have notice of it.
(c)
Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent, the Swingline Agent, the Issuing Agent nor the Arranging Parties are obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or a breach of a fiduciary duty.
32.19
Relationship with the Lenders
Subject to Clause 30.9 (
Pro rata interest settlement
), the Agent, the Swingline Agent and the Issuing Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than five (5) Business Days’ prior notice from such Lender to the contrary in accordance with the terms of this Agreement.
32.20
Deduction from amounts payable by the Agent, the Swingline Agent and the Issuing Agent
If any Party owes an amount to the Agent, the Swingline Agent or the Issuing Agent under the Finance Documents, the relevant agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of
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the amount owed. For the purposes of the Finance Documents, that Party shall be regarded as having received any amount so deducted.
33.
CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
(a)
interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
(b)
oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
(c)
oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
34.
SHARING AMONG THE FINANCE PARTIES
34.1
Payments to Finance Parties
(a)
Subject to paragraph (b) below, if a Finance Party (a “
Recovering Finance Party
”) receives or recovers any amount from an Obligor other than in accordance with Clause 35 (
Payment Mechanics
) and applies that amount to a payment due under the Finance Documents, then:
(i)
the Recovering Finance Party shall, within three (3) Business Days, notify details of the receipt or recovery to the Agent;
(ii)
the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 35 (
Payment Mechanics
), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
(iii)
the Recovering Finance Party shall, within three (3) Business Days of demand by the Agent, pay to the Agent an amount (the “
Sharing Payment
”) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 35.6 (
Partial payments
).
(b)
Paragraph (a) above shall not apply to any amount received or recovered by the Issuing Agent in respect of any cash cover placed in an account with the Issuing Agent.
34.2
Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 35.6 (
Partial payments
).
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34.3
Recovering Finance Party’s rights
(a)
On a distribution by the Agent under Clause 34.2 (
Redistribution of payments
), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.
(b)
If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph (a) above, the relevant Obligor shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.
34.4
Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a)
each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 34.2 (
Redistribution of payments
) shall, upon request of the Agent, pay to the Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and
(b)
that Recovering Finance Party’s rights of subrogation in respect of any reimbursement shall be cancelled, and the relevant Obligor will be liable to the reimbursing Finance Party for the amount so reimbursed.
34.5
Exceptions
(a)
This Clause 34 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause 34, have a valid and enforceable claim against the relevant Obligor.
(b)
A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings if:
(i)
it notified the other Finance Party of the legal or arbitration proceedings; and
(ii)
the other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
35.
PAYMENT MECHANICS
35.1
Payments to the Agent
(a)
On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, excluding a payment under the terms of a US Dollar Swingline Loan, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date not later than:
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(i)
1:00 p.m. (New York, New York time) in the case of payments to be made by or to GTECH Corporation;
(ii)
1:00 p.m. (London time) in the case of payments to be made by or to the Parent,
and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment. All payments received by the Agent after the above mentioned times, shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(b)
Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to Euro, in a principal financial centre in a Participating Member State or London) with such bank as the Agent specifies.
35.2
Distributions by the Agent, the Swingline Agent or the Issuing Agent
Each payment received by the Agent, the Swingline Agent or the Issuing Agent (as applicable) under the Finance Documents for another Party shall, subject to Clause 35.3 (
Distributions to an Obligor
) and Clause 35.4 (
Clawback
), be made available by the Agent, the Swingline Agent or the Issuing Agent (as applicable) as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office) to such account as that Party may notify to the Agent, the Swingline Agent or the Issuing Agent (as applicable) by not less than five (5) Business Days’ notice with a bank in the principal financial centre of the country of that currency (or, in relation to Euro, in the principal financial centre of a Participating Member State or London).
35.3
Distributions to an Obligor
The Agent, the Swingline Agent or the Issuing Agent may (with the consent of the Obligor or in accordance with Clause 36 (
Set-Off
)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
35.4
Clawback
(a)
Where a sum is to be paid to the Agent, the Swingline Agent or the Issuing Agent under the Finance Documents for another Party, the Agent, the Swingline Agent or the Issuing Agent (as applicable) is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b)
If the Agent, the Swingline Agent or the Issuing Agent (as applicable) pays an amount to another Party and it proves to be the case that the agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the relevant agent shall on demand refund the same to the Agent, the Swingline Agent or the Issuing Agent (as applicable) together with interest on that amount from the date of payment to the date of receipt by the Agent or the Issuing Agent (as
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applicable), calculated by the Agent, the Swingline Agent or the Issuing Agent (as applicable) to reflect its cost of funds.
35.5
Impaired Agent
(a)
If, at any time, the Agent, the Swingline Agent or the Issuing Agent becomes an Impaired Agent, then an Obligor or a Lender which is required to make a payment under the Finance Documents to the relevant agent in accordance with Clause 35.1 (
Payments to the Agent
) may instead either pay that amount direct to the required recipient or pay that amount to an interest-bearing account held with an Acceptable Bank within the meaning of paragraph (a) of the definition of “Acceptable Bank” and in relation to which no Insolvency Event has occurred and is continuing, in the name of the Obligor or the Lender making the payment and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents. In each case such payments must be made on the due date for payment under the Finance Documents.
(b)
All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the beneficiaries of that trust account
pro rata
to their respective entitlements.
(c)
A Party which has made a payment in accordance with this Clause 35.5 shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.
(d)
Promptly upon the appointment of a successor agent in accordance with Clause 32.10 (
Reliance by the Agent, the Swingline Agent and the Issuing Agent
), each Party which has made a payment to a trust account in accordance with this Clause 35.5 shall give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor agent for distribution in accordance with Clause 35.2 (
Distributions by the Agent, the Swingline Agent or the Issuing Agent
).
35.6
Partial payments
(a)
Subject to this Clause 35.6 if the Agent receives a payment for application against amounts due in respect of any Finance Documents that is insufficient to discharge all the amounts then due and payable by an Obligor under those Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under those Finance Documents in the following order:
(i)
first
, in or towards payment
pro rata
of any unpaid fees, costs and expenses of the Agent, the Swingline Agent and the Issuing Agent under those Finance Documents;
(ii)
secondly
, in or towards payment
pro rata
of any accrued interest, fee or commission due but unpaid under those Finance Documents;
(iii)
thirdly
, in or towards payment
pro rata
of any principal due but unpaid under those Finance Documents and any amount due but unpaid under Clause 8.3 (
Claims under a Letter of Credit
) and Clause 8.5 (
Indemnities
); and
(iv)
fourthly
, in or towards payment
pro rata
of any other sum due but unpaid under the Finance Documents.
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(b)
The Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.
(c)
Paragraphs (a) and (b) above will override any appropriation made by an Obligor.
35.7
No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) counterclaim, recoupment or setoff.
35.8
Business Days
(a)
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)
During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement, interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
35.9
Currency of account
(a)
Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.
(b)
A repayment of a Utilisation or Unpaid Sum or a part of a Utilisation or Unpaid Sum shall be made in the currency in which that Utilisation or Unpaid Sum is denominated on its due date.
(c)
Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.
(d)
Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(e)
Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.
35.10
Change of currency
(a)
Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(i)
any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Borrowers and with the consent of each Lender); and
(ii)
any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency
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or currency unit into the other, rounded up or down by the Agent (acting reasonably and with the consent of each Lender).
(b)
If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrowers and with the consent of each Lender) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.
35.11
Disruption to Payment Systems, etc.
If either the Agent determines (in its discretion) that a Disruption Event has occurred or the Agent is notified by a Borrower that a Disruption Event has occurred:
(a)
the Agent may, and shall if requested to do so by a Borrower, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Facilities as the Agent may deem necessary in the circumstances;
(b)
the Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in paragraph (a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;
(c)
the Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;
(d)
any such changes agreed upon by the Agent and the Borrowers shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 42 (
Amendments and Waivers
);
(e)
the Agent shall not be liable for any damages, costs or losses whatsoever (including, without limitation, for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 35.11; and
(f)
the Agent shall notify the Finance Parties of all changes agreed upon pursuant to paragraph (d) above.
35.12
USA Patriot Act notice
(a)
Each Lender and the Agent (for itself and not on behalf of any Lender) hereby notifies the Obligors that, pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies each Obligor, which information includes the name and address of such Obligor and other information that will allow such Lender or the Agent (as applicable) to identify such Obligor in accordance with the USA Patriot Act. Each of the Obligors shall, and shall cause each of its Subsidiaries to, provide such information and take such actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and the Lenders in maintaining compliance with the USA Patriot Act.
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(b)
Notwithstanding anything to the contrary contained in this Agreement or in any other Finance Document, the covenants under paragraph (a) above shall not be made to or for the benefit of any Specified Lender, no Specified Lender shall have any rights under such paragraph and each Specified Lender shall be deemed not to be a Lender solely for purposes of calculating any consent or vote of the Majority Lenders under Clause 29.16 (
Acceleration
) with respect to any breach of such paragraph (but in each case without prejudice to any other rights or obligations of any Specified Lender as a consequence of any Default occurring as a result of any breach of such paragraph).
36.
SET-OFF
A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
37.
NOTICES
37.1
Notices generally
Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Clause 37.3 (
Electronic Communications
) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(a)
if to a Borrower or the other Original Obligors, to the address, fax number, electronic mail address or telephone number specified for such person below, with respect to each Original Borrower as set out in Schedule 12 (
Original Borrowers’ Details
);
(b)
if the any Arranger or any Bookrunner, to the address, fax number, electronic mail address or telephone number specified for such person below;
(c)
if to the Agent, the Swingline Agent or the Issuing Agent, to the address, fax number, electronic mail address or telephone number specified in Schedule 11 (
Agents’ Details
); and
(d)
if to any other Finance Party, to the address, fax number, electronic mail address or telephone number specified in the Administrative Questionnaire supplied by the Agent.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by fax shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in Clause 37.3 (
Electronic Communications
) below shall be effective as provided in such Clause.
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37.2
Communication with Impaired Agent
If the Agent, the Swingline Agent or the Issuing Agent is an Impaired Agent, then the Parties other then the Impaired Agent may, instead of communicating with each other through the relevant agent, communicate with each other directly and (while the relevant agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the relevant agent shall be varied so that communications may be made and notices given to or by the relevant Parties directly. This provision shall not operate after a replacement agent has been appointed.
37.3
Electronic Communications
Notices and other communications to the Lenders, the Agent, the Swingline Agent and the Issuing Agent hereunder may be delivered or furnished by electronic mail or other electronic means pursuant to procedures approved by the Agent;
provided that
the foregoing shall not apply to notices to any Lender or the Issuing Agent pursuant to Clause 5 (
Utilisation — Revolving Facility Loans
) if such Lender or the Issuing Agent (as applicable) has notified the Agent that it is incapable of receiving notices under such Clause by electronic communication. Each agent for a Finance Party or a Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it;
provided that
approval of such procedures may be limited to particular notices or communications.
Unless an agent for a Finance Party otherwise prescribes, notices and other communications sent to an electronic mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return electronic mail or other written acknowledgement);
provided that
if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
37.4
The Platform
The platform is provided “as is” and “as available”. The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Borrower Materials or the adequacy of the platform, and expressly disclaim liability for errors in or omissions from the Borrower Materials. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any agent party in connection with the Borrower Materials or the platform. In no event shall the Agent or any of its Related Parties (collectively, the “
Agent Parties
”) have any liability to any Borrower, any Lender, the Swingline Agent, the Issuing Agent or any other person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and non-appealable judgment to have resulted from the gross negligence or wilful misconduct of such Agent Party;
provided that
in no event shall any Agent Party have any liability to any Borrower, any Lender, the Issuing Agent or any other person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
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37.5
Change of address, etc.
Each of the Global Coordinators, Bookrunners and Mandated Lead Arrangers, the Obligors, the Agent, the Swingline Agent and the Issuing Agent may change its address, fax or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Finance Party may change its address, fax or telephone number for notices and other communications hereunder by notice to the Borrowers, the Agent, the Swingline Agent and the Issuing Agent. In addition, each Lender agrees to notify the Agent from time to time to ensure that the Agent has on record an effective address, contact name, telephone number, fax number and electronic mail address to which notices and other communications may be sent and accurate wire instructions for such Lender.
37.6
Reliance by the Agent, the Swingline Agent, the Issuing Agent and the Lenders
The Agent, the Swingline Agent, the Issuing Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Utilisation Requests) purportedly given by or on behalf of a Borrower even if (a) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (b) the terms thereof, as understood by the recipient, varied from any confirmation thereof. Each Borrower shall indemnify the Agent, the Swingline Agent, the Issuing Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such person on each notice purportedly given by or on behalf of a Borrower. All telephonic notices to and other telephonic communications with the Agent may be recorded by the Agent, and each of the parties hereto hereby consents to such recording.
37.7
Use of websites
(a)
Each Borrower may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the “
Website Lenders
”) who accept this method of communication by posting this information onto an electronic website designated by the Borrowers and the Agent (the “
Designated Website
”) if:
(i)
the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;
(ii)
both the Borrowers and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and
(iii)
the information is in a format previously agreed between the Borrowers and the Agent.
If any Lender (a “
Paper Form Lender
”) does not agree to the delivery of information electronically, then the Agent shall notify the Borrowers accordingly, and each Borrower shall at its own cost supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event, each Borrower shall at its own cost supply the Agent with at least one copy in paper form of any information required to be provided by it.
(b)
The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Borrowers and the Agent.
(c)
The Borrowers shall promptly upon becoming aware of its occurrence notify the Agent if:
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(i)
the Designated Website cannot be accessed due to technical failure;
(ii)
the password specifications for the Designated Website change;
(iii)
any new information which is required to be provided under this Agreement is posted onto the Designated Website;
(iv)
any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or
(v)
the Borrowers become aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.
If a Borrower notifies the Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by a Borrower under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.
(d)
Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. Each Borrower shall at its own cost comply with any such request within ten (10) Business Days.
37.8
English language
(a)
Any notice given under or in connection with any Finance Document must be in English.
(b)
All other documents provided under or in connection with any Finance Document must be:
(i)
in English; or
(ii)
if not in English and if so required by the Agent, accompanied by a certified English translation, and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
38.
CALCULATIONS AND CERTIFICATES
38.1
Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are
prima facie
evidence of the matters to which they relate.
38.2
Certificates and determinations
Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
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38.3
Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of three hundred and sixty (360) days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.
39.
TAX CHARACTERIZATION
Each party hereto agrees that, consistent with the specific terms of this Agreement, the loan relationships created hereby shall be treated as resulting in borrowings by and loans to the Borrowers for all US Tax purposes.
40.
PARTIAL INVALIDITY
If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
41.
REMEDIES AND WAIVERS
No failure to exercise nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
42.
AMENDMENTS AND WAIVERS
42.1
Required consents
(a)
Subject to Clause 42.2 (
Exceptions
), any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Borrowers, and any such amendment or waiver will be binding on all Parties.
(b)
The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 42.
(c)
Each Obligor agrees to any such amendment or waiver permitted by this Clause 42 which is agreed to by the Borrowers. This includes any amendment or waiver which would, but for this paragraph (c), require the consent of all of the Guarantors.
42.2
Exceptions
(a)
An amendment or waiver that has the effect of changing or which relates to:
(i)
the definition of “
Change of Control
” in Clause 1.1 (
Definitions
);
(ii)
the definition of “
Majority Lenders
” in Clause 1.1 (
Definitions
);
(iii)
an extension to the date of payment of any amount under the Finance Documents;
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(iv)
a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;
(v)
a change in currency of payment of any amount under the Finance Documents;
(vi)
an increase in or an extension of any Commitment or the Total Facility Commitments, an extension of the Availability Period, or any requirement that a cancellation of Revolving Commitments reduces the Revolving Commitments of the Lenders rateably under the relevant Facility;
(vii)
a change to the Borrowers or Guarantors other than in accordance with Clause 31 (
Changes to the Obligors
);
(viii)
any provision which expressly requires the consent of all the Lenders;
(ix)
Clause 2.2 (
Finance Parties’ rights and obligations
), Clause 13 (
Mandatory Prepayment
), Clause 24 (
Guarantee and Indemnity
), Clause 30 (
Changes to the Lenders
), Clause 31.3 (
Resignation of an Obligor
), this Clause 42, Clause 46 (
Governing Law
) or Clause 47.1 (
Jurisdiction of English courts
).
shall not be made without the prior consent of all the Lenders.
(b)
An amendment or waiver which relates to the rights or obligations of the Agent, the Arranging Parties, the Swingline Agent, the Issuing Agent or a Hedging Bank may not be effected without the consent of the Agent, the Arranging Parties, the Swingline Agent, the Issuing Agent or such Hedging Bank.
(c)
Any amendment or
waiver that has the effect of changing or which relates to:
(i)
other than as expressly permitted by the provisions of this Agreement, any release of any guarantee or indemnity; or
(ii)
any Security (or the nature or scope of the assets expressed to be subject to a Security Document) unless expressly permitted under this Agreement or relating to a sale or disposal of such asset where such sale or disposal is expressly permitted under this Agreement,
in each case following the date on which it is created and perfected pursuant to the provision of this Agreement shall not be made without the consent of the Super Majority Lenders. For the avoidance of doubt any amendment or waiver of the provisions of Clauses 28.23 (
Security following Debt Ratings decrease
), 28.24 (
Guarantor Threshold Test and Additional Guarantors
) and to the Agreed Security Principles shall be governed by Clause 42.1 (
Required consents
).
42.3
Replacement of Lender
(a)
If at any time any Lender becomes a Non-Consenting Lender (as defined in paragraph (c) below) then the Parent may, on five (5) Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and such Lender shall) transfer pursuant to Clause 30 (
Changes to the Lenders
) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a “
Replacement Lender
”) selected by the Parent, and which is
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acceptable to the Agent and (in the case of any transfer of a Revolving Facility Commitment or a participation in a Letter of Credit) the Issuing Agent and (in the case of any transfer of a US Dollar Swingline Commitment or a participation in a US Dollar Swingline Loan) the Swingline Agent, which confirms its willingness to assume and does assume all the obligations of the transferring Lender (including the assumption of the transferring Lender’s participations on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lender’s participation in the outstanding Utilisations and all accrued interest or Letter of Credit fees, Break Costs and other amounts payable in relation thereto under the Finance Documents.
(b)
The replacement of a Lender pursuant to this Clause 42.3 shall be subject to the following conditions:
(i)
the Borrowers shall have no right to replace the Agent, the Swingline Agent or the Issuing Agent pursuant to this Clause 42.3;
(ii)
neither the Agent nor the Non-Consenting Lender shall have any obligation to the Borrowers to find a Replacement Lender;
(iii)
the replacement must take place no later than ninety (90) days after the date the Non-Consenting Lender notifies the Borrowers and the Agent of its failure or refusal to agree to any consent, waiver or amendment to the Finance Documents requested by the Borrowers; and
(iv)
in no event shall the Lender replaced under this paragraph (b) be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents.
(c)
In the event that:
(i)
the Borrowers or the Agent (at the request of the Borrowers) has requested the Lenders to consent to a waiver or amendment of any provisions of the Finance Documents;
(ii)
the waiver or amendment in question requires the consent of all the Lenders; and
(iii)
Lenders whose Commitments aggregate more than eighty per cent. (80%) of the Total Facility Commitments (or, if the Total Facility Commitments have been reduced to zero, aggregated more than eighty per cent. (80%) of the Total Facility Commitments prior to that reduction) have consented to such waiver or amendment,
then any Lender who does not and continues not to agree to such waiver or amendment shall be deemed a “
Non-Consenting Lender
”.
42.4
Disenfranchisement of Defaulting Lenders
(a)
For so long as a Defaulting Lender has any Available Revolving Commitment, in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Facility Commitments or Total Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote
166
under the Finance Documents, that Defaulting Lender’s Commitments will be reduced by the amount of its Available Revolving Commitments.
(b)
For the purposes of this Clause 42.4, the Agent may assume that the following Lenders are Defaulting Lenders:
(i)
any Lender which has notified the Agent that it has become a Defaulting Lender;
(ii)
any Lender in relation to which it is aware that any of the events or circumstances referred to in paragraphs (a), (b) or (c) of the definition of “
Defaulting Lender
” has occurred,
unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.
42.5
Replacement of a Defaulting Lender
(a)
The Parent may, at any time a Lender has become and continues to be a Defaulting Lender, by giving five (5) Business Days’ prior written notice to the Agent and such Lender:
(i)
replace such Lender by requiring such Lender to (and such Lender shall) transfer pursuant to Clause 30 (
Changes to the Lenders
) all (and not part only) of its rights and obligations under this Agreement;
(ii)
require such Lender to (and such Lender shall) transfer pursuant to Clause 30 (
Changes to the Lenders
) all (and not part only) of the undrawn Commitment of the Lender; or
(iii)
require such Lender to (and such Lender shall) transfer pursuant to Clause 30 (
Changes to the Lenders
) all (and not part only) of its rights and obligations in respect of the Facility,
to a Lender or a Replacement Lender selected by the Parent, and which (unless the Agent is an Impaired Agent) is acceptable to the Agent (acting reasonably) and (in the case of any transfer of a Revolving Facility Commitment or a participation in a Letter of Credit) to the Issuing Agent, which confirms its willingness to assume and does assume all the obligations of the transferring Lender (including the assumption of the transferring Lender’s participations in Loans or Letters of Credit (as the case may be) on the same basis as the transferring Lender).
(b)
Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause 42.5 shall be subject to the following conditions:
(i)
the Borrowers shall have no right to replace the Agent pursuant to this Clause 42.5;
(ii)
neither the Agent nor the Defaulting Lender shall have any obligation to the Parent to find a Replacement Lender;
(iii)
the transfer must take place no later than ninety (90) days after the notice referred to in paragraph (a) above; and
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(iv)
in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents.
42.6
Amendment to correct manifest error
The Agent may (without receiving any instructions from the Majority Lenders) agree with the Borrowers any amendment to or the modification of the provisions of any Finance Document or any schedule or annex thereto, which is necessary to correct a manifest error.
42.7
Release of Security on Permitted Disposal and Investment Grade Rating
(a)
The Finance Parties shall procure that if an Obligor or a Material Subsidiary has created Security over any of its assets (other than shares) in favour of any of the Finance Parties, which assets subsequently become the subject of a Permitted Disposal or any other disposal approved by the Majority Lenders to a person which is not a member of the Group the Finance Parties which are the beneficiaries of such Security will, at the cost and request of the Parent (to the extent that such cost is duly documented), release the Security promptly following the Parent’s request.
(b)
The release of the Security referred to in paragraph (a) above shall not become effective until the date of that Permitted Disposal or such earlier date agreed between the Agent and the Parent.
(c)
The Finance Parties shall further procure that if at any time following the granting of Security pursuant to Clause 28.23 (
Security following Debt Ratings Decrease
) all Public Debt Ratings received are at least BBB- or higher by S&P or Fitch or Baa3 or higher by Moody’s (in each case with a stable outlook), the Finance Parties which are the beneficiaries of such Security will at the cost and request of the Parent (to the extent that such cost is duly documented), release the Security promptly following the Parent’s request. It is understood however that following any such release, the provisions of Clause 28.23 (
Security following Debt Ratings Decrease
) shall continue with full force and effect and in the event that the relevant trigger conditions are met, the Parent shall again be obliged to procure the granting of Security in accordance with Clause 28.23.
43.
NEGOTIATED AGREEMENT
For the purposes of the transparency rules set forth in the CICR Resolution of March 4, 2003 and by the
Disposizioni sulla trasparenza delle operazioni e dei servizi bancari e finanziari
issued by the Bank of Italy on 20 June 2012 and published in the Italian Official Gazette on 30 June 2012, the Parties hereby acknowledge and confirm that this Agreement (and each of the provisions hereof) has been specifically negotiated with the support of legal advisors on each side.
44.
CONFIDENTIALITY
44.1
Confidential Information
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 44.2 (
Disclosure of Confidential Information
) and Clause 30.10 (
Disclosure to numbering service providers
), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
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44.2
Disclosure of Confidential Information
Any Finance Party may disclose:
(a)
to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;
(b)
to any person:
(i)
to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;
(ii)
with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, any securitisation (or similar transaction of broadly equivalent economic effect), or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents or one or more Obligors and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;
(iii)
appointed by any Finance Party or by a person to whom paragraph (b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf;
(iv)
who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph (b)(i) or (b)(ii) above;
(v)
to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;
(vi)
to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 30.8 (
Security over Lenders’ rights
);
(vii)
to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;
(viii)
who is a Party; or
(ix)
with the consent of the Parent;
169
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(A)
in relation to paragraphs (b)(i), (b)(ii) and (b)(iii) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(B)
in relation to paragraph (b)(iv) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(C)
in relation to paragraphs (b)(v), (b)(vi) and (b)(vii) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;
(c)
to any person appointed by that Finance Party or by a person to whom paragraph (b)(i) or (b)(ii) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Parent and the relevant Finance Party;
(d)
to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents or the Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information;
(e)
to any insurer (including its professional advisers) such Confidential Information as required to be disclosed to enable it to carry out its normal insurance activities in relation to the Finance Documents, the Obligors or its assets if the insurer is informed of its confidential nature; and
(f)
to any Sanctions Authority.
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44.3
Continuing obligations
The obligations in this Clause 44 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of one (1) year from the earlier of:
(a)
the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and
(b)
the date on which such Finance Party otherwise ceases to be a Finance Party.
45.
COUNTERPARTS
Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
46.
GOVERNING LAW
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.
47.
ENFORCEMENT
47.1
Jurisdiction of English courts
(a)
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligations arising out of or in connection with this Agreement) (a “
Dispute
”).
(b)
The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes, and, accordingly, no Party will argue to the contrary.
(c)
This Clause 47.1 is for the benefit of the Finance Parties and Hedging Banks only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties and Hedging Banks may take concurrent proceedings in any number of jurisdictions.
(d)
Each Obligor agrees not to claim and hereby irrevocably waives any immunity from legal process in connection with a Finance Document under any law of any applicable jurisdiction which it is entitled to claim or which may be attributed to it in respect of itself or its assets to the fullest extent permitted by the laws of such jurisdiction.
47.2
Service of process
(a)
Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):
(i)
irrevocably appoints Holdco of 70 Chancery Lane, London WC2A 1AF, England, as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and
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(ii)
agrees that failure by an agent for service of process to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
(b)
If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Parent (on behalf of all the Obligors) must immediately (and in any event within fifteen (15) days of such events taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.
47.3
Waiver of Jury Trial
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY LITIGATION IN ANY UNITED STATES FEDERAL OR STATE COURT DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER FINANCE DOCUMENTS OR ANY DEALINGS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE LENDER/BORROWER/GUARANTOR RELATIONSHIP.
Each party hereto hereby acknowledges that this waiver is a material inducement to enter into a business relationship, it has relied on this waiver in entering into this Agreement, and it will continue to rely on this waiver in related future dealings. Each party hereto hereby further warrants and represents that it has reviewed this waiver with its legal counsel and it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.
THIS WAIVER IS IRREVOCABLE AND MAY NOT BE MODIFIED OTHER THAN BY A WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS CLAUSE 47.3 AND EXECUTED BY EACH OF THE PARTIES HERETO.
In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
This Agreement has been entered into on the date stated at the beginning of this Agreement.
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SCHEDULE 1
THE ORIGINAL PARTIES
PART I
THE ORIGINAL OBLIGORS
|
Name of Borrower
|
|
Registration number (or equivalent, if any) and Jurisdiction of Incorporation
|
|
|
|
|
|
GTECH S.p.A.
|
|
08028081001 Italy
|
|
|
|
|
|
GTECH Corporation
|
|
090517 Delaware
|
|
|
|
|
|
Name of Original Guarantors
|
|
Registration number (or equivalent, if any) and Jurisdiction of Incorporation
|
|
|
|
|
|
GTECH S.p.A.
|
|
08028081001 Italy
|
|
|
|
|
|
GTECH Corporation
|
|
090517 Delaware
|
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PART II
A
THE ORIGINAL LENDERS
|
Name of Original Lender
|
|
Revolving Facility A
Commitment
US$
|
|
Treaty Passport Scheme
Reference Number
|
|
Jurisdiction of Tax
Residence
|
|
Barclays Bank PLC
|
|
108,851,348.84
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
BNP Paribas, Succursale Italia
|
|
108,851,348.84
|
|
005/B/0255139/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
Citibank, N.A.
|
|
108,851,348.84
|
|
13/C/62301/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
Crédit Agricole Corporate Investment Bank, New York branch
|
|
108,851,348.84
|
|
5/C/222082/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
Credit Suisse AG, Milan Branch
|
|
108,851,348.84
|
|
n/a
|
|
Italy (and Switzerland for DTT purposes) and meets definition of UK Treaty Lender
|
|
|
|
|
|
|
|
|
|
Deutsche Bank Luxembourg S.A.
|
|
108,851,348.84
|
|
48/D/72718/DTTP
|
|
Luxembourg
|
|
|
|
|
|
|
|
|
|
ING Bank N.V. Milan Branch
|
|
108,851,348.84
|
|
1/I/70193/DTTP
|
|
The Netherlands
|
|
|
|
|
|
|
|
|
|
Intesa Sanpaolo S.p.A NYC Branch
|
|
108,851,348.84
|
|
n/a
|
|
US
|
|
|
|
|
|
|
|
|
|
JP Morgan Chase Bank, N.A., London Branch
|
|
89,370,829.36
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
Mediobanca International (Luxembourg) S.A.
|
|
108,851,348.85
|
|
48/M/315419/DTTP
|
|
Luxembourg
|
|
|
|
|
|
|
|
|
|
The Royal Bank of Scotland plc, Milan Branch
|
|
108,851,348.84
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
Scotiabank Europe plc
|
|
108,851,348.84
|
|
n/a
|
|
United Kingdom
|
|
|
|
|
|
|
|
|
|
Société Générale Paris
|
|
108,851,348.84
|
|
5/S/70085/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
Unicredit Bank AG, New York Branch
|
|
108,851,348.84
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
Fifth Third
|
|
122,899,978.96
|
|
13/F/24267/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
Wells Fargo Bank, NA(1)
|
|
122,899,978.96
|
|
13/W/61173/DTTP
|
|
US
|
(1) Wells Fargo Bank, NA’s commitment is conditional on Target Accession Date occurring.
174
|
Name of Original Lender
|
|
Revolving Facility A
Commitment
US$
|
|
Treaty Passport Scheme
Reference Number
|
|
Jurisdiction of Tax
Residence
|
|
KeyBank National Association
|
|
49,761,677.79
|
|
13/K/216374/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
Total
|
|
1,800,000,000.00
|
|
|
|
|
175
|
Name of Original Lender
|
|
Revolving Facility B
Commitment
EUR
|
|
Treaty Passport
Scheme Reference
Number
|
|
Jurisdiction of Tax
Residence
|
|
Barclays Bank PLC, Milan Branch
|
|
59,728,100.91
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
BNP Paribas, Succursale Italia
|
|
59,728,100.91
|
|
005/B/0255139/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
Citibank, N.A.
|
|
59,728,100.91
|
|
13/C/62301/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
Crédit Agricole Corporate and Investment Bank, Milan branch
|
|
59,728,100.91
|
|
5/C/222082/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
Credit Suisse AG, Milan Branch
|
|
59,728,100.91
|
|
n/a
|
|
Italy (and Switzerland for DTT purposes) and meets definition of UK Treaty Lender
|
|
|
|
|
|
|
|
|
|
Deutsche Bank Luxembourg S.A.
|
|
59,728,100.91
|
|
48/D/72718/DTTP
|
|
Luxembourg
|
|
|
|
|
|
|
|
|
|
ING Bank N.V. Milan Branch
|
|
59,728,100.91
|
|
1/I/70193/DTTP
|
|
The Netherlands
|
|
|
|
|
|
|
|
|
|
Intesa Sanpaolo S.p.A.
|
|
59,728,100.91
|
|
n/a
|
|
Italy
|
|
|
|
|
|
|
|
|
|
JP Morgan Chase Bank, N.A., Milan Branch
|
|
46,824,875.10
|
|
13/M/0268710/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
Mediobanca International (Luxembourg) S.A.
|
|
59,728,100.89
|
|
48/M/315419/DTTP
|
|
Luxembourg
|
|
|
|
|
|
|
|
|
|
The Royal Bank of Scotland plc, Milan Branch
|
|
59,728,100.87
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
Scotiabank Europe plc
|
|
59,728,100.91
|
|
n/a
|
|
United Kingdom
|
|
|
|
|
|
|
|
|
|
SOCIETE GENERALE, MILAN BRANCH
|
|
59,728,100.91
|
|
5/S/70085/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
Unicredit Bank AG, Milan Branch
|
|
59,728,100.91
|
|
7/U/237605/DTTP
|
|
Italy
|
|
|
|
|
|
|
|
|
|
Banca Popolare di Milano S.c.a.r.l.
|
|
99,286,075.79
|
|
n/a
|
|
Italy
|
|
|
|
|
|
|
|
|
|
UBI Banca S.c.p.a.
|
|
77,780,699.45
|
|
n/a
|
|
Italy
|
176
|
Banco Popolare S.C., London Branch
|
|
49,643,037.89
|
|
n/a
|
|
UK
|
|
|
|
|
|
|
|
|
|
Total
|
|
1,050,000,000.00
|
|
|
|
|
177
PART IIB
THE ORIGINAL US DOLLAR SWINGLINE LENDERS
|
Name of Original US
Dollar Swingline
Lender
|
|
US Dollar Swingline
Commitment
|
|
Treaty Passport
Scheme Reference
Number (if applicable)
|
|
Jurisdiction of Tax
Residence
|
|
Citibank, N.A.
|
|
20,000,000.00
|
|
13/C/62301/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
Crédit Agricole Corporate and Investment Bank, New York branch
|
|
20,000,000.00
|
|
5/C/222082/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
KeyBank National Association
|
|
20,000,000.00
|
|
13/K/216374/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
JP Morgan Chase Bank, N.A.
|
|
20,000,000.00
|
|
13/M/0268710/DTTP
|
|
US
|
|
|
|
|
|
|
|
|
|
The Royal Bank of Scotland Plc, Milan Branch
|
|
20,000,000.00
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
|
Total
|
|
100,000,000.00
|
|
|
|
|
178
PART III
THE BOOKRUNNERS AND MANDATED LEAD ARRANGERS
Banca IMI S.p.A.
Barclays Bank PLC
BNP Paribas Succursale Italia
Crédit Agricole Corporate and Investment Bank, Milan branch
Credit Suisse AG, Milan Branch
Citigroup Global Markets Limited
Deutsche Bank Luxembourg S.A.
J.P. Morgan Limited
ING Bank N.V. Milan Branch
Mediobanca - Banca di Credito Finanziario S.p.A
The Royal Bank of Scotland Plc
Scotiabank Europe Plc
SOCIETE GENERALE
Unicredit Bank AG New York Branch
Unicredit Bank AG, Milan Branch
179
PART IV
THE MANDATED LEAD ARRANGERS
Banca Popolare di Milano S.c.a.r.l
Fifth Third
UBI Banca S.c.p.a.
Wells Fargo Bank, NA
180
PART V
THE ARRANGERS
Banco Popolare S.C., London Branch
Keybank National Association
181
PART VI
THE INITIAL MATERIAL SUBSIDIARIES
As at the date of this Agreement:
·
GTECH Corporation
·
GTECH Global Services Corporation Limited
·
Lotterie Nazionali S.r.l.
·
Lottomatica Scommesse S.r.l.
·
Lottomatica Videolot Rete S.p.A.
182
SCHEDULE 2
CONDITIONS PRECEDENT
PART I
CONDITIONS PRECEDENT TO INITIAL UTILISATION
1.
Original Obligors
(a)
A certificate of the Parent (signed by an authorised signatory) confirming that borrowing or guaranteeing, as appropriate, the Total Facility Commitments would not cause any borrowing, guaranteeing or similar limit binding on any Original Obligor to be exceeded.
(b)
A certificate of an authorised signatory of the relevant Original Obligor certifying that each copy document relating to it specified in this Part I or in Part III of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
2.
Legal opinions
Executed forms of the following legal opinions, in each case addressed to, and capable of being relied on by the Finance Parties (other than the Hedging Banks) and dated as at the date of this Agreement:
(a)
a legal opinion of Studio Legale Associato, in associazione con Clifford Chance, legal advisers to the Obligors as to Italian law as to due incorporation and capacities, powers and authority to enter into the Finance Documents in the form distributed to the Original Lenders prior to signing of this Agreement.
(b)
a legal opinion of Clifford Chance US LLP as advisors to the Obligors as to the laws of Delaware as to due incorporation and capacities, powers and authority to enter into the Finance Documents and legal, valid, binding and enforceable obligations, in the form distributed to the Original Lenders prior to signing of this Agreement.
(c)
a legal opinion of Linklaters Studio Legale Associato, legal advisers to the Arranging Parties and the Agent in England, substantially in the form distributed to the Original Lenders prior to signing this Agreement.
(d)
a legal opinion of Linklaters Studio Legale Associato, legal advisers to the Arranging Parties and the Agent in Italy, substantially in the form distributed to the Original Lenders prior to signing this Agreement.
3.
US Conditions Precedent
In the case of GTECH Corporation:
(a)
a solvency certificate signed by the chief financial officer or chief accounting officer in form and substance satisfactory to the Agent and its counsel; and
(b)
a certificate as to existence and good standing from the appropriate governmental authorities in its jurisdiction of organisation.
183
4.
Italian Conditions Precedent
A certificate (
certificato di vigenza
) issued by the competent
Registro delle Imprese
in respect of each Original Obligor incorporated in Italy dated no earlier than five (5) Business Days prior to the date of this Agreement
5.
Other documents and evidence
(a)
Evidence that Holdco has accepted its appointment as process agent.
(b)
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Parent accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.
(c)
The Original Financial Statements.
(d)
Evidence that the fees, costs and expenses then due from the Borrowers pursuant to Clause 18 (
Fees
) and Clause 23 (
Costs and Expenses
) have been paid or will be paid by the first Utilisation Date.
184
PART II
CONDITIONS PRECEDENT TO BE DELIVERED
BY ADDITIONAL OBLIGORS
1.
An Accession Letter, duly executed by the Additional Obligor and the Borrowers.
2.
A copy of the constitutional documents of the Additional Obligor.
3.
A copy of a resolution of the board of directors of the Additional Obligor:
(a)
approving the terms of, and the transactions contemplated by, the Accession Letter and the Finance Documents and resolving that it execute the Accession Letter;
(b)
authorising a specified person or persons to execute the Accession Letter on its behalf; and
(c)
authorising a specified person or persons, on its behalf, to sign or despatch all other documents and notices (including, in relation to an Additional Borrower, any Utilisation Request) to be signed or despatched by it under or in connection with the Finance Documents.
4.
A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above.
5.
If required by applicable law, a copy of a resolution signed by all the holders of the issued shares of the Additional Guarantor, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Additional Guarantor is a party.
6.
A certificate of the Additional Obligor (signed by a director (or an officer if the Additional Obligor is a US Obligor)) confirming that borrowing or guaranteeing, as appropriate, the Total Facility Commitments would not cause any borrowing, guaranteeing or similar limit binding on it to be exceeded.
7.
A certificate of an authorised signatory of the Additional Obligor certifying that each copy document listed in this Part II of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Letter.
8.
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Accession Letter or for the validity and enforceability of any Finance Document.
9.
If available, the latest audited financial statements of the Additional Obligor.
10.
A legal opinion of Linklaters Studio Legale Associato, legal advisers to the Global Coordinators and the Agent in England.
11.
If the Additional Obligor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Arranger and the Agent in the jurisdiction in which the Additional Obligor is incorporated.
12.
A legal opinion of from Clifford Chance LLP or other reputable counsel to the relevant Additional Obligor as advisors to the Obligors as to the laws of the jurisdiction of incorporation of the
185
proposed Additional Obligors in relation to due incorporation and capacities, powers and authority to enter into the Finance Documents.
13.
If the proposed Additional Obligor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in Clause 47.2 (
Service of process
), if not an Obligor, has accepted its appointment in relation to the proposed Additional Obligor.
14.
If the proposed Additional Obligor is a US Obligor:
(a)
a solvency certificate signed by the chief financial officer or chief accounting officer of such Obligor in form and substance satisfactory to the Agent and its counsel; and
(b)
a certificate as to the existence and good standing of such US Obligor from the appropriate governmental authorities in such US Obligor’s jurisdiction of organisation.
15.
Copies of any information and any other evidence reasonably requested by any Lender required in order to comply with “know your customer” or anti-money laundering requirements under applicable laws.
186
PART III
CONDITIONS PRECEDENT TO SIGNING
1.
Prepayment and Cancellation Notice
A copy of the irrevocable notices of cancellation and prepayment in respect of the Existing GTECH Facilities confirming that the Existing GTECH Facilities will be cancelled in full and repaid in an amount equal to the outstanding amounts under the Existing GTECH Facilities.
2.
Original Obligors
(a)
A copy of the constitutional documents of each Original Obligor (being, in the case of the Parent, its
statuto
and
atto costititutivo
).
(b)
A copy of a resolution of the board of directors or, if applicable, equivalent body of each Original Obligor:
(i)
approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;
(ii)
authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf;
(iii)
authorising a specified person or persons, on its behalf, to sign or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed or despatched by it under or in connection with the Finance Documents to which it is a party;
(iv)
in the case of an Obligor other than the Parent, authorising the Parent to act as its agent in connection with the Finance Documents; and
(v)
if applicable, a copy of the resolution of the board of directors of the relevant company, establishing the body referred to in sub-paragraph (iv) above.
(c)
A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above.
(d)
The Structure Memorandum together addressed to or capable of being relied on by the Finance Parties (other than the Hedging Banks).
3.
Legal Opinions
Agreed forms of the legal opinions set out at Part I of this Schedule 2 (
Conditions Precedent
).
4.
“Know your customer” checks
Copies of any information and any other evidence reasonably requested by any Lender prior to the first Utilisation Date required in order to comply with “know your customer” or anti-money laundering requirements under applicable laws.
187
SCHEDULE 3
REQUESTS
PART IA
UTILISATION REQUEST LOANS
From:
[
Borrower
]
To:
The Royal Bank of Scotland plc, as Agent
Dated: [
Date
]
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Utilisation Request. Terms defined in the Facilities Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.
2.
We wish to borrow a Loan on the following terms:
(a)
Borrower:
[
·
]
(b)
Proposed Utilisation Date:
[
·
] (or, if that is not a Business Day, the next Business Day)
(c)
Facility to be utilised:
[Revolving Facility[A/B]]
(d)
Currency of Loan:
[
·
]
(e)
Amount:
[
·
] or, if less, the Available Revolving Facility
(f)
Interest Period:
[
·
]
3.
We confirm that each condition specified in Clause 4.2 (
Further conditions precedent
) is satisfied on the date of this Utilisation Request.
4.
[The proceeds of this Loan should be credited to [account]].
5.
This Utilisation Request is irrevocable.
Yours faithfully
|
|
|
|
authorised signatory for
|
|
|
[
the Borrower
]
|
|
188
PART IB
UTILISATION REQUEST
LETTERS OF CREDIT
From:
[
Borrower
]
To:
The Royal Bank of Scotland plc, as Agent
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
We refer to the Facilities Agreement. This is a Utilisation Request. Terms defined in the Facilities Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.
1.
We wish to arrange for a Letter of Credit to be issued by the Issuing Agent specified below (which has agreed to do so) on the following terms:
(a)
Borrower: [
·
]
(b)
Issuing Agent: The Royal Bank of Scotland plc
(c)
Proposed Utilisation Date: [
·
] (or, if that is not a Business Day, the next Business Day)
(d)
Facility to be utilised: Facility[A/B]
(e)
Currency of Letter of Credit: [
·
]
(f)
Amount: [
·
] or, if less, the Available Revolving Facility in relation to the Facility[A/B]
(g)
Term: [
·
]
(h)
Delivery instructions as follows: [
·
]
2.
We confirm that each condition specified in paragraph (c) of Clause 6.7 (
Issue of Letters of Credit
) is satisfied on the date of this Utilisation Request.
3.
We attach a copy of the proposed Letter of Credit.
4.
The purpose of this proposed Letter of Credit is [
·
].
5.
This Utilisation Request is irrevocable.
Yours faithfully
|
|
|
|
authorised signatory for
|
|
|
[
the Borrower
]
|
|
189
PART IC
UTILISATION REQUEST
US DOLLAR SWINGLINE LOANS
From:
[
Borrower
]
To:
KeyBank National Association, as Agent for the US Dollar Swingline Lenders
The Royal Bank of Scotland plc, as Agent
Dated: [
insert date
]
Ladies and Gentlemen:
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
We refer to the Facilities Agreement. This is a Utilisation Request. Terms defined in the Facilities Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request. The Swing Line Borrowing requested herein complies with the requirements of Clauses 7 (
Utilisations — US Dollar Swingline Loans
) and 11 (
US Dollar Swingline Facility
) of the Agreement.
1.
We wish to borrow on the following terms:
(a)
Borrower: [
·
]
(b)
Proposed Utilisation Date: [
·
] (or, if that is not a New York Business Day, the next New York Business Day)
(c)
Facility to be utilised: US Dollar Swingline Facility
(d)
Currency of Loan: US Dollars
(e)
Amount: [
·
]
(f)
Interest Period: [
·
]
2.
We confirm that each condition specified in Clause 4.2 (
Further conditions precedent
) is satisfied on the date of this Utilisation Request.
3.
[The proceeds of this US Dollar Swingline Loan should be credited to [account]].
4.
This Utilisation Request is irrevocable.
5.
The Borrower certifies that it shall not use the proceeds of the US Dollar Swingline Loan requested herein to refinance any outstanding US Dollar Swingline Loan.
Yours faithfully
|
|
|
|
authorised signatory for
|
|
|
[
the Borrower
]
|
|
190
SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
To:
The Royal Bank of Scotland plc, as Agent
From:
[
The Existing Lender
] (the “
Existing Lender
”) and [
The New Lender
] (the “
New Lender
”)
Dated: [
insert date
]
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Transfer Certificate. Terms defined in the Facilities Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2.
We refer to Clause 30.5 (
Procedure for transfer
):
(a)
The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lender’s Commitment, rights and obligations referred to in the Schedule in accordance with Clause 30.5 (
Procedure for transfer
).
(b)
The proposed Transfer Date is [
·
].
(c)
The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 37.1 (
Notices generally
) are set out in the Schedule.
3.
The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 30.4 (
Limitation of responsibility of Existing Lenders
).
4.
This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
5.
The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 30.4 (
Limitation of responsibility of Existing Lenders
).
6.
The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a)
[in respect of an Italian Obligor,:
(i)
[an Exempt Lender];
(ii)
[an Italian Qualifying Lender];
(iii)
[an Italian Treaty Lender];
(iv)
[not a Qualifying Lender].]
(b)
[in respect of a UK Borrower,:
(i)
[not a Qualifying Lender];
191
(ii)
[a Qualifying Lender other than a UK Treaty Lender]; or
(iii)
[a UK Treaty Lender].]
(c)
[in respect of a US Borrower,:
(i)
[not a Qualifying Lender]; or
(ii)
[a Qualifying Lender within limb (b) of the definition of Qualifying Lender].
7.
[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [
·
]) and is tax resident in [
·
], so that interest payable to it by borrowers is generally subject to [full exemption from][a reduced rate of] UK withholding tax, and requests that the Parent notify:
(a)
each UK Borrower which is a Party as a Borrower as at the Transfer Date; and
(b)
each Additional Borrower which is a UK Borrower and becomes an Additional Borrower after the Transfer Date,
that it wishes that scheme to apply to the Agreement.] **
8.
The New Lender confirms that is not a Blacklisted Resident Entity.
9.
This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by English law.
** delete as applicable
192
THE SCHEDULE
Commitment/rights and obligations to be transferred
[
insert relevant details
]
[
Facility Office address, fax number and attention details for notices and account details for payments
,]
|
[
Existing Lender
]
|
|
[
New Lender
]
|
|
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|
|
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|
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|
|
By:
|
|
|
By:
|
|
|
|
|
|
|
|
This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as [
·
].
[
Agent
]
193
SCHEDULE 5
FORM OF ASSIGNMENT AGREEMENT
To:
The Royal Bank of Scotland plc, as Agent
From:
[the
Existing Lender
] (the “
Existing Lender
”) and [the
New Lender
] (the “
New Lender
”)
Dated: [
insert date
]
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is an Assignment Agreement. Terms defined in the Facilities Agreement have the same meaning in this Assignment Agreement unless given a different meaning in this Assignment Agreement.
2.
We refer to Clause 30.6 (
Procedure for assignment
):
(a)
The Existing Lender assigns absolutely to the New Lender all the rights of the Existing Lender under the Facilities Agreement and the other Finance Documents which relate to that portion of the Existing Lender’s Commitments and participations in Loans under the Facilities Agreement as specified in the Schedule.
(b)
The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lender’s Commitments and participations in Loans under the Facilities Agreement specified in the Schedule.
(c)
The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b) above.
3.
The proposed Transfer Date is [
·
].
4.
On the Transfer Date the New Lender becomes Party to the Finance Documents as a Lender.
5.
The Facility Office and address, fax number and attention details for notices of the New Lender are set out in the Schedule.
6.
The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 30.4 (
Limitation of responsibility of Existing Lenders
).
7.
The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a)
[in respect of an Italian Obligor,:
(i)
[an Exempt Lender];
(ii)
[an Italian Qualifying Lender];
(iii)
[an Italian Treaty Lender];
(iv)
[not a Qualifying Lender].]
194
(b)
[in respect of a UK Borrower,:
(i)
[not a Qualifying Lender];
(ii)
[a Qualifying Lender other than a UK Treaty Lender]; or
(iii)
[a UK Treaty Lender].]
(c)
[in respect of a US Borrower,:
(i)
[not a Qualifying Lender]; or
(ii)
[a Qualifying Lender within limb (b) of the definition of Qualifying Lender].
8.
[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [
·
]) and is tax resident in [
·
], so that interest payable to it by borrowers is generally subject to [full exemption from][a reduced rate of] UK withholding tax, and requests that the Parent notify:
(a)
each UK Borrower which is a Party as a Borrower as at the Transfer Date; and
(b)
each Additional Borrower is a UK Borrower which becomes an Additional Borrower after the Transfer Date,
that it wishes that scheme to apply to the Agreement.]**
[8/9].
The New Lender confirms that is not a Blacklisted Resident Entity.
[9/10].
This Assignment Agreement acts as notice to the Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 30.7 (
Copy of Transfer Certificate or Assignment Agreement to Parent
), to the Parent (on behalf of each Obligor) of the assignment referred to in this Assignment Agreement.
[10/11].
This Assignment Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Assignment Agreement.
[11/12].
This Assignment Agreement [and any non-contractual obligations arising out of or in connection with it] [is/are] governed by English law.
[12/13].
This Assignment Agreement has been entered into on the date stated at the beginning of this Assignment Agreement.
** delete as applicable
195
SCHEDULE 6
FORM OF ACCESSION LETTER
To:
The Royal Bank of Scotland plc, as Agent
From:
[
Subsidiary
] and [
Parent
]
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is an Accession Letter. Terms defined in the Facilities Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.
2.
[
Subsidiary
]/[
Hedging Bank
] agrees to become [an Additional Guarantor][and][an Additional Borrower]/[a Hedging Bank] and to be bound by the terms of the Facilities Agreement and the other Finance Documents as [an Additional Guarantor] [and][an Additional Borrower]/ [a Hedging Bank] pursuant to [Clause 31.2 (
Additional Obligors
)]/[Clause 30.12 (
Accession, assignments and transfers by Hedging Banks
)] of the Facilities Agreement [
Subsidiary
]/[
Hedging Bank
] is a company duly incorporated in [
name of relevant jurisdiction
] and is a limited liability company and its registered number is [
·
].
3.
[
Subsidiary’s
]/ [
Hedging Bank’s
] administrative details are as follows:
Address:
Fax No.:
Attention:
4.
[The guarantee to be granted by [Subsidiary] pursuant to Clause 24 (
Guarantee and Indemnity
) of the Facilities Agreement shall be subject to the following limitations [
insert as applicable — subject to agreement with Agent (acting reasonably)
].
5.
[This Accession Letter is governed by English law.]
(2)
This Accession Letter is entered into by deed.
[
Parent
]
[
Subsidiary
]/ [
Hedging Bank
]
[witnessed by:
(2) For Additional Obligor accessions
196
SCHEDULE 7
FORM OF RESIGNATION LETTER
To:
The Royal Bank of Scotland plc, as Agent
From:
[
resigning Obligor
] and [
Parent
]
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Resignation Letter. Terms defined in the Facilities Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.
2.
Pursuant to Clause
31.3
(
Resignation of an Obligor
), we request that [
resigning Obligor
] be released from its obligations as a [Guarantor] [Borrower] under the Facilities Agreement and the other Finance Documents.
3.
We confirm that:
(a)
no Default is continuing or would result from the acceptance of this request; and
(b)
this request is given in relation to [a Third Party Disposal of [
resigning Obligor
]]/[(
resigning Obligor
) ceasing to be a Material Subsidiary]; [the all Lender consent obtained on [
insert date
]];
4.
This letter is governed by English law.
|
[Parent]
|
|
[resigning Obligor]
|
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By:
|
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By:
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|
|
|
197
SCHEDULE 8
FORM OF COMPLIANCE CERTIFICATE
To:
The Royal Bank of Scotland plc, as Agent
From:
[
Parent
]
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 4 November “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Compliance Certificate. Terms defined in the Facilities Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.
We confirm that:
[
Insert details of covenants to be certified
].
[
Insert details and calculations required pursuant to Clause 27.2 (Financial Condition) of the Facilities Agreement
].
3.
[
When applicable
] We confirm that the Parent has complied with Clause 27 (
Financial Covenants
) of the Facilities Agreement.
4.
[
When applicable
] We confirm that the Parent has complied with Clause 28.24 (
Guarantor Threshold Test and Additional Guarantors
)of the Facilities Agreement. Following are the
computations (in reasonable detail):
[
·
]
5.
[
When applicable
] Pursuant to Clause 26.2(c) of the Facilities Agreement, we confirm that [there have been no change to the list of Material Subsidiaries since the Compliance Certificate for the Financial Quarter ending 31 December [
·
].]/[The following is the list of Material Subsidiaries as at (
insert date
):]
198
SCHEDULE 9
TIMETABLES - LOANS
- NOTICES TO THE AGENT
|
|
|
Loans in Euro
|
|
Loans in US
Dollars
|
|
Loans in Other
Currencies
|
|
|
|
|
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|
|
|
|
Approval as an Optional Currency, if required (Clause
4.3
(
Conditions relating to Optional Currencies
))
|
|
|
|
|
|
U-4
11:00 a.m. (London time)
|
|
|
|
|
|
|
|
|
|
The Agent notifies the Parent if a currency is approved as an Optional Currency in accordance with Clause 4.3 (
Conditions relating to Optional Currencies
)
|
|
—
|
|
|
|
U-3
11:00 a.m. (London time)
|
|
|
|
|
|
|
|
|
|
Delivery of a duly completed Utilisation Request (Clause 5.1 (
Delivery of a Utilisation Request
) for Interest Periods of one (1), three (3) or six (6) Months (Clause
16.1
(
Selection of Interest Periods and Terms
)
|
|
U-3
11:00 a.m. (London time)
|
|
U-3
9:00 a.m. (New York time)
|
|
U-3 (U-4 in the case of a Special Notice Currency)
11:00 a.m. (London time)
|
|
|
|
|
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|
|
Delivery of a duly completed Utilisation Request (Clause 7.2 (
Delivery of a Utilisation Request for
US Dollar Swingline Loans
))
|
|
—
|
|
11:00 a.m. (New York time)
|
|
—
|
|
|
|
|
|
|
|
|
|
The Agent determines (in relation to a Utilisation) the Base Currency Amount of the Loan, if required under Clause
5.4
(
Lenders’ participation
)
|
|
U-3
1:00 p.m. (London time)
|
|
U-3
3:00 p.m. (London time)
|
|
U-3 (U-4 in the case of a Special Notice Currency)
1:00 p.m. (London time)
|
|
|
|
|
|
|
|
|
|
The Agent notifies the Lenders of the Loan in accordance with Clause 5.4 (
Lenders’ participation
)
|
|
U-3
3:00 p.m. (London time)
|
|
U-3
5:00 p.m. (London time)
|
|
U-3 (U-4 in the case of a Special Notice Currency)
3:00 p.m. (London time)
|
|
|
|
|
|
|
|
|
|
The Swingline Agent determines (in relation to a Utilisation) the Base Currency Amount of the US Dollar Swingline Loan, if required under Clause 7.4 (
US Dollar
Swingline Lenders’ participation
) and notifies each US Dollar Swingline Lender of
|
|
—
|
|
1:00 p.m. New York time)
|
|
—
|
199
|
|
|
Loans in Euro
|
|
Loans in US
Dollars
|
|
Loans in Other
Currencies
|
|
|
|
|
|
|
|
|
|
the amount of its participation in the US Dollar Swingline Loan under Clause 7.4 (
US Dollar
Swingline Lenders’ participation
)
|
|
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|
|
|
|
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|
|
|
|
|
|
The Agent sets the lending rate in dollars under Clause 15.5 (
Notification of rates of interest
).
|
|
—
|
|
U-0
11.00 a.m.
(New York time)
|
|
—
|
|
|
|
|
|
|
|
|
|
The Agent receives a notification from a Lender under Clause
10.2
(
Unavailability of a currency
)
|
|
—
|
|
—
|
|
U-2
11:00 a.m. (London time)
|
|
|
|
|
|
|
|
|
|
The Agent gives notice in accordance with Clause
10.2
(
Unavailability of a currency
)
|
|
—
|
|
—
|
|
U-2
2:00 p.m. (London time)
|
|
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|
The Agent determines amount of the Loan in Optional Currency in accordance with Clause 35.10 (
Change of currency
)
|
|
U-3
11:00 a.m. (London time)
|
|
U-3
11:00 a.m. (London time)
|
|
U-4
11:00 a.m. (London time)
|
|
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|
|
LIBOR or EURIBOR is fixed
|
|
EURIBOR Quotation Day as of approximately 11:00 a.m. (Brussels time)
|
|
LIBOR Quotation Day as of approximately 11:00 a.m. (London time)
|
|
LIBOR Quotation Day as of approximately 11:00 a.m. (London time)
|
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“U”
=
|
|
date of Utilisation
|
|
date of Utilisation
|
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“U - X”
=
|
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X Business Days prior to date of Utilisation
|
|
X Business Days prior to date of Utilisation
|
|
|
200
PART I
LETTERS OF CREDIT
– NOTICES TO AGENT
|
|
|
Lette
rs
of Credit
|
|
|
|
|
|
Delivery of a duly completed Utilisation Request (Clause
6.3
).
|
|
U-5
11:00 a.m. (London time)
|
|
|
|
|
|
The Agent determines (in relation to a Utilisation) the Base Currency Amount of the Letter of Credit if required under paragraph (d) of Clause 6.6 and notifies the Issuing Agent and Lenders of the Letter of Credit in accordance with paragraph (d) of Clause
6.5
.
|
|
(London time) on date of receipt by Agent of Utilisation Request)
|
|
|
|
|
|
Delivery of duly completed Renewal Request
|
|
U-5
11:00 a.m. (London time)
|
|
“U”
|
=
|
date of Utilisation
|
|
|
|
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|
“U-X”
|
=
|
Business Days prior to date of Utilisation
|
201
SCHEDULE 10
FORM OF LETTER OF CREDIT
To:
[Beneficiary] (the “
Beneficiary”
)
Date []
Irrevocable Standby Letter of Credit No. []
Our customer, [] (the “
Applicant
”) has entered into an agreement for [] (the “
Contract
”) with the Beneficiary.
At the request of the banks whose names are set out below and in the attached Appendix 2 (each a
Lender
and together the
Lenders
) issue on a several basis this unconditional and irrevocable standby Letter of Credit (
Letter of Credit
) in your favour on the following terms:
1.
Definitions
1.1
In this Letter of Credit:
“
Business Day
” means a day (other than a Saturday or a Sunday) on which banks are open for general business in London.
“
Demand
” means a demand for a payment under this Letter of Credit in the form of Appendix 2 to this Letter of Credit.
“
Expiry Date
” means: [].
“
Issuing Agent
” means The Royal Bank of Scotland plc, London Trade Services Centre, PO Box 66891, Aldgate Union, 10 Whitechapel High Street, London E1W 9FQ.
“
Participation Amount
” means in respect of a Lender and any drawings under this Letter of Credit, the sum which is equal to that Lender’s Participation Percentage of the Total L/C Amount.
“
Participation Percentage
” means in respect of a Lender, the percentage set opposite its name in the second column in Appendix 2.
“
Total L/C Amount
” means [].
2.
Lender’s
Agreement
(a)
The Beneficiary may request a drawing or drawings under this Letter of Credit by giving to the Issuing Agent a duly completed Demand. A Demand must be received by the Issuing Agent by no later than 3.30 pm (London time) on the Expiry Date.
(b)
Subject to terms of this Letter of Credit, each Lender shall, no later than five (5) Business Days after the deemed date of receipt by the Issuing Agent of a Demand (the “
Due Date
”), pay to the Beneficiary (by making payment via us, the Issuing Agent) its respective Participation Percentage of the sum demanded in the Demand.
(c)
The obligations of the Lenders under this Letter of Credit shall be several, not joint, and no Lender shall ever be obliged to make a payment under this Letter of Credit if as a result the aggregate of all payments made by it under this Letter of Credit would exceed its
202
Participation Amount. The Lenders together, shall never be obliged to make payments hereunder in aggregate exceeding the Total L/C Amount.
(d)
The Beneficiary is entitled to make multiple requests pursuant to this Letter of Credit;
provided that
the total sum claimed under this Letter of Credit does not in aggregate exceed the Total L/C Amount.
(e)
Each Lender shall accept any Demand made in accordance with this Letter of Credit as evidence, for the purposes of this Letter of Credit alone, that the amount claimed is due to the Beneficiary (waiving all rights of objection and defence and without reference to the Applicant or any third party).
(f)
If the identity or commitment of the Lenders as set out in Appendix 2 changes after this Letter of Credit is issued, then the Agent shall deliver to the Beneficiary an adjusted Appendix 2 (an “
Adjusted Letter of Credit Schedule
”) setting out the then current Lenders and their Commitments, and this will replace the immediately preceding Appendix 2 that was in effect. Any Adjusted Letter of Credit Schedule provided pursuant to the preceding sentence shall be effective;
provided that
: (i) the adjusted aggregate Participation Amounts (as defined in each case in the relevant Letter of Credit) are no less than the aggregate Participation Amounts (as defined in each case in the relevant Letter of Credit) under the former Appendix 2; and (ii) it is dated and includes the reference number of this Letter of Credit.
3.
Liability of Lenders
The liability of the Lenders under this Letter of Credit is several and not joint and neither we (as the Issuing Agent or the Lender) nor any Lender shall be liable for the failure of any other Lender to perform its obligations under the Letter of Credit.
4.
Expiration
(a)
Each Lender will be released from its obligations under this Letter of Credit on the date (if any) notified by the Beneficiary to the Issuing Agent as the date upon which the obligations of each Lender under this Letter of Credit are released.
(b)
Unless previously released under paragraph 4(a) above, at 3.30 pm (London time) on the Expiry Date the obligations of each Lender under this Letter of Credit will cease with no further liability on the part of any Lender except for any Demand validly presented under the Letter of Credit before 3.30 pm (London time) on the Expiry Date that remains unpaid.
(c)
When the Lenders are no longer under any further obligations under this Letter of Credit, the Beneficiary must return the original of this Letter of Credit to the Issuing Agent.
5.
Liability of the Issuing Agent
This Letter of Credit is signed by the Issuing Agent solely as agent and
mandatario con rappresentanza
for the Lenders and the Issuing Agent makes no representation or warranty, express or implied, concerning, and accepts no responsibility for the legality, validity, effectiveness, adequacy or enforceability of this Letter of Credit or concerning its power to enter into this Letter of Credit on behalf of any Lender (except for itself as a Lender) and, accordingly, it shall not be liable for any cost, loss or expense sustained or incurred by the Beneficiary as a result of any present or future total or partial invalidity, illegality or unenforceability affecting this Letter
203
of Credit or the failure of any Lender (except for itself as a Lender, if applicable) to be bound by its terms.
6.
Payments
All payments under this Letter of Credit shall be made by wire transfer in [] and for value on or before the Due Date for the Demand under which such payment was demanded to the following account
Name: []
Account number: []
Bank: []
7.
Delivery of Demand
Each Demand shall be in writing, and, unless otherwise stated, may be made by letter or fax. All Demands must be presented to the Issuing Agent in legible form at the following address and addressed to the department stated below:
The Royal Bank of Scotland plc
London Trade Services Centre,
PO Box 66891,
Aldgate Union,
10 Whitechapel High Street,
London E1W 9FQ
FAO: The Centre Manager
Any Demand shall be deemed to be received by the Issuing Agent (i) if sent by fax, at the date and time received by the Issuing Agent in legible form (
provided that
an original is received by post or hand within two (2) Business Days thereafter); and (ii) if sent by post or hand, when the Demand is delivered. For the purposes of this paragraph, signature of a courier’s proof of delivery shall be sufficient evidence of delivery.
8.
Assignment and Transfer
The Beneficiary’s rights under this Letter of Credit may not be assigned or transferred.
9.
ISP
Except to the extent it is inconsistent with the express terms of this Letter of Credit, this Letter of Credit is subject to the International Standby Practices (ISP 98), International Chamber of Commerce Publication No. 590.
10.
Third Parties
This Letter of Credit shall not confer any benefit on or be enforceable by anyone other than the Beneficiary.
204
11.
Governing Law
For any matter not regulated by ISP 98, this Letter of Credit and any non-contractual obligations arising out of or in connection with it are governed by [English] [New York] law.
12.
Jurisdiction
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Letter of Credit (including a dispute relating to any non-contractual obligation arising out of or in connection with this Letter of Credit).
|
Yours faithfully
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
for and on behalf of
|
|
|
[Names of all Lenders]
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
The Issuing Agent
|
|
|
|
|
|
|
|
|
Name:
|
|
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Title:
|
|
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|
|
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Signature:
|
|
205
APPENDIX 1
FORM OF DEMAND
To:
[
Issuing Agent
]
[
Date
]
Ladies and Gentlemen
Irrevocable Standby Letter of Credit No. [
] issued in favour of [Beneficiary] (Letter of Credit)
We refer to the Letter of Credit. Terms defined in the Letter of Credit have the same meaning when used in this Demand.
1.
We certify that the Applicant has failed to pay the sum of [
] when due under the Contract. We therefore demand payment of the sum of [
].
2.
Payment should be made to the account specified in the Letter of Credit as follows:
3.
Name:
a.
Account number: []
b.
Bank: []
4.
The date of this Demand is not later than the Expiry Date.
|
Yours faithfully
|
|
|
|
|
|
|
|
|
(Authorised Signatory)
|
(Authorised Signatory)
|
|
|
|
|
For
|
|
|
|
|
|
[Beneficiary]
|
|
206
APPENDIX 2
Irrevocable Standby Letter Credit No. [
] (Letter of Credit)
|
Name and Address of Lender
|
|
Participation Percentage
|
|
[
·
]
|
|
[
·
]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
[
·
]
|
207
SCHEDULE 11
AGENTS’ DETAILS
Notices to the Agent and the Issuing Agent
The Royal Bank of Scotland plc
250 Bishopsgate
London, EC2M 4AA
United Kingdom
Attention: Natalie Brown
email: Natalie.Brown@rbs.com
Tel: +44 20 3361 1101
Notices to the Swingline Agent:
KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
US
Attention: Matthew Bradley / Kathy Koenig
email: matthew_j_bradley@keybank.com / Kathy_koenig@keybank.com
Tel: +1 216 689 3270 / +1 216 813 4814
208
SCHEDULE 12
ORIGINAL BORROWERS’ DETAILS
Notices to GTECH:
GTECH S.p.A.
Via del Campo Boario 19
00156 Rome
Italy
Attention: Treasury Department
Facsimile: 00 39 06 51894205
Notices to GTECH Corporation:
GTECH Corporation
GTECH Center
10 Memorial Boulevard
Providence, RI 02903-1125
USA
Attention: Treasury Department
Facsimile: 001-401-392-4951
209
SCHEDULE 13
AGREED SECURITY PRINCIPLES
1.
SECURITY PRINCIPLES
1.1
The Security to be provided pursuant to Clause 28.23 (
Security following Debt Ratings decrease
) will be given in accordance with these agreed security principles and the limitations set forth in Clauses 24.11 (
Limitations on US Guarantees
) to 24.13 (
Guarantee Limitations applicable to GTECH as Parent
) (the “
Agreed Security Principles
”). This Schedule addresses the manner in which the Agreed Security Principles will impact on the guarantees and Security proposed to be taken pursuant to Clause 28.23 (
Security following Debt Rating decrease
) or Clause 28.24 (
Guarantor Threshold Test and Additional Guarantors
). Terms defined in Clause 28.23 (
Security following Debt Ratings decrease
) or Clause 28.24 (
Guarantor Threshold Test and Additional Guarantors
) shall have the same meaning where used in this Schedule.
1.2
The Security Principles embody a recognition by all parties that there may be certain legal and practical difficulties in obtaining effective guarantees and security from members of the Group in the relevant jurisdictions of incorporation. In particular:
(a)
general statutory limitations, financial assistance, corporate benefit, fraudulent preference, tax restrictions or costs, retention of title claims and similar principles may limit the ability of a member of the Group to provide Security or any guarantee or may require that the Security or guarantee be limited by an amount or otherwise;
(b)
a key factor in determining whether or not Security shall be taken or the extent of its perfection is the applicable cost (including but not limited to adverse effects on interest deductibility and stamp duty, notarisation and registration fees) which shall not be disproportionate to the benefit to the Lenders of obtaining such Security. In particular, the Parties acknowledge that
Imposta Sostitutiva
pursuant to article 15 and subsequent of Italian Presidential Decree No. 601/1973 as amended and supplemented from time to time will not be available with respect to the Agreement. Accordingly, Security that requires payment of an
ad valorem
registration tax on the amount of the Secured obligations will not be taken subject to paragraph (c) below;
(c)
the maximum guaranteed or secured amount may be limited to minimise stamp duty, notarisation, registration or other applicable fees, taxes and duties where the benefit of increasing the guaranteed or secured amount is disproportionate to the level of such fee, taxes and duties;
(d)
where there is material incremental cost involved in creating Security over assets owned by an Obligor in a particular category the principle stated at paragraph 1.2(b)above shall apply and, subject to the Agreed Security Principles, only the material assets in that category shall be subject to Security;
(e)
it is acknowledged that in certain jurisdictions it may be either impossible or impractical to create Security over certain categories of assets in which event Security will not be taken over such assets;
(f)
any assets subject to third party arrangements which may prevent those assets from being charged will be excluded from any relevant Security Document;
provided that
such third party arrangements are permitted under this Agreement and provided that the consent of
210
that third part has been requested. In particular, in certain circumstances, the granting of Security over the shares of a member of the Group which holds a gaming license or concession will require the prior consent of the relevant gaming or licensing authority. No guarantee or assurance can be given in such respect;
(g)
members of the Group will not be required to enter into Security Documents or guarantees if the same would conflict with the fiduciary duties of the directors (or other officers) of the relevant member of the Group or contravene any legal prohibition or would result in (or in a material risk of) personal or criminal liability on the part of any director (or other officer) of any member of the Group;
provided that
the relevant member of the Group shall use reasonable endeavours to overcome any such obstacle;
(h)
members of the Group will not be required to enter into Security Documents or guarantees if the same would conflict with the terms of any applicable shareholder agreements or if the granting of the relevant Security or guarantee would be prohibited for regulatory reasons;
(i)
no Joint Venture shall be required to become a Guarantor nor shall any member of the Group be required to grant Security over any interest in any Joint Venture;
(j)
the granting of Security or the perfection of the Security granted will not be required if it would restrict the ability of the relevant member of the Group to conduct its operations and business in the ordinary course as otherwise permitted by the Finance Documents. Accordingly, no Security shall be granted over bank accounts or insurance policies of members of the Group;
(k)
to the extent possible and without prejudice to the rights of the Finance Parties, all Security shall be given in favour of a security agent and not the Finance Parties individually; “Parallel debt” provisions will be used where necessary, subject to applicable law. Where Security is granted in respect of more than one instrument or category of creditor of Pari Passu Indebtedness, there shall be a single security agent or trustee appointed in respect of each relevant Security Document and customary intercreditor arrangements shall be entered into between the relevant creditors of the Pari Passu Indebtedness setting out,
inter alia
, a common waterfall on enforcement and customary security agent or trustee protections; and
(l)
with regard to Security over any intercompany notes, the fact they are secured shall not prevent the relevant debtors from repaying or prepaying or otherwise discharging the relevant outstandings at any time prior to the taking of any action pursuant to Clause 29.16 (
Acceleration
).
1.3
The Parent need only perform its obligations to procure that any member of the Group becomes an Additional Guarantor or to procure the granting of Security over its shares or other ownership interests if: (i) it is not unlawful for the relevant person to become a Guarantor and that person becoming a Guarantor would not result in personal liability for that person’s directors or other management, and (ii) the guarantee would have some economic value having regard to corporate benefit and other relevant restrictions applicable to the person granting the guarantee. Each Obligor must use, and must procure that the relevant person uses, all reasonable endeavours lawfully available to avoid any such unlawfulness or personal liability. This includes agreeing to a limit on the amount guaranteed. The Agent may (but shall not be obliged to) agree to such a limit if, in its opinion, to do so would avoid the relevant unlawfulness or personal liability. The Agent and the relevant Additional Guarantor (each acting reasonably and on the basis of the advice of their
211
respective local counsel) may agree to other limitations for the purpose of avoiding any obstacle to the grating of an additional guarantee.
2.
TERMS OF SECURITY DOCUMENTS
2.1
The following principles will be reflected in the terms of any Security taken:
(a)
Security will not be enforceable until an Event of Default has occurred and notice of acceleration has been given by the Agent under this Agreement;
(b)
the Security Documents should only operate to create Security rather than to impose new commercial obligations; accordingly, they should not contain additional representations, warranties, undertaking and indemnities, unless these are (i) required to be included in any Security Document for the validity and enforceability of the Security Documents or (ii) are the same as or consistent with those contained in this Agreement;
(c)
until an Event of Default has occurred and notice of acceleration has been given by the Agent under this Agreement, pledgors of shares in Obligors shall be permitted to retain and to exercise voting rights to any shares pledged by them in a manner which does not adversely affect the validity or enforceability of the Security or cause an Event of Default to occur and the Obligors shall be permitted to pay dividends on pledged shares to the pledgors and the pledgors shall be entitled to retain such dividends to the extent permitted under this Agreement;
(d)
any accounts receivable which, if charged, such charge would be prohibited by anti-assignment provisions of contracts or applicable law or would breach the terms of any contract relating to such accounts receivable or would be a default or event of default under the relevant contract or entitle the counterparty to the relevant contract a right to terminate the relevant contract will be excluded from any relevant Security Document;
provided that
the consent of that counterparty has been sought;
(e)
notification to debtors of Security over accounts receivable will only be given if an Event of Default has occurred and notice of an acceleration has been given by the Agent under this Agreement;
(f)
security over any loan or note intercompany receivables will be perfected upon execution of the Security Document either by virtue of notification to debtors or by acknowledgement in writing by such debtor (as may be required by local law to perfect such Security) subject to no adverse tax consequences;
(g)
the Finance Parties should only be able to exercise any power of attorney granted to them under the Security Documents following the occurrence of an Event of Default in respect of which notice of acceleration has been given by the Agent under this Agreement or material failure to comply with a written request to fulfil a further assurance or perfection obligation;
(h)
the Security Documents shall not operate so as to prevent transactions which are permitted under this Agreement or to require additional consents or authorisations;
(i)
unless the restriction is required by law, the constitutional documents of the Obligors whose shares have been pledged will be amended to remove any restriction on the transfer or the registration of the transfer of the shares on enforcement of the Security granted over them. If the pledging of shares of an Obligor under the Agreed Security Principles requires the
212
prior consent of any gaming or licensing authority, the Parent shall use its commercial reasonable efforts to obtain such consent in a reasonable time frame; and
(j)
in furtherance of Clause 24.11 (
Limitations on US Guarantees
),
(i)
no member of the Group that is a CFC will have any obligation or liability, directly or indirectly, to grant Security with respect to any US Obligation;
(ii)
not more than sixty-five per cent. (65%) of the stock or other equity interests (measured by the total combined voting power of the issued and outstanding voting stock or other equity interests) of, and none of the assets or property of, a person that is a CFC will be required to be pledged directly or indirectly as security for any US Obligations; and
(iii)
no member of the Group shall grant any Security for the obligations of a US Borrower if (a) such member of the Group is a “related person” (as defined in Section 267(b) or Section 707(b) of the Code) to such US Borrower, (b) such member of the Group is not a “United States person” (as defined in Section 7701(a)(30) of the Code) and (c) such US Borrower does not own a “controlling interest” (as defined in Section 163(j) of the Code) in such member of the Group, to the extent such guarantee or pledge would cause such US Borrower to be disallowed, for US federal or state income tax purposes, a deduction (or any portion thereof) for interest expense paid that could otherwise have been utilised.
3.
FIRST RANKING SECURITY
3.1
Subject to the due execution of all relevant Security Documents, completion of relevant perfection formalities within statutorily prescribed time limits, payment of all registration fees and documentary taxes, any other rights arising by operation of law, and any qualifications contained in any legal opinion delivered under this Agreement, the Agent shall (in the case of those Security Documents creating pledges of shares in an Obligor) obtain a first priority valid pledge of the shares in issue at any time in that Obligor which are owned by another Obligor. Such Security Document shall be governed by the laws of the jurisdiction in which such Obligor whose shares are being pledged is formed.
3.2
It is further acknowledged that pursuant to each Security Document (or, if applicable, this Agreement) any costs, fees, taxes or other amounts payable in connection with any re-taking, renotarisation, perfection, presentation, novation or re-registration of any Security or any interest in any Finance Document in connection with an assignment or transfer by any Lender shall be borne by the applicable Lender.
213
SCHEDULE 14
FORM OF AFFIDAVIT
COVER PAGE
Claim for the refund, exemption or application of the reduced tax rate on income paid to non-residents
|
Conventions for the avoidance of double taxation
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o
dividends (FORM A)
|
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o
interest (FORM B)
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o
royalties (FORM C)
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o
other income (FORM D)
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EU Directives
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o
parent-subsidiary tax regime dir. 90/435/EEC (FORM E)
|
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o
interest and royalty tax regime dir. 2003/49/EC (FORM F)
|
o
DETAILS OF THE BENEFICIAL OWNER
|
Natural person
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Surname
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Name
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Place of Birth
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Date of Birth
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Legal person
o
cross in the case of a permanent establishment
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Business Name
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Foreign TIN
|
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No.
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o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
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Italian TIN (if issued)
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Residence
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State
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Full address
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Domicile
(if different from residence)
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State
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Full address
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P.O. Box (optional)
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E-MAIL (optional)
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214
COVER PAGE
o
DETAILS OF THE LEGAL REPRESENTATIVE
|
Natural person
|
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Surname
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Name
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Place of Birth
|
Date of Birth
|
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Legal person
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Business Name
|
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TIN
|
|
No.
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|
o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
|
|
|
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|
Italian TIN (if issued)
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Residence
|
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State
|
Full address
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Domicile
(if different from residence)
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State
|
Full address
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P.O. Box (optional)
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E-MAIL (optional)
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|
o
OTHER CO-BENEFICIARIES OF THE INCOME FOR WHICH REFUND IS BEING REQUESTED
|
Natural person
|
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Surname
|
Name
|
Place of Birth
|
Date of Birth
|
|
|
|
|
|
Legal person
|
|
Business Name
|
|
|
|
|
|
TIN
|
|
No.
|
|
|
|
|
o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
|
|
|
|
|
|
Italian TIN (if issued)
|
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|
|
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Residence
|
|
State
|
Full address
|
|
|
|
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|
Domicile
(if different from residence)
|
|
State
|
Full address
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|
P.O. Box (optional)
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E-MAIL (optional)
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215
COVER PAGE
o
DETAILS OF THE PROXY APPOINTED TO SUBMIT THE APPLICATION (IF PRESENT)
(3)
|
Natural person
|
|
Surname
|
Name
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Place of Birth
|
Date of Birth
|
|
|
|
|
|
Legal person
|
|
Name
|
|
|
|
|
|
TIN
|
|
No.
|
|
|
|
|
o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
|
|
|
|
|
|
Italian TIN (if issued)
|
|
|
|
|
|
|
|
Residence
|
|
State
|
Full address
|
|
|
|
|
|
|
Domicile
(if different from the residence)
|
|
State
|
Full address
|
|
|
|
|
|
P.O. Box (optional)
|
|
|
|
|
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|
|
E-MAIL (optional)
|
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|
|
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PAYMENT METHOD (for refunds)
|
|
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|
FINANCIAL ISTITUTION:
|
|
|
|
|
|
BANK ACCOUNT HOLDER
(4)
|
|
|
|
|
|
(if part of the Economic and Monetary Union): BIC
(5)
|
IBAN
|
|
|
|
|
|
|
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|
|
(if outside the Economic and Monetary Union)
(6)
: BANK ACCOUNT DETAILS
|
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ADDRESS OF THE FINANCIAL INSTITUTION
|
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|
(3) Attach the original copy of the relative power of attorney
(4) If the beneficiary uses a proxy for the payment, fill in the application with the bank account of the proxy. For powers of attorney released abroad, the original copy with translation must be sent to Centro Operativo di Pescara. If the proxy for the collection is also the proxy for the submission of the application and/or for making the requested declarations, only one original copy with translation is required.
(5) If Economic and Monetary Union: the BIC code is mandatory.
(6) If not Economic and Monetary Union: the BIC code is an alternative to the address of the financial institutions.
216
FORM B - INTEREST
o
EXEMPTION/APPLICATION OF THE TAX RATE PROVIDED BY THE CONVENTION
o
REFUND
Article of the Convention for the avoidance of double taxation between Italy and
ITALIAN INTEREST PAYER
|
Person
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Surname Name / Business Name
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Italian TIN
|
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Residence
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Full address
|
DEPOSITARY BANK (FOR CUSTODY OF SECURITIES)
|
Legal Person
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Business Name
|
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Italian TIN
|
|
|
|
|
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Residence
|
|
Full address
|
DESCRIPTION OF THE INTEREST RECEIVED
|
Payment date
|
|
Amount of
interest gross of
the Italian tax
|
|
Amount of the
tax paid in Italy
|
|
Applicable tax
rate according
to the
Convention
|
|
Amount of the
tax due
|
|
Requested
refund
|
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TOTAL
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218
DECLARATION OF THE BENEFICIARY OR ITS AUTHORISED REPRESENTATIVE
(7)
The undersigned acting as
Declares
·
to reside / that the entity is resident in pursuant to the Convention with for the tax period / periods ;
·
to be / that the entity above mentioned is the beneficial owner of the interest;
·
not to have / that the above mentioned entity does not have a permanent establishment or a fixed base in Italy to which the income effectively connects;
o
to be / that the above mentioned entity is subject to tax for the specified interest in the Country of residence;
o
NOT to be / that the above mentioned entity is NOT subject to tax for the specified interest in the Country of residence (explain the reasons for exemption) ;
·
to comply with all other necessary requirement for applying the benefits granted by the Convention regarding the income received;
·
that all information in this declaration is correct and complete, and that the undersigned shall communicate if one or more of the requirements described above ceases to be, as well as of any variations in the supplied data and information.
Requests
o
exemption from Italian tax or application within the limits provided by the mentioned Convention;
o
refund of taxes regarding the income specified above;
·
that the refund should be made according to the payment methods specified on the cover page.
(7) The authorised representative is the delegated person authorised to submit the application and/or supply the declarations requested by the Convention on behalf of the beneficial owner (see cover page), on the basis of the document that grants the relative power of representation (the original copy of which must be attached).
219
CERTIFICATION OF THE TAX AUTHORITY
The Tax Authority of certifies that for the tax period/s the beneficiary
described above is resident in according to Article of the Convention with Italy and that the declarations given in this form are true to the best of the knowledge of this Tax administration.
|
Date
|
|
|
Signature and Office stamp
|
220
SCHEDULE 15
FORM OF SUBSTITUTE AFFILIATE LENDER DESIGNATION NOTICE
To:
[The Royal Bank of Scotland plc] (as Agent) for itself and each of the other parties to the Facilities Agreement referred to below.
Cc:
[The Parent]
From:
[Designating Lender] (the “
Designating Lender
”)
Dated:
[]
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 4 November 2014 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. Terms defined in the Facilities Agreement have the same meaning in this Designation Notice.
2.
We hereby designate our [Affiliate/Facility Office] details of which are given below as a Substitute [Affiliate Lender/Facility Office] in respect of [details of the Utilisation or Utilisations] required to be advanced to [specify name of borrower or refer to all borrowers in a particular jurisdiction etc.] (“
Designated Loans
”).
3.
The details of the Substitute [Affiliate Lender/Facility Office] are as follows:
Name:
Facility Office:
Fax Number:
Attention:
Jurisdiction of Incorporation:
4.
[By countersigning this notice below the Designated Affiliate Lender agrees to become a Designated Affiliate Lender in respect of Designated Loans as indicated above and agrees to be bound by the terms of the Facilities Agreement accordingly.]
5.
This Designation Notice and any non-contractual obligations arising out of or in connection with it are governed by English law.
221
|
|
|
|
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|
|
For and on behalf of
|
|
|
|
|
|
[Designating Lender]
|
|
|
|
|
|
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|
|
We acknowledge and agree to the terms of the above.
|
|
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For and on behalf of
|
|
|
|
|
|
[Substitute Affiliate Lender]
|
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|
|
We acknowledge the terms of the above.
|
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For and on behalf of
|
|
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|
|
|
The [Agent] [and the Security Agent]
|
|
|
|
|
|
Dated
|
|
222
SCHEDULE 16
SELF DECLARATION FORM
The undersigned [Lender’s legal representative], domiciled at [Lender’s legal representative address], legal representative of [Lender’s Name], with its registered office at [Lender’s registered address]
CONSIDERING THAT
pursuant to article 26, paragraph 5-bis, of Presidential Decree No. 600 of 29 September 1973 as amended by article 22 of Law Decree No. 91 of 24 June 2014, converted into law by Law No. 144 of 11 August 2014, and Article 10, paragraph 2, of Law Decree No. 133 dated 12 September 2014 no Italian withholding tax applies to interest payments made by Italian entities to:
·
Credit institutions established in a EU Member State;
·
Insurance companies incorporated in a EU Member State and authorised under the legislative provisions of a EU Member State;
·
Collective investment founds established in a EU Member State or in a EEA Member State included within the list provided by article 168-bis of Italian Presidential Decree No. 917 of 22 December 1986, as amended and implemented from time to time, to the extent they do not make recourse to leverage debt financing (
non fanno ricorso alla leva finanziaria
);
·
Entities listed under Article 2, paragraph 5, numbers from 4) to 23), of Directive 2013/36/EU.
DECLARES
(Please check one of the following three boxes, if applicable)
·
That [Lender’s Name] is a credit institution established in a EU Member State.
·
That [lender’s Name] is an insurance company incorporated in a EU Member State and authorized under the legislative provisions of a EU Member State.
·
That [Lender’s Name] is a collective investment found established in a EU Member State or in a EEA Member State including within the list provided by article 168-bis of Italian Presidential Decree nr. 917 of 22 December 1986, as amended and implemented from time to time, to the extent it does not make recourse to leverage debt financing.
·
That [Lender’s Name] is an entities listed under Article 2, paragraph 5, numbers from 4) to 23), of Directive 2013/36/EU.
and as such is entitled to receive interest payments under the US$1,800,000,000 and €1,050,000,000 Multicurrency Revolving Credit Facilities for GTECH Corporation and GTECH S.p.A without the application of any tax deduction to interest payments made by Italian entities.
223
|
Place and date of signature
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Signature of Legal Representative of
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[Name and Surname]
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[Title]
|
224
SIGNATORIES
The Parent
GTECH S.P.A.
By: CLAUDIO DEMOLLI
The Original Borrowers
GTECH S.P.A.
By: CLAUDIO DEMOLLI
GTECH CORPORATION
By: CLAUDIO DEMOLLI
The Original Guarantors
GTECH S.P.A.
By: CLAUDIO DEMOLLI
GTECH CORPORATION
By: CLAUDIO DEMOLLI
225
Global Coordinators, Bookrunners and Mandated Lead Arrangers
J.P. MORGAN LIMITED
By: MICHAEL HOLLAND, NIA HORNE
MEDIOBANCA — BANCA DI CREDITO
FINANZIARIO S.P.A.
By: JOSEP BUADES (ATTORNEY)
Bookrunners and Mandated Lead Arrangers
BANCA IMI S.P.A
By: ALESSANDRA CAPOZZI
BARCLAYS BANK PLC
By: ROBERT AZURDIA, SINEAD HARRIS
BNP PARIBAS, SUCCURSALE ITALIA
By: JOSEP BUADES (ATTORNEY)
CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, MILAN BRANCH
By: JOSEP BUADES (ATTORNEY)
226
|
CREDIT SUISSE AG, MILAN BRANCH
|
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By: JOSEP BUADES (ATTORNEY)
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CITIGROUP GLOBAL MARKETS LIMITED
|
|
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|
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|
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By: LUCY DEVLIN
|
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DEUTSCHE BANK LUXEMBOURG S.A.
|
|
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By: JOSEP BUADES (ATTORNEY)
|
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J.P. MORGAN LIMITED
|
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By: MICHAEL HOLLAND
|
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ING BANK N.V. MILAN BRANCH
|
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By: JOSEP BUADES (ATTORNEY)
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MEDIOBANCA - BANCA DI CREDITO FINANZIARIO S.P.A
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By: JOSEP BUADES (ATTORNEY)
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THE ROYAL BANK OF SCOTLAND PLC
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By: JOSEP BUADES
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227
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SCOTIABANK EUROPE PLC
|
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By: STEVE CALLER, JOHN O’CONNOR
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SOCIETE GENERALE
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By: JOSEP BUADES (ATTORNEY)
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UNICREDIT BANK AG, MILAN BRANCH
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By:
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JOSEP BUADES
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UNICREDIT BANK AG NEW YORK BRANCH
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By: JOSEP BUADES (ATTORNEY)
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Mandated Lead Arrangers
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BANCA POPOLARE DI MILANO S.C.A.R.L
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By: JOSEP BUADES (ATTORNEY)
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FIFTH THIRD
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By: JOSEP BUADES (ATTORNEY)
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228
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UBI BANCA S.C.P.A.
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By: JOSEP BUADES (ATTORNEY)
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WELLS FARGO BANK, NA
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By: KEITH W ENDERSON
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Arrangers
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BANCO POPOLARE S.C., LONDON BRANCH
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By: DARIO MANCINI, PETER SOULSBY
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KEYBANK NATIONAL ASSOCIATION
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By: JOSEP BUADES (ATTORNEY)
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Agent
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THE ROYAL BANK OF SCOTLAND PLC
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By: JOSEP BUADES
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Issuing Agent
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THE ROYAL BANK OF SCOTLAND PLC
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By: JOSEP BUADES
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229
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Swingline Agent
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KEYBANK NATIONAL ASSOCIATION
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By: JOSEP BUADES (ATTORNEY)
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Original Lenders
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BARCLAYS BANK PLC
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By: ROBERT AZURDIA, SINEAD HARRIS
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BARCLAYS BANK PLC, MILAN BRANCH
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By: ROBERT AZURDIA, SINEAD HARRIS
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BNP PARIBAS, SUCCURSALE ITALIA
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By: JOSEP BUADES (ATTORNEY)
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CITIBANK, N.A.
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By: LUCY DEVLIN
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CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, MILAN BRANCH
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By: JOSEP BUADES (ATTORNEY)
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230
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CRÉDIT AGRICOLE CORPORATE AND INVESTMENT BANK, NEW YORK BRANCH
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By: JOSEP BUADES (ATTORNEY)
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CREDIT SUISSE AG, MILAN BRANCH
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By: JOSEP BUADES (ATTORNEY)
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DEUTSCHE BANK LUXEMBOURG S.A.
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By: JOSEP BUADES (ATTORNEY)
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ING BANK N.V. MILAN BRANCH
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By: JOSEP BUADES (ATTORNEY)
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INTESA SANPAOLO S.P.A
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By: ALESSANDRA CAPOZZI
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INTESA SANPAOLO S.P.A NYC BRANCH
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By: ALESSANDRA CAPOZZI
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JP MORGAN CHASE BANK, N.A., LONDON BRANCH
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231
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By: MICHAEL HOLLAND
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JP MORGAN CHASE BANK, N.A.
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By: MICHAEL HOLLAND
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JP MORGAN CHASE BANK, N.A., MILAN BRANCH
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By: MICHAEL HOLLAND
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MEDIOBANCA INTERNATIONAL (LUXEMBOURG) S.A.
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By: JOSEP BUADES (ATTORNEY)
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THE ROYAL BANK OF SCOTLAND PLC, MILAN BRANCH
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By: JOSEP BUADES
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SCOTIABANK EUROPE PLC
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By: STEVE CALLER, JOHN O’CONNOR
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SOCIETE GENERALE PARIS
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By: JOSEP BUADES (ATTORNEY)
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232
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SOCIETE GENERALE, MILAN BRANCH
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By: JOSEP BUADES (ATTORNEY)
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UNICREDIT BANK AG, MILAN BRANCH
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By: JOSEP BUADES (ATTORNEY)
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UNICREDIT BANK AG, NEW YORK BRANCH
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By: JOSEP BUADES (ATTORNEY)
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BANCA POPOLARE DI MILANO, S.C.A.R.L
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By: JOSEP BUADES (ATTORNEY)
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FIFTH THIRD
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By: JOSEP BUADES (ATTORNEY)
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UBI BANCA S.C.P.A.
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By: JOSEP BUADES (ATTORNEY)
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WELLS FARGO BANK, NA
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By: KEITH W ENDERSON
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233
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BANCO POPOLARE S.C., LONDON BRANCH
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By: DARIO MANCINI, PETER SOULSBY
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KEYBANK NATIONAL ASSOCIATION
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By:
JOSEP BUADES (ATTORNEY)
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|
234
Exhibit 4.14
|
|
CLIFFORD CHANCE LLP
|
EXECUTION VERSION
DATED 3 APRIL 2015
GTECH S.P.A. (FORMERLY KNOWN AS LOTTOMATICA S.P.A.)
AS ISSUER
AND
BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED (AS SUCCESSOR TO J.P. MORGAN CORPORATE TRUSTEE SERVICES LIMITED)
AS TRUSTEE
FIRST SUPPLEMENTAL TRUST DEED RELATING TO A TRUST DEED DATED 17 MAY 2006 IN RESPECT OF €750,000,000 SUBORDINATED INTEREST-DEFERRABLE CAPITAL SECURITIES DUE 2066
Contents
|
Clause
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Page
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1.
|
Definitions and Interpretation
|
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2
|
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2.
|
Amendment and Restatement
|
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2
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3.
|
Notices
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2
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4.
|
Costs, Expenses and Indemnification
|
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2
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5.
|
Further Assurance
|
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3
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6.
|
Counterparts
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3
|
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7.
|
Governing Law and Jurisdiction
|
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3
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8.
|
Third Party Rights
|
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3
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Schedule 1 Amended and Restated Trust Deed
|
|
|
i
THIS FIRST SUPPLEMENTAL TRUST DEED
is made on 3 April 2015
BETWEEN:
(1)
GTECH S.p.A.
a
società per azioni
incorporated under the laws of the Republic of Italy (formerly known as Lottomatica S.p.A.) as issuer (the “
Issuer
”); and
(2)
BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED
(as successor to J.P. Morgan Corporate Trustee Services Limited) as trustee (the “
Trustee
”).
WHEREAS:
(A)
The Issuer and the Trustee have entered into a trust deed (the “
Principal Trust Deed
”) dated 17 May 2006 constituting the Securities.
(B)
On 15 July 2014, the Issuer entered into an agreement and plan of merger (the “
Merger Agreement
”) with, amongst others, International Game Technology, a Nevada Corporation (“
IGT
”), to acquire IGT through the formation of International Game Technology PLC (formerly known as Georgia Worldwide PLC), a public limited company incorporated under the laws of England and Wales with company number 09127533 (“
Holdco
”). The acquisition of IGT will be effected by (i) the merger of the Issuer with and into Holdco (the “
Merger
”), pursuant to which each issued and outstanding ordinary share of the Issuer, par value €1.00, will be converted into the right to receive one ordinary share of Holdco, nominal value US$0.10 (the Merger being more fully described in the Common Cross-Border Merger Terms (
Progetto Comune di Fusione Transfrontaliera
)); and (ii) immediately thereafter, the merger of
Georgia Worldwide Corporation, a Nevada corporation and wholly owned subsidiary of Holdco,
with and into IGT, with IGT surviving as a wholly-owned subsidiary of Holdco (in each case subject to the terms and conditions of the Merger Agreement).
(C)
By an Extraordinary Resolution dated 19 January 2015, the Securityholders consented to amend the Conditions and the Principal Trust Deed to (i) reflect the change in the jurisdiction of incorporation of the Issuer pursuant to the Merger and to remove provisions which are no longer relevant or applicable as a result of such change of jurisdiction, including but not limited to those only applicable to Italian companies; (ii) remove commercial terms that are no longer relevant and amend certain other provisions to align these with the customary terms of similar securities issued under English law (including amendments to the quorum required to pass an Extraordinary Resolution and to incorporate certain protections in favour of the Trustee); and (iii) clarify that Condition 6.7 (
Replacement
) of the Capital Securities is not intended to be a contractual term of the Capital Securities and is instead only an indication of the Issuer’s intention, and requested the Trustee to concur in such amendments and execute this first supplemental trust deed (the “
First Supplemental Trust Deed
”) in order to give effect thereto.
1
NOW THIS DEED WITNESSETH
and it is hereby agreed and declared as follows:
1.
DEFINITIONS AND INTERPRETATION
All words and expressions defined in the Principal Trust Deed shall where the context so requires and admits have the same meaning in this First Supplemental Trust Deed, and the principles of interpretation specified in Clause 1.2 of the Principal Trust Deed shall where the context so requires and admits also apply to this First Supplemental Trust Deed. In addition, in this First Supplemental Trust Deed the following expression has the following meaning:
“
Holdco Merger Effective Date
” means
the date fixed as the effective date of the Merger by an order of the High Court of England and Wales, as the competent English authority.
2.
AMENDMENT AND RESTATEMENT
2.1
The Principal Trust Deed, with effect from the Holdco Merger Effective Date, shall stand amended and restated in the form set out in Schedule 1 hereto.
2.2
The Conditions (as set out in Schedule 3 (
Terms and Conditions
) to the Principal Trust Deed), with effect from the Holdco Merger Effective Date, shall be deleted in their entirety and replaced with the Conditions set out in Schedule 1 hereto.
2.3
This First Supplemental Trust Deed is supplemental to the Principal Trust Deed.
2.4
Subject to the amendments to be effected to the Principal Trust Deed and the Conditions hereunder, the Principal Trust Deed and the Securities shall remain in full force and effect and the Principal Trust Deed and this First Supplemental Trust Deed shall be read and construed together as one deed.
3.
NOTICES
3.1
A memorandum of this First Supplemental Trust Deed shall be endorsed on the original of the Principal Trust Deed by the Trustee and on the duplicate thereof by the Issuer.
3.2
The Issuer shall, as soon as practicable after the amendments set out in Clause 2 (
Amendment and Restatement
) become effective, give notice of the amendments to the Securityholders in accordance with Condition 15 (
Notices
).
4.
COSTS, EXPENSES AND INDEMNIFICATION
The Issuer shall, from time to time on demand of the Trustee, reimburse the Trustee for all properly incurred costs and expenses (including legal fees) incurred by it in connection with the negotiation, preparation and execution or purported execution of this First Supplemental Trust Deed and the completion of the matters herein contemplated.
2
5.
FURTHER ASSURANCE
The Issuer undertakes to the Trustee to execute all such other documents and comply with all such other requirements to effect the amendments contemplated hereby and any other matter incidental thereto as the Trustee may direct in the interests of the Securityholders.
6.
COUNTERPARTS
This First Supplemental Trust Deed may be executed in any number of counterparts, each of which is an original and all of which together evidence the same agreement. This First Supplemental Trust Deed shall not come into effect until each party has executed and delivered at least one counterpart.
7.
GOVERNING LAW AND JURISDICTION
7.1
This First Supplemental Trust Deed and any non-contractual obligations arising out of or in connection with it are governed by, and shall be construed in accordance with, the laws of England.
7.2
Clause 22 (
Jurisdiction
) of the Principal Trust Deed shall apply,
mutatis mutandis
, to this First Supplemental Trust Deed.
8.
THIRD PARTY RIGHTS
A person who is not party to this First Supplemental Trust Deed may not enforce any terms of this First Supplemental Trust Deed under the Contract (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any third party which exists or is available apart from that Act.
IN WITNESS WHEREOF
this First Supplemental Trust Deed has been executed as a deed by the parties hereto and is intended to be and is hereby delivered on the day first before written.
3
EXECUTION PAGES
|
EXECUTED
as a
DEED
by
GTECH S.p.A.
|
|
|
(formerly known as Lottomatica S.p.A.)
|
|
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By:
|
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|
|
|
|
CLAUDIO DEMOLLI (ATTORNEY-IN-FACT)
|
|
|
EXECUTED
as a
DEED
by
|
|
|
BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED
(as successor to J.P. Morgan Corporate Trustee Services Limited)
acting by two of its lawful attorneys:
|
|
|
|
|
|
Attorney: PAUL CATTERMOLE (VICE PRESIDENT)
|
|
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Attorney: MARIA BERTOLIN
|
|
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(AUTHORIZED SIGNATORY)
|
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In the presence of
|
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Witness’s signature:
|
/S/ THOMAS VANSON
|
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Name: THOMAS VANSON
|
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Address:
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CLIFFORD CHANCE LLP
|
SCHEDULE 1
AMENDED AND RESTATED TRUST DEED
INTERNATIONAL GAME TECHNOLOGY PLC
AS ISSUER
AND
BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED (AS SUCCESSOR TO J.P. MORGAN CORPORATE TRUSTEE SERVICES LIMITED)
AS TRUSTEE
AMENDED AND RESTATED TRUST DEED
RELATING TO THE
€750,000,000 SUBORDINATED INTEREST-DEFERRABLE CAPITAL SECURITIES DUE 2066
1
CONTENTS
|
Clause
|
|
|
Page
|
|
|
|
|
|
|
1.
|
Definitions and Interpretation
|
|
3
|
|
|
|
|
|
|
2.
|
Covenant to Pay
|
|
8
|
|
|
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|
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3.
|
Form and Issue of the Securities and Further Issues
|
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11
|
|
|
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4.
|
Stamp Duties and Taxes
|
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12
|
|
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5.
|
Covenant of Compliance
|
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13
|
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6.
|
Amounts due to the Trustee
|
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13
|
|
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|
|
7.
|
Proceedings, Action and Indemnification
|
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13
|
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8.
|
Application of Moneys received by the Trustee
|
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14
|
|
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|
|
9.
|
Partial Payments
|
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15
|
|
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|
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10.
|
Covenants by the Issuer
|
|
16
|
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|
|
|
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11.
|
Remuneration and Indemnification of Trustee
|
|
21
|
|
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|
|
|
12.
|
Supplement to the Trustee Acts
|
|
23
|
|
|
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|
|
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13.
|
Trustee’s Liability
|
|
28
|
|
|
|
|
|
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14.
|
Trustee Entering into Contracts
|
|
28
|
|
|
|
|
|
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15.
|
Waiver and Modification
|
|
29
|
|
|
|
|
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16.
|
Currency Indemnity
|
|
30
|
|
|
|
|
|
|
17.
|
Appointment, Retirement and Removal of the Trustee
|
|
30
|
|
|
|
|
|
|
18.
|
Meetings
|
|
32
|
|
|
|
|
|
|
19.
|
Notes Held in Clearing Systems
|
|
32
|
|
|
|
|
|
|
20.
|
Notices
|
|
32
|
|
|
|
|
|
|
21.
|
Governing Law and Submission to Jurisdiction
|
|
33
|
|
|
|
|
|
|
22.
|
Counterparts
|
|
33
|
|
|
|
|
|
Schedule 1 Forms of Global Certificates
|
|
34
|
|
|
|
|
|
Part 1 Form of Unrestricted Global Certificate
|
|
34
|
|
|
|
|
|
Part 2 Form of Restricted Global Certificate
|
|
41
|
|
|
|
|
|
Schedule 2 Form of Definitive Certificate
|
|
49
|
|
|
|
|
|
Schedule 3 Terms and Conditions
|
|
55
|
|
|
|
|
|
Schedule 4 Provisions for Meetings of Securityholders
|
|
91
|
|
|
|
|
|
Schedule 5 Form of Officer’s Certificate
|
|
101
|
|
|
|
|
|
Schedule 6 Form of Officer’s Certificate Relating to Mandatory Deferral Event
|
|
103
|
2
THIS TRUST DEED
is made on 17 May 2006 (as supplemented by a first supplemental trust deed on 3 April 2015 and as further amended and restated from time to time)
BETWEEN
:
(3)
INTERNATIONAL GAME TECHNOLOGY PLC
, a public limited company incorporated under the laws of England and Wales with company number 09127533 (the “
Issuer
”); and
(4)
BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED
(as successor to J.P. Morgan Corporate Trustee Services Limited) acting through its registered office at One Canada Square, London, E14 5AL, as trustee for the Securityholders (in such capacity, the “
Trustee
”, which expression shall, wherever the context so admits, include such company and all other persons or companies for the time being the Trustee or Trustees under this Trust Deed).
WHEREAS:
(D)
By a resolution of the board of directors of GTECH S.p.A. (formerly Lottomatica S.p.A.), a
società per azioni
incorporated under the laws of the Republic of Italy (“
GTECH
”), passed on 27 April 2006, GTECH resolved to issue €750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066, such Securities constituted in the manner hereinafter appearing.
(E)
On 15 July 2014, GTECH entered into an agreement and plan of merger (the “
Merger Agreement
”) with, amongst others, International Game Technology, a Nevada Corporation (“
IGT
”), to acquire IGT through the formation of the Issuer. The acquisition of IGT was effected by (i) the merger of GTECH with and into the Issuer (the “
Merger
”) and (ii) immediately thereafter, the merger of Georgia Worldwide Corporation, a Nevada corporation and wholly owned subsidiary of the Issuer, with and into IGT, with IGT surviving as a wholly-owned subsidiary of the Issuer (in each case subject to the terms and conditions of the Merger Agreement).
(F)
In connection with the Merger and pursuant to a first supplemental trust deed dated 3 April 2015 (the “
Supplemental Trust Deed
”), this Trust Deed was amended and restated to the form set out herein with effect on and from the Holdco Merger Effective Date (as defined below).
(G)
The Trustee has agreed to act as trustee of this Trust Deed upon and subject to the terms and conditions hereinafter contained.
NOW THIS TRUST DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED
as follows:
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
Terms defined in the Conditions shall, unless otherwise defined herein or the context requires otherwise, bear the same meanings herein (including in the recitals hereto).
In addition, in this Trust Deed:
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“
Agents
” means the Principal Paying and Transfer Agent, any other Paying and Transfer Agent, the Registrar and the Agent Bank;
“
Appointee
” means any delegate, agent, attorney, manager, nominee or custodian appointed by the Trustee pursuant to the provisions of this Trust Deed;
“
Auditors
” means the auditors for the time being of the Issuer or, if they are unable or unwilling to carry out any action requested of them under this Trust Deed, such other firm of accountants as may be nominated by the Issuer and approved in writing by the Trustee for the purpose, or failing such nomination, as selected by the Trustee for the purpose;
“
Clearstream, Luxembourg
” means Clearstream Banking,
société anonyme
;
“
Conditions
” means the terms and conditions in the form set out in Schedule 3 hereto, as the same may from time to time be modified in accordance with this Trust Deed and any reference in this Trust Deed to a particular specified Condition shall be construed accordingly;
“
Definitive Certificate
” means a registered certificate issued in the name of the holder of one or more Securities, being in or substantially in the form set out in Schedule 2;
“
Euroclear
” means Euroclear Bank, S.A./N.V.;
“
Extraordinary Resolution
” has the meaning given to it in Schedule 4;
“
Global Certificates
” means the Restricted Global Certificate and the Unrestricted Global Certificate;
“
Holdco Merger Effective Date
” means
the date fixed as the effective date of the Merger by an order of the High Court of England and Wales, as the competent English authority;
“
Insolvency Event
” means (i) the commencement of a voluntary or involuntary liquidation, dissolution or winding-up due to corporate action or an administrative and/or court order, or (ii) the occurrence of any Insolvency Proceedings (as defined in the Conditions), subject to applicable bankruptcy law;
“
Issue Date
” means 17 May 2006;
“
Liabilities
” means, in respect of any person, any losses, damages, costs, charges, awards, claims, demands, expenses, judgments, decrees, actions, proceedings or other liabilities whatsoever including legal fees and any taxes and penalties incurred by that person, including any value added tax or similar tax charged or chargeable in respect thereof and legal fees and expenses on a full indemnity basis;
“
Officer’s Certificate
” has the meaning given to it in the Conditions;
“
outstanding
” means, in relation to the Securities, all of the Securities issued other than:
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(a)
those Securities which have been redeemed or purchased and cancelled pursuant to Condition 6 or otherwise pursuant to this Trust Deed;
(b)
those Securities in respect of which the date for redemption in full in accordance with the Conditions has occurred and the redemption moneys for which (including all Scheduled Interest Amounts, Optionally Deferred Interest and Equity Funded Deferred Interest payable thereon) have been duly paid to the Trustee or to the Principal Paying and Transfer Agent in the manner provided in the Paying Agency Agreement (and, where appropriate, notice to that effect has been given to the Securityholders in accordance with Condition 15) and remain available for payment against presentation of the relevant Securities;
(c)
those Securities which have become void pursuant to Condition 10;
(d)
those mutilated or defaced Securities which have been surrendered and cancelled and in respect of which replacements have been issued pursuant to Condition 11;
(e)
(for the purpose only of ascertaining the principal amount outstanding of the Securities and without prejudice to the status for any other purpose of the relevant Securities) those Securities which are alleged to have been lost, stolen or destroyed and in respect of which replacements have been issued pursuant to Condition 11; and
(f)
the Global Certificates to the extent that they shall have been exchanged for Definitive Certificates pursuant to the provisions contained therein,
PROVIDED THAT for each of the following purposes, namely:
(i)
for ascertaining the right to attend and vote at any meeting of the Securityholders or any of them and any direction or request by the Securityholders;
(ii)
the determination of how many and which Securities are for the time being outstanding for the purposes of Conditions 9 and 12 and Schedule 4; and
(iii)
the exercise of any discretion, power or authority contained in this Trust Deed which the Trustee is required, expressly or impliedly, to exercise in or by reference to the interests of any of the Securityholders,
those Securities (if any) which are for the time being held by (1) the Issuer or any of its subsidiaries or (2) any person for the benefit of the Issuer or any of its subsidiaries shall (unless and until no longer so held), be deemed not to remain outstanding;
“
Paying Agency Agreement
” means the agreement appointing the initial Paying and Transfer Agents, Registrar and Agent Bank and any other agreement for the time being in force appointing successor paying and transfer agents, or a successor registrar or agent bank together with any agreement for the time being in force amending or modifying with the prior written approval of the Trustee any of the aforesaid agreements;
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“
powers
” in relation to the Trustee and any Appointee appointed by it under this Trust Deed means their respective powers, authorities and discretions under this Trust Deed or the general law;
“
Relevant Documents
” means this Trust Deed and the Paying Agency Agreement and any other document which is designated as such by the Issuer and the Trustee from time to time;
“
Restricted Global Certificate
” means the registered global certificate representing the Securities sold pursuant to Rule 144A under the Securities Act, in or substantially in the form set out in Schedule 1, Part 2;
“
Rule 144A Legend
” means the transfer restriction legend set out on the Restricted Global Certificate and any Definitive Certificate issued in respect thereof;
“
Securities
” means the securities in registered form comprising the said €750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066 of the Issuer hereby constituted or the principal amount thereof for the time being outstanding or, as the context may require, a specific number thereof;
“
Securities Act
” means the U.S. Securities Act of 1933, as amended;
“
tax
” shall be construed so as to include any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature whatsoever (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) imposed or levied by or on behalf of a tax authority and “taxes”, “taxation” and “taxable” and comparable expressions shall be construed accordingly;
“
this Trust Deed
” means this Trust Deed and the Schedules and any trust deed supplemental hereto and the Schedules (if any) thereto, the Securities and the Conditions, all as from time to time modified in accordance with the provisions herein or therein contained;
“
Trust Corporation
” means a trust corporation (as defined in the Law of Property Act 1925) or a corporation entitled to act as a trustee pursuant to applicable foreign legislation relating to trustees;
“
Trustee Acts
” means the Trustee Act 1925 and the Trustee Act 2000; and
“
Unrestricted Global Certificate
” means the registered global certificate representing the Securities sold pursuant to Regulation S under the Securities Act, in or substantially in the form set out in Schedule 1, Part 1.
1.2
Interpretation
References to:
(a)
principal in respect of the Securities shall be deemed also to include a reference to any premium which may be payable in respect of the Securities, and references to principal and/or interest in respect of the Securities shall be deemed also to include references to any Additional Amounts which may be payable under Condition 8;
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(b)
interest in respect of the Securities shall, unless the context otherwise requires, be deemed also to include a reference to Optionally Deferred Interest and Equity Funded Deferred Interest;
(c)
Liabilities or remuneration shall include any amount in respect of any withholding, value added, turnover or similar tax charged in respect thereof;
(d)
“
€
” or “
euros
” are references to the lawful single currency for the time being of the European Union;
(e)
any action, remedy or method of judicial proceedings for the enforcement of rights of creditors shall include, in respect of any jurisdiction other than England and Wales, references to such action, remedy or method of judicial proceedings for the enforcement of rights of creditors available or appropriate in such jurisdiction as shall most nearly approximate thereto and any other similar, analogous or corresponding event under the insolvency laws of any applicable jurisdiction;
(f)
words denoting the singular number only shall include the plural number also and
vice versa
;
(g)
words denoting one gender only shall include the other gender;
(h)
words denoting persons only shall include firms and corporations and
vice versa
;
(i)
Euroclear and/or Clearstream, Luxembourg shall, wherever the context so admits, be deemed to include references to any additional or alternative clearing system approved by the Issuer and the Trustee;
(j)
any provision of any statute shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under such modification or re-enactment; and
(k)
“
approval not to be unreasonably withheld
” or like references mean, in relation to the Trustee, that, in determining whether to give such approval, the Trustee shall have regard to the interests of the Securityholders only and any determination as to whether or not its approval is unreasonably withheld shall be made on that basis.
1.3
Contracts (Rights of Third Parties) Act 1999
Unless otherwise provided herein, a person who is not a party to this Trust Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Trust Deed. The parties to this Trust Deed shall have the right to amend, vary or rescind any provisions of this Trust Deed without the consent of any such third party.
1.4
Headings
Headings shall be ignored in construing this Trust Deed.
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1.5
Schedules
The Schedules are part of this Trust Deed and shall have effect accordingly.
1.6
Enforceability
If at any time any provision of this Trust Deed is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Trust Deed nor the legality, invalidity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.
2.
COVENANT TO PAY
2.1
Amount of Securities
The initial aggregate principal amount of the Securities is €750,000,000.
2.2
Covenant to Pay
The Issuer covenants with the Trustee that it will, in accordance with this Trust Deed, on the due date for the final maturity of the Securities provided for in the Conditions or on such earlier date as the same or any part thereof may become due and repayable thereunder, pay or procure to be paid unconditionally to or to the order of the Trustee in euros in a city in which banks have access to the TARGET System in immediately available funds, the principal amount of the Securities repayable on that date and shall in the meantime and until such date (both before and after any judgment or other order of a court of competent jurisdiction) pay or procure to be paid unconditionally to or to the order of the Trustee as aforesaid interest (which shall accrue from day to day) on the principal amount outstanding of the Securities at the rates specified in, or calculated from time to time in accordance with, the Conditions and when payable in accordance with the Conditions,
provided that
:
(a)
every payment of principal or interest in respect of the Securities or any of them made to or to the account of the Principal Paying and Transfer Agent in the manner provided in the Paying Agency Agreement shall satisfy, to the extent of such payment, the relevant covenant by the Issuer contained in this Clause except to the extent that there is default in the subsequent payment thereof in accordance with the Conditions to the Securityholders;
(b)
if any payment of principal or interest in respect of the Securities or any of them is made after the date on which such amount is payable in accordance with the Conditions, payment shall be deemed not to have been made until either the full amount is paid to the Securityholders or, if earlier, the seventh day after notice has been given to the Securityholders in accordance with Condition 15 that the full amount has been received by the Principal Paying and Transfer Agent or the Trustee except, in the case of payment to the Principal Paying and Transfer Agent, to the extent that there is default in the subsequent payment thereof in accordance with the Conditions to the Securityholders; and
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(c)
in any case where payment of the whole or any part of the principal amount of any Security is improperly withheld or refused upon due presentation thereof, interest shall continue to accrue on the whole or such part of such principal amount at the rates aforesaid or, if higher, the rate of interest on judgment debts for the time being provided by English law from (and including) the date of such withholding or refusal up to (and including) the date either on which the full amount (including interest as aforesaid) is paid to the Securityholders or, if earlier, the seventh day after notice has been given to the Securityholders in accordance with Condition 15 that the full amount (including interest as aforesaid) payable in respect of such Security is available for payment, provided that, upon further presentation thereof being duly made, such payment is in fact made.
The Trustee will hold the benefit of this covenant on trust for the Securityholders in accordance with this Trust Deed.
2.3
Settlement of Equity Funded Deferred Interest
(a)
The Issuer covenants with the Trustee that, so long as any Equity Funded Deferred Interest has arisen and remains unpaid, it will:
(i)
to the extent permitted by applicable law and subject to Condition 5.3, promptly fund the full settlement in cash of such Equity Funded Deferred Interest using the proceeds raised from the issue, offer and sale or contribution of Authorised Equity (as defined in the Conditions) in accordance with the provisions of Condition 5.2; and
(ii)
pay or procure to be paid such proceeds (less any expenses relating thereto) unconditionally to or to the order of the Trustee or the Principal Paying Agent in euros in a city in which banks have access to the TARGET System in immediately available funds as soon as practicable, but in any event within twenty business days following the settlement of the relevant issue, offer and sale or contribution of Authorised Equity. Notice of such payment shall be given to the Trustee and the Principal Paying Agent and the Securityholders (in accordance with Condition 15) five business
days
prior to the date on which such payment is made.
(b)
The Trustee will hold the benefit of this covenant on trust for the Securityholders in accordance with this Trust Deed.
(c)
Any amounts received by the Trustee pursuant to this Clause 2.3 shall forthwith be paid by it to the Principal Paying and Transfer Agent for payment to the Securityholders in the manner provided in the Paying and Transfer Agency Agreement.
2.4
Subordination
Upon the occurrence of any Insolvency Event in relation to the Issuer, the rights and claims of the Securityholders against the Issuer under this Trust Deed and in relation to the Securities are subordinated to the extent set out in Condition 2 (
Status
).
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2.5
Discharge
Subject to Clause 2.6, any payment to be made in respect of the Securities by the Issuer or the Trustee may be made as provided in the Conditions and any payment so made will (subject to Clause 2.6), to such extent, be a good discharge to the Issuer or the Trustee, as the case may be.
2.6
Following certain Enforcement Events
Upon the occurrence of an Enforcement Event, the Trustee may:
(a)
by notice in writing to the Issuer and the Agents require the Agents, until notified by the Trustee to the contrary, so far as permitted by applicable law:
(i)
to act thereafter as Agents of the Trustee under this Trust Deed and the Securities on the terms of the Paying Agency Agreement (with consequential amendments as necessary save that the Trustee’s liability for the indemnification, remuneration and all other out-of-pocket expenses of the Agents shall be limited to the amounts for the time being held by the Trustee in respect of the Securities on the trusts of this Trust Deed and available for such purpose) and thereafter to hold all Securities and all sums, documents and records held by them in respect of Securities on behalf of the Trustee; and/or
(ii)
to deliver up all Securities and all sums, documents and records held by them in respect of Securities to the Trustee or as the Trustee shall direct in such notice
provided that
such notice shall be deemed not to apply to any documents or records which the relevant Agent is obliged not to release by any law or regulation; and
(b)
by notice in writing to the Issuer require it to make all subsequent payments in respect of the Securities to or to the order of the Trustee and not to the Principal Paying and Transfer Agent; with effect from the issue of any such notice to the Issuer and until such notice is withdrawn proviso (a) to Clauses 2.2 and (so far as it concerns payments by the Issuer) Clause 2.5 shall cease to have effect.
2.7
Calculation of Rate of Interest
References in proviso (b) to Clause 2.2 to “the rates aforesaid” shall, in respect of any Securities bearing interest at a floating rate, in the event of such Securities having become due and repayable, with effect from the expiry of the Interest Period during which such Securities become due and repayable, be construed as references to the rates of interest calculated
mutatis mutandis
in accordance with the Conditions and notices thereof shall be published in accordance with the Conditions unless the Trustee otherwise agrees.
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3.
FORM AND ISSUE OF THE SECURITIES AND FURTHER ISSUES
3.1
Form and Denomination
The Securities are issued in registered form in an initial aggregate principal amount of €750,000,000, each with a minimum denomination of €50,000 and integral multiples of €1,000 above such amount.
3.2
The Global Certificates
(a)
On issue of the Securities, the Unrestricted Global Certificate and the Restricted Global Certificate will be issued representing the aggregate principal amount of the Securities and the Issuer shall procure that the appropriate entries be made in the register of Securityholders by the Registrar to reflect the issue of such Securities.
(b)
The Unrestricted Global Certificate and the Restricted Global Certificate will be issued in the name of a nominee for a common depositary for Euroclear and Clearstream, Luxembourg. The Securities represented by the Global Certificates shall be subject to their terms in all respects and entitled to the same benefits under this Trust Deed as individual Securities represented by Definitive Certificates.
(c)
Interests in the Global Certificates shall be exchangeable for Definitive Certificates as set out in the Global Certificates.
(d)
The Unrestricted Global Certificate and the Restricted Global Certificate shall be in or substantially in the forms set out in Part 1 and Part 2 of Schedule 1 respectively, and the Restricted Global Certificate shall bear the Rule 144A Legend.
3.3
Definitive Certificates
(a)
The Global Certificates are exchangeable for Definitive Certificates in the limited circumstances set out therein. The Definitive Certificates may be printed or typed and need not be security printed unless otherwise required by applicable stock exchange requirements. The Definitive Certificates will be endorsed with the Conditions.
(b)
The Definitive Certificates, if issued, shall be in or substantially in the form set out in Schedule 2.
3.4
Signature
The Global Certificates and Definitive Certificates (if issued) will be signed manually or in facsimile by a director of the Issuer duly authorised for the purpose and will be authenticated manually by or on behalf of the Registrar. The Issuer may use the facsimile signature of any person who at the date of this Trust Deed is an authorised director of the Issuer even if at the time of issue of any Security (including the Global Certificates) he no longer holds such office or is so authorised. Securities (including the Global Certificates) so executed and authenticated will be valid evidence of binding and valid obligations of the Issuer.
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3.5
Entitlement to treat Holder as Owner
The Issuer, the Trustee and any Agent may deem and treat the registered holder of any Security as the absolute owner of such Security for all purposes, free of any equity, set-off or counterclaim on the part of the Issuer against the original or any intermediate holder of such Security (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the related Certificate issued in respect of it (other than a duly executed transfer thereof)) for all purposes and, except as ordered by a court of competent jurisdiction or as required by applicable law, the Issuer, the Trustee and the Agents shall not be affected by any notice to the contrary. All payments made to any such holder shall be valid and, to the extent of the sums so paid, effective to satisfy and discharge the liability for the moneys payable on the Securities.
3.6
Further Issues
(a)
The Issuer may from time to time without the consent of the Securityholders create and issue further securities having the same terms and conditions as the Securities in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with, and have the same International Securities Identification Number (ISIN) and common code number as, the Securities.
(b)
Any further securities forming a single series with the Securities shall be constituted by a deed supplemental to the Trust Deed. The Issuer shall prior to the issue of any further securities to be so constituted execute and deliver to the Trustee a deed supplemental to this Trust Deed (if applicable duly stamped) and containing covenants by the Issuer in the form
mutatis mutandis
of Clause 2 in relation to the principal amount and interest in respect of such further securities and such other provisions (corresponding to any of the provisions contained in this Trust Deed) as the Trustee shall require and effecting other modifications to this Trust Deed as the Trustee shall require in order to reflect the issue of such further securities.
(c)
A memorandum of every such supplemental deed shall be endorsed by the Trustee on this Trust Deed and by the Issuer on the duplicate(s) of this Trust Deed.
(d)
Whenever it is proposed to create and issue any further securities, the Issuer shall give to the Trustee not less than 14 days’ notice in writing of its intention so to do, stating the amount of the further securities proposed to be created and issued.
4.
STAMP DUTIES AND TAXES
4.1
Stamp Duties
The Issuer will pay any stamp, issue, registration, documentary and other similar duties and taxes, including interest and penalties, payable on or in connection with (i) the execution and delivery of this Trust Deed and (ii) the constitution, issue and offering of the Securities. The Issuer will also pay (or, if the same are required to be
12
paid in the United Kingdom by the Trustee, the Issuer shall pay the necessary amount to the Trustee to enable the Trustee to pay) all stamp, issue, registration, documentary or other similar duties and taxes payable in any jurisdiction in relation to which the liability to pay arises directly as a result of any action taken by or on behalf of the Trustee or, as the case may be, (where entitled under Condition 9 to do so, and subject to Clause 2.4) the Securityholders to enforce the obligations of the Issuer under this Trust Deed or the Securities.
4.2
Relevant Taxing Jurisdiction
If the Issuer shall become subject generally to the taxing jurisdiction of any country or any political subdivision thereof or therein that has the power to tax (each an “
Additional Taxing Jurisdiction
”) other than or in addition to a Relevant Taxing Jurisdiction , it shall immediately notify the Trustee upon becoming aware thereof and (if the Trustee so requires) shall enter into a trust deed supplemental hereto, giving to the Trustee an undertaking or covenant in form and manner satisfactory to the Trustee in terms corresponding to the terms of Condition 8 in respect of such Additional Taxing Jurisdiction. Condition 8 shall be deemed to apply as if references in such provision to “
Taxes
” included taxes imposed by way of withholding or deduction by any such Additional Taxing Jurisdiction (or any political subdivision thereof or therein).
5.
COVENANT OF COMPLIANCE
The Issuer hereby covenants with the Trustee that it will comply with and perform and observe all the provisions of this Trust Deed which are expressed to be binding on it. The Conditions shall be binding on the Issuer and the Securityholders. The Trustee shall be entitled to enforce the obligations of the Issuer under the Securities and the Conditions as if the same were set out and contained in this Trust Deed which shall be read and construed as one document therewith. The provisions contained in Schedule 3 shall have effect in the same manner as if herein set forth.
6.
AMOUNTS DUE TO THE TRUSTEE
In respect of amounts due to the Trustee in its personal capacity under this Trust Deed (including all amounts due pursuant to Clause 11), the Trustee may at any time, at its discretion and without notice, take such proceedings and/or other steps as it may think fit against or in relation to the Issuer to obtain payment of the amounts due.
7.
PROCEEDINGS, ACTION AND INDEMNIFICATION
7.1
Proof of Default
Should the Trustee take legal proceedings against the Issuer to enforce any of the provisions of the Securities or this Trust Deed, proof therein that as regards any specified Security the Issuer has made default in paying any principal or interest payable in respect of such Security shall (unless the contrary be proved) be sufficient evidence that the Issuer has made the like default as regards all other Securities which are then payable.
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7.2
Securityholders’ directions or requests
Upon the occurrence of an Enforcement Event or upon the breach by the Issuer of any of its obligations under this Trust Deed (other than any of its obligation set out in the Conditions), the Trustee may at any time, at its discretion and without further notice, institute such proceedings or take such other action against the Issuer as permitted by Condition 9 to recover any amounts due in respect of the Securities or to enforce any of its obligations under this Trust Deed or the Conditions, but the Trustee shall not be bound to take any such action or proceedings or any other action under this Trust Deed unless:
(a)
instructed to do so by Securityholders holding not less than 25% in aggregate principal amount of the outstanding Securities; or
(b)
so directed by an Extraordinary Resolution,
subject in each case to it being indemnified and/or secured to its satisfaction against all actions, proceedings, claims and demands to which it may thereby render itself liable and all Liabilities which it may incur by so doing.
7.3
Enforcement by Trustee only
In accordance with Condition 9.7, no Securityholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound as aforesaid so to proceed, fails to do so within a reasonable period and such failure is continuing.
7.4
Notification to the Trustee
The Issuer shall notify the Trustee in writing immediately upon becoming aware of any action or proceedings to enforce the terms of this Trust Deed and/or the Securities being taken directly against the Issuer by any Securityholder or Securityholders.
8.
APPLICATION OF MONEYS RECEIVED BY THE TRUSTEE
8.1
Declaration of Trust
All moneys received by the Trustee in respect of the Securities or amounts payable under this Trust Deed will be held by the Trustee (subject to the provisions of Clause 8.2 and Clause 8.3) on trust to apply them:
(a)
first, in payment of all Liabilities properly incurred by the Trustee or any Appointee (including all amounts payable to it pursuant to Clause 11) in carrying out its functions under this Trust Deed;
(b)
secondly, subject to the provisions of Clause 2.4, in payment of any amounts owing in respect of the Securities
pari passu
and rateably; and
(c)
thirdly, in payment of the balance (if any) to the Issuer for itself.
Without prejudice to this Clause 8.1, if the Trustee holds any moneys which represent principal or interest or other sums in respect of Securities which have become void or
14
in respect of which claims have become prescribed under Condition 9, the Trustee will hold such moneys upon the above trusts.
8.2
Suspense Accounts
Any amount received or recovered by the Trustee (otherwise than as a result of a payment by the Issuer to the Trustee in accordance with Clause 2) in respect of any sum payable by the Issuer under this Trust Deed or the Securities may be placed in a suspense account and kept there for so long as the Trustee thinks fit.
8.3
Accumulation
If the amount of the moneys at any time available for payment in respect of the Securities under Clause 8.1 is less than 10% of the principal amount of the Securities then outstanding, the Trustee may, at its discretion, invest such moneys. The Trustee may retain such investments and accumulate the resulting income until the investments and the accumulations, together with any other funds for the time being under the control of the Trustee and available for such payment, amount to at least 10% of the principal amount of the Securities then outstanding. The accumulated investments (after deduction of, or provision for, any applicable taxes) will be applied as specified in Clause 8.1. All interest and other income deriving from such investments shall be applied first in payment or satisfaction of all amounts then due and unpaid under Clause 11 to the Trustee and/or any Appointee and otherwise held for the benefit of and paid to the Securityholders.
8.4
Investment
Any moneys held by the Trustee may be invested in the name or under the control of the Trustee in any investments or other assets in any part of the world whether or not they produce income or by placing the same on deposit in the name or under the control of the Trustee at such bank or other financial institution and in such currency as the Trustee may, in its absolute discretion, think fit. If that bank or institution is the Trustee or a subsidiary, holding or associated company of the Trustee, it shall not be liable to account for interest at a rate greater than that payable by it to an independent customer on a deposit of the type made. The Trustee may at any time vary any such investments for or into other investments or convert any moneys so deposited into any other currency and shall not be responsible for any resulting loss, whether due to depreciation in value, fluctuation in exchange rates or otherwise.
9.
PARTIAL PAYMENTS
Upon any payment under Clause 2.2 or Clause 2.3 (other than (a) a payment which is made in full or (b) a payment which is made in full except to the extent of any withholding or deduction made therefrom for or on account of Taxes or duties as permitted by the Conditions against surrender of a Security), the Security in respect of which such payment is made shall be produced to the Trustee or the Principal Paying and Transfer Agent and the Trustee shall or shall cause the Principal Paying and Transfer Agent to enface thereon a memorandum of the amount paid and the date of such payment, but the Trustee may dispense with such production and enfacement upon such indemnity being given as it shall think sufficient.
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10.
COVENANTS BY THE ISSUER
So long as any of the Securities remains outstanding the Issuer shall:
(a)
Conduct:
at all times carry on and conduct its affairs, and procure that its subsidiaries carry on and conduct their respective affairs, in a proper manner in accordance with good business practice;
(b)
Information:
so far as permitted by applicable law, give to the Trustee such information, opinions, certificates and other evidence as it shall require and in such form as it shall require (including, without limitation, the certificates called for by the Trustee pursuant to Clause (e)) for the performance of its functions;
(c)
Books of Account:
at all times keep, and procure that each of its subsidiaries keeps, proper books of account and, after an Enforcement Event has occurred and at any other time upon reasonable notice being given to the Issuer, allow the Trustee and any person appointed by it to whom the Issuer and/or the relevant subsidiary has no reasonable objection, access to all books of record and account and other relevant records of the Issuer and/or the relevant subsidiary, respectively, at all reasonable times during normal business hours;
(d)
Notice of Events:
give notice in writing to the Trustee immediately upon becoming aware of the occurrence of any Enforcement Event or any breach of any of the provisions of this Trust Deed or any Change of Control Event, and without waiting for the Trustee to take any further action;
(e)
Officer’s Certificate:
send to the Trustee, within ten business days of any request by the Trustee and (without the need for any request) at the time of the despatch to the Trustee of its year end consolidated financial statements as provided for in Clause (f) below, and in any event not later than 30 days after its year end consolidated financial statements are published, an Officer’s Certificate (in the form or substantially in the form set out in Schedule 5) certifying that up to a specified date being not more than five days before the date of such certificate (the “
Certification Date
”), the Issuer and each subsidiary, as applicable, has complied with all the provisions relating to it as specified under this Trust Deed and/or the Conditions (or, if such is not the case, giving details of the circumstances of such non-compliance) and that as at such date there did not exist nor had there existed at any time prior thereto since the Certification Date of the last such certificate (or, in the case of the first such certificate, the date of this Trust Deed), any Enforcement Event or other matter which would affect the Issuer’s ability to perform its obligations hereunder (or, if such is not the case, specifying the same);
(f)
Financial Statements etc.:
send to the Trustee in the English language (i) as soon as the same become available and in any event no later than 30 days following the publication of the year end consolidated financial statements of the Issuer, two copies of its consolidated financial statements for such year, audited by an internationally recognised firm of independent auditors and (ii) as soon as the same become available and in any event no later than 30 days following the publication of the semi-annual interim consolidated financial
16
statements of the Issuer, two copies of its consolidated financial statements for such six-month period, subject to a limited review by an internationally recognised firm of independent auditors, together with (iii) two copies in English of every report or other notice, statement or circular issued, or that legally or contractually should be issued, to the members or creditors (or any class of them) of the Issuer generally in their capacity as such at the time of the actual (or legally or contractually required) publication or issue thereof, and procure that the same are made available for inspection by Securityholders at the specified offices of the Paying and Transfer Agents as soon as practicable thereafter;
(g)
Further Acts:
insofar as is permitted by applicable law, at all times execute and/or do all such further documents, acts and things as may be necessary in the opinion of the Trustee to give effect to this Trust Deed;
(h)
Maintenance of Agents:
at all times maintain a Registrar, a Principal Paying and Transfer Agent, an Agent Bank and Paying and Transfer Agents in accordance with the Conditions;
(i)
Change of Agents:
give, or procure that there be given, notice to the Securityholders in accordance with Condition 15 of any appointment, resignation or removal of any Agent (other than the appointment of the initial Agents) or change of any Agent’s specified office and not make any such appointment or removal without the written approval of the Trustee;
(j)
Obligations of Agents:
observe and comply with its obligations and use all reasonable endeavours to procure that the Agents observe and comply with their obligations under the Paying Agency Agreement and notify the Trustee immediately it becomes aware of any material breach of such obligations, or failure by a Paying and Transfer Agent to comply with such obligations, in relation to the Securities;
(k)
Notification of Late Payment:
procure the Principal Paying and Transfer Agent to notify the Trustee forthwith in the event that it does not, on or before the date any amount becomes payable in respect of the Securities or any of them, receive unconditionally pursuant to the Paying Agency Agreement payment of a sufficient amount in euros to discharge the amount of moneys payable in respect thereof on such date;
(l)
Notification of Unconditional Payment:
in the event of the unconditional payment to the Principal Paying and Transfer Agent of any amount payable in respect of the Securities or any of them being made after the date for payment thereof in accordance with the Conditions forthwith give or procure to be given notice to the Securityholders in accordance with Condition 15, that such payment has been made;
(m)
Notices relating to Optional Deferral:
give or procure to be given: (i) in the event it elects to optionally defer payment of any Scheduled Interest Amounts pursuant to Condition 4.1, an Optional Deferral Notice (as defined in Condition 4.1) to the Trustee (in an Officer’s Certificate) and to the Principal Paying and Transfer Agent, the Registrar and the Securityholders in
17
accordance with Condition 15, not less than ten business days prior to an Interest Payment Date; (ii) while any Optionally Deferred Interest remains outstanding, notice to the Trustee (in an Officer’s Certificate) and the Securityholders in accordance with Condition 15 as soon as practicable after becoming aware of the occurrence of any of the events specified in Condition 4.1(b); (iii) at least seven business days’ notice to the Trustee, the Principal Paying and Transfer Agent, the Registrar and the Securityholders of its intention to pay any Optionally Deferred Interest in cash pursuant to Condition 4.1(b), specifying the date of such payment; and (iv) in the event that any Optionally Deferred Interest becomes Old Optionally Deferred Interest in accordance with Condition 4.1, notice to the Trustee and the Securityholders in accordance with Condition 15 no later than seven business days thereafter;
(n)
Notices relating to Mandatory Deferral:
give or procure to be given not less than five business days prior to any Interest Payment Date, notice of the occurrence of any Mandatory Deferral Event as of the relevant Test Date, and the amount of any available cash proceeds which may be used as provided in Condition 4.2 to pay any Scheduled Interest Amount payable on the following Interest Payment Date to the Trustee (in an Officer’s Certificate in the form or substantially in the form set out in Schedule 6) and to the Agent Bank, the Principal Paying and Transfer Agent, the Registrar and Securityholders in accordance with Condition 15; or, if no Mandatory Deferral Event occurred as of the relevant Test Date, notice to the Trustee (in an Officer’s Certificate in the form or substantially in the form set out in Schedule 6) certifying that no Mandatory Deferral Event occurred as of the relevant Test Date, and setting out the details of the relevant Coverage Ratio and, if so requested by the Trustee, the amount of any Capital Expenditure, EBITDA, ESOP Cashflow, Interest Expense or Taxes Paid;
(o)
Notices relating to Equity Funding of Deferred Interest:
in the event that any unpaid Equity Funded Deferred Interest is to be settled by way of the issue, offer or sale of ordinary shares (pursuant to the provisions of Condition 5.2), give or procure to be given notice to the Trustee (in an Officer’s Certificate) and the Securityholders in accordance with Condition 15:
(i)
if the Issuer does not have a sufficient amount of authorised ordinary shares available for issue, (x) notice that all or part, as the case may be, of the relevant Equity Funded Deferred Interest cannot be settled for such reason, and (y) promptly following approval and adoption by the shareholders of the Issuer of any resolution relating to the authorisation for issuance of a sufficient amount of ordinary shares to settle such unpaid Equity Funded Deferred Interest, notice of such approval and adoption; or
(ii)
in the event of the issue, offer and sale or contribution of Authorised Equity and the payment of the proceeds thereof to the Trustee in accordance with the provisions of Condition 5.2, the amount of such proceeds and the relevant Equity Funded Deferred Interest Settlement Date in respect thereof;
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(p)
Notices relating to Equity Funded Deferred Interest:
in the event that any Equity Funded Deferred Interest remains unpaid, (i) give or procure to be given to the Trustee (in an Officer’s Certificate) notice of the occurrence of any of the events specified in Conditions 4.3 and 5.4; (ii) give or procure to be given to the Trustee (in an Officer’s Certificate) and the Securityholders in accordance with Condition 15, as soon as practicable after becoming aware thereof, of the occurrence of a Market Disruption Event; and, following the termination or cessation of such Market Disruption Event, notice of such termination or cessation; and (iii) every month following the date on which such Equity Funded Deferred Interest first arose, until the date on which such unpaid Equity Funded Deferred Interest is settled in full, give or procure to be given to the Trustee information on the best endeavours being undertaken by the Issuer to fund such unpaid Equity Funded Deferred Interest;
(q)
Listing:
use its best endeavours to obtain and maintain the listing of the Securities on the Luxembourg Stock Exchange for as long as any Security is outstanding. If, however, it is unable to do so, having used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be unduly onerous, the Issuer will instead use its best endeavours promptly to obtain and thereafter to maintain a listing for the Securities on such other stock exchange approved by the Trustee (such approval not to be unreasonably withheld);
(r)
Notice to Securityholders:
send to the Trustee for its approval (such approval not to be unreasonably withheld), not less than three business days prior to the date on which any such notice is to be given to Securityholders, a copy of each notice to be given to the Securityholders in accordance with Condition 15 and not give such notice without such approval (which approval shall not be unreasonably withheld), and, upon publication, two copies of each such notice (such approval, unless so expressed, not to constitute approval of such notice for the purposes of Section 21 of the Financial Services and Markets Act 2000);
(s)
Securities held by the Issuer etc.:
send to the Trustee promptly after being so requested by it an Officer’s Certificate setting out the total number and aggregate principal amount outstanding of the Securities which:
(i)
up to and including the date of such certificate, have been purchased or redeemed by the Issuer or any of its subsidiaries; and
(ii)
at the date of such certificate are held by or on behalf of the Issuer or any of its subsidiaries;
(t)
Notification of Early Redemption or Payment:
not less than the number of days specified in the relevant Condition prior to the redemption or repayment date in respect of any Security, give to the Trustee notice in writing of the amount of such redemption or repayment pursuant to the Conditions, specify the date fixed for such redemption or prepayment and duly proceed to redeem or repay such Securities accordingly;
(u)
Tax Redemption
: if the Issuer gives notice to the Trustee that it intends to redeem the Securities pursuant to Condition 6.3, the Issuer shall, prior to
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giving such notice to the Securityholders, provide such information to the Trustee as the Trustee requires in order to satisfy itself of the matters referred to in such Condition;
(v)
Maintaining Current Ratings of the Securities:
furnish, or procure that there is furnished, from time to time, any and all documents, instruments, information and undertakings that may be reasonably necessary in order to maintain the current ratings of the Securities by the Rating Agencies (save that when any such document, instrument, information and/or undertaking is not within the possession or control of the Issuer or is not to be given by the Issuer, the Issuer agrees only to use its best endeavours to furnish, or procure that there is furnished, from time to time any such documents, instruments, information and undertakings as may be reasonably necessary in order to maintain the then current ratings of the Securities by the Rating Agencies);
(w)
Inspection of Documents:
procure that each of the Paying and Transfer Agents makes available for inspection by Securityholders at its specified office copies of each of the Relevant Documents and the then latest audited balance sheet and profit and loss account of the Issuer;
(x)
Clearstream, Luxembourg and Euroclear:
use its best endeavours to procure that Clearstream, Luxembourg and/or Euroclear (as the case may be) issue(s) any certificate or other document called for by the Trustee under Clause 12 as soon as practicable after such request;
(y)
Calculation pursuant to the Conditions:
do, or procure that there are done on its behalf, all calculations required pursuant to the Conditions;
(z)
Documents in connection with Meetings of Securityholders:
from time to time as required or contemplated by this Trust Deed or as requested by the Trustee, make available through the Paying and Transfer Agents or otherwise such documents as may be required by the Securityholders in connection with meetings of Securityholders;
(aa)
Modifications:
prior to making any modification or amendment or supplement to this Trust Deed, procure the delivery of legal opinion(s) as to English and any other relevant law, addressed to the Trustee, dated the date of such modification or amendment or supplement, as the case may be, and in a form acceptable to the Trustee from legal advisers acceptable to the Trustee;
(bb)
Rule 144A(d)(4):
for so long as any of the Securities are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer will, during any period in which it is neither subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from the reporting requirements of the Exchange Act pursuant to Rule 12g3-2(b) thereunder, provide to the holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted securities designated by such holder or beneficial owner, in each case upon the request of such holder, beneficial owner or prospective purchaser, the information required to be provided by Rule 144A(d)(4) under the Securities Act;
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(cc)
Recordation as Subordinated Debt:
record its payment obligations in respect of the Securities as subordinated indebtedness in its financial statements; and
(dd)
Tax Laws:
in order to comply with applicable tax laws (inclusive of any current and future laws, rules, regulations, intergovernmental agreements and interpretations thereof promulgated by competent authorities) related to this Trust Deed, the Paying Agency Agreement and the Securities in effect from time to time (“
Applicable Law
”) that a foreign financial institution, the Issuer, the Trustee, the Paying and Transfer Agents or another party is or has agreed to be subject to, the Issuer agrees (i) to provide to the Trustee sufficient information about the parties and/or transactions (including any modification to the terms of such transactions) so the Trustee can determine whether it has tax related obligations under Applicable Law, (ii) that the Trustee shall be entitled to make any withholding or deduction from payments to comply with Applicable Law for which the Trustee shall not have any liability, and (iii) to hold harmless the Trustee for any losses it may suffer due to the actions it takes to comply with Applicable Law. The terms of this Clause 10(dd) shall survive the termination of this Trust Deed.
11.
REMUNERATION AND INDEMNIFICATION OF TRUSTEE
11.1
Normal Remuneration
As from the date of this Trust Deed, the Issuer shall pay to the Trustee as remuneration for its services as trustee, such sum at such rate on such dates in each case as may be agreed between them from time to time. Such remuneration shall accrue from day to day from the date of this Trust Deed. However, if any payment to a Securityholder of any moneys payable in respect of any Security is improperly withheld or refused, such remuneration shall continue to accrue as from the date of such withholding or refusal until payment to such Securityholder is duly made.
11.2
Additional Remuneration
At any time after the occurrence of an Enforcement Event or any breach of the provisions of this Trust Deed, or if the Trustee considers it expedient in the interests of Securityholders, or is requested by the Issuer, to undertake duties which they both agree to be of an exceptional nature or otherwise outside the scope of the normal duties of the Trustee under this Trust Deed, the Issuer shall pay to the Trustee such additional remuneration as shall be agreed between them or, failing such agreement as to any of the matters in this Clause (or as to such sums referred to in Clause 11.1), as determined by a person (acting as an expert) selected by the Trustee and approved in writing by the Issuer or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales. The expenses involved in such nomination and such person’s fee shall be paid by the Issuer. The determination of such person shall be conclusive and binding on the Issuer, the Trustee and the Securityholders.
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11.3
Expenses
Subject to Clause 13 below, the Issuer shall also on demand by the Trustee pay or discharge all Liabilities properly incurred by the Trustee and any Appointee in the preparation and execution of this Trust Deed and the performance of its functions under this Trust Deed including, but not limited to, legal and travelling expenses and any stamp, documentary or other taxes or duties paid by the Trustee in connection with any legal proceedings brought or contemplated by the Trustee against the Issuer to enforce any provision of this Trust Deed or the Securities. Such Liabilities shall:
(a)
in the case of payments made by the Trustee before such demand, carry interest from the date of the demand at the rate equal to the Trustee’s cost of funding (as reasonably determined by the Trustee) on the date on which the Trustee made such payments; and
(b)
in other cases, carry interest at such rate from 30 days after the date of the demand or (where the demand specifies that payment is to be made on an earlier date) from such earlier date.
11.4
Indemnity
Subject to Clause 13 below, the Issuer will indemnify the Trustee in respect of all Liabilities paid or properly incurred by it in the fulfilment of its obligations, rights, authorities and discretions under this Trust Deed or by any Appointee in the carrying out its functions in the fulfilment of its obligations under this Trust Deed and against any Liability (including, but not limited to, all Liabilities paid or incurred in disputing or defending any of the foregoing) which any of them may incur or which may be made against any of them arising out of or in relation to or in connection with, its appointment or the exercise of its functions.
11.5
Claims of the Trustee unaffected
The provisions of Clause 2.4 apply only in respect of amounts payable pursuant to Clauses 2.2 and 2.3, and under any Security, and nothing set out in Clause 2.4. shall affect or prejudice any claim by the Trustee against the Issuer in respect of amounts payable under this Clause.
11.6
Provisions Continuing
The provisions of Clauses 11.3, 11.4 and 11.5 shall continue in full force and effect in relation to the Trustee even if it may have ceased to be the Trustee in relation to claims which arose during the period of its appointment as Trustee.
11.7
No withholding
The Issuer hereby further undertakes to the Trustee that all monies payable by the Issuer to the Trustee under this Clause shall be made without set-off, counterclaim, deduction or withholding unless compelled by law in which event the Issuer will pay such additional amounts as will result in the receipt by the Trustee of the amounts which would otherwise have been payable by the Issuer to the Trustee under this Clause in the absence of any such set-off, counterclaim, deduction or withholding.
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12.
SUPPLEMENT TO THE TRUSTEE ACTS
The Trustee shall have all the powers conferred upon trustees by the Trustee Acts and by way of supplement thereto it is expressly declared as follows:
(a)
Advice:
The Trustee may act on the advice or opinion of, or any information obtained from, any expert, or a certificate or report or confirmation of the Auditors, or of any accountants, financial advisers, investment banks, lawyers or experts in each case whether or not addressed to the Trustee, and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto entered into by the Trustee or in any other manner) by reference to a monetary cap, methodology or otherwise, whether obtained by certificate or report and shall not be responsible to anyone for any Liability occasioned by so acting. Any such advice, opinion, information, certificate or report may be sent or obtained by letter, facsimile transmission, e-mail or cable and the Trustee shall not be liable to anyone for acting in good faith on any advice, opinion, information, certificate or report purporting to be conveyed by such means although the same shall contain some error or shall not be authentic. The Trustee shall be entitled to accept and be entitled to rely on any such advice, opinion, information, certificate or report and, if so relied on, such advice, opinion, information, certificate or report shall be conclusive and binding on the Issuer, the Trustee and the Securityholders in the absence of manifest error.
(b)
Trustee to Assume Due Performance:
The Trustee need not notify anyone of the execution of this Trust Deed or do anything to ascertain whether any Enforcement Event or other event, condition or act or breach of the provisions of this Trust Deed, the happening of which would cause a right or remedy to become exercisable by the Trustee under this Trust Deed or Change of Control Event has occurred or to monitor or supervise the performance and observance by the Issuer of its obligations hereunder or under any Relevant Document and, until it has actual knowledge or express notice pursuant to this Trust Deed to the contrary, the Trustee may assume that no such event, condition or act has occurred and that the Issuer is performing all its obligations under this Trust Deed and the Securities.
(c)
Resolutions of Securityholders:
The Trustee shall not be liable to any person by reason of having acted upon any Written Resolution or any Extraordinary or other resolution purporting to have been passed at any meeting of Securityholders in respect whereof minutes have been made and signed or any direction or request of Securityholders even though subsequent to its acting it may be found that there was some defect in the constitution of the meeting or the passing of the resolution or (in the case of a Written Resolution) that not all Securityholders had signed the Extraordinary Resolution or (in the case of a direction or request) it was not signed by the requisite number of Securityholders or that for any reason the resolution, direction or request was not valid or binding upon such Securityholders.
(d)
Officer’s Certificate:
The Trustee may call for and accept as sufficient evidence of any fact or matter or of the expediency of any act an Officer’s Certificate as to any fact or matter upon which the Trustee may, in the exercise
23
of any of its functions require to be satisfied or have information to the effect that, in the opinion of the persons so certifying, any particular act is expedient and the Trustee need not call for further evidence and shall not be responsible for any Liability that may be occasioned by it or any other person acting on such certificate.
(e)
Deposit of Documents:
The Trustee shall be at liberty to hold this Trust Deed and any other documents or to deposit them in any part of the world with any banker or banking company or company whose business includes undertaking the safe custody of documents or lawyer or firm of lawyers considered by it to be of good repute and the Trustee shall not be responsible for or required to insure against any Liability incurred in connection with any such holding or deposit, and may pay all sums required to be paid on account of or in respect of any such deposit.
(f)
Custodians/Nominees:
The Trustee may appoint and pay any person to act as a custodian or nominee on any terms in relation to such assets of the trusts constituted by this Trust Deed as the Trustee may determine, including for the purposes of depositing with a custodian this Trust Deed or any document relating to the trusts constituted by this Trust Deed; the Trustee is not obliged to appoint a custodian if the Trustee invests in securities payable to bearer.
(g)
Discretion of Trustee:
Save as expressly otherwise provided in this Trust Deed, the Trustee shall have absolute and uncontrolled discretion as to the exercise or non-exercise of its trusts, powers, authorities and discretions under this Trust Deed (the exercise or non-exercise of which as between the Trustee and the Securityholders shall be conclusive and binding on the Securityholders) and shall not be responsible for any Liability which may result from their exercise or non-exercise, and in particular the Trustee shall not be bound to act at the request or direction of the Securityholders or otherwise under any provision of this Trust Deed or to take at such request or direction or otherwise any other action under any provision of this Trust Deed unless it shall first be indemnified and/or secured to its satisfaction against all Liabilities to which it may render itself liable or which it may incur by so doing.
(h)
Agents:
Whenever it considers it expedient in the interests of the Securityholders, the Trustee may, in the conduct of its trust business, instead of acting personally, employ and pay an agent selected by it, whether or not a lawyer or other professional person, to transact or conduct, or concur in transacting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee (including the receipt and payment of money).
(i)
Delegation:
Whenever it considers it expedient in the interests of the Securityholders, the Trustee may delegate to any person and on any terms (including power to sub-delegate) all or any of its functions provided that the Trustee may not delegate the right to determine whether an Enforcement Event has occurred unless prior to such delegation the Trustee provides to the Issuer confirmation in writing that the Trustee has been advised by its legal advisers that it should delegate that right (with or without any other rights, trusts, powers, authorities and discretions) to another person or fluctuating
24
body of persons because of a conflict of interest or possible conflict of interest and/or other similar circumstances which the Trustee might face, or be subjected to, as the trustee of this Trust Deed if it were not to delegate that right.
(j)
Forged Securities:
The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any Security purporting to be such and subsequently found to be forged or not authentic.
(k)
Responsibility for Appointees:
If the Trustee exercises reasonable care in selecting any Appointee appointed under this Clause, it will not have any obligation to supervise such Appointee or be responsible for any Liability incurred by reason of the misconduct of such Appointee, or the default or misconduct or default of any substitute appointed by such Appointee.
(l)
Confidentiality:
The Trustee shall not (unless and to the extent ordered so to do by a court of competent jurisdiction) be required to disclose to any Securityholder any information (including, without limitation, information of a confidential, financial or price sensitive nature) made available to the Trustee by the Issuer or any other person in connection with this Trust Deed and no Securityholder shall be entitled to take any action to obtain from the Trustee any such information.
(m)
Determinations Conclusive:
The Trustee may determine all questions and doubts arising in relation to any of the provisions of this Trust Deed. Every such determination, whether or not relating in whole or in part to the acts or proceedings of the Trustee, shall be conclusive and shall bind the Trustee and the Securityholders.
(n)
Breach of Provisions of the Trust Deed:
The Trustee may determine whether or not any breach by the Issuer of any provision of this Trust Deed is in its opinion capable of remedy and/or whether or not any event is in its opinion materially prejudicial to the interests of the Securityholders. Any such determination will be conclusive and binding upon the Issuer and the Securityholders.
(o)
Currency Conversion:
Where it is necessary or desirable for any purpose in connection with this Trust Deed or the Conditions to convert any sum from one currency to another, it shall (unless otherwise provided herein or required by law) be converted at such rate or rates, in accordance with such method and as at such date, as may be specified by the Trustee but having regard to current rates of exchange. Any rate, method and date so specified shall be binding on the Issuer and the Securityholders.
(p)
Payment for and Delivery of Securities:
The Trustee shall not be responsible for the receipt or application by the Issuer of the proceeds of the issue of the Securities, the exchange of the interests between the Securities represented by any Global Certificate or the delivery of any Global Certificate or Definitive Certificate to the person(s) entitled to it or them.
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(q)
Securities held by the Issuer, etc.:
Unless notified to the contrary, the Trustee shall be entitled to assume without enquiry (other than requesting a certificate pursuant to Clause 10(s)) that no Securities are held by, for the benefit of, or on behalf of, the Issuer or any of its subsidiaries.
(r)
Legal opinions:
The Trustee shall not be responsible to any person for failing to request, require or receive any legal opinion relating to the Securities or for checking or commenting upon the content of any such legal opinion.
(s)
Interests of Securityholders:
In connection with the exercise or performance by it of any right, power, trust, authority, duty or discretion under or in relation to this Trust Deed (including, without limitation, any modification, waiver, authorisation of any breach or proposed breach of any of the Conditions or this Trust Deed), the Trustee shall have regard to the general interests of the Securityholders (whatever their number) as a class and shall not have regard to any interests arising from circumstances particular to individual Securityholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise or performance for individual Securityholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Securityholder be entitled to claim, from the Issuer, the Trustee or any other person, any indemnification or payment in respect of any tax consequence of any such exercise upon individual Securityholders except to the extent already provided for in Condition 8 and/or any undertaking given in addition thereto or in substitution therefor under this Trust Deed.
(t)
Consents and Approvals:
Any consent or approval given by the Trustee for the purposes of this Trust Deed may be given on such terms and subject to such condition (if any) as the Trustee thinks fit, and notwithstanding anything to the contrary in this Trust Deed may be given retrospectively. The Trustee may give any consent or approval, exercise any power, authority or discretion or take any similar action (whether or not such consent, approval, power, authority, discretion or action is specifically referred to in this Trust Deed) if it is satisfied that the interests of the Securityholders will not be materially prejudiced thereby. For the avoidance of doubt, the Trustee shall not have any duty to the Securityholders in relation to such matters other than that which is contained in the preceding sentence.
(u)
Reliance of Certification of Clearing System:
The Trustee may call for any certificate or other document to be issued by Clearstream, Luxembourg, or Euroclear or any other relevant clearing system as to the principal amount of Securities represented by a Global Certificate standing to the account of any person. Any such certificate or other document shall, in the absence of manifest error, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear’s EUCLID or Clearstream, Luxembourg’s Cedcom system) in accordance with its usual procedures and in which the holder of a particular principal amount of Securities is clearly identified together with the amount of
26
such holding. The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by Clearstream, Luxembourg or Euroclear and subsequently found to be forged or not authentic.
(v)
Right to Deduct or Withhold:
Notwithstanding anything contained in this Trust Deed, to the extent required by any applicable law, if the Trustee is or will be required to make any deduction or withholding from any distribution or payment made by it hereunder or if the Trustee is or will be otherwise charged to, or is or may become liable to, tax as a consequence of performing its duties hereunder whether as principal, agent or otherwise, and whether by reason of any assessment, prospective assessment or other imposition of liability to taxation of whatsoever nature and whensoever made upon the Trustee, and whether in connection with or arising from any sums received or distributed by it or to which it may be entitled under this Trust Deed (other than in connection with its remuneration as provided for herein) or any investments or deposits from time to time representing the same, including any income or gains arising therefrom or any action of the Trustee in connection with the trusts of this Trust Deed (other than the remuneration herein specified) or otherwise, then the Trustee shall be entitled to make such deduction or withholding or, as the case may be, to retain out of sums received by it an amount sufficient to discharge any liability to tax which relates to sums so received or distributed or to discharge any such other liability of the Trustee to tax from the funds held by the Trustee upon the trusts of this Trust Deed. The Trustee shall pay such sums over to the appropriate taxing authority within the period of time required by applicable law.
(w)
Responsibility for Statements etc.:
The Trustee shall not be responsible for, or for investigating any matter which is the subject of, any recital, statement, representation, warranty or covenant of any person contained in this Trust Deed or any other agreement or document relating to the transactions contemplated in this Trust Deed or under such other agreement or document.
(x)
Professional Charges:
Any Trustee of this Trust Deed being a lawyer, accountant, broker or other person engaged in any profession or business shall be entitled to charge and be paid all usual professional and other charges for business transacted and acts done by him or his firm in connection with the trusts of this Trust Deed, and also his proper charges in addition to disbursements for all other work and business done and all time spent by him or his firm in connection with matters arising in connection with this Trust Deed.
(y)
Not Bound to Act:
The Trustee shall not be bound to take any action in connection with this Trust Deed or any obligations arising pursuant hereto, including, without prejudice to the generality of the foregoing, forming any opinion or employing any financial adviser, where it is not satisfied that it will be indemnified against all Liabilities which may be incurred in connection with such action, and may demand prior to taking any such action that there be paid to it in advance such sums as it considers (without prejudice to any further demand) shall be sufficient so to indemnify it.
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(z)
Compliance:
No provision of this Trust Deed shall require the Trustee to do anything which may (i) be illegal or contrary to applicable law or regulation; or (ii) cause it to expend or risk its own funds or otherwise incur any Liability in the performance of any of its duties or in the exercise of any of its rights, powers or discretions, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or Liability is not assured to it.
(aa)
No Responsibility for Rating:
The Trustee shall have no responsibility whatsoever to the Issuer, any Securityholder or any other person for the maintenance of or failure to maintain any rating of any of the Securities by any rating agency.
(bb)
Reliance on Information relating to Meetings:
The Trustee may rely without further investigation on (i) an Officer’s Certificate and/or (ii) the confirmation, opinion, certificate, advice or any other information obtained from any lawyer, consultant or other expert the Trustee deems appropriate regarding any matter governing the procedure for calling and holding a meeting. The Trustee shall be entitled at any time to obtain and rely on such legal advice as it may deem necessary in respect of all applicable laws and regulations governing the procedure for calling and holding any meeting, and the Trustee shall not be responsible for any delay occasioned in obtaining such advice, and all proper costs and expenses incurred for such legal advice shall be borne by the Issuer upon respect of proper evidence thereof.
13.
TRUSTEE’S LIABILITY
Section 1 of the Trustee Act 2000 shall not apply to the duties of the Trustee in relation to the trusts contained in this Trust Deed, provided that if the Trustee fails to show the degree of care and diligence required of it as Trustee having regard to the provisions of this Trust Deed conferring on it any powers, authorities or discretions, nothing in this Trust Deed shall relieve or indemnify it from or against any liability which by virtue of any rule of law would otherwise attach to it in respect of any negligence, wilful default or fraud of which it may be guilty in relation to its duties hereunder.
Where there are any inconsistencies between the Trustee Acts and the provisions of this Trust Deed, the provisions of this Trust Deed shall, to the extent allowed by law, prevail and, in the case of any such inconsistency with the Trustee Act 2000, the provisions of this Trust Deed shall constitute a restriction or exclusion for the purposes of that Act.
The powers conferred upon the Trustee by this Trust Deed shall be in addition to any powers which may from time to time be vested in the Trustee by general law or as a holder of any of the Securities.
14.
TRUSTEE ENTERING INTO CONTRACTS
Neither the Trustee, nor any director or officer of a corporation acting as Trustee under this Trust Deed, whether acting for itself or in any other capacity shall, by reason of its or his fiduciary position, be in any way precluded from entering into or
28
being interested in any contract or financial or other transaction or arrangement with the Issuer and/or any of its subsidiaries or associated companies, from accepting or holding the trusteeship of any other trust deed constituting or securing any other securities issued by or relating to or the trusteeship of any shares in the Issuer or any such person or company as aforesaid, or any other office of profit under the Issuer or any such person or company as aforesaid or from becoming the owner of, or acquiring any interest in, or holding, or disposing, of any Securities or ordinary shares or securities of the Issuer or any such person or company as aforesaid and shall be entitled (a) to exercise and enforce its rights, comply with its obligations and perform its duties, under or in relation to any such transactions, any such trusteeship or, as the case may be, such Securities, ordinary shares or securities, in each case with the same rights as it would have had if the Trustee were not the Trustee and (b) to retain and shall not be in any way liable to account for any profit made or share of brokerage or commission or remuneration or other amount or benefit received thereby or in connection therewith.
15.
WAIVER AND MODIFICATION
15.1
Waiver, Authorisation and Determination
The Trustee may, without the consent of Securityholders and without prejudice to its rights in respect of any subsequent breach, from time to time and at any time, but only and in so far as in its opinion the interests of the Securityholders shall not be materially prejudiced thereby, on such terms and subject to such conditions as to it shall seem fit and proper, waive or authorise any breach, continuing breach or proposed breach by the Issuer of any of the covenants or provisions contained in this Trust Deed, or determine that any condition, event or act which constitutes, or which with the giving of notice and/or the lapse of time would constitute an Enforcement Event shall not be treated as such for the purposes of this Trust Deed
provided always that
the Trustee shall not exercise any powers conferred on it by this Clause 15 in contravention of any express direction given by Extraordinary Resolution or by request in writing made by the holders of not less than 25% in aggregate principal amount of Securities then outstanding, but so that no such direction shall affect any waiver, authorisation or determination previously given or made, or so as to authorise or waive any such breach or proposed breach relating to any of the matters the subject of the Reserved Matters as specified and defined in Schedule 4. Any such waiver, authorisation or determination shall be binding on the Securityholders and, if the Trustee so requires, shall be notified to the Securityholders as soon as practicable in accordance with Condition 15.
15.2
Modification
The Trustee may without, the consent of the Securityholders from time to time and at any time concur with the Issuer in making any modification to this Trust Deed or the Securities or any of the Relevant Documents or any documents supplemental hereto or thereto which in the opinion of the Trustee (a) is of a formal, minor or technical nature or is made to correct a manifest error and (b) any other modification (except in relation to the Reserved Matters set out in Schedule 4 hereto) which is not, in its opinion, materially prejudicial to the interests of the Securityholders. Any such modification shall be binding upon the Securityholders and if the Trustee so requires,
29
shall be notified by the Issuer to the Securityholders as soon as practicable in accordance with Condition 15.
16.
CURRENCY INDEMNITY
16.1
Currency of Account and Payment
Euro is the sole currency of account and payment for all sums payable by the Issuer under or in connection with this Trust Deed and the Securities, including damages.
16.2
Extent of Discharge
An amount received or recovered in a currency other than euro (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the insolvency, winding-up or dissolution of the Issuer or otherwise), by the Trustee or any Securityholder in respect of any sum expressed to be due to it from the Issuer shall only discharge the Issuer to the extent of the euro amount that the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). If the euro amount so received or recovered is less than euro amount expressed to be due to the recipient under this Trust Deed or the Securities, the Issuer shall indemnify such recipient against any loss sustained by it as a result. In any event, the Issuer shall indemnify the recipient against the cost of making any such purchase.
16.3
Indemnities Separate
The indemnities in this Clause constitute separate and independent obligations from the other obligations in this Trust Deed, shall give rise to separate and independent causes of action, shall apply irrespective of any indulgence granted by the Trustee and/or any Securityholder and shall continue in full force and effect despite any judgment, order, claim or proof for a liquidated amount in respect of any sum due under this Trust Deed and/or the Securities or any other judgment or order. Any such Liability as referred to in this Clause 16 shall be deemed to constitute a Liability constituted by the Trustee and the Securityholders and no proof or evidence of any actual Liability shall be required by the Issuer or its liquidator or liquidators.
17.
APPOINTMENT, RETIREMENT AND REMOVAL OF THE TRUSTEE
17.1
Appointment
The Issuer shall have the power to appoint a new Trustee but no person shall be appointed who shall not previously have been approved by an Extraordinary Resolution. One or more persons may hold office as Trustee or Trustees but such Trustee or Trustees shall be or include a Trust Corporation. Whenever there shall be more than two Trustees of this Trust Deed the majority of such Trustees shall be competent to execute and exercise all or any of the Trustee’s functions.
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17.2
Appointment of separate or co-trustees
Notwithstanding the provisions of Clause 17.1, the Trustee may by notice in writing to the Issuer (but without the consent of the Issuer or the Securityholders), appoint any person to act either as a separate trustee or as a co-trustee jointly with the Trustee:
(a)
if the Trustee considers such appointment to be in the interests of the Securityholders; or
(b)
for the purposes of conforming to any legal requirements, restrictions or conditions in any jurisdictions in which any particular act or acts is or are to be performed; or
(c)
for the purposes of obtaining a judgment in any jurisdiction or the enforcement in any jurisdiction of either a judgment already obtained or any of the provisions of this Trust Deed against the Issuer.
Subject to the provisions of this Trust Deed the Trustee may confer on any person so appointed such functions as it thinks fit. The Trustee may by written notice to the Issuer and that person remove that person. At the Trustee’s request, the Issuer shall forthwith do all things as may be required to perfect such appointment or removal and it irrevocably appoints the Trustee as its attorney in its name and on its behalf to do so.
17.3
Retirement and removal
The Trustee may retire at any time on giving not less than 60 days’ prior written notice to the Issuer without assigning any reason and without being responsible for any costs occasioned by such retirement and the Securityholders shall have the power exercisable by Extraordinary Resolution to remove any Trustee, provided that in the event of the only trustee of this Trust Deed which is a Trust Corporation giving notice or being removed under this Clause, the retirement or removal of such sole Trust Corporation shall not become effective until a new Trust Corporation is appointed. If a sole Trust Corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal, the Issuer shall use all reasonable endeavours to procure that another Trust Corporation be appointed as Trustee. If in such circumstances no appointment of a new Trustee has become effective within 60 days of the date of such notice or Extraordinary Resolution, the Trustee shall be entitled to appoint a Trust Corporation as trustee of this Trust Deed.
17.4
Merger
Any corporation into which the Trustee may be merged or converted, any corporation with which the Trustee may be consolidated or amalgamated, or any corporation resulting from any merger, amalgamation, conversion or consolidation to which the Trustee shall be a party, any corporation to which the Trustee shall sell or otherwise transfer all or substantially all of its assets or any corporation to which the Trustee shall sell or otherwise transfer all or substantially all of its corporate trust business, shall, to the extent permitted by applicable law and provided that such corporation shall be otherwise qualified and eligible under this Clause, be the successor Trustee under this Trust Deed without the execution or delivery of any papers or any further act on the part of the parties hereto whereupon the Issuer and such successor shall
31
acquire and become subject to the same rights and obligations between themselves as if they had entered into a trust deed in the same form
mutatis mutandis
of this Trust Deed. Notice of any such merger, amalgamation, conversion, consolidation, sale or transfer shall forthwith be given by the Trustee to the Issuer and, as soon as practicable, to the Securityholders in accordance with Condition 15.
18.
MEETINGS
18.1
Meetings of Securityholders
For the purposes of paragraph 4 of Schedule 4 to this Trust Deed, the Issuer shall, at the request of the Trustee, convene a meeting of the Securityholders.
18.2
Notification to the Trustee
The Issuer shall notify the Trustee in writing immediately upon becoming aware of any action or proceedings to enforce the terms of this Trust Deed and/or the Securities being taken directly against the Issuer by any Securityholder or Securityholders.
19.
NOTES HELD IN CLEARING SYSTEMS
So long as any Global Certificate is, or any Securities represented by a Global Certificate are, held on behalf of a clearing system, in considering the interests of Securityholders, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders or participants with entitlements to any such Global Certificate or the Securities and may consider such interests on the basis that such accountholders or participants were the holder(s) thereof.
20.
NOTICES
Any communication shall be by letter or facsimile transmission as follows:
to the Issuer:
International Game Technology PLC
70 Chancery Lane
London WC2A 1AF
England
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Attention:
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General Counsel
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Tel:
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+44 (0)203 131 0300
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Fax:
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+44 (0)203 131 0301
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to the Trustee:
BNYM Mellon Corporate Trustee Services Limited
One Canada Square
London E14 5AL
England
32
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Attention:
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Trustee Administration Manager - International Game Technology PLC
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Fax:
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+44 207 964 2509,
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or to such other details as a party may notify in writing to the other party from time to time.
Any such communication will take effect, in the case of delivery, at the time of delivery or, in the case of facsimile transmission, at the time of despatch,
provided that
any such notice or other communication which would otherwise take effect after 4.00 p.m. on any particular day shall not take effect until 10.00 a.m. on the immediately succeeding business days in the place of the addressee.
21.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
21.1
Governing Law
This Trust Deed and all non-contractual obligations arising from or connected with it are governed by, and shall be construed in accordance with, English law.
21.2
Jurisdiction
The Issuer irrevocably agrees for the benefit of the Trustee and the Securityholders that the courts of England are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Trust Deed, and accordingly any legal action or proceedings arising out of or in connection with this Trust Deed or the Securities may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of such courts and waives any objection to Proceedings in such courts on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient or inappropriate forum. This submission shall not limit the right of the Trustee and the Securityholders to take any Proceedings against the Issuer in any other court of competent jurisdiction or concurrent Proceedings in any number of jurisdictions.
22.
COUNTERPARTS
This Trust Deed and any trust deed supplemental hereto may be executed and delivered in any number of counterparts, all of which, taken together, shall constitute one and the same deed and any party to this Trust Deed or any trust deed supplemental hereto may enter into the same by executing and delivering a counterpart.
IN WITNESS
whereof this Trust Deed has been executed by the Issuer and the Trustee and entered into the day and year first above written.
33
SCHEDULE 1
FORMS OF GLOBAL CERTIFICATES
PART 1
FORM OF UNRESTRICTED GLOBAL CERTIFICATE
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Common Code: 025409566
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ISIN: XS0254095663
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INTERNATIONAL GAME TECHNOLOGY PLC
(Incorporated under the laws of England and Wales)
UNRESTRICTED GLOBAL CERTIFICATE
representing up to
€750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066
The issue was approved by resolution of the Board of Directors of GTECH S.p.A. (formerly known as Lottomatica S.p.A.), a
società per azioni
incorporated under the laws of the Republic of Italy (“
GTECH
”), on 27 April 2006 (and registered at the company register in Rome on 5 May 2006). An offering circular dated 10 May 2006 was prepared by GTECH in connection with the issue and sale of the Securities.
The Securities in respect of which this Unrestricted Global Certificate is issued form part of the series designated as specified in the title (the “
Securities
”) of International Game Technology PLC, a public limited company incorporated in England and Wales with company number 09127533 (the “
Issuer
”), as successor by merger to GTECH.
The Issuer hereby certifies that The Bank of New York Depository (Nominees) Limited is, at the date hereof, entered in the Register as the holder of Securities in the principal amount of
€[
·
]
([
·
] euros)
or such other amount as is shown on the register of Securityholders as being represented by this Unrestricted Global Certificate and is duly endorsed (for information purposes only) in the third column of Schedule A to this Unrestricted Global Certificate. For value received, the Issuer promises to pay the person who appears at the relevant time on the register of Securityholders as holder of the Securities in respect of which this Unrestricted Global Certificate is issued, such amount or amounts as shall become payable from time to time in respect of such Securities and otherwise to comply with the Conditions referred to below.
The Securities are constituted by a Trust Deed dated 17 May 2006, as supplemented by a first supplemental trust deed on 3 April 2015 and as further supplemented, amended and restated from time to time (the “
Trust Deed
”) between the Issuer and BNY Mellon Corporate Trustee Services Limited (as successor to J.P. Morgan Corporate Trustee Services Limited) as trustee (the “
Trustee
”) and are subject to the Trust Deed and the terms and conditions (the “
Conditions
”) set out in Schedule B hereto and as modified by the provisions of this Unrestricted Global Certificate. Terms defined in the Trust Deed have the same meaning when used herein.
This Unrestricted Global Certificate is evidence of entitlement only.
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Title to the Securities passes only on due registration of Securityholders and only the duly registered holder is entitled to payments on Securities in respect of which this Unrestricted Global Certificate is issued.
The statements set out in the legend above are an integral part of the Security or Securities in respect of which this Unrestricted Global Certificate is issued and by acceptance hereof each holder or beneficial owner of the Securities evidenced by this Unrestricted Global Certificate or any owner of an interest in such Securities agrees to be subject to and bound by the terms of such legend.
The Conditions are modified as follows in so far as they apply to the Securities represented by this Unrestricted Global Certificate.
Exchange
Owners of beneficial interests in the Securities in respect of which this Unrestricted Global Certificate is issued will be entitled to have title to the Securities registered in their names and to receive individual definitive registered certificates (“
Definitive Certificates
”) if (a) either Euroclear or Clearstream, Luxembourg (or any other clearing system as shall have been designated by the Issuer and approved by the Trustee on behalf of which the Securities evidenced by this Unrestricted Global Certificate may be held) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so or notifies the Issuer that it is no longer willing or able to act as a depositary for this Unrestricted Global Certificate and a successor depositary is not appointed by the Issuer within 120 days of such notice, or (b) there shall have occurred and be continuing an Enforcement Event or (c) instructions have been given for the transfer of an interest in the Securities evidenced by this Unrestricted Global Certificate to a person who would otherwise take delivery thereof in the form of an interest in the Securities evidenced by the Restricted Global Certificate where the Restricted Global Certificate has been exchanged for Definitive Certificates.
In such circumstances, the Issuer will cause sufficient Definitive Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant Securityholders within 21 days following a request therefor by the holder of this Unrestricted Global Certificate. A person with an interest in the Securities represented by this Unrestricted Global Certificate must provide the Registrar with (i) a written order containing instructions and other such information as the Issuer and the Registrar may require to complete, execute and deliver such individual Definitive Certificates and (ii) a certificate to the effect that (other than in the case of (c) above) such person is not transferring its interest in this Unrestricted Global Certificate.
Meetings
At any meeting of the Securityholders the holder hereof shall be treated as having one vote in respect of each €1,000 principal amount of Securities represented by this Unrestricted Global Certificate. The Trustee may allow to attend and speak (but not to vote) at any meeting of Securityholders any accountholder (or the representative of any such person) of a clearing system with an interest in the Securities represented by this Unrestricted Global Certificate on confirmation of entitlement and proof of his identity.
35
Redemption at the Option of the Issuer
The option of the Issuer provided for in Conditions 6.2, 6.3 and 6.4 shall be exercised by the Issuer giving notice to the Securityholders within the time limits set out in, and containing the information required by, those Conditions.
Trustee’s Powers
In considering the interests of Securityholders the Trustee may, to the extent it considers it appropriate to do so in the circumstances, (a) have regard to such information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of Securities and (b) consider such interests on the basis that such accountholders were the holders of the Securities represented by this Unrestricted Global Certificate.
Enforcement
For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a certificate of the holder of the Securities represented by this Unrestricted Global Certificate shall be recognised as the beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interest in the Securities set out in the certificate of the holder as if they were themselves the holders of Securities in such principal amounts.
Purchase and Cancellation
Cancellation of any Security following its purchase will be effected by reduction in the principal amount of the Securities in the Register.
Payments
Payments of principal in respect of Securities represented by this Unrestricted Global Certificate will be made against presentation and, if no further payment falls to be made in respect of the Securities, surrender of this Unrestricted Global Certificate to or to the order of the Principal Paying and Transfer Agent or such other Paying and Transfer Agent as shall have been notified to the holder of this Unrestricted Global Certificate for such purpose.
Transfers
Transfers of interests in the Securities represented by this Unrestricted Global Certificate for interests in the Restricted Global Certificate shall be made in accordance with the Paying Agency Agreement and in accordance with the operating procedures of the relevant clearing system.
Notices
So long as Securities are represented by this Unrestricted Global Certificate and this Unrestricted Global Certificate is held on behalf of Euroclear or Clearstream, Luxembourg, notices to the holders of such Securities may be given by delivery of the relevant notice to the relevant clearing system for communication by it to entitled accountholders in substitution for notification as required by the Conditions.
36
This Unrestricted Global Certificate shall not be valid for any purpose until authenticated by or on behalf of the Registrar.
This Unrestricted Global Certificate and any non-contractual obligations arising out of or in connection with it are governed by, and shall be construed in accordance with, English law.
In Witness
whereof the Issuer has caused this Unrestricted Global Certificate to be signed manually or in facsimile on its behalf.
Dated [
·
]
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INTERNATIONAL GAME TECHNOLOGY PLC
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By:
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Authorised Director
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37
Certificate of Authentication
Certified by or on behalf of the Registrar that the above-named holder is at the date hereof entered in the Register as holder of the above-mentioned principal amount of Securities.
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THE BANK OF NEW YORK MELLON (LUXEMBOURG) S.A.
(as successor to J.P. Morgan Bank Luxembourg S.A.)
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(as Registrar)
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By:
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Authorised Signatory
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Dated:
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38
SCHEDULE A
SCHEDULE OF INCREASE OR REDUCTION IN PRINCIPAL AMOUNT OF
THE SECURITIES REPRESENTED BY THIS UNRESTRICTED GLOBAL CERTIFICATE
The following increases or reductions in the principal amount of the Securities represented by this Unrestricted Global Certificate have been made as a result of (i) redemption or purchase and cancellation of Securities or (ii) transfer of Securities (including transfers of interests between the Global Certificates):
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Date of Redemption/
Purchase and
cancellation /Transfer
(stating which)
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Amount of increase or
decrease in principal
amount of Securities
represented by this
Unrestricted Global
Certificate
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Principal amount of
Securities represented
by this Unrestricted
Global Certificate
following such
increase or decrease
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Notation made by or on
behalf of the Principal
Paying and Transfer
Agent or other Paying
and Transfer Agent
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39
SCHEDULE B
[TERMS AND CONDITIONS TO BE ATTACHED]
40
PART 2
FORM OF RESTRICTED GLOBAL CERTIFICATE
THE RESTRICTED SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, ENCUMBERED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT (1) IN THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THAT IS (A) A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A) OR A PURCHASER THAT THE SELLER AND ANY PERSON ACTING ON THE SELLER’S BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, AND (B) AWARE THAT THE OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (IN WHICH CASE ADDITIONAL TRANSFER RESTRICTIONS MAY APPLY), (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”), (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS AND SUBJECT TO THE RIGHT OF THE ISSUER AND THE TRUSTEE PRIOR TO ANY SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER PURSUANT TO CLAUSES (2) OR (4) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO EACH OF THEM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE RESTRICTED SECURITIES EVIDENCED HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS AND THAT NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THIS RESTRICTED GLOBAL CERTIFICATE AND AGREES THAT IT WILL NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF (A) THE TRANSFER OF THE RESTRICTED SECURITIES EVIDENCED HEREBY PURSUANT TO CLAUSE (3) ABOVE OR (B) THE DATE WHICH IS TWO YEARS AFTER THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF SUCH SECURITIES, OR ANY SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT.
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Common Code: 025409574
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ISIN: XS0254095747
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41
INTERNATIONAL GAME TECHNOLOGY PLC
(Incorporated under the laws of England and Wales)
RESTRICTED GLOBAL CERTIFICATE
representing up to
€750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066
The issue was approved by resolution of the Board of Directors of GTECH S.p.A. (formerly known as Lottomatica S.p.A.), a
società per azioni
incorporated under the laws of the Republic of Italy (“
GTECH
”), on 27 April 2006 (and registered at the company register in Rome on 5 May 2006). An offering circular dated 10 May 2006 was prepared by GTECH in connection with the issue and sale of the Securities.
The Securities in respect of which this Restricted Global Certificate is issued form part of the series designated as specified in the title (the “
Securities
”) of International Game Technology PLC, a public limited company incorporated in England and Wales with company number 09127533 (the “
Issuer
”), as successor by merger to GTECH.
The Issuer hereby certifies that The Bank of New York Depository (Nominees) Limited is, at the date hereof, entered in the Register as the holder of Securities in the principal amount of
€[
·
]
([
·
] euros)
or such other amount as is shown on the register of Securityholders as being represented by this Restricted Global Certificate and is duly endorsed (for information purposes only) in the third column of Schedule A to this Restricted Global Certificate. For value received, the Issuer promises to pay the person who appears at the relevant time on the register of Securityholders as holder of the Securities in respect of which this Restricted Global Certificate is issued, such amount or amounts as shall become due and payable from time to time in respect of such Securities and otherwise to comply with the Conditions referred to below.
The Securities are constituted by a Trust Deed dated 17 May 2006 (the “
Trust Deed
”), as supplemented by a first supplemental trust deed on 3 April 2015 and as further supplemented, amended and restated from time to time between the Issuer and BNY Mellon Corporate Trustee Services Limited (as successor to J.P. Morgan Corporate Trustee Services Limited) as trustee (the “
Trustee
”) and are subject to the Trust Deed and the terms and conditions (the “
Conditions
”) set out in Schedule B hereto, as modified by the provisions of this Restricted Global Certificate. Terms defined in the Trust Deed have the same meaning when used herein.
This Restricted Global Certificate is evidence of entitlement only.
Title to the Securities passes only on due registration of Securityholders and only the duly registered holder is entitled to payments on Securities in respect of which this Restricted Global Certificate is issued.
The statements set out in the legend above are an integral part of the Security or Securities in respect of which this Restricted Global Certificate is issued and by acceptance hereof each holder or beneficial owner of the Securities evidenced by this Restricted Global Certificate or
42
any owner of an interest in such Securities agrees to be subject to and bound by the terms of such legend.
The Conditions are modified as follows in so far as they apply to the Securities represented by this Restricted Global Certificate is issued.
Exchange
Owners of beneficial interests in the Securities in respect of which this Restricted Global Certificate is issued will be entitled to have title to the Securities registered in their names and to receive individual definitive certificates (“
Definitive Certificates
”) if (a) either Euroclear or Clearstream, Luxembourg (or any other clearing system as shall have been designated by the Issuer and approved by the Trustee on behalf of which the Securities evidenced by this Restricted Global Certificate may be held) is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so or notifies the Issuer that it is no longer willing or able to act as a depositary for this Unrestricted Global Certificate and a successor depositary is not appointed by the Issuer within 120 days of such notice, or (b) there shall have occurred and be continuing an Enforcement Event or (c) instructions have been given for the transfer of an interest in the Securities evidenced by this Restricted Global Certificate to a person who would otherwise take delivery thereof in the form of an interest in the Securities evidenced by the Unrestricted Global Certificate where the Unrestricted Global Certificate has been exchanged for Definitive Certificates.
In such circumstances, the Issuer will cause sufficient Definitive Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant Securityholders within 21 days following a request therefor by the holder of this Restricted Global Certificate. A person with an interest in the Securities represented by this Restricted Global Certificate must provide the Registrar with (i) a written order containing instructions and other such information as the Issuer and the Registrar may require to complete, execute and deliver such individual definitive registered Securities and (ii) a certificate to the effect that (other than in the case of (c) above) such person is not transferring its interest in this Restricted Global Certificate.
Meetings
At any meeting of Securityholders, the holder hereof shall be treated as having one vote in respect of each €1,000 principal amount of Securities represented by this Restricted Global Certificate. The Trustee may allow to attend and speak (but not to vote) at any meeting of Securityholders any accountholder (or the representative of any such person) of a clearing system with an interest in the Securities represented by this Restricted Global Certificate on confirmation of entitlement and proof of his identity.
Redemption at the Option of the Issuer
The option of the Issuer provided for in Conditions 6.2, 6.3 and 6.4 shall be exercised by the Issuer giving notice to the Securityholders within the time limits set out in, and containing the information required by, those Conditions.
43
Trustee’s Powers
In considering the interests of Securityholders the Trustee may, to the extent it considers it appropriate to do so in the circumstances, (a) have regard to such information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of Securities and (b) consider such interests on the basis that such accountholders were the holders of the Securities represented by this Restricted Global Certificate.
Enforcement
For the purposes of enforcement of the provisions of the Trust Deed against the Trustee, the persons named in a certificate of the holder of the Securities represented by this Restricted Global Certificate shall be recognised as the beneficiaries of the trusts set out in the Trust Deed to the extent of the principal amount of their interest in the Securities set out in the certificate of the holder as if they were themselves the holders of Securities in such principal amounts.
Purchase and Cancellation
Cancellation of any Security following its purchase will be effected by reduction in the principal amount of the Securities in the Register.
Payments
Payments of principal in respect of Securities represented by this Restricted Global Certificate will be made against presentation and, if no further payment falls to be made in respect of the Securities, surrender of this Restricted Global Certificate to or to the order of the Principal Paying and Transfer Agent or such other Paying and Transfer Agent as shall have been notified to the holder of this Restricted Global Certificate for such purpose.
Transfers
Transfers of interests in the Securities represented by this Restricted Global Certificate for interests in the Unrestricted Global Certificate shall be made in accordance with the Paying Agency Agreement and in accordance with the operating procedures of the relevant clearing system and any such transfers may only be made upon presentation of a certificate as provided in the Paying Agency Agreement.
Notices
So long as Securities are represented by this Restricted Global Certificate and this Restricted Global Certificate is held on behalf of Euroclear or Clearstream, Luxembourg, notices to the holders of such Securities may be given by delivery of the notice to the relevant clearing system for communication by it to entitled accountholders in substitution for notification as required by the Conditions.
This Restricted Global Certificate shall not be valid for any purpose until authenticated by or on behalf of the Registrar.
This Restricted Global Certificate and any non-contractual obligations arising out of or in connection with it are governed by, and shall be construed in accordance with, English law.
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In Witness
whereof the Issuer has caused this Restricted Global Certificate to be signed manually or in facsimile on its behalf.
Dated [
·
]
INTERNATIONAL GAME TECHNOLOGY PLC
45
Certificate of Authentication
Certified by or on behalf of the Registrar that the above-named holder is at the date hereof entered in the Register as holder of the above-mentioned principal amount of Securities.
THE BANK OF NEW YORK MELLON
(
LUXEMBOURG) S.A.
(as successor to J.P. Morgan Bank Luxembourg S.A.) (as Registrar)
By:
Authorised Signatory
Dated:
46
SCHEDULE A
SCHEDULE OF INCREASE OR REDUCTION IN PRINCIPAL AMOUNT OF
THE SECURITIES REPRESENTED BY THIS RESTRICTED GLOBAL CERTIFICATE
The following increases or reductions in the principal amount of the Securities represented by this Restricted Global Certificate have been made as a result of (i) redemption or purchase and cancellation of Securities or (ii) transfer of Securities (including transfers of interests between the Global Certificates):
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Date of Redemption/
Purchase and
cancellation /Transfer
(stating which)
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Amount of increase or
decrease in principal
amount of Securities
represented by this
Restricted Global
Certificate
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Principal amount of
Securities represented
by this Restricted
Global Certificate
following such
increase or decrease
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Notation made by or on
behalf of the Principal
Paying and Transfer
Agent or other Paying
and Transfer Agent
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SCHEDULE B
[TERMS AND CONDITIONS TO BE ATTACHED]
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SCHEDULE 2
FORM OF DEFINITIVE CERTIFICATE
[THE RESTRICTED SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, ENCUMBERED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT (1) IN THE UNITED STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THAT IS (A) A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A) OR A PURCHASER THAT THE SELLER AND ANY PERSON ACTING ON THE SELLER’S BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER, IN EACH CASE PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, AND (B) AWARE THAT THE OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (“REGULATION S”) TO A PERSON OTHER THAN A U.S. PERSON (AS DEFINED IN REGULATION S), (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS AND SUBJECT TO THE RIGHT OF THE ISSUER AND THE TRUSTEE PRIOR TO ANY SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER PURSUANT TO CLAUSES (2) OR (4) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO EACH OF THEM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. EACH HOLDER AND BENEFICIAL OWNER, BY ITS ACCEPTANCE OF THE RESTRICTED SECURITIES EVIDENCED HEREBY, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS AND THAT NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THE RESTRICTED SECURITIES EVIDENCED HEREBY AND AGREES THAT IT WILL NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF (A) THE TRANSFER OF THE RESTRICTED SECURITIES EVIDENCED HEREBY PURSUANT TO CLAUSE (3) ABOVE OR (B) THE DATE WHICH IS TWO YEARS AFTER THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF SUCH SECURITIES, OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT.](1)
(1) Legend to be borne on any Restricted Definitive Certificate.
49
INTERNATIONAL GAME TECHNOLOGY PLC
(Incorporated under the laws of England and Wales)
€750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066
The issue was approved by resolution of the Board of Directors of GTECH S.p.A. (formerly known as Lottomatica S.p.A.), a
società per azioni
incorporated under the laws of the Republic of Italy (“
GTECH
”), on 27 April 2006 (and registered at the company register in Rome on 5 May 2006). An offering circular dated 10 May 2006 was prepared by GTECH in connection with the issue and sale of the Securities.
The Securities represented by this certificate form part of a series of Securities designated as specified in the title (the “
Securities
”) of International Game Technology PLC, a public limited company incorporated in England and Wales with company number 09127533 (the “
Issuer
”), as successor by merger to GTECH. The Securities are constituted by a Trust Deed dated 17 May 2006, as supplemented by a first supplemental trust deed on 3 April 2015 and as further supplemented, amended and restated from time to time, made between the Issuer and BNY Mellon Corporate Trustee Services Limited (as successor to J.P. Morgan Corporate Trustee Services Limited) as Trustee (the “
Trust Deed
”). The Securities are subject to, and have the benefit of, the Trust Deed and the terms and conditions (the “
Conditions
”) endorsed hereon. Terms defined in the Trust Deed have the same meanings when used herein.
The Issuer hereby certifies that of is, at the date hereof, entered in the Register as the holder of Securities in the principal amount of € ( euros). For value received, the Issuer promises to pay the person who appears at the relevant time on the Register as holder of the Securities in respect of which this Definitive Certificate is issued such amount or amounts as shall become due and payable from time to time in respect of such Securities and otherwise to comply with the Conditions.
[The statements set forth in the legend above are an integral part of the Securities in respect of which this certificate is issued and by acceptance thereof each holder agrees to be subject to and bound by the terms and provisions set forth in such legend.](2)
This Definitive Certificate is evidence of entitlement only. Title to the Securities passes only on due registration on the Register and only the duly registered holder is entitled to payments in respect of this Definitive Certificate.
This Definitive Certificate shall not be valid for any purpose until authenticated by or on behalf of the Registrar.
This Definitive Certificate and any non-contractual obligations arising out of or in connection with it are governed by, and shall be construed in accordance with, English law.
(2) Delete if there is no Rule 144A Legend.
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IN WITNESS
whereof this certificate has been executed on behalf of the Issuer.
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INTERNATIONAL GAME TECHNOLOGY PLC
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By:
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Authorised Director
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Dated [ ]
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51
Certificate of Authentication
Certified by or on behalf of the Registrar that the above-named holder is at the date hereof entered in the Register as holder of the above-mentioned principal amount of Securities.
THE BANK OF NEW YORK MELLON (LUXEMBOURG) S.A.
(as successor to J.P. Morgan Bank Luxembourg S.A.)
(as Registrar)
By:
Authorised Signatory
Dated:
On the back:
[Terms and Conditions of the Securities to be inserted]
52
FORM OF TRANSFER
For value received the undersigned hereby sell(s), assign(s) and transfer(s) to
(Please print or type name and address (including postal code) of transferee)
€[ ] principal amount of the Securities represented by this Definitive Certificate and all rights in respect thereof.
[NOTE: INSERT FOR TRANSFERS OF SECURITIES BEARING THE RULE 144A LEGEND TO TRANSFEREES THAT TAKE DELIVERY OF SECURITIES NOT BEARING THE RULE 144A LEGEND.]
[In connection with such request and in respect of such Securities, the undersigned hereby certifies that (i) such transfer has been effected in accordance with the transfer restrictions set forth in the Securities and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction and (ii) either:
(1)
such transfer has been effected pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S under the U.S. Securities Act of 1933, as amended (the “
Securities Act
”), and accordingly the undersigned hereby further certifies that:
(a)
the offer and sale of the Securities was not made to a person in the United States or to or for the account or benefit of a U.S. person and such offer and sale was not targeted to an identifiable group of U.S. citizens abroad;
(b)
either:
(i)
at the time the buy order was originated, the transferee was outside the United States or the undersigned and any person acting on its behalf reasonably believed that the transferee was outside the United States, or
(ii)
the transaction was executed in, on or through the facilities of a designated offshore securities market (as defined in Regulation S) and neither the undersigned nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;
(c)
no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
(d)
the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and
(e)
if the undersigned is an officer or director of the Issuer or a distributor, who is an affiliate of the Issuer or distributor solely by holding such position, such
53
sale is made in accordance with the applicable provisions of Rule 904(b)(2) of Regulation S; or
(2)
the transfer has been effected pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder.](3)
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Certifying Signature
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Date:
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Signed
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N.B.
1.
This form of transfer must be accompanied by such documents, evidence and information as the Registrar may require and must be executed under the hand of the transferor or, if the transferor is a corporation, either under its common seal or under the hand of two of its officers duly authorised in writing.
2.
The signature(s) on this form of transfer must correspond with the name(s) as it/they appear(s) on the face of this Definitive Certificate in every particular. In the case of joint holders, each of the joint holders named on the Register must sign this form of transfer.
3.
A representative of the Securityholder should state the capacity in which he signs e.g. executor.
4.
The signature of the person(s) effecting a transfer shall conform to any list of duly authorised specimen signatures supplied by the registered holder or be certified by a recognised bank, notary public or in such other manner as the Registrar may require.
(3) Insert for transfers of Securities bearing the Rule 144A Legend to transferees that take delivery of Securities not bearing the Rule 144A Legend.
54
SCHEDULE 3
TERMS AND CONDITIONS
The following, except for the paragraphs in italics, are the terms and conditions of the Securities substantially in the form in which they will be endorsed on any certificates representing the Securities:
The issue of the €750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066 (the “
Securities
”, which expression shall include any further securities issued pursuant to Condition 14 and forming a single series with the Securities) was authorised by a resolution of the Board of Directors of GTECH S.p.A. (formerly known as Lottomatica S.p.A.), a
società per azioni
incorporated under the laws of the Republic of Italy (“
GTECH
”), on 27 April 2006, and registered with the company register of Rome on 5 May 2006. The Securities are constituted by a Trust Deed dated 17 May 2006, as supplemented by a first supplemental trust deed on 3 April 2015 and as further supplemented, amended or restated from time to time (the “
Trust Deed
”), between International Game Technology PLC, a public limited company incorporated under the laws of England and Wales with company number 09127533 (the “
Issuer
”), as successor by merger to GTECH, and BNY Mellon Corporate Trustee Services Limited (as successor to J.P. Morgan Corporate Trustee Services Limited) (the “
Trustee
” which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Securityholders (as defined below). These terms and conditions (the “
Conditions
”) include summaries of, and are subject to, the detailed provisions of the Trust Deed. Capitalised terms used in these Conditions and not defined herein shall have the meaning given to them in the Trust Deed. The Trust Deed shall also set out the forms of the Global Certificates and Definitive Certificates (each as defined below) from time to time representing the Securities. Copies of the Trust Deed and of the Paying and Transfer Agency Agreement dated 17 May 2006 relating to the Securities, as supplemented by a supplemental paying and transfer agency agreement on 3 April 2015 and as further supplemented, amended or restated from time to time (the “
Paying Agency Agreement
”), between the Issuer, the Trustee, The Bank of New York Mellon acting through its London Branch (as successor to JPMorgan Chase Bank, N.A.) as agent bank (the “
Agent Bank
” which expression includes any bank appointed as the Agent Bank from time to time), The Bank of New York Mellon (Luxembourg) S.A. (as successor to J.P. Morgan Bank Luxembourg S.A.) as registrar (the “
Registrar
” which expression includes any bank appointed as the Registrar from time to time), The Bank of New York Mellon acting through its London Branch (as successor to JPMorgan Chase Bank, N.A.) as the initial principal paying and transfer agent (the “
Principal Paying and Transfer Agent
”) and the other paying and transfer agents named therein (together with the Principal Paying and Transfer Agent, the “
Paying and Transfer Agents
”), are available for inspection during usual business hours at the principal office of the Trustee (presently at One Canada Square, London, E14 5AL) and at the specified offices of the Registrar and the Paying and Transfer Agents. The Securityholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, and are deemed to have notice of those provisions applicable to them of the Paying Agency Agreement.
55
1.
FORM AND DENOMINATION, TITLE AND TRANSFERS
1.1
Form and denomination
The Securities are issued in registered form in an initial aggregate principal amount of €750,000,000, each in the denomination of €50,000 and integral multiples of €1,000 above such amount (each, an “
Authorised Denomination
”).
The Securities are being offered and sold in offshore transactions in reliance on Regulation S under the Securities Act, and may be offered and sold to qualified institutional buyers in reliance on an exemption from the registration requirements of the Securities Act (including the exemption provided by Rule 144A).
Securities sold in reliance on Regulation S shall be known as “
Unrestricted Securities
”. The Unrestricted Securities are initially evidenced by a single global certificate in registered form without interest coupons (the “
Unrestricted Global Certificate
”). The Unrestricted Global Certificate shall be deposited with a common depositary (the “
Common Depositary
”) of Euroclear Bank S.A./N.V. (“
Euroclear
”) and Clearstream Banking,
société anonyme
(“
Clearstream, Luxembourg
”) and registered in the name of a nominee of the Common Depositary.
Securities sold to qualified institutional buyers in reliance on an exemption from the registration requirements of the Securities Act (including the exemption provided by Rule 144A) shall be known as “
Restricted Securities
”. Restricted Securities are initially evidenced by a single global certificate in registered form without interest coupons (the “
Restricted Global Certificate
” and, together with the Unrestricted Global Certificate, the “
Global Certificates
”). The Restricted Global Certificate shall be deposited with the Common Depositary of Euroclear and Clearstream, Luxembourg and registered in the name of a nominee of the Common Depositary. The Restricted Global Certificate is subject to certain restrictions on transfer set forth therein and in the Paying Agency Agreement and bears the legend regarding such restrictions as set out in the Trust Deed.
Except in the limited circumstances set out therein, the Global Certificates shall not be exchangeable for definitive certificates (“
Definitive Certificates
” and, together with the Global Certificates, the “
Certificates
”).
1.2
Title
Title to the Securities passes only by transfer and registration in the Register as described below. The registered holder of any Security shall (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it or any writing on, or the theft or loss of, the related Certificate issued in respect of it (other than a duly executed transfer thereof)) and no person (including, without limitation, the Issuer and the Trustee) shall be liable for so treating the holder. In these Conditions, “
Securityholders
” and “
holder
” means the persons or person in whose name a Security is registered.
1.3
Register
The Issuer will cause to be kept at the specified office of the Registrar and in accordance with the terms of the Paying Agency Agreement, a register (the “
Register
”) on which shall be entered the names and addresses of the holders and the particulars of the Securities held by them and of all transfers of, and payments on, the
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Securities. If Definitive Certificates are issued, each Securityholder will be entitled to receive only one Definitive Certificate in respect of its entire holding.
1.4
Transfers
Subject to the provisions contained herein and in the Paying Agency Agreement, and mandatory provisions of applicable law, the Securities may be transferred, in whole or in part in an Authorised Denomination, by the delivery of the Certificate issued in respect of such Security, with the form of transfer on the back duly completed and signed by the holder or his attorney duly authorised in writing, to the specified office of the Registrar or any Paying and Transfer Agent. No transfer of title shall be valid unless entered on the Register.
Ownership of interests in the Global Certificates (“
Book-Entry Interests
”) shall be limited to persons that have accounts with Euroclear and Clearstream, Luxembourg, or persons that may hold interests through their participants. Book-Entry Interests shall be shown on, and transfers thereof shall be effected only through, records maintained in book-entry form by Euroclear and Clearstream, Luxembourg and their participants. Transfers of beneficial interests in the Securities will be subject to the applicable rules and procedures of Euroclear and Clearstream, Luxembourg and their respective direct or indirect participants, which rules and procedures may change from time to time.
1.5
Delivery of Certificates
Each new Certificate to be issued upon a transfer of Securities will, within seven business days (at the place of the specified office of the Registrar or the relevant Paying and Transfer Agent) of receipt by the Registrar or the relevant Paying and Transfer Agent of the form of transfer (duly completed), be mailed by uninsured mail at the risk of the holder entitled to the Securities to the address specified in the form of transfer. For the purposes of this Condition 1.5 and Condition 1.6, unless otherwise specified, “
business day
” means a day which is both a day on which commercial banks and foreign exchange markets settle payment and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and the city in which the specified office of the Registrar or the relevant Paying and Transfer Agent with whom a Certificate is deposited in connection with a transfer is located.
Where some but not all the Securities in respect of which a Certificate is issued are to be transferred, a new Certificate in respect of the Securities not so transferred shall, within seven business days of deposit or surrender of the original Certificate with or to the Registrar or the relevant Paying and Transfer Agent, be mailed free of charge to the holder of the Securities not so transferred at the Issuer’s expense by uninsured mail, at the risk of such holder, to the address of such holder appearing on the Register.
Registration of any transfer of Securities and the issuance of new Certificates will be effected without charge by or on behalf of the Issuer, the Registrar or any of the Paying and Transfer Agents, subject to (a) payment (or the giving of such indemnity as the Issuer, the Registrar or any of the Paying and Transfer Agents may require) in respect of any tax or other governmental charges which may be imposed in relation to
57
such transfer, (b) the Registrar being satisfied with the documents of title and/or the identity of the person making the application for transfer and (c) the Registrar being satisfied that the regulations concerning transfer of the Securities have been complied with.
All transfers of Securities and entries on the Register will be made subject to the detailed regulations concerning the transfer of Securities set forth in the Paying Agency Agreement. These regulations may be changed by the Issuer from time to time, with the prior written approval of the Trustee and the Registrar to reflect changes in applicable laws. A copy of the current regulations will be mailed (at the Issuer’s expense) by the Registrar to any Securityholder who requests a copy.
1.6
Closed Periods
Neither the Issuer nor the Registrar will be required to register the transfer of any Security (or part thereof) (a) during the period of 15 days immediately prior to the Maturity Date or any earlier date fixed for redemption of the Securities pursuant to Condition 6 and (b) during the period of 15 days ending on (and including) the due date in respect of any payment of interest in respect of the Securities.
2.
STATUS
The Securities constitute direct, unsecured and subordinated obligations of the Issuer as set out herein.
In the event of (i) the commencement of a voluntary or involuntary liquidation, dissolution or winding-up of the Issuer due to corporate action or an administrative and/or court order, or (ii) the occurrence of any Insolvency Proceedings, subject to applicable bankruptcy law, the rights of the Securityholders and the Trustee to payments of principal, accrued but unpaid Scheduled Interest Amounts, Optionally Deferred Interest and Additional Amounts thereon, if any, payable in respect of the Securities (regardless of whether such amounts have become payable before, or as a result of, such event) will rank:
(a)
pari passu
and without any preference among themselves;
(b)
pari passu
with any other present or future obligations of the Issuer under any Liquidation Parity Securities;
(c)
junior to the claims of all other unsubordinated and subordinated creditors of the Issuer, other than holders of Liquidation Parity Securities; and
(d)
in priority to (i) the claims of holders of all classes of share capital of the Issuer and (ii) any claims against the Issuer which, by their terms or by operation of law, rank
pari passu
with, or junior to, the claims described in (i) above (together, “
Junior Obligations
”).
In the event of (i) the commencement of a voluntary or involuntary liquidation, dissolution or winding-up of the Issuer due to corporate action or an administrative and/or court order, or (ii) the occurrence of any Insolvency Proceedings, subject to applicable bankruptcy law, the rights of the Securityholders and the Trustee to payment of unpaid Equity Funded Deferred Interest and Additional Amounts thereon,
58
if any, payable in respect of the Securities (regardless of whether such amounts have become payable before, or as a result of, such event) will rank:
(a)
pari passu
and without any preference among themselves;
(b)
in priority to (i) the claims of holders of all classes of share capital of the Issuer and (ii) any claims against the Issuer which, by their terms or by operation of law, rank
pari passu
with, or junior to, the claims described in (i) above; and
(c)
junior to the claims of all unsubordinated and subordinated creditors of the Issuer, including holders of Liquidation Parity Securities and the holders of any preference shares of the Issuer and any other equity interest (other than ordinary shares) in the Issuer (to the extent that such claims do not relate to the nominal capital thereof).
A Securityholder may not, subject to mandatory provisions of applicable law, set-off any claims arising under the Securities against any claims the Issuer may have against it.
As at the date of this Offering Circular no Liquidation Parity Securities, preference shares or other equity instruments which may be issued by the Issuer were outstanding.
3.
INTEREST
3.1
Fixed Rate Payment Dates
Subject to Condition 6.4, the Securities bear interest on their aggregate principal amount, on a daily basis, at a rate of 8.25% per annum (the “
Fixed Interest Rate
”) from (and including) the Issue Date to (but excluding) the Reset Date payable (subject to Condition 4) annually in arrear on 31 March in each year (each, a “
Fixed Rate Payment Date
”), commencing on 31 March 2007 and ending on (and including) the Reset Date.
The period beginning on (and including) the Issue Date and ending on (but excluding) the first Fixed Rate Payment Date and each successive period beginning on (and including) a Fixed Rate Payment Date and ending on (but excluding) the next succeeding Fixed Rate Payment Date, regardless of any deferral of payments in accordance with Condition 4, is called a “
Fixed Rate Interest Perio
d”. The amount of interest payable for the Fixed Rate Interest Period or part thereof on each Security determined in accordance with this Condition 3.1 is called a “
Fixed Rate Interest Amount
”. The Fixed Rate Interest Amount scheduled to be paid (subject to Condition 4) in respect of each full Fixed Rate Interest Period shall be €4,125 per €50,000 in principal amount of the Securities, except that the first Fixed Rate Interest Amount scheduled to be paid (subject to Condition 4) on 31 March 2007 in respect of the period from (and including) 17 May 2006 to (but excluding) 31 March 2007, shall be €3,593.84 per €50,000 in principal amount of the Securities. Where, prior to the Reset Date, interest is to be calculated in respect of a period which is shorter than a Fixed Rate Interest Period, the day-count fraction used will be the number of days in the relevant period, from (and including) the date from which interest begins to accrue to
59
(but excluding) the date on which it becomes payable, divided by the number of days in the Fixed Rate Interest Period in which the relevant period falls.
3.2
Floating Rate Payment Dates
Subject to Condition 6.4, the Securities bear interest on their aggregate principal amount from (and including) the Reset Date to (but excluding) the Maturity Date at the rates determined in accordance with Conditions 3.3 and 3.4 (the “
Floating Interest Rate
”) payable (subject to Condition 4) semi-annually in arrear on or about 31 March and 30 September in each year (each a “Floating Rate Payment Date” and together with the Fixed Rate Payment Dates, the “
Interest Payment Dates
”) commencing on the Floating Rate Payment Date falling in September 2016 and ending on (and including) the Maturity Date. If any Floating Rate Payment Date would otherwise fall on a day which is not a business day, it shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month in which event it shall be brought forward to the immediately preceding business day.
The period beginning on (and including) the Reset Date and ending on (but excluding) the first Floating Rate Payment Date and each successive period beginning on (and including) a Floating Rate Payment Date and ending on (but excluding) the next succeeding Floating Rate Payment Date, regardless of any deferral of payments in accordance with Condition 4, is called a “Floating Rate Interest Period” and, together with each Fixed Rate Interest Period, an “Interest Period”. The amount of interest payable in respect of the relevant Floating Rate Interest Period or part thereof determined in accordance with this Condition 3.2 and Conditions 3.3 and 3.4 is called a “Floating Rate Interest Amount”, and, together with each Fixed Rate Interest Amount, a “Scheduled Interest Amount” (which shall include interest accrued which becomes payable in respect of part of an Interest Period).
3.3
Floating Interest Rate
The Floating Interest Rate in respect of the Securities will be determined by the Agent Bank on the following basis:
(a)
On the second business day before the beginning of each Floating Rate Interest Period (the “
Interest Determination Date
”) the Agent Bank will determine the Euro Interbank Offered Rate (“
EURIBOR
”) for six-month euro deposits as at 11.00 a.m. (Brussels time) on the relevant Interest Determination Date. Such offered rate will be that which appears on the display designated as page “
248
” on the Telerate Monitor (or such other page or service as may replace it for the purpose of displaying such rates). The Floating Interest Rate for such Floating Rate Interest Period shall be the aggregate of the Margin and the rate which so appears, as determined by the Agent Bank.
(b)
If for any reason such offered rate does not so appear, or if the relevant page is unavailable, the Agent Bank will determine EURIBOR based on quotations from five major banks in the Euro-zone interbank market chosen by the Agent Bank (the “
Reference Banks
”) for a period of six months as at 11.00 a.m. (Brussels time) on the relevant Interest Determination Date. The Floating Interest Rate for such Floating Rate Interest Period shall be the aggregate of
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the Margin and the arithmetic mean (rounded, if necessary, to the nearest fifth decimal place, with 0.000005 being rounded upwards) of such quotations (or of such of them, being at least two, as are so provided), as determined by the Agent Bank.
(c)
If the relevant Floating Interest Rate cannot be determined in accordance with the above provisions, the Floating Interest Rate for such Floating Rate Interest Period shall be the Floating Interest Rate determined as at the last preceding Interest Determination Date or, if none, the Fixed Interest Rate.
3.4
Determination of Floating Interest Rate and calculation of Floating Rate Interest Amount
The Agent Bank will, as soon as practicable after 11.00 a.m. (Brussels time) on each Interest Determination Date, determine the Floating Interest Rate and the Floating Rate Interest Amount for the relevant Floating Rate Interest Period. The Floating Rate Interest Amount shall be calculated by applying the Floating Interest Rate to each €50,000 in principal amount of the Securities, multiplying such product by the actual number of days in the Floating Rate Interest Period concerned (or, in respect of any shorter period, such shorter period) divided by 360 and rounding the resulting figure to the nearest €0.01 (€0.005 being rounded upwards). The determination of the Floating Interest Rate and the Floating Rate Interest Amount by the Agent Bank shall (in the absence of manifest error, wilful default, bad faith and gross negligence) be final and binding upon all parties.
3.5
Publication of Floating Interest Rate and Floating Rate Interest Amount
The Agent Bank will cause the Floating Interest Rate and the corresponding Floating Rate Interest Amount for each Floating Rate Interest Period and the relevant Floating Rate Payment Date to be notified to the Issuer, the Trustee, the Registrar, each of the Paying and Transfer Agents and any stock exchange on which the Securities are for the time being listed and to be notified to Securityholders (in accordance with Condition 15) as soon as possible after their determination, but in no event later than the second business day thereafter. The Floating Rate Interest Amount and Floating Rate Payment Date so published may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Floating Rate Interest Period.
3.6
Determination or calculation by Trustee
If the Agent Bank does not at any time for any reason so determine the Floating Interest Rate or calculate the corresponding Floating Rate Interest Amount for a Floating Rate Interest Period, the Trustee (or an agent appointed by it) shall do so and such determination or calculation shall be deemed to have been made by the Agent Bank. In doing so, the Trustee shall apply the provisions of Conditions 3.2 to 3.4 (inclusive), with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects it shall determine and/or calculate the same in such manner as it shall deem fair and reasonable in all the circumstances.
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3.7
Scheduled Interest Amounts
Each Security will cease to bear interest from the due date for redemption thereof unless, upon due presentation of the relevant Certificate representing such Security, payment of principal is improperly withheld or refused. In such event, it shall continue to bear interest in accordance with this Condition 3 (both before and after judgment) until whichever is the earlier of (a) the day on which all sums payable in respect of such Security up to (but excluding) that day are received by or on behalf of the relevant Securityholder, and (b) the day seven days after the Trustee or the Principal Paying and Transfer Agent has notified Securityholders of receipt of all sums payable in respect of all the Securities up to (but excluding) that seventh day (except to the extent that there is failure in the subsequent payment to the relevant Securityholders under these Conditions).
3.8
Notifications etc. to be binding
All notifications, opinions, determinations, certifications, conditions, quotations and decisions given, expressed, made or obtained for the purposes of this Condition 3, whether by the Agent Bank or the Trustee (or its agent), shall (in the absence of wilful default, bad faith, gross negligence or manifest or proven error) be binding on the Issuer, the Agent Bank, the Trustee, the Registrar, the Paying and Transfer Agents and on all Securityholders and (in the absence of wilful default, bad faith and gross negligence) no liability to the Securityholders or the Issuer shall attach to the Agent Bank or the Trustee (or its agent) in connection with the exercise or non-exercise by them of any of their powers, duties or discretions.
4.
DEFERRALS OF INTEREST
The Issuer shall pay each Scheduled Interest Amount on the relevant Interest Payment Date subject to and in accordance with these Conditions, in particular the provisions relating to interest deferral set out in this Condition 4.
4.1
Optional deferral of interest
(a)
Subject to Conditions 4.1(b), 4.2 and 4.3, the Issuer may, by giving notice (an “
Optional Deferral Notice
”) to the Principal Paying and Transfer Agent, the Registrar and the Trustee (in an Officer’s Certificate of the Issuer) and the Securityholders in accordance with Condition 15, not less than ten business days prior to an Interest Payment Date, at its sole discretion elect to defer payment of any Scheduled Interest Amount (or part thereof) on the Securities. Any Scheduled Interest Amount (or part thereof) not paid pursuant to the provisions of this Condition 4.1 (“
Optionally Deferred Interest
”, which term does not include any Old Optionally Deferred Interest), shall be deemed accrued on the relevant Interest Payment Date notwithstanding deferral of the payment thereof, and shall remain accrued until paid in full but shall not itself accrue interest. Non-payment of any Scheduled Interest Amount (or part thereof) pursuant to the provisions of this Condition 4.1 shall not constitute an Enforcement Event or otherwise be subject to enforcement except as provided in Condition 9.
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(b)
Optionally Deferred Interest may be paid by the Issuer at its discretion in cash at any time (having given not less than seven business days notice thereof to the Principal Paying and Transfer Agent, the Registrar, the Trustee and the Securityholders in accordance with Condition 15) on or before the fifth anniversary of the Interest Payment Date on which payment thereof was first deferred in accordance with this Condition 4.1, and during such period will become immediately payable in cash on the date which is the earliest to occur of:
(i)
the date on which the Issuer next pays any interest amount in respect of the Securities or any interest amount is payable in respect of the Securities (unless payment thereof is deferred by the Issuer pursuant to these Conditions);
(ii)
the date on which a Capital Payment is next made;
(iii)
the due date for redemption of the Securities, whether at their Maturity Date, any Early Redemption Date or the date on which the Securities become immediately due and repayable pursuant to Condition 9;
(iv)
the date which is 180 days after the date on which any petition is filed by any third party in connection with any Insolvency Proceedings in respect of the Issuer, where such petition has not been dismissed by such 180th day; and
(v)
the date on which an order is made or a resolution is passed for the voluntary or involuntary liquidation, dissolution or winding up of, or an administrative and/or court order is made for any Insolvency Proceedings in respect of, the Issuer, or the date on which the Issuer takes any corporate action for the purposes of opening, or initiates or consents to, Insolvency Proceedings in respect of it.
Any Optionally Deferred Interest that has not been paid in full in cash by the Issuer on or before the fifth anniversary of the Interest Payment Date on which payment thereof was first deferred in accordance with this Condition 4.1 shall, from such fifth anniversary, no longer be referred to Optionally Deferred Interest but shall be referred to as “
Old Optionally Deferred Interest
”, and may only be paid pursuant to Conditions 4.3 and 5.
4.2
Mandatory deferral of interest
The Issuer shall not pay any Scheduled Interest Amount on an Interest Payment Date if, as at the relevant Test Date, a Mandatory Deferral Event has occurred, unless and to the extent that the Issuer has available cash proceeds raised from the offer, issue and sale or contribution of Issuer Equity during the six month period ending on such Interest Payment Date and specified at the time of such offer, issue and sale or contribution to be for the purpose of enabling the payment of all or part of such Scheduled Interest Amount. Any Scheduled Interest Amount (or part thereof) not paid pursuant to the provisions of this Condition 4.2 (“
Mandatorily Deferred Interest
”) shall be deemed accrued on the relevant Interest Payment Date notwithstanding deferral of the payment thereof, and shall remain accrued until paid in full but shall
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not itself accrue interest. Non-payment of any Scheduled Interest Amount (or part thereof) pursuant to this Condition 4.2 shall not constitute an Enforcement Event or otherwise be subject to enforcement except as provided in Condition 9. Mandatorily Deferred Interest may only be paid pursuant to Conditions 4.3 and 5.
A “
Mandatory Deferral Event
” shall be deemed to occur in respect of an Interest Payment Date if the Coverage Ratio as of the relevant Test Date is less than or equal to 1.35. The Issuer will give to the Principal Paying and Transfer Agent, the Registrar and the Trustee (in an Officer’s Certificate of the Issuer) and the Securityholders in accordance with Condition 15 notice not later than five business days prior to the relevant Interest Payment Date of the occurrence of a Mandatory Deferral Event as at the relevant Test Date. An Officer’s Certificate of the Issuer addressed to the Trustee as to the amount of Capital Expenditure, EBITDA, ESOP Cashflow, Interest Expense and Taxes Paid, as to the Coverage Ratio or as to whether a Mandatory Deferral Event has occurred or will occur or not occur at any time may, in the absence of manifest error be relied upon by the Trustee and, if so relied upon, shall be conclusive and binding on the Issuer and the Securityholders.
4.3
Equity Funded Deferred Interest
For so long as any Old Optionally Deferred Interest or Mandatorily Deferred Interest (together, “
Equity Funded Deferred Interest
”) remains unpaid, the Issuer must take all steps necessary (in compliance with applicable law) to fund payment of the same pursuant to Condition 5.2, but such Equity Funded Deferred Interest will become immediately payable in cash on the date which is the earliest to occur of:
(a)
7 business days following the settlement of an issue, offer and sale or contribution of Issuer Equity in accordance with Condition 5, to the extent of the proceeds thereof received by the Issuer;
(b)
the tenth anniversary of the Interest Payment Date on which such payment thereof was first deferred in accordance with these Conditions;
(c)
the due date for redemption of the Securities, whether at the Maturity Date, any Early Redemption Date, or the date on which the Securities become immediately due and repayable pursuant to Condition 9.3;
(d)
the date which is 180 days after the date on which any petition is filed by any third party in connection with any Insolvency Proceedings in respect of the Issuer, where such petition has not been dismissed by such 180th day; and
(e)
the date on which an order is made or a resolution is passed for the voluntary or involuntary liquidation, dissolution or winding up of, or an administrative and/or court order is made for any Insolvency Proceedings in respect of, the Issuer, or the date on which the Issuer takes any corporate action for the purposes of opening, or initiates or consents to, Insolvency Proceedings in respect of it.
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5.
EQUITY FUNDING OF EQUITY FUNDED DEFERRED INTEREST
5.1
Authorised Equity
For so long as any Securities are outstanding (as defined in the Trust Deed), the Issuer undertakes to take all steps necessary (in compliance with applicable law) to keep available, as of the date of each Annual General Meeting, Sufficient Authorised Equity.
Such steps shall include, but not be limited to the following:
(a)
if, in the opinion of the board of directors of the Issuer prior to the date of each Annual General Meeting, the Issuer will not have available on the date of such Annual General Meeting a sufficient amount of Authorised Equity to fund the payment of all outstanding Equity Funded Deferred Interest, the board of directors of the Issuer shall, in compliance with any applicable law, propose a resolution at such Annual General Meeting for shareholders to resolve on the authorisation for the issuance of ordinary shares in such number as will enable the Issuer to (i) pay in full all accrued and unpaid Equity Funded Deferred Interest pursuant to Condition 5.2 and (ii) after doing so, have available Sufficient Authorised Equity. The Issuer shall estimate the number of ordinary shares required for this purpose based on the prevailing market price for such ordinary shares on or around the time of proposing such resolution; and
(b)
if any resolution relating to the authorisation and issuance of new ordinary shares for the payment of Equity Funded Deferred Interest proposed as provided in Condition 5.1(a) is not approved and adopted by the shareholders of the Issuer at such Annual General Meeting, the board of directors of the Issuer shall, in compliance with applicable law, propose a similar resolution at the next Annual General Meeting of the Issuer. This process shall be repeated, in compliance with applicable law, until the relevant resolution is approved and adopted.
If the Issuer does not have a sufficient number of ordinary shares available for issue, then the Issuer shall give notice thereof to the Trustee (in an Officer’s Certificate of the Issuer) and the Securityholders in accordance with Condition 15. The Issuer shall thereafter give notice to the Trustee (in an Officer’s Certificate signed of the Issuer) and the Securityholders in accordance with Condition 15 of the subsequent approval and adoption by the shareholders of the Issuer of any resolution relating to the authorisation for issuance of ordinary shares to fund the payment of such unpaid Equity Funded Deferred Interest, promptly following the date of the Annual General Meeting at which such resolution is passed.
The shareholders of the Issuer initially authorised for issuance Authorised Equity of up to €170 million in connection with these provisions.
5.2
Payment of Equity Funded Deferred Interest
For as long as any Equity Funded Deferred Interest (or part thereof) remains unpaid, the Issuer must, after obtaining all shareholder authorisations for the issue or creation of Issuer Equity, in compliance with any applicable law and subject to Condition 5.3,
65
promptly fund the full payment in cash of such Equity Funded Deferred Interest, using the proceeds derived from the issue, offer and sale or contribution of Issuer Equity raised in accordance with this Condition 5.2.
Promptly following the date on which Mandatorily Deferred Interest or Old Optionally Deferred Interest, as the case may be, arises, the Issuer shall, after obtaining all shareholder authorisations for the issue or creation of Issuer Equity, in compliance with any applicable law and subject to Condition 5.3:
(i)
procure the issue, offer and sale or contribution of such amount of Issuer Equity as will result in proceeds received by the Issuer, after any expenses relating thereto, of not less than the aggregate amount of unpaid Equity Funded Deferred Interest; and
(ii)
deliver to the Trustee or to the Principal Paying Agent a cash amount equal to the amount of unpaid Equity Funded Deferred Interest as soon as practicable, but in any event within twenty business days following the settlement of the relevant issue, offer and sale or contribution of Issuer Equity. If such cash amount is received by the Trustee, the Trustee shall pay such amount to the Principal Paying and Transfer Agent. The Principal Paying and Transfer Agent shall pay the amount received by it to the Securityholders in respect of the relevant Equity Funded Deferred Interest within ten business days following receipt thereof by the Principal Paying and Transfer Agent (such date, the “
Equity Funded Deferred Interest Payment Date
”).
If the proceeds of the issue, offer and sale or contribution of Issuer Equity received by the Issuer pursuant to paragraph (i) above are insufficient to pay in full all unpaid Equity Funded Deferred Interest on the relevant Equity Funded Deferred Interest Payment Date, then: (A) the Issuer’s obligations pursuant to this Condition 5.2 shall continue until all unpaid Equity Funded Deferred Interest has been paid in full; and (B) any payment in respect of Equity Funded Deferred Interest made to Securityholders on such Equity Funded Deferred Interest Payment Date will be applied
pro rata
to all Securityholders and the Issuer shall be released and discharged from its obligations under this Condition 5.2 only to the extent of such amount applied, and the Securityholders shall have no further claim against the Issuer to that extent (without prejudice to any claims in respect of any amount of Equity Funded Deferred Interest that remains unpaid).
5.3
Market Disruption Event
The Issuer shall not be obliged to pay Equity Funded Deferred Interest pursuant to Condition 5.2 if a Market Disruption Event has occurred and for so long as it is continuing, but the Issuer’s obligations contained in Condition 5.2 shall recommence immediately upon the cessation of such Market Disruption Event. The Issuer shall, as soon as practicable after becoming aware of the occurrence of a Market Disruption Event at any time whilst any Equity Funded Deferred Interest remains unpaid, notify the same to the Trustee (in an Officer’s Certificate of the Issuer) and to the Securityholders in accordance with Condition 15. An Officer’s Certificate of the Issuer addressed to the Trustee as to the occurrence of a Market Disruption Event may be relied upon by the Trustee as sufficient evidence thereof and if so relied upon shall be conclusive and binding on the Issuer, the Trustee and the Securityholders.
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5.4
Capital Restriction
Until such time as all unpaid Equity Funded Deferred Interest has been paid in full in cash in accordance with Conditions 4.3 and 5.2 (and, in the case of paragraph (c) below, for a period of one year thereafter) the Issuer:
(a)
shall not declare or make a payment of, or resolve on the declaration or payment of, a distribution or any other similar payment with respect to any Junior Obligations (other than ordinary share capital) or Distribution Parity Securities, other than a payment in the form of Issuer Equity; and
(b)
subject to paragraph (c) below, shall not redeem, repurchase or acquire any Junior Obligations or Parity Securities for any consideration, other than the purchase of fractional interests in Junior Obligations or Parity Securities pursuant to any conversion or exchange provisions of such Junior Obligations or Parity Securities; and
(c)
shall not redeem, repurchase or acquire any Issuer Equity for any consideration, other than (i) in connection with any existing or future employee benefit plan, directors’ and senior management’s stock based compensation, directors’ stock option plan or similar arrangement; or (ii) a reclassification of Issuer Equity or exchange or conversion of one class or series of Issuer Equity into another class or series of Issuer Equity; or (iii) the purchase of fractional interests in Issuer Equity pursuant to any conversion or exchange provisions of such Issuer Equity,
such restrictions shall be called the “
Capital Restriction
”.
As at the date of this Offering Circular, no Parity Securities or Junior Obligations falling within the exceptions to Condition 5.4(b) above were outstanding.
6.
REDEMPTION AND PURCHASE
The Securities may not be redeemed at the option of the Issuer other than in accordance with this Condition 6.
6.1
Maturity date
If not redeemed or purchased and cancelled earlier, the Securities will be redeemed on the Maturity Date at their principal amount together with any accrued and unpaid Scheduled Interest Amount, any unpaid Optionally Deferred Interest and Equity Funded Deferred Interest (which Equity Funded Deferred Interest may only be paid from the proceeds of the issue, offer and sale or contribution of Issuer Equity as described in Condition 5) together with any Additional Amounts thereon (the “
Redemption Price
”).
6.2
Redemption at the option of the Issuer
On giving not less than 30 nor more than 60 days’ notice to the Trustee and the Securityholders in accordance with Condition 15 (which notice shall be irrevocable and shall specify the date fixed for redemption) the Issuer may, at its option, redeem all but not some only of the Securities in cash on the Reset Date or on any Floating
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Rate Payment Date thereafter, at the Redemption Price. Upon the expiry of any such notice, the Issuer shall be obliged to redeem the Securities in accordance with this Condition 6.2.
6.3
Redemption for taxation reasons
On giving not less than 30 nor more than 60 days’ notice to the Trustee and the Securityholders in accordance with Condition 15 (which notice shall be irrevocable and shall specify the date fixed for redemption), the Issuer may, at its option, redeem all but not some only of the Securities in cash on any date prior to the Reset Date:
(a)
upon the occurrence of a Withholding Tax Event, at the Redemption Price; or
(b)
upon the occurrence of a Tax Event, at the Make-Whole Price together with any accrued and unpaid Scheduled Interest Amount, any unpaid Optionally Deferred Interest and Equity Funded Deferred Interest (which Equity Funded Deferred Interest may only be paid from the proceeds of the issue, offer and sale or contribution of Issuer Equity as described in Condition 5) and any Additional Amounts thereon.
Prior to the publication of any notice of redemption pursuant to the above paragraphs, the Issuer shall deliver or procure that there is delivered to the Trustee:
(A)
an Officer’s Certificate of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred (including, in the case of a Withholding Tax Event, that such obligation to pay Additional Amounts cannot be avoided by the Issuer taking reasonable measures available to it); and
(B)
an opinion of an independent legal advisor of recognised standing under the laws of the Relevant Taxing Jurisdiction to the effect that either (1) the Issuer has or will become obliged to pay such Additional Amounts as a result of a Withholding Tax Event, or (2) that a Tax Event has occurred.
Upon the expiry of any such notice, the Issuer shall be obliged to redeem the Securities in accordance with this Condition 6.3. Notwithstanding the foregoing, no such notice of redemption will be given in respect of the occurrence of a Withholding Tax Event (a) earlier than 90 days prior to the earliest date on which the Issuer would be obliged to make such payment of Additional Amounts or withholding if any amounts in respect of the Securities were then payable and (b) unless at the time such notice is given, the obligation to pay Additional Amounts remains in effect.
6.4
Change of Control Call Event
(a)
If at any time while the Securities are outstanding a Change of Control Event occurs prior to the Reset Date, the Issuer may, not later than 60 days following the occurrence of such Change of Control Event and on giving not less than 30 nor more than 60 days’ notice to the Trustee and the Securityholders in accordance with Condition 15 (which notice shall be irrevocable and shall specify the date fixed for redemption), at its option, redeem all but not some
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only of the Securities in cash at the Make-Whole Price together with any accrued and unpaid Scheduled Interest Amount, any unpaid Optionally Deferred Interest and Equity Funded Deferred Interest (which Equity Funded Deferred Interest may only be paid from the proceeds of the issue, offer and sale or contribution of Issuer Equity as described in Condition 5) and any Additional Amounts thereon.
(b)
If at any time while the Securities are outstanding a Change of Control Event occurs on or after the Reset Date, the Issuer may, on the next Floating Rate Payment Date thereafter or, if the next succeeding Floating Rate Payment Date falls less than 30 days from the date such Change of Control Event occurs, then on the next Floating Rate Payment Date thereafter), on giving not less than 30 nor more than 60 days’ notice to the Trustee and the Securityholders in accordance with Condition 15 (which notice shall be irrevocable and shall specify the date fixed for redemption), at its option, redeem all but not some only of the Securities in cash at the Redemption Price.
Upon the expiry of any such notice, the Issuer shall be obliged to redeem the Securities in accordance with this Condition 6.4.
If a Change of Control Event occurs and the Issuer does not elect to redeem the Securities by giving notice to the Trustee and the Securityholders in accordance with the provisions of Condition 6.4(a) or (b), as the case may be, within the periods described therein, then the Securities shall, from the date on which the Change of Control Event occurred, bear interest on their aggregate principal amount at a rate which is (a) prior to the Reset Date, equal to the Change of Control Fixed Rate or (b) from (and including) the Reset Date, equal to the Change of Control Floating Rate.
6.5
Purchase
The Issuer or any of its subsidiaries may, at any time, purchase Securities in the open market or otherwise at any price. Any Securities so purchased, pending cancellation in accordance with Condition 6.7, shall not entitle the holder to vote at any meetings of the Securityholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Securityholders or for the purposes of Condition 12.1.
The Issuer’s intention is (without assuming a legal obligation) only to redeem, repurchase or otherwise acquire the Securities for cash consideration prior to the Maturity Date if the Issuer has received from parties that are not members of the Issuer Group cash proceeds at least amounting to such consideration within a period of six months prior to such redemption, repurchase or other acquisition from the issue, offer and sale or contribution of (a) Issuer Equity or (b) other securities which contain terms that are substantially the same as the Securities in respect of (i) enforcement rights and remedies of holders thereof, (ii) subordination of such holders’ claims in the event of a liquidation, dissolution or winding up or Insolvency Proceedings in respect of the Issuer, (iii) initial maturity and any early redemption provisions, (iv) the payment, deferral or non-payment of scheduled distributions, (v) scheduled step up in distribution rate, if any, and (vi) replacement conditions pertaining to early redemption, repurchase or acquisition of such other securities.
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6.6
Cancellation
All Securities so redeemed or purchased in accordance with this Condition 6 will be cancelled and may not be re-issued or resold.
7.
PAYMENTS
7.1
Method of Payment
(a)
Subject to Condition 4, payments of principal in respect of the Securities will be made to the person shown in the Register at the close of business on the seventh business day in London and the city in which the specified office of the Registrar is located before the due date for the relevant payment (the “
Record Date
”), and against presentation and surrender (or, in the case of a partial payment, endorsement) of the relevant Certificate at the specified office of the Registrar or any Paying and Transfer Agent by euro cheque drawn on, or by transfer to a euro account maintained by the payee with, a bank in a city in which banks have access to the TARGET System.
(b)
Payments of interest due on an Interest Payment Date and payments in respect of Optionally Deferred Interest and Equity Funded Deferred Interest will be made to the person shown in the Register at the close of business on the relevant Record Date. Such payments on each Security shall be made by euro cheque drawn on, or by transfer to a euro account maintained by the payee with, a bank in a city in which banks have access to the TARGET System.
(c)
Where payment is to be made by cheque, the cheque will be mailed, on the business day in London and the city in which the specified office of the Registrar is located preceding the due date for payment or, in the case of payments referred to in Condition 7.1(a), if later, on the business day (in the city on which the specified office of the Registrar or the relevant Paying and Transfer Agent with whom the Certificate is deposited is located) on which the relevant Certificate is presented for surrender or endorsement, as applicable (at the risk and, if mailed at the request of the holder otherwise than by ordinary mail, at the expense of the holder) to the holder (or the first named of joint holders) of the Securities at its address appearing in the Register.
(d)
Securityholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due (i) as a result of the due date not being a business day, (ii) if the Securityholder is late in presenting the relevant Certificate for surrender (or endorsement, as applicable) or (iii) if a cheque mailed in accordance with this Condition 7.1 arrives after the date for payment.
7.2
Payments subject to laws
All payments are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 8. No commissions or expenses shall be charged to the Securityholders in respect of such payments.
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7.3
Payments on business days
A Certificate may only be presented for payment on a day which is a business day in the place of presentation (and, in the case of payment by transfer to a euro account, in a city where banks have access to the TARGET System). No further interest or other payment will be made if the day on which the relevant Certificate may be presented for payment under this paragraph is a day falling after the due date. In this Condition 7 “
business day
” means a day on which commercial banks and foreign exchange markets settle payment and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the relevant city.
7.4
Agents
The initial Registrar, Paying and Transfer Agents and Agent Bank and their initial specified offices are listed below. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of any Paying and Transfer Agent or the Agent Bank and appoint additional or other agents, provided that it will, at all times while any Security is outstanding, maintain (a) a Registrar, (b) a Principal Paying and Transfer Agent (and for so long as any amounts remain payable in respect of the Securities), (c) an Agent Bank, (d) Paying and Transfer Agents having specified offices in at least two major European cities approved by the Trustee and (e) a Paying and Transfer Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any other law implementing or complying with, or introduced in order to conform to, such Directive.
If any of the Registrar, Agent Bank or Principal Paying and Transfer Agent is unable or unwilling to act as such or if it fails to make any determination or calculation or otherwise fails to perform its duties under these Conditions or the Paying Agency Agreement, as the case may be, the Issuer shall appoint, on terms acceptable to the Trustee, an independent investment bank acceptable to the Trustee to act as such in its place.
7.5
Fractions
When making payments to Securityholders, if the relevant payment is not of an amount which is a whole multiple of €0.01, such payment will be rounded down to the nearest €0.01.
8.
TAXATION
8.1
Additional Amounts
All payments in respect of principal, premium (if any) and interest (including, without limitation, any Optionally Deferred Interest and Equity Funded Deferred Interest) by or on behalf of the Issuer in respect of the Securities shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges (including, without limitation, any interest, penalties and other similar liabilities related thereto) of whatever nature imposed, levied, collected,
71
withheld or assessed by or within the United Kingdom or the United States of America or any political subdivision thereof or therein that has the power to tax (each a “
Relevant Taxing Jurisdiction
”) (such amounts being hereafter referred to as “
Taxes
”), unless such withholding or deduction is required by law (including, but not limited to, as a consequence of any change in tax law or any change in the interpretation of Tax law). In such event the Issuer shall pay such additional amounts (“
Additional Amounts
”) as will result in the receipt by the Securityholders (which for all purposes of this Condition 8 shall include the beneficial owners of the Securities) of the same amounts as would have been received by them had no such withholding or deduction been required; except that no such Additional Amounts shall be due from the Issuer to the extent that the relevant Tax is a direct result of one or more of the following circumstances:
(a)
Other connection
:
in respect of any Securityholder who is liable to such Taxes by reason of his having some present or future connection with the Relevant Taxing Jurisdiction (other than by reason of (i) the mere receipt or holding of the Security or (ii) the mere receipt of payments under the Securities); or
(b)
Declaration of non-residence or other exemption claim
:
in respect of any Securityholder who would not be liable or subject to the withholding or deduction by making a declaration (including, without limitation, a U.S. Internal Revenue Service Form W-8 BEN or W-9) of non-residence or other similar claim for exemption (in each case, which the relevant Securityholder was legally entitled to make) to the relevant tax authority after notification by the Issuer of the requirement to comply with the same (which notification shall be accomplished by providing written notice of the same to the Trustee, the Principal Paying and Transfer Agent and the relevant clearing systems and by publication of an appropriate notice in at least two international economic newspapers, which publication shall be made at a time which would enable the Securityholders, acting reasonably, to comply with such requirement; or
(c)
Presentation more than 30 days after the Relevant Date
:
in respect of any Certificate presented for payment (where presentation is required) more than 30 days after the Relevant Date except to the extent that the Securityholder thereof would have been entitled to such Additional Amounts on presenting such Certificate for payment on the last day of such period of 30 days; or
(d)
European Council Directive
:
where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any other law implementing or complying with, or introduced in order to conform to, such Directive; or
(e)
Payment by another Paying and Transfer Agent
:
in respect of any Certificate presented for payment (where presentation is required) by or on behalf of a Securityholder who would have been able to avoid such withholding or deduction by presenting the relevant Certificate to another Paying and Transfer Agent in a Member State of the European Union; or
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(f)
U.S. Backup Withholding
:
where such withholding or deduction is in respect of backup withholding imposed under Section 3406 of the United States Internal Revenue Code of 1986, as amended (the “
Code
”) and the U.S. Treasury regulations thereunder.
Such Additional Amounts will also not be payable where, had the beneficial owner of the Security been the registered Securityholder, it would not have been entitled to payment of Additional Amounts by reason of Conditions 8.1(a) to (g) (inclusive) above.
The Issuer will (i) make such withholding or deduction required by applicable law and (ii) remit the full amount withheld or deducted to the relevant taxing authority in accordance with applicable law.
At least 30 calendar days prior to each date on which any payment under or with respect to the Securities is payable, if the Issuer will be obliged to pay Additional Amounts with respect to such payment (unless such obligation to pay Additional Amounts arises after the 30th day prior to the date on which payment under or with respect to the Securities is payable, in which case it will be promptly thereafter), the Issuer will deliver to the Trustee an Officer’s Certificate of the Issuer stating that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee, the Registrar or the Paying and Transfer Agent, as the case may be, to pay such Additional Amounts to Securityholders on the relevant payment date. The Trustee shall, without further investigation, be entitled to rely absolutely on each such Officer’s Certificate as conclusive proof that such payments are necessary. The Issuer will promptly publish a notice in accordance with the provisions set forth in Condition 15 stating that such Additional Amounts will be payable and describing the obligation to pay such amounts.
Upon request, the Issuer will make reasonable efforts to furnish to the Trustee or a Securityholder within a reasonable time certified copies of Tax receipts evidencing the payment by the Issuer of any Taxes imposed or levied by a Relevant Taxing Jurisdiction, in such form as provided in the normal course by the taxing authority imposing such Taxes and as is reasonably available to the Issuer. If, notwithstanding the efforts of the Issuer to obtain such receipts, the same are not obtainable, the Issuer will provide the Trustee or Securityholder with other evidence reasonably satisfactory to the Trustee or such Securityholder of such payments by the Issuer. The Issuer will attach to each copy a certificate stating that the amount of Taxes evidenced by the certified copy was paid in connection with payments in respect of the principal amount of Securities then outstanding.
The Trust Deed shall further provide that if the Issuer becomes subject to the taxing jurisdiction of any country or any political subdivision thereof or therein that has the power to tax (an “
Additional Taxing Jurisdiction
”) other than or in addition to a Relevant Taxing Jurisdiction, this Condition 8 shall be deemed to apply as if references therein to “
Taxes
” included taxes imposed by way of withholding or deduction by any such Additional Taxing Jurisdiction (or any political subdivision thereof or therein).
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In addition, the Issuer will pay (i) all present and future stamp, issue, registration, court, documentation, or any excise or property taxes or other similar taxes, charges and duties, including interest and penalties with respect thereto, imposed by any Relevant Taxing Jurisdiction in respect of the execution, issue, delivery or registration of the Securities, the Trust Deed, or any other document or instrument referred to therein, and any such taxes, charges, or similar levies imposed by any jurisdiction as a result of, or in connection with, the enforcement of the Securities, the Trust Deed or any other such document or instrument, or (ii) any stamp, court, or documentary taxes (or similar charges or levies) imposed with respect to the receipt of any payments with respect to the Securities.
The preceding provisions will survive any termination, defeasance or discharge of the Trust Deed and redemption of the Securities and shall apply
mutatis mutandis
to any jurisdiction in which the Issuer is organised, incorporated or otherwise resident for tax purposes and any political subdivision or taxing authority or agency thereof or therein.
8.2
References
Any reference in these Conditions to principal, interest and/or any other amounts in respect of the Securities shall be deemed to include any Additional Amounts which may be payable under this Condition or any undertaking given in addition to or substitution for it under the Trust Deed.
9.
ENFORCEMENT EVENTS
9.1
Enforcement Events
An “
Enforcement Event
” shall have occurred if:
(a)
the Issuer fails to pay any Optionally Deferred Interest in respect of the Securities within fifteen business days of the due date for payment thereof;
(b)
the Issuer fails to pay in full any Equity Funded Deferred Interest, in the manner described herein by the tenth anniversary of the Interest Payment Date on which payment of the relevant Scheduled Interest Amount was first deferred in accordance with these Conditions, or the Issuer breaches the Capital Restriction;
(c)
the Issuer defaults in the performance or observance of any of its other obligations in respect of the Securities (other than any of its obligations under the Trust Deed) and such default (i) is, in the reasonable opinion of the Trustee, incapable of remedy or (ii) being a default which is, in the reasonable opinion of the Trustee, capable of remedy, remains unremedied for 60 days or such longer period as the Trustee may agree after the Trustee has given notice thereof to the Issuer;
(d)
any petition is filed by any third party in connection with any Insolvency Proceedings in respect of the Issuer, and such petition is not dismissed within 180 days of such filing; or
(e)
an order is made or a resolution is passed for the voluntary or involuntary liquidation, dissolution or winding up of, or an administrative and/or court
74
order is made for any Insolvency Proceedings in respect of, the Issuer, or the Issuer takes any corporate action for the purposes of opening, or initiates or consents to, Insolvency Proceedings in respect of it.
9.2
Enforcement in respect of Optionally Deferred Interest
Upon the occurrence of an Enforcement Event described in Condition 9.1(a) and subject to mandatory provisions of applicable law, the Trustee at its discretion may, and if so instructed by Securityholders holding not less than 25% in aggregate principal amount of the outstanding Securities or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) shall, subject in each case to its being indemnified and/or secured to its satisfaction, by written notice addressed to the Issuer, institute proceedings to obtain payment of the amounts due, provided that the Issuer shall not by virtue of the institution of any such proceedings be obliged to pay any sum or sums sooner than the same would otherwise have been payable by it and the Trustee shall not, in these circumstances, be entitled to declare the principal amount of the Securities due and payable.
The proviso to this Condition 9.2 shall not apply to amounts due to the Trustee in its personal capacity under the Trust Deed.
9.3
Enforcement in respect of Equity Funded Deferred Interest and Capital Restriction
Upon the occurrence of an Enforcement Event described in Condition 9.1(b) above and subject to Condition 12.1 and mandatory provisions of applicable law, the Trustee at its discretion may, and if so instructed by Securityholders holding not less than 25% in aggregate principal amount of the outstanding Securities or if so directed by an Extraordinary Resolution shall, subject in each case to it being indemnified and/or secured to its satisfaction, (a) give notice to the Issuer that the Securities are, and they shall accordingly forthwith become, immediately due and repayable at their principal amount, together with any accrued and unpaid Scheduled Interest Amount, any Deferred Interest and any Additional Amounts thereon, and/or (b) institute steps in order to obtain a judgment against the Issuer for any amounts due in respect of the Securities, including the institution of Insolvency Proceedings.
9.4
Enforcement in respect of Breach of Other Obligations
Upon the occurrence of an Enforcement Event described in Condition 9.1(c) above or upon the breach by the Issuer of any of its obligations under the Trust Deed and subject to mandatory provisions of applicable law, the Trustee at its discretion may, and if so instructed by Securityholders holding not less than 25% in aggregate principal amount of the outstanding Securities or if so directed by an Extraordinary Resolution shall, subject in each case to it being indemnified and/or secured to its satisfaction, institute such proceedings and/or take any other action against the Issuer as it may think fit to enforce any obligation, condition, undertaking or provision binding on the Issuer under the Securities or the Trust Deed (other than as provided in Conditions 9.2 and 9.3); provided that the Issuer shall not by virtue of the institution of any such proceedings be obliged to pay any sum or sums sooner than the same would otherwise have been payable by it and the Trustee shall not, in these
75
circumstances, be entitled to declare the principal amount of the Securities due and repayable.
The proviso to this Condition 9.4 shall not apply to amounts due to the Trustee in its personal capacity under the Trust Deed.
9.5
Enforcement in respect of Insolvency Proceedings
Upon the occurrence of an Enforcement Event described in Condition 9.1(d) or (e) above and subject to Condition 12.1 and mandatory provisions of applicable law, the Trustee at its discretion may, and if so instructed by Securityholders holding not less than 25% in aggregate principal amount of the outstanding Securities or if so directed by an Extraordinary Resolution shall, subject in each case to it being indemnified and/or secured to its satisfaction, (a) give notice to the Issuer that the Securities are, and they shall accordingly forthwith become, immediately due and repayable at their principal amount, together with any accrued and unpaid Scheduled Interest Amount, any Deferred Interest and any Additional Amounts thereon, and/or (b) institute steps in order to obtain a judgment against the Issuer for any amounts due in respect of the Securities, including filing a proof of claim and participating in the relevant Insolvency Proceedings or proceedings for the liquidation, dissolution or winding-up of the Issuer.
9.6
Non-Payment of Principal
If the Issuer shall default in the payment of principal or premium in respect of any Security which has become due and repayable, or fails to redeem the Securities when obliged to do so, in each case in accordance with the terms hereof, the Trustee at its discretion may, and if so instructed by Securityholders holding not less than 25% in aggregate principal amount of the outstanding Securities or if so directed by an Extraordinary Resolution (as defined in the Trust Deed) shall, subject in each case to its being indemnified and/or secured to its satisfaction, institute proceedings to obtain payment of the amounts due, including the institution of Insolvency Proceedings.
9.7
Other Remedies and Rights of Securityholders
No remedy against the Issuer other than the institution of the steps or the proceedings or taking of other action by the Trustee referred to in Conditions 9.2, 9.3, 9.4, 9.5 and 9.6 shall be available to the Trustee or the Securityholders whether for the recovery of amounts owing in respect of the Securities or in respect of any breach by the Issuer of any other obligation, condition, or provision binding on it under the Securities or the Trust Deed, provided that the second paragraph of Conditions 9.2 and 9.4 shall apply to this Condition 9.7.
9.8
Holders not entitled to proceed directly
No Securityholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable period and such failure is continuing.
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10.
PRESCRIPTION
Claims against the Issuer for payment in respect of the Securities shall be prescribed and become void unless made within a period of 10 years (in the case of principal) or five years (in the case of interest) from the appropriate Relevant Date in respect of such payment and thereafter any principal, interest or other sums payable in respect of such Securities shall be forfeited and revert to the Issuer.
11.
REPLACEMENT OF CERTIFICATES
If any Certificate is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Paying and Transfer Agent in Luxembourg (for so long as the Securities are listed on the Luxembourg Stock Exchange, otherwise at the specified office of the Registrar) subject to all applicable laws and stock exchange or other relevant authority requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Certificates must be surrendered before replacements will be issued.
12.
MEETINGS OF SECURITYIIOLDERS, MODIFICATION AND WAIVER
12.1
Meetings of Securityholders
The Trust Deed contains provisions for convening meetings of Securityholders to consider any matter affecting their interests, including a modification of any of these Conditions or any provisions of the Trust Deed in accordance with any applicable provisions of law. Any such modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convened by the board of directors of the Issuer or by the Securityholders’ Representative and shall be convened upon the request in writing of Securityholders holding not less than 5% in aggregate principal amount of the Securities for the time being outstanding. Such a meeting will be validly held if (a) there are one or more persons present, being or representing Securityholders holding at least one half of the aggregate principal amount of the Securities for the time being outstanding, or (b) at any adjourned meeting, following adjournment of the first meeting for lack of quorum, there are one or more persons present being or representing Securityholders whatever the principal amount of the Securities represented,
provided, however, that
if the business of such meeting includes consideration of proposals,
inter alia
, (i) to modify the Maturity Date or the dates on which, or manner in which, interest is payable in respect of the Securities, (ii) to reduce or cancel the principal amount of, or interest on or to vary the method of calculating the rate of interest on, the Securities, (iii) to change the currency of payment of the Securities, (iv) to modify the provisions relating to status or (v) to modify the provisions concerning the quorum required at any meeting of Securityholders or the majority required to pass an Extraordinary Resolution (each, a “
Reserved Matter
”), the necessary quorum shall be one or more persons present, being or representing Securityholders holding at least three quarters of the aggregate principal amount of the Securities for the time being outstanding or, at any adjourned meeting one or more persons present, being or representing Securityholders holding at least one quarter of the aggregate principal amount of the Securities for the time being. The majority required to pass a resolution at any meeting convened to vote on an
77
Extraordinary Resolution (including any meeting convened following adjournment of the previous meeting for want of quorum) shall be one or more persons present being or representing Securityholders holding at least two thirds of the aggregate principal amount of the Securities represented at the meeting. Any Extraordinary Resolution duly passed shall be binding on all Securityholders (whether or not they were present at the meeting at which such resolution was passed).
In addition, a Written Resolution will take effect as if it were an Extraordinary Resolution.(4)
12.2
Modification and Waiver
The Trustee may agree, without the consent of the Securityholders, to (i) any modification of any of the provisions of the Trust Deed which, in its opinion, is of a formal, minor or technical nature or is made to correct a manifest error, and (ii) any other modification, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed (except a Reserved Matter) which is in the opinion of the Trustee not materially prejudicial to the interests of the Securityholders. Any such modification, authorisation or waiver shall be binding on the Securityholders and, if the Trustee so requires, such modification, authorisation or waiver shall be notified to the Securityholders as soon as practicable in accordance with Condition 15.
12.3
Entitlement of the Trustee
In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or determination), the Trustee shall have regard to the general interests of Securityholders as a class but shall not have regard to any interests arising from circumstances particular to individual Securityholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Securityholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Securityholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Securityholders except to the extent already provided for in Condition 8 and/or any undertaking given in addition to, or in substitution for, Condition 8 pursuant to the Trust Deed.
13.
INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer and any entity related to the Issuer without accounting for any profit.
(4) To be further conformed against amended Trust Deed meeting provisions as necessary
78
14.
FURTHER ISSUES
The Issuer may from time to time without the consent of the Securityholders create and issue further securities having the same terms and conditions as the Securities in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with, and have the same ISIN and Common Code numbers as, the Securities. References in these Conditions to the Securities include (unless the context requires otherwise) any such securities and forming a single series with the Securities. Any further securities forming a single series with the Securities shall be constituted by a deed supplemental to the Trust Deed.
15.
NOTICES
Notices to Securityholders shall be validly given when: (i) delivered in person or when sent by first class registered or certified mail, postage pre-paid, to them at their respective addresses as set out in the Register; or (ii) so long as the Securities are listed on the Luxembourg Stock Exchange and the rules of that stock exchange so require, notices will be published in a leading newspaper having general circulation in Luxembourg (which is expected to be
d’Wort
), at least 21 days prior to the meeting (exclusive of the day on which the notice is published and of the day on which the meeting is to be held). Any notice shall be deemed to have been given on the date of publication or, if published more than once or on different dates, on the first date on which publication is made in all required publications, provided that, if notices are mailed, such notice shall be deemed to have been given on the later of such publication and the fifth day after being so mailed. Failure to mail a notice or communication to any holder, or any defect in any such notice or communication, shall not affect its validity with respect to other holders. If a notice or communication is mailed in the manner provided above, it shall be deemed validly given, whether or not the addressee receives it.
While any Securities are represented by a Global Certificate, notices may be delivered to Euroclear and Clearstream, Luxembourg, each of which shall give notice of such notice to holders of Book-Entry Interests instead of publication as described above.
16.
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Securities under the Contracts (Rights of Third Parties) Act 1999.
17.
GOVERNING LAW
The Trust Deed and the Securities, and any non-contractual obligations arising out of or in connection with them, are governed by and shall be construed in accordance with English law.
17.1
Jurisdiction
The courts of England are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Securities and accordingly any legal action or proceedings arising out of or in connection with the Securities
79
(“
Proceedings
”) may be brought in such courts. The Issuer has in the Trust Deed irrevocably submitted to the non-exclusive jurisdiction of such courts.
17.2
Agent for Service of Process
The Issuer has irrevocably appointed an agent in England to receive service of process in any Proceedings in England based on any of the Securities or the Trust Deed.
18.
DEFINITIONS
“
Accounting Principle
s” means (i) generally accepted accounting principles in the United States, the United Kingdom or Italy or (ii) IFRS.
“
Additional Amounts
” has the meaning given to it in Condition 8.
“
Additional Taxing Jurisdiction
” has the meaning given to it in Condition 8.
“
Advance Capital Contributions
” means any irrevocable, unconditional and non-reimbursable (except upon the voluntary or involuntary liquidation, dissolution or winding-up of, the Issuer) capital contribution made or to be made by a shareholder of the Issuer.
“
Agent Bank
” has the meaning given to it in the preamble.
“
Annual General Meeting
” means the shareholders’ meeting of the Issuer convened in accordance with the articles of association of the Issuer in force from time to time.
“
Audited Accounts
” means, as at a Test Date, the most recent annual consolidated audited financial statements of the Issuer Group taken as a whole, prepared in accordance with Accounting Principles and having been approved by the board of directors of the Issuer and filed with the competent companies’ registrar.
“
Authorised Denomination
” has the meaning given to it in Condition 1.1.
“
Authorised Equity
” means from time to time, ordinary shares authorised for issuance pursuant to a resolution approved and adopted by the shareholders of the Issuer or, to the extent delegated by such resolution, the board of directors of the Issuer, in connection with the Securities.
“
B&D Holding
” means B&D Holding di Marco Drago e C. S.a.p.a., a company incorporated under the laws of Italy as a
società in accomandita per azioni
.
“
Benchmark Rate
” means 0.75% plus the annualised offer yield to maturity, as calculated by the Agent Bank to be the average of three market quotations, of the then current Euro government benchmark security selected by the Agent Bank, after consultation with the Issuer, as having a maturity comparable to the remaining term of the Securities to the Reset Date that would be used, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the Reset Date.
“
Book-Entry Interests
” has the meaning given to it in Condition 1.
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“
business day
” means, except in Conditions 1 and 7, a day which is both a day on which commercial banks and foreign exchange markets settle payment and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and a day on which the TARGET System is operating.
“
Capital Expenditure
” means the amount of capital expenditure (in the Issuer’s reporting currency) incurred by the Issuer Group in respect of the annual financial period ending on the date of the relevant Audited Accounts, as determined in accordance with such Audited Accounts.
“
Capital Payment
” means:
(a)
the redemption, repurchase or acquisition of any Parity Securities, or Junior Obligations for any consideration, other than (i) in connection with any existing or future employee benefit plan, directors’ and senior management’s stock based compensation, directors’ stock option plan or similar arrangement; or (ii) a reclassification of Issuer Equity or exchange or conversion of one class or series of Issuer Equity into another class or series of Issuer Equity; or (iii) the purchase of fractional interests in Parity Securities or Junior Obligations pursuant to any conversion or exchange provisions of such Parity Securities or Junior Obligations; or
(b)
the declaration or payment of, or the resolution of, a dividend or distribution or any other similar payment with respect to any Distribution Parity Securities or Junior Obligations, other than a payment in the form of Issuer Equity.
“
Capital Restriction
” has the meaning given to it in Condition 5.4.
A “
Change of Control
” will be deemed to have occurred if any person or any persons acting in concert (as defined in the City Code on Takeovers and Mergers), other than a holding company (as defined in Section 1159 of the Companies Act 2006 (as amended)) whose shareholders are or are to be substantially similar to the pre-existing shareholders of the Issuer, shall become interested (within the meaning of Part 22 of the Companies Act 2006 (as amended)) in (A) more than 50% of the issued or allotted ordinary share capital of the Issuer or (B) shares in the capital of the Issuer carrying more than 50% of the voting rights normally exercisable at a general meeting of the Issuer, provided that a Change of Control shall not be deemed to have occurred if the Principal Shareholder continues, without interruption, to hold the percentage of shares specified in (A) or (B) above.
A “
Change of Control Downgrade
” shall be deemed to have occurred if a relevant Rating Agency publicly announces that in connection with, anticipation of or as a result of, a Change of Control occurring, the Corporate Credit Rating or Corporate Family Rating assigned to the Issuer by such Rating Agency is withdrawn, or downgraded to a rating of or below BB+ by S&P or Ba1 by Moody’s (or their respective equivalents at such time).
A “
Change of Control Event
” shall be deemed to have occurred on the earliest date on which both a Change of Control Downgrade and the respective Change of Control have occurred.
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“
Change of Control Fixed Rate
” means the Fixed Interest Rate plus an additional margin of 5% per annum.
“
Change of Control Floating Rate
” means, in respect of a Floating Rate Interest Period, the relevant Floating Interest Rate determined in accordance with Conditions 3.3 and 3.4, plus an additional margin of 5% per annum.
“
Clearstream, Luxembourg
” has the meaning given to it in Condition 1.
“
Code
” has the meaning given to it in Condition 8.
“
Common Depositary
” has the meaning given to it in Condition 1.
“
Corporate Credit Rating
” means the corporate credit rating assigned from time to time to the Issuer by S&P, representing the highest rating that S&P may assign to any unsecured obligation of any member of the Issuer Group, and being on the Issue Date, BBB.
“
Corporate Family Rating
” means the corporate family rating assigned from time to time to the Issuer by Moody’s, representing the highest rating that Moody’s may assign to any unsecured obligation of any member of the Issuer Group, and being on the Issue Date, Baa3.
“
Coverage Ratio
” means the ratio (to be calculated to the fourth decimal place, with 0.00005 being rounded upwards) of (a) Free Cash-flow Before Debt Service, divided by (b) Interest Expense, in each case in respect of the annual financial period ending on the date of the relevant Audited Accounts.
“
Definitive Certificates
” has the meaning given to it in Condition 1.
“
Deferred Interest
” means any unpaid Optionally Deferred Interest and any unpaid Equity Funded Deferred Interest.
“
Distribution Parity Securities
” means any securities (including Liquidation Parity Securities) or other instruments issued, entered into or guaranteed by the Issuer which, in each case, by their terms or by operation of law, constitute obligations of the Issuer to make periodic payments, taking into account provisions for the Issuer to suspend or defer such payments at its discretion or subject to certain conditions, that are substantially the same as those of the Securities.
“
Early Redemption Date
” means any date fixed for redemption of the Securities (other than the Maturity Date) in accordance with the provisions of Condition 6.
“
EBITDA
” means the amount of the consolidated net pre-taxation profits of the Issuer Group (in the Issuer’s reporting currency), as adjusted by (without double counting):
(a)
adding back the amount of Interest Expense;
(b)
adding back the amount of depreciation and amortisation expense, if any;
(c)
eliminating the effect of any extraordinary item or any non-cash items;
82
(d)
eliminating the effect of any revaluation of an asset, or any loss or gain on the disposal of an asset (otherwise than in the ordinary course of trading); and
(e)
excluding the amount of any EBITDA attributable to minority shareholders in members of the Issuer Group,
in each case, in respect of the annual financial period ending on the date of the relevant Audited Accounts and as determined in accordance with such Audited Accounts.
“
Enforcement Event
” has the meaning given to it in Condition 9.1.
“
Equity Funded Deferred Interest
” has the meaning given to it in Condition 4.3.
“
Equity Funded Deferred Interest Payment Date
” has the meaning given to it in Condition 5.2(ii).
“
ESOP Cashflow
” means the cash amount (in the Issuer’s reporting currency), if any, received by the Issuer or any member of the Issuer Group in respect of the exercise of stock options by employees in respect of the annual financial period ending on the date of the relevant Audited Accounts, as determined in accordance with such Audited Accounts.
“
EURIBOR
” has the meaning given to it in Condition 3.3(a).
“
Euro-zone
” means the region comprised of Member States of the European Union that adopt or have adopted the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on the European Union.
“
Euroclear
” has the meaning given to it in Condition 1.
“
Fixed Interest Rate
” has the meaning given to it in Condition 3.1.
“
Fixed Rate Interest Amount
” has the meaning given to it in Condition 3.1.
“
Fixed Rate Interest Period
” has the meaning given to it in Condition 3.1.
“
Fixed Rate Payment Date
” has the meaning given to it in Condition 3.1.
“
Floating Interest Rate
” has the meaning given to it in Condition 3.2.
“
Floating Rate Interest Amount
” has the meaning given to it in Condition 3.2.
“
Floating Rate Interest Period
” has the meaning given to it in Condition 3.2.
“
Floating Rate Payment Date
” has the meaning given to it in Condition 3.2.
“
Free Cash-flow Before Debt Service
” means EBITDA plus ESOP Cashflow less Capital Expenditure less Taxes Paid, in each case in respect of the annual financial period ending on the date of the relevant Audited Accounts.
“
Global Certificates
” has the meaning given to it in Condition 1.
83
“
IFRS
” means the International Financial Reporting Standards issued by the International Accounting Standards Board, as from time to time adopted by the European Commission for use in the European Union.
“
Insolvency Proceedings
” means any insolvency proceedings or proceedings equivalent or analogous thereto including, but not limited to, (i) the Issuer becoming insolvent or unable to pay its debts as they fall due, (ii) an administrator or liquidator being appointed in respect of the Issuer, (iii) the Issuer taking any action for a readjustment or deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or declares a moratorium in respect of any of its indebtedness or any guarantee of any indebtedness given by it, or (iv) an order being made or an effective resolution is passed for the winding up or liquidation of the Issuer.
“
Interest Determination Date
” has the meaning given to it in Condition 3.3(a).
“
Interest Expense
” means the amount of (a) the expense relating to interest and amounts in the nature of interest, discount, acceptance and commitment fees, amounts payable under interest rate hedging agreements and the interest element of payments under finance leases (including interest expense relating to the Securities), less (b) the income relating to interest and amounts in the nature of interest or premium, or amounts receivable under interest rate hedging agreements, in each case in respect of the annual financial period ending on the date of the relevant Audited Accounts, as determined in accordance with such Audited Accounts, plus (c) the amount of accrued but unpaid Deferred Interest, if any, as of the relevant Test Date.
“
Interest Payment Date
” has the meaning given to it in Condition 3.2.
“
Interest Period
” has the meaning given to it in Condition 3.2. “
Issue Date
” means 17 May 2006.
“
Issuer Equity
” means all present or future ordinary share capital and Advance Capital Contributions of the Issuer.
“
Issuer Group
” means the Issuer and its consolidated subsidiaries.
“
Junior Obligations
” has the meaning given to it in Condition 2.
“
Liquidation Parity Securities
” means any securities (including Distribution Parity Securities) or instruments issued, entered into or guaranteed by the Issuer which, in each case, rank (or in relation to which the Issuer’s payment obligations under any relevant guarantee rank), by their terms or by operation of law,
pari passu
with the claims of the holders of the Securities as regards entitlement to distributions representing principal on the voluntary or involuntary liquidation, dissolution or winding up of the Issuer.
“
Make-Whole Price
” means, per Security, the higher of (a) the principal amount of such Security and (b) the Net Present Value.
“
Mandatorily Deferred Interest
” has the meaning given to it in Condition 4.2.
“
Margin
” means 5.05% per annum.
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“
Market Disruption Event
” means any one of the following events or circumstances:
(a)
the occurrence of an outbreak or escalation of hostilities involving the Republic of Italy, the United Kingdom or the United States of America, or the declaration by the Republic of Italy, the United Kingdom or the United States of America of a national emergency or war or act of terrorism or other material national or international calamity or crisis;
(b)
the occurrence of a general banking moratorium on commercial banking activities by any relevant authority, or the occurrence of a material disruption in commercial banking or securities settlement or clearance services in each case in the Republic of Italy, the United Kingdom or the United States of America;
(c)
a change in national or international financial, political or economic conditions or currency exchange rates or exchange controls in the Republic of Italy, the United Kingdom or the United States of America, including, without limitation as a result of an act of terrorism or the effect of international market conditions on the financial markets in the Republic of Italy, the United Kingdom or the United States of America; or
(d)
trading generally on the Luxembourg Stock Exchange, the
Mercato Telematico Azionario,
the London Stock Exchange or the New York Stock Exchange has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required by any such exchanges or by order of any governmental authority;
in each case (a) to (d) above, having the effect that trading in the Issuer’s ordinary shares is suspended or materially limited on any stock exchange or in any over-the-counter market; or
(e)
all consents, clearances, approvals, authorisations, orders, registrations or qualifications of or with any governmental or regulatory authority having jurisdiction over the Issuer required in connection with the issue of the Issuer’s ordinary shares have not been obtained despite the Issuer’s best endeavours to obtain them; or
(f)
the occurrence of any event which would, in the Issuer’s opinion, result in the offering documents relating to the issue of the Issuer’s ordinary shares containing an untrue statement of a material fact or omitting to state a material fact therein or necessary in order to make the statements therein not misleading, and either (i) the disclosure of that event at such time, in the Issuer’s opinion, would have a material adverse effect on the Issuer’s and the Issuer Group’s business; or (ii) the disclosure relates to a previously undisclosed proposed or pending material business transaction, the disclosure of which would impede the Issuer’s ability to consummate such transaction; provided that no suspension period as contemplated by this paragraph shall exceed 90 days in any 360-day period.
“
Maturity Date
” means the Interest Payment Date falling in March 2066.
85
“
Net Present Value
” means, with respect to any Security, the sum of (i) the present value of the principal amount as at the Reset Date plus (ii) the present values of all Scheduled Interest Amounts that would otherwise be payable on such Security during the period from the relevant Early Redemption Date to (and including) the Reset Date (excluding accrued but unpaid interest), such present values calculated using a discount rate equal to the Benchmark Rate as of 11.00 a.m. London time five business days prior to the date fixed for redemption, and discounting the relevant amounts to the date fixed for redemption of the Securities.
“
Officer’s Certificate
” means a certificate signed by the chief financial officer or two directors of the Issuer.
“
Old Optionally Deferred Interest
” has the meaning given to it in Condition 4.1.
“
Optional Deferral Notice
” has the meaning given to it in Condition 4.1.
“
Optionally Deferred Interest
” has the meaning given to it in Condition 4.1.
“
Parity Securities
” means all Distribution Parity Securities and Liquidation Parity Securities of the Issuer.
“
Paying and Transfer Agents
” has the meaning given to it in the preamble.
“
Principal Paying and Transfer Agent
” has the meaning given to it in the preamble.
“
Principal Shareholder
” means De Agostini S.p.A. (a company incorporated under the laws of Italy as a
società per azioni
), its Subsidiaries or B&D Holding, or any other entity; provided that in each case, it is controlled by one or more of the beneficial holders, provided further that for the purposes of this definition, an entity or B&D Holding shall be treated as being controlled, directly or indirectly, by any such holder(s) if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) have or has (as applicable) the power to (i) appoint or remove all, or the majority, of its directors or other equivalent officers or (ii) direct its operating and financial policies. For the purpose of this definition, “
beneficial holder
” means each of the beneficial holders that directly or indirectly control B&D Holding as at the Holdco Merger Effective Date (as defined in the Trust Deed) (an “
original
beneficial holder
”) and any spouse, legal or testamentary heir, legal or testamentary executor and legal or testamentary administrator of an original beneficial holder.
“
Proceedings
” has the meaning given to it in Condition 18.2.
“
Rating Agency
” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies Inc (“
S&P
”), or any of its subsidiaries and their successors or Moody’s Investors Service Limited (“
Moody’s
”) or any of its subsidiaries and their successors or any rating agency substituted for any of them by the Issuer from time to time with the prior written approval of the Trustee.
“
Redemption Price
” has the meaning given to it in Condition 6.1.
“
Reference Banks
” has the meaning given to it in Condition 3.3(b).
“
Register
” has the meaning given to it in Condition 1.3.
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“
Registrar
” has the meaning given to it in the preamble.
“
Regulation S
” means Regulation S under the Securities Act.
“
Relevant Date
” means whichever is the later of (i) the date on which such payment first becomes payable and (ii) if the full amount payable has not been received by the Principal Paying and Transfer Agent or the Trustee on or prior to such date, the date on which, the full amount payable having been so received, notice to that effect shall have been given to the Securityholders.
“
Relevant Taxing Jurisdiction
” has the meaning given to it in Condition 8.
“
Reserved Matters
” has the meaning given to it in Condition 12.1.
“
Reset Date
” means 31 March 2016.
“
Restricted Securities
” has the meaning given to it in Condition 1.
“
Restricted Global Certificate
” has the meaning given to it in Condition 1.
“
Rule 144A
” means Rule 144A under the Securities Act.
“
Scheduled Interest Amount
” has the meaning given to it in Condition 3.2.
“
Securities
” has the meaning given to it in the preamble.
“
Securities Act
” means the U.S. Securities Act of 1933, as amended.
“
Securityholder
” means a registered holder of Securities.
“
Subsidiary
” means, in relation to any company, corporation or other legal entity (a “
holding company
”), a company, corporation or other legal entity (i) which is controlled, directly or indirectly, by the holding company;
(ii)
more than half the issued share capital of which is beneficially owned directly or indirectly by the holding company;
(iii)
which is a subsidiary of another Subsidiary of the holding company; or
(iv)
whose financial statements are, in accordance with applicable law and generally accepted accounting principles applicable to the Issuer, consolidated with those of that company or corporation. For the purposes of this definition, a company or corporation shall be treated as being controlled by another entity if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) has the power to (a) appoint or remove all, or the majority, of its directors or other equivalent officers or (b) direct its operating and financial policies.
“
Sufficient Authorised Equity
” means, as of an Annual General Meeting, an amount of Authorised Equity that would enable the Issuer to pay in full, pursuant to Condition 5.2, an amount of Equity Funded Deferred Interest equal to the aggregate of the Scheduled Interest Amounts expected to accrue on the Securities during the two years following the date of such Annual General Meeting. The board of directors of the Issuer shall estimate such amounts at the time of such Annual General Meeting based on prevailing market prices for the Issuer’s ordinary shares, interest and foreign exchange rates, as applicable.
87
“
TARGET System
” means the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) System or any successor thereto.
A “
Tax Event
” means the receipt by the Issuer of an opinion of counsel in the United Kingdom (experienced in such matters) to the effect that, as a result of (a) any amendment to, clarification of, or change (including any announced prospective change) in, the laws or treaties (or any regulations thereunder) of the United Kingdom affecting taxation, (b) any governmental action or (c) any amendment to, clarification of, or change in the official position or the interpretation of such governmental action that differs from the previously generally accepted position, in each case, by any legislative body, court, governmental authority or regulatory body, which amendment, clarification or change is effective, or such pronouncement or decision is announced, on or after the Issue Date, there is a more than insubstantial risk that the treatment of any of the Issuer’s items of income or expense with respect to the Securities as lawfully reflected on the tax returns (including estimated returns) filed (or to be filed) by the Issuer will not be respected by a taxing authority, which results in the Issuer being subject to a more than a
de minimis
amount of additional taxes, duties or other governmental charges with respect to the Securities in the United Kingdom.
“
Taxes
” has the meaning given to it in Condition 8.
“
Taxes Paid
” means the amount (in the Issuer’s reporting currency) paid by the Issuer or any member of the Issuer Group in respect of corporation or income taxes, or similar in respect of the annual financial period ending on the date of the relevant Audited Accounts, as determined in accordance with such Audited Accounts.
“
Test Date
” means the tenth business day prior to an Interest Payment Date.
“
Trust Deed
” has the meaning given to it in the preamble.
“
Trustee
” has the meaning given to it in the preamble.
“
Unrestricted Global Certificate
” has the meaning given to it in Condition 1.
“
Unrestricted Securities
” has the meaning given to it in Condition 1.
A “
Withholding Tax Event
” shall mean:
(a)
any change in, or amendment to, the laws or treaties (or any regulations or rulings promulgated thereunder) of any Relevant Taxing Jurisdiction affecting taxation which becomes effective on or after the Issue Date; or, if the Relevant Taxing Jurisdiction has changed since the Issue Date, the date on which the then current Relevant Taxing Jurisdiction became the Relevant Taxing Jurisdiction; or
(b)
any change in the official application, administration, or interpretation of the laws, treaties, regulations or rulings of any Relevant Taxing Jurisdiction (including a holding, judgment, or order by a court of competent jurisdiction), on or after the Issue Date or, if the Relevant Taxing Jurisdiction has changed since the Issue Date, the date on which the then current Relevant Taxing Jurisdiction became the Relevant Taxing Jurisdiction,
88
in either case, resulting in a requirement for the Issuer to pay Additional Amounts in respect of payments on the Securities which the Issuer cannot avoid by the use of reasonable measures available to it.
“
Written Resolution
” means a resolution in writing signed by or on behalf of all holders of Securities who for the time being are entitled to receive notice of a meeting in accordance with the provisions of the Trust Deed, whether contained in one document or several documents in the same form, each signed by or on behalf of one or more such holders of the Securities.
89
PRINCIPAL PAYING AND TRANSFER AGENT
The Bank of New York Mellon (acting through its London Branch)
One Canada Square
London E14 5AL
England
LUXEMBOURG PAYING AND TRANSFER AGENT
The Bank of New York Mellon (Luxembourg) S.A.
Vertigo Building
Polaris
2-4 Eugène Ruppert, L-2453
Luxembourg
REGISTRAR
The Bank of New York Mellon (Luxembourg) S.A.
Vertigo Building
Polaris
2-4 Eugène Ruppert, L-2453
Luxembourg
and/or such other or further Principal Paying and Transfer Agent, Registrar or Paying and Transfer Agents, and/or specified offices as may from time to time be appointed by the Issuer with the approval of the Trustee and notice of which has been given to the Securityholders.
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SCHEDULE 4
PROVISIONS FOR MEETINGS OF SECURITYHOLDERS
1.
DEFINITIONS AND INTERPRETATION
1.1
The provisions of this Schedule 4 are subject to the provisions of Condition 12.
1.2
As used in this Schedule the following expressions shall have the following meanings unless the context otherwise requires:
“
Block Voting Instruction
” means a document in the English language issued by a Paying and Transfer Agent in which:
(a)
it is certified that on the date thereof Securities which are held in an account with any Clearing System (in each case not being Securities in respect of which a Voting Certificate has been issued and is outstanding in respect of the meeting specified in such Block Voting Instruction) have been deposited with such Paying and Transfer Agent or (to the satisfaction of such Paying and Transfer Agent) are held to its order or under its control or are blocked in an account with a Clearing System and that no such Securities will cease to be so deposited or held or blocked until the first to occur of:
(i)
the conclusion of the meeting specified in such Block Voting Instruction; and
(ii)
the surrender to the Paying and Transfer Agent, not less than 48 Hours before the time for which such meeting is convened (or, if such meeting has been adjourned, the time fixed for its resumption), of the receipt issued by such Paying and Transfer Agent in respect of each such deposited Security which is to be released or (as the case may require) the Securities ceasing with the agreement of the Paying and Transfer Agent to be held to its order or under its control or so blocked and the giving of notice by the Paying and Transfer Agent to the Issuer;
(a)
it is certified that each Securityholder of such Securities has instructed such Paying and Transfer Agent that the vote(s) attributable to the Securities so deposited or held or blocked should be cast in a particular way in relation to the resolution(s) to be put to such meeting and that all such instructions are, during the period commencing 48 Hours prior to the time for which such meeting is convened and ending at the conclusion or adjournment thereof, neither revocable nor capable of amendment;
(b)
the aggregate principal amount of the Securities so deposited or held or blocked is listed (and, if in definitive form, listing the relevant certificate numbers) and distinguishing with regard to each such resolution between those in respect of which instructions have been given that the votes attributable thereto should be cast in favour of the resolution and those in respect of which instructions have been so given that the votes attributable thereto should be cast against the resolution; and
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(c)
one or more persons named in such Block Voting Instruction (each hereinafter called a “
proxy
”) is or are authorised and instructed by such Paying and Transfer Agent to cast the votes attributable to the Securities so listed in accordance with the instructions referred to in (c) above as set out in such Block Voting Instruction.
“
Clearing System
” means Euroclear and/or Clearstream, Luxembourg and includes in respect of any Security any clearing system on behalf of which such Security is held or which is the holder or (directly or through a nominee) registered owner of a Security, in either case whether alone or jointly with any other Clearing System(s).
“
Eligible Person
” means any one of the following persons who shall be entitled to attend and vote at a meeting:
(a)
a holder of a Global Certificate;
(b)
a holder of a Definitive Certificate which is not held in an account with any Clearing System;
(c)
a bearer of any Voting Certificate;
(d)
a proxy specified in any Block Voting Instruction; and
(e)
a proxy appointed by a holder of a Definitive Certificate which is not held in an account with any Clearing System.
“
Extraordinary Resolution
” means a resolution passed by the number of Eligible Persons specified in paragraph 4.4(b) at a meeting duly convened and held in accordance with this Schedule 4.
“
First Meeting
” means an initial meeting convened in accordance with the provisions of this Schedule.
“
Reserved Matter
” means any proposal:
(a)
to modify the maturity of the Securities or the dates on which, or manner in which, interest is payable in respect of the Securities;
(b)
to reduce or cancel the principal amount of, or interest on or to vary the method of calculating the rate of interest on, the Securities;
(c)
to change the currency of payment of the Securities;
(d)
to modify the provisions relating to status; or
to modify the provisions concerning the quorum required at any meeting of Securityholders or the majority required to pass an Extraordinary Resolution. .
“
Second Meeting
” means a meeting convened after adjournment for want of quorum of a First Meeting convened by means of the notice described in paragraph 4.2 below.
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“
Voting Certificate
” means a certificate in English issued by a Paying and Transfer Agent in which it is stated:
(a)
that on the date thereof Securities which are held in an account with any Clearing System (in each case not being Securities in respect of which a Block Voting Instruction has been issued and is outstanding in respect of the meeting specified in such Voting Certificate) were deposited with such Paying and Transfer Agent or (to the satisfaction of such Paying and Transfer Agent) are held to its order or under its control or are blocked in an account with a Clearing System and that no such Securities will cease to be so deposited or held or blocked until the first to occur of:
(i)
the conclusion of the meeting specified in such Voting Certificate; and
(ii)
the surrender of the Voting Certificate to the Paying and Transfer Agent who issued the same; and
(b)
that the bearer thereof is entitled to attend and vote at such meeting in respect of the Securities represented by such Voting Certificate.
“
Written Resolution
” means a resolution in writing signed by or on behalf of all holders of Securities who for the time being are entitled to receive notice of a meeting in accordance with the provisions of this Schedule, whether contained in one document or several documents in the same form, each signed by or on behalf of one or more such holders of the Securities.
“
24 Hours
” means a period of 24 hours including all or part of a day upon which banks are open for business in both the place where the relevant meeting is to be held and in each of the places where the Paying and Transfer Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of a day upon which banks are open for business in all of the places as aforesaid.
“
48 Hours
” means a period of 48 hours including all or part of two days upon which banks are open for business both in the place where the relevant meeting is to be held and in each of the places where the Paying and Transfer Agents have their specified offices (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of two days upon which banks are open for business in all of the places as aforesaid.
All references in this Schedule to a “
meeting
” shall, where the context so permits, include any relevant adjourned meeting.
2.
EVIDENCE OF ENTITLEMENT TO ATTEND AND VOTE
2.1
A holder of a Security which is held in an account with any Clearing System may require the issue by a Paying and Transfer Agent of Voting Certificates and Block Voting Instructions in accordance with the terms of paragraph 3.
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For the purposes of paragraph 3, each Paying and Transfer Agent (including the Principal Paying and Transfer Agent) shall be entitled to rely, without further enquiry, on any information or instructions received from a Clearing System and shall have no liability to any Securityholder or other person for any Liability occasioned by its acting in reliance thereon, nor for any failure by a Clearing System to deliver information or instructions to any Paying and Transfer Agent (including the Principal Paying and Transfer Agent).
The holder of any Voting Certificate or the proxies named in any Block Voting Instruction shall for all purposes in connection with the relevant meeting be deemed to be the holder of the Securities to which such Voting Certificate or Block Voting Instruction relates, and the Paying and Transfer Agent with which such Securities have been deposited or the person holding Securities to the order or under the control of such Paying and Transfer Agent or the Clearing System in which such Securities have been blocked shall be deemed for such purposes not to be the holder of those Securities.
3.
PROCEDURE FOR ISSUE OF VOTING CERTIFICATES, BLOCK VOTING INSTRUCTIONS AND PROXIES
3.1
Definitive Certificates not held in a Clearing System — Voting Certificate
A holder of a Definitive Certificate which is not held in an account with any Clearing System (not being a Definitive Certificate in respect of which a Block Voting Instruction has been issued and is outstanding in respect of the meeting specified in such Voting Certificate) may obtain a Voting Certificate in respect of such Definitive Certificate from a Paying and Transfer Agent subject to such Securityholder having procured that such Definitive Certificate is deposited with such Paying and Transfer Agent or (to the satisfaction of such Paying and Transfer Agent) is held to its order or under its control upon terms that no such Definitive Certificate will cease to be so deposited or held until the first to occur of:
(a)
the conclusion of the meeting specified in such Voting Certificate; and
(b)
the surrender of the Voting Certificate to the Paying and Transfer Agent who issued the same.
3.2
Global Certificates and Definitive Certificates held in a Clearing System — Voting Certificate
A holder of a Security (not being a Security in respect of which instructions have been given to the Principal Paying and Transfer Agent in accordance with paragraph 3.4) represented by a Global Certificate or Definitive Certificate and which is held in an account with any Clearing System may procure the delivery of a Voting Certificate in respect of such Security by giving notice to the Clearing System through which such Securityholder’s interest in the Security is held specifying by name a person (an “
Identified Person
”) (which need not be the Securityholder himself) to collect the Voting Certificate and attend and vote at the meeting. The relevant Voting Certificate will be made available at or shortly prior to the commencement of the meeting by the Principal Paying and Transfer Agent against presentation by such Identified Person of the form of identification previously notified by such Securityholder to the Clearing
94
System. The Clearing System may prescribe forms of identification (including, without limitation, a passport or driving licence) which it deems appropriate for these purposes. Subject to receipt by the Principal Paying and Transfer Agent from the Clearing System, no later than 24 Hours prior to the time for which such meeting is convened, of notification of the principal amount of the Securities to be represented by any such Voting Certificate and the form of identification against presentation of which such Voting Certificate should be released, the Principal Paying and Transfer Agent shall, without any obligation to make further enquiry, make available Voting Certificates against presentation of the form of identification corresponding to that notified.
3.3
Definitive Certificates not held in a Clearing System — Block Voting Instruction
A holder of a Definitive Certificate which is not held in an account with any Clearing System (not being a Definitive Certificate in respect of which a Voting Certificate has been issued and is outstanding in respect of the meeting specified in such Block Voting Instruction) may require a Paying and Transfer Agent to issue a Block Voting Instruction in respect of such Definitive Certificate by depositing such Definitive Certificate with such Paying and Transfer Agent or (to the satisfaction of such Paying and Transfer Agent) by procuring that, not less than 48 Hours before the time fixed for the relevant meeting, such Definitive Certificate is held to the Paying and Transfer Agent’s order or under its control, in each case on terms that no such Definitive Certificate will cease to be so deposited or held until the first to occur of:
(a)
the conclusion of the meeting specified in such Block Voting Instruction; and
(b)
the surrender to the Paying and Transfer Agent, not less than 48 Hours before the time for which such meeting is convened, of the receipt issued by such Paying and Transfer Agent in respect of each such deposited or held Definitive Certificate which is to be released or (as the case may require) the Definitive Certificate ceasing with the agreement of the Paying and Transfer Agent to be held to its order or under its control and the giving of notice by the Paying and Transfer Agent to the Issuer in accordance with paragraph 3.7 hereof of the necessary amendment to the Block Voting Instruction;
and instructing the Paying and Transfer Agent that the vote(s) attributable to the Definitive Certificate so deposited or held should be cast in a particular way in relation to the resolution or resolutions to be put to such meeting and that all such instructions are, during the period commencing 48 Hours prior to the time for which such meeting is convened and ending at the conclusion or adjournment thereof, neither revocable nor capable of amendment.
3.4
Global Certificates and Definitive Certificates held in a Clearing System — Block Voting Instruction
A holder of a Security (not being a Security in respect of which a Voting Certificate has been issued) represented by a Global Certificate or Definitive Certificate and which is held in an account with any Clearing System may require the Principal Paying and Transfer Agent to issue a Block Voting Instruction in respect of such Security by first instructing the Clearing System through which such Securityholder’s interest in the Security is held to procure that the votes attributable to such Security
95
should be cast at the meeting in a particular way in relation to the resolution or resolutions to be put to the meeting. Any such instruction shall be given in accordance with the rules of the Clearing System then in effect. Subject to receipt by the Principal Paying and Transfer Agent of instructions from the Clearing System, no later than 24 Hours prior to the time for which such meeting is convened, of notification of the principal amount of the Securities in respect of which instructions have been given and the manner in which the votes attributable to such Securities should be cast, the Principal Paying and Transfer Agent shall, without any obligation to make further enquiry, appoint a proxy to attend the meeting and cast votes in accordance with such instructions.
3.5
Global Certificates and Definitive Certificates not held in a Clearing System — Appointment of proxy
(a)
A holder of a Global Certificate or a Definitive Certificate not held in an account with any Clearing System may, by an instrument in writing in the English language (a “
form of proxy
”) signed by the Securityholder or, in the case of a corporation, executed under its common seal or signed on its behalf by an attorney or a duly authorised officer of the corporation and delivered to the specified office of the Registrar or any Paying and Transfer Agent not less than 48 Hours before the time fixed for the relevant meeting, appoint any proxy to act on his or its behalf in connection with any meeting.
(b)
Any proxy appointed pursuant to subparagraph (a) above shall so long as such appointment remains in force be deemed, for all purposes in connection with the relevant meeting, to be the holder of the Securities to which such appointment relates and the holders of the Securities shall be deemed for such purposes not to be the Securityholder.
3.6
Each Block Voting Instruction, together (if so requested by the Trustee) with proof satisfactory to the Trustee of its due execution on behalf of the relevant Paying and Transfer Agent, shall be deposited by the relevant Paying and Transfer Agent or (as the case may be) by the Registrar at such place as the Trustee shall approve not less than 24 Hours before the time appointed for holding the meeting at which the proxy or proxies named in the Block Voting Instruction proposes to vote, and in default the Block Voting Instruction shall not be treated as valid unless the Chairman of the meeting decides otherwise before such meeting proceeds to business. A copy of each Block Voting Instruction shall be deposited with the Trustee before the commencement of the meeting but the Trustee shall not thereby be obliged to investigate or be concerned with the validity of or the authority of the proxy or proxies named in any such Block Voting Instruction.
3.7
Any vote given in accordance with the terms of a Block Voting Instruction or form of proxy shall be valid notwithstanding the previous revocation or amendment of the Block Voting Instruction or form of proxy or of any of the instructions of the relevant Securityholder or the relevant Clearing System (as the case may be) pursuant to which it was executed provided that no intimation in writing of such revocation or amendment has been received from the relevant Paying and Transfer Agent (in the case of a Block Voting Instruction) or from the Securityholder thereof (in the case of a proxy appointed pursuant to paragraph 3.5) by the Issuer at its registered office (or such other place as may have been required or approved by the Trustee for the
96
purpose) by the time being 24 Hours (in the case of a Block Voting Instruction) or 48 Hours (in the case of a proxy) before the time appointed for holding the meeting at which the Block Voting Instruction or form of proxy is to be used.
4.
CONVENING OF MEETINGS, QUORUM AND ADJOURNED MEETINGS
4.1
The board of directors of the Issuer may at any time, and the Issuer shall , at the request of the Trustee or upon a requisition in writing signed by the holders of not less than 5% in aggregate principal amount outstanding of the Securities, convene a meeting of the Securityholders. Every such meeting shall be held at such time and place as the Trustee may appoint or approve in writing.
4.2
At least 21 days’ notice (exclusive of the day on which the notice is given and of the day on which the relevant meeting is to be held) specifying the date, time and place of the meeting shall be given to the Securityholders prior to any meeting in the manner provided by Condition 15, and such notice shall be given to the Paying and Transfer Agents (with a copy to the Issuer and the Trustee). Such notice, which shall be in the English language, shall (a) set out the full text of the resolutions to be proposed (unless the Trustee agrees that the notices shall instead specify the nature of the resolutions without including the full text) and (b) shall also include statements as to the manner in which Securityholders may arrange for Voting Certificates or Block Voting Instructions to be issued and, if applicable, appoint proxies and the details of the time limits applicable. Such notice may also specify the date of a Second Meeting. Notices of all meetings shall also be published and given in any other manner pursuant to the laws and regulations applicable from time to time. A copy of the notice shall be sent by fax, following by registered mail, to the Issuer (unless the meeting is convened by the Issuer’s board of directors).
4.3
A person (who may but need not be a Securityholder or agent) nominated in writing by the Issuer shall be entitled to take the chair at the relevant meeting, but if no such nomination is made or if at any meeting the person nominated shall not be present within 15 minutes after the time appointed for holding the meeting, the Securityholders or agents present shall choose one of their number to be Chairman. The Chairman of an adjourned meeting need not be the same person as was Chairman of the meeting from which the adjournment took place.
4.4
Quorum
(a)
A meeting will be validly held if (i) at the First Meeting there are one or more Eligible Persons present holding or representing in aggregate at least one half of the principal amount of the Securities for the time being outstanding; or (ii) at the Second Meeting there are one or more Eligible Persons present whatever the principal amount of Securities held or represented, provided that in relation to a meeting held to consider a Reserved Matter, the necessary quorum shall be (i) at the First Meeting one or more Eligible Persons present holding or representing in aggregate at least three quarters of the principal amount of the Securities for the time being outstanding; and (ii) at the Second Meeting one or more Eligible Persons present holding or representing in aggregate at least one quarter of the principal amount of the Securities for the time being outstanding.
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(b)
The majority required to pass an Extraordinary Resolution shall be one or more Eligible Persons present holding or representing at least two thirds of the principal amount of the Securities represented at the relevant meeting
(c)
If within one hour after the time appointed for any First Meeting or Second Meeting a quorum is not present, the relevant meeting shall, if convened upon the requisition of Securityholders, be dissolved.
(d)
The Chairman may with the consent of (and shall if directed by) any meeting adjourn the same from time to time and from place to place (provided that (a) the meeting shall be dissolved if the Issuer and the Trustee together so decide and (b) no meeting may be adjourned more than once for want of quorum) but no business shall be transacted at any adjourned meeting except business which might lawfully (but for lack of required quorum) have been transacted at the meeting from which the adjournment took place.
(e)
Notice of any adjourned meeting at which an Extraordinary Resolution is to be submitted shall be given in the same manner as notice of an original meeting, provided that 10 days’ notice (exclusive of the day on which the notice is given and of the day on which the meeting is to be resumed) shall be sufficient and the notice shall otherwise be given in compliance with paragraph 4.2 and shall state the required quorum.
5.
CONDUCT OF BUSINESS AT MEETINGS
5.1
Every question submitted to a meeting shall be decided in the first instance by a show of hands. Unless a poll is validly demanded before or at the time that the result is declared, the Chairman’s declaration that on a show of hands a resolution has been passed, passed by a particular majority, rejected or rejected by a particular majority shall be conclusive, without proof of the number of votes cast for, or against, the resolution. Where there is only one Eligible Person, this paragraph shall not apply and the resolution will immediately be decided by means of a poll.
5.2
A demand for a poll shall be valid if it is made by the Chairman, the Issuer, the Trustee or one or more Eligible Persons representing or holding not less than one fiftieth of the aggregate principal amount of the outstanding Securities. A poll shall be taken in such manner and, subject as hereinafter provided, either at once or after an adjournment as the Chairman directs and the result of such poll shall be deemed to be the resolution of the meeting in respect of which the poll was held as at the date of the taking of the poll. A poll shall not prevent the continuance of the meeting for the transaction of any business other than the motion on which the poll will be held.
5.3
Any poll at any such meeting on the election of a Chairman or on any question of adjournment shall be taken at the meeting without adjournment.
5.4
Eligible Persons, the chairman, the Issuer, the Trustee, any director or statutory auditor of the Issuer and any other person approved by the meeting, including representatives of the Issuer and the Trustee and their respective lawyers and financial advisors, may attend and speak at any meeting. Save as aforesaid, no person shall be entitled to attend and speak nor shall any person be entitled to vote at any meeting unless he is an Eligible Person. No person shall be entitled to vote at any meeting in
98
respect of Securities which are deemed to be not outstanding by virtue of the proviso to the definition of “outstanding” in Clause 1 (
Definitions and Interpretation
).
5.5
At any meeting, every Eligible Person present shall have:
(a)
on a show of hands, one vote; and
(b)
on a poll, one vote in respect of each €1,000 in aggregate principal amount of the outstanding Securities represented or held by such Eligible Person.
Without prejudice to the obligations of the proxies named in any Block Voting Instruction or form of proxy, any Eligible Person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way.
5.6
The proxies named in any Block Voting Instruction or form of proxy need not be Securityholders. Nothing herein shall prevent any of the proxies named in any Block Voting Instruction or form of proxy from being a director, officer or representative of or otherwise connected with the Issuer.
5.7
A meeting shall, subject to the Conditions, and in any event, without prejudice to any powers conferred on other persons by this Trust Deed, have power by Extraordinary Resolution:
(a)
to approve any Reserved Matter;
(b)
to sanction any abrogation, modification, compromise or arrangement in respect of the rights of the Trustee, any Appointee, the Securityholders or the Issuer against any other or others of them, or against any of their property, whether such rights arise under this Trust Deed or otherwise;
(c)
to waive any breach or proposed breach by the Issuer of its obligations under or in respect of the Securities or the Trust Deed or any act or omission which might otherwise constitute an Enforcement Event under the Securities;
(d)
to appoint or revoke the appointment of the Trustee;
(e)
to give any authority or sanction which under the provisions of this Trust Deed is required to be given by Extraordinary Resolution;
(f)
to assent to any modification of the provisions of this Trust Deed or the Conditions which is proposed by the Issuer, the Trustee or any Securityholder;
(g)
to appoint any persons (whether Securityholders or not) as a committee or committees to represent the interests of the Securityholders and to confer upon such committee or committees any powers or discretions which the Securityholders could themselves exercise by Extraordinary Resolution;
(h)
to discharge or exonerate the Trustee and/or any Appointee from all liability in respect of any act or omission for which the Trustee and/or such Appointee may have become responsible under this Trust Deed;
99
(i)
to authorise the Trustee and/or any Appointee to concur in and execute and do all such deeds, instruments, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution; and
(j)
to sanction the exchange or substitution for the Securities of, or the conversion of the Securities into, other securities of the Issuer or any other entity.
5.8
Any resolution passed at a meeting of the Securityholders duly convened and held in accordance with this Trust Deed shall be binding upon all the Securityholders whether or not present or whether or not represented at such meeting and whether or not voting and each of them shall be bound to give effect thereto accordingly and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof. Notice of the result of the voting on any resolution duly considered by the Securityholders shall be published in accordance with Condition 15 by the Issuer within 14 days of such result being known,
provided that
the non-publication of such notice shall not invalidate such result.
5.9
Minutes of all resolutions and proceedings at every meeting shall be made and entered in books to be from time to time provided for that purpose by the Issuer (if any) and any such minutes as aforesaid, if purporting to be signed by the Chairman of the meeting at which such resolutions were passed or proceedings transacted, shall be conclusive evidence of the matters therein contained and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes have been made shall be deemed to have been duly held and convened and all resolutions passed or proceedings transacted thereat to have been duly passed or transacted.
6.
WRITTEN RESOLUTION
A Written Resolution shall take effect as if it were an Extraordinary Resolution.
7.
REGULATIONS
Subject to all other provisions of this Trust Deed, the Trustee may (after consultation with the Issuer where the Trustee considers such consultation to be practicable but without the consent of the Issuer or the Securityholders) prescribe such further or alternative regulations regarding the requisitioning and/or the holding of meetings and attendance and voting thereat as the Trustee may in its sole discretion reasonably think fit (including, without limitation, the substitution for periods of 24 Hours and 48 Hours referred to in this Schedule of shorter periods). Such regulations may, without prejudice to the generality of the foregoing, reflect the practices and facilities of any relevant Clearing System. Notice of any such further or alternative regulations may, at the sole discretion of the Trustee, be given to Securityholders in accordance with Condition 15 at the time of service of any notice convening a meeting or at such other time as the Trustee may decide.
100
SCHEDULE 5
FORM OF OFFICER’S CERTIFICATE
To:
BNY Mellon Corporate Trustee Services Limited
One Canada Square
London E14 5AL
England
Dear Sirs
International Game Technology PLC
€750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066
This certificate is delivered to you in accordance with Clause 10(e) of the Trust Deed dated 17 May 2006, as supplemented by a first supplemental trust deed on 3 April 2015 and as further supplemented, amended and restated from time to time (the “
Trust Deed
”) and made between International Game Technology PLC, a public limited company incorporated in England and Wales with company number 09127533 (the “
Issuer
”) (as successor by merger to GTECH S.p.A., a
società per azioni
incorporated under the laws of the Republic of Italy (formerly known as Lottomatica S.p.A.)) and BNY Mellon Corporate Trustee Services Limited (as successor to J.P. Morgan Corporate Trustee Services Limited) (the “
Trustee
”). All words and expressions defined in the Trust Deed shall (save as otherwise provided herein or unless the context otherwise requires) have the same meanings herein.
We hereby certify that, to the best of our knowledge, information and belief (having made all reasonable enquiries):
(a)
from and including [ ](5) [
the Certification Date (as defined in the Trust Deed) of the last certificate delivered under Clause 10(e)
](6) to and including [ ](7), the Issuer and each of its subsidiaries has complied with all the provisions relating to it as specified under this Trust Deed and/or the Conditions [
other than
[ ]](8); and
(b)
as at [ ](9), no Enforcement Event existed [
other than
[ ]](10) and no Enforcement Event has existed at any time prior to that date since [ ](11) [
the Certification Date (as defined
(5) The Certification Date of the last certificate delivered under Clause 10(e), unless the certificate is the first certificate delivered thereunder, in which case insert date of Trust Deed.
(6) Include unless the certificate is the first certificate delivered under Clause 10(e), in which case delete.
(7) Specify a date no more than five days before the date of the certificate.
(8) If the Issuer or any subsidiary has failed to comply with any obligation(s), give details; otherwise delete.
(9) Specify a date no more than five days before the date of the certificate.
(10) If any Enforcement Event existed, give details; otherwise delete.
(11) Insert date of Trust Deed in respect of the first certificate delivered under Clause 10(e); otherwise delete.
101
in the Trust Deed) of the last certificate delivered under Clause 10(e)
](12) [
other than
[ ]](13).
For and on behalf of
INTERNATIONAL GAME TECHNOLOGY PLC
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[Chief Financial Officer/Director]
|
[Director]
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(12) Include unless the certificate is first certificate delivered under Clause 10(e), in which case delete.
(13) If any Enforcement Event did exist, give details; otherwise delete.
102
SCHEDULE 6
FORM OF OFFICER’S CERTIFICATE RELATING TO MANDATORY DEFERRAL EVENT
To:
BNY Mellon Corporate Trustee Services Limited
One Canada Square
London E14 5AL
England
Dear Sirs
International Game Technology PLC (company number: 09127533)
€750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066
This certificate is delivered to you in accordance with Clause 10(n) of the Trust Deed dated 17 May 2006, as supplemented by a first supplemental trust deed on 3 April 2015 and as further supplemented, amended and restated from time to time (the “
Trust Deed
”) and made between International Game Technology PLC, a public limited company incorporated in England and Wales with company number 09127533 ((the “
Issuer
”) (as successor by merger to GTECH S.p.A., a
società per azioni
incorporated under the laws of the Republic of Italy (formerly known as Lottomatica S.p.A.)) and BNY Mellon Corporate Trustee Services Limited (as successor to J.P. Morgan Corporate Trustee Services Limited) (the “
Trustee
”). All words and expressions defined in the Trust Deed shall (save as otherwise provided herein or unless the context otherwise requires) have the same meanings herein.
We hereby certify that, to the best of our knowledge, information and belief (having made all reasonable enquiries) that as of [ ](14), [
no/a
] Mandatory Deferral Event occurred. The Coverage Ratio as of such Test Date was [ ](15). The amount of available cash proceeds which may be used as provided in Condition 4.2 is €[ ].
[
Insert additional details as necessary
]
For and on behalf of
INTERNATIONAL GAME TECHNOLOGY PLC
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[Chief Financial Officer/Director]
|
[Director]
|
(14) The relevant Test Date
(15) Insert relevant Coverage Ratio calculated as of the Test Date.
103
SIGNATORIES
EXECUTED
as a
DEED
by
INTERNATIONAL GAME
TECHNOLOGY PLC
by
Director’s signature:
Name of Director:
in the presence of:
Witness’s signature:
Name of Witness:
Address of Witness:
|
EXECUTED
as a
DEED
by
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BNY MELLON CORPORATE TRUSTEE SERVICES LIMITED
(as successor to J.P. Morgan Corporate Trustee Services Limited)
acting by two of its lawful attorneys:
|
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Attorney:
Attorney:
In the presence of
Witness’s signature:
Name:
Address:
104
Exhibit 4.15
To:
GTECH S.P.A.
as Parent and Original Borrower
GTECH CORPORATION
as Original Guarantor
BNP PARIBAS, ITALIAN BRANCH
as Mandated Lead Arranger and Original International Lender
BANCA IMI S.P.A.
as Mandated Lead Arranger
UNICREDIT BANK AG, MILAN BRANCH
as Mandated Lead Arranger and Original International Lender
INTESA SANPAOLO S.P.A.
as Original Italian Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Following our recent negotiations in relation to the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”), we hereby proposes to your companies the following Facilities Agreement, the contents of which are set out in the Annex hereto.
Should you agree with this proposal, please manifest your acceptance thereof by sending us a letter that attaches the text set out in the Annex hereto, duly signed by way of acceptance by a representative authorised to bind your companies in relation to the Facilities Agreement.
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Yours sincerely
|
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/s/ Stefano Gianesello and Roberto Turati
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MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
|
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as Agent, Mandated Lead Arranger and Original Italian Lender
|
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To:
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
as Agent, Mandated Lead Arranger and Original Italian Lender
Copy to:
GTECH CORPORATION
as Original Guarantor
BNP PARIBAS, ITALIAN BRANCH
as Mandated Lead Arranger and Original International Lender
BANCA IMI S.P.A.
as Mandated Lead Arranger
UNICREDIT BANK AG, MILAN BRANCH
as Mandated Lead Arranger and Original International Lender
INTESA SANPAOLO S.P.A.
as Original Italian Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Reference is made to your letter dated 29 January 2015, pursuant to which you proposed to our Company the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”).
We hereby notify you of our acceptance of the Facilities Agreement and we attach in the Annex hereto the Facilities Agreement.
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Yours sincerely
|
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/s/ Claudio Demolli
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GTECH S.P.A.
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as Parent and Original Borrower
|
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To:
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
as Agent, Mandated Lead Arranger and Original Italian Lender
Copy to:
GTECH S.P.A.
as Parent and Original Borrower
BNP PARIBAS, ITALIAN BRANCH
as Mandated Lead Arranger and Original International Lender
BANCA IMI S.P.A.
as Mandated Lead Arranger
UNICREDIT BANK AG, MILAN BRANCH
as Mandated Lead Arranger and Original International Lender
INTESA SANPAOLO S.P.A.
as Original Italian Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Reference is made to your letter dated 29 January 2015, pursuant to which you proposed to our Company the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”).
We hereby notify you of our acceptance of the Facilities Agreement and we attach in the Annex hereto the Facilities Agreement.
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Yours sincerely
|
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|
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|
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/s/ Claudio Demolli
|
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GTECH CORPORATION
|
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|
as Original Guarantor
|
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To:
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
as Agent, Mandated Lead Arranger and Original Italian Lender
Copy to:
GTECH S.P.A.
as Parent and Original Borrower
GTECH CORPORATION
as Original Guarantor
BANCA IMI S.P.A.
as Mandated Lead Arranger
UNICREDIT BANK AG, MILAN BRANCH
as Mandated Lead Arranger and Original International Lender
INTESA SANPAOLO S.P.A.
as Original Italian Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Reference is made to your letter dated 29 January 2015, pursuant to which you proposed to our Company the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”).
We hereby notify you of our acceptance of the Facilities Agreement and we attach in the Annex hereto the Facilities Agreement.
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Yours sincerely
|
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/s/ Elena Di Cristofaro and Gian Luca Spatafora
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BNP PARIBAS, ITALIAN BRANCH
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as Mandated Lead Arranger and Original International Lender
|
|
To:
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
as Agent, Mandated Lead Arranger and Original Italian Lender
Copy to:
GTECH S.P.A.
as Parent and Original Borrower
GTECH CORPORATION
as Original Guarantor
BNP PARIBAS, ITALIAN BRANCH
as Mandated Lead Arranger and Original International Lender
UNICREDIT BANK AG, MILAN BRANCH
as Mandated Lead Arranger and Original International Lender
INTESA SANPAOLO S.P.A.
as Original Italian Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Reference is made to your letter dated 29 January 2015, pursuant to which you proposed to our Company the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”).
We hereby notify you of our acceptance of the Facilities Agreement and we attach in the Annex hereto the Facilities Agreement.
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Yours sincerely
|
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Corrado Passoni and Antonio Vittoria
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BANCA IMI S.P.A.
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as Mandated Lead Arranger
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To:
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
as Agent, Mandated Lead Arranger and Original Italian Lender
Copy to:
GTECH S.P.A.
as Parent and Original Borrower
GTECH CORPORATION
as Original Guarantor
BNP PARIBAS, ITALIAN BRANCH
as Mandated Lead Arranger and Original International Lender
BANCA IMI S.P.A.
as Mandated Lead Arranger
INTESA SANPAOLO S.P.A.
as Original Italian Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Reference is made to your letter dated 29 January 2015, pursuant to which you proposed to our Company the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”).
We hereby notify you of our acceptance of the Facilities Agreement and we attach in the Annex hereto the Facilities Agreement.
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Yours sincerely
|
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/s/ Andrea Rozzi and Gianluca Savoldi
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UNICREDIT BANK AG, MILAN BRANCH
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as Mandated Lead Arranger and Original International Lender
|
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To:
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
as Agent, Mandated Lead Arranger and Original Italian Lender
Copy to:
GTECH S.P.A.
as Parent and Original Borrower
GTECH CORPORATION
as Original Guarantor
BNP PARIBAS, ITALIAN BRANCH
as Mandated Lead Arranger and Original International Lender
BANCA IMI S.P.A.
as Mandated Lead Arranger
UNICREDIT BANK AG, MILAN BRANCH
as Mandated Lead Arranger and Original International Lender
29 January 2015
Dear Sirs,
€800,000,000 Facilities Agreement for GTECH S.p.A.
Reference is made to your letter dated 29 January 2015, pursuant to which you proposed to our Company the execution of the €800,000,000 facilities agreement for GTECH S.p.A. (the “
Facilities Agreement
”).
We hereby notify you of our acceptance of the Facilities Agreement and we attach in the Annex hereto the Facilities Agreement.
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Yours sincerely
|
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/s/ Luca Giorgetti
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INTESA SANPAOLO S.P.A.
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as Original Italian Lender
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CLIFFORD CHANCE STUDIO LEGALE
IN ASSOCIAZIONE CON CLIFFORD CHANCE
|
GTECH S.P.A.
AS PARENT
GTECH S.P.A.
AS ORIGINAL BORROWER
GTECH CORPORATION
AS ORIGINAL GUARANTOR
BNP PARIBAS, ITALIAN BRANCH
BANCA IMI S.P.A.
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
UNICREDIT BANK AG, MILAN BRANCH
AS MANDATED LEAD ARRANGERS
AND
BNP PARIBAS, ITALIAN BRANCH
INTESA SANPAOLO S.P.A.
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
UNICREDIT BANK AG, MILAN BRANCH
AS ORIGINAL LENDERS
MEDIOBANCA — BANCA DI CREDITO FINANZIARIO S.P.A.
AS AGENT
€800,000,000
TERM LOAN FACILITIES
FOR GTECH S.P.A.
CONTENTS
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Clause
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Page
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1.
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DEFINITIONS AND INTERPRETATION
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1
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2.
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THE FACILITies
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45
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3.
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PURPOSE
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46
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4.
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CONDITIONS OF UTILISATION
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46
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5.
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UTILISATION
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47
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6.
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REPAYMENT
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49
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7.
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ILLEGALITY, VOLUNTARY PREPAYMENT AND CANCELLATION
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49
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8.
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MANDATORY PREPAYMENT
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51
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9.
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RESTRICTIONS
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52
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10.
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INTEREST
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53
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11.
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INTEREST PERIODS
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54
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12.
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CHANGES TO THE CALCULATION OF INTEREST
|
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55
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13.
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FEES
|
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56
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14.
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TAX GROSS UP AND INDEMNITIES
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56
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15.
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INCREASED COSTS
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73
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16.
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OTHER INDEMNITIES
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75
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17.
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MITIGATION
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76
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18.
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COSTS AND EXPENSES
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77
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19.
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GUARANTEE AND INDEMNITY
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77
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20.
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REPRESENTATIONS
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83
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21.
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INFORMATION UNDERTAKINGS
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89
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22.
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FINANCIAL COVENANTS
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93
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23.
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GENERAL UNDERTAKINGS
|
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95
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24.
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EVENTS OF DEFAULT
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106
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25.
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CHANGES TO THE LENDERS
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113
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26.
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CHANGES TO THE OBLIGORS
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120
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27.
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ROLE OF THE AGENT, THE Mandated Lead Arrangers AND OTHERS
|
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123
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28.
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CONDUCT OF BUSINESS BY THE FINANCE PARTIES
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131
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29.
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SHARING AMONG THE FINANCE PARTIES
|
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131
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30.
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PAYMENT MECHANICS
|
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133
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31.
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SET-OFF
|
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137
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32.
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NOTICES
|
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137
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33.
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CALCULATIONS AND CERTIFICATES
|
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141
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34.
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TAX CHARACTERIZATION
|
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141
|
i
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35.
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PARTIAL INVALIDITY
|
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141
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36.
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REMEDIES AND WAIVERS
|
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141
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37.
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AMENDMENTS AND WAIVERS
|
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142
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38.
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NEGOTIATED AGREEMENT
|
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146
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39.
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CONFIDENTIALITY
|
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146
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40.
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ITALIAN TRANSPARENCY RULES
|
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149
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41.
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GOVERNING LAW
|
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149
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42.
|
ENFORCEMENT
|
|
149
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Schedule 1 THE ORIGINAL PARTIES
|
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151
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Schedule 2 CONDITIONS PRECEDENT
|
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156
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Schedule 3 REQUESTS
|
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160
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Schedule 4 FORM OF TRANSFER CERTIFICATE
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163
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Schedule 5 FORM OF ASSIGNMENT AGREEMENT
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166
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Schedule 6 FORM OF ACCESSION LETTER
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169
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Schedule 7 FORM OF RESIGNATION LETTER
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170
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Schedule 8 FORM OF COMPLIANCE CERTIFICATE
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171
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Schedule 9 TIMETABLES — LOANS — NOTICES TO THE AGENT
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172
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Schedule 10 AGENT’s DETAILS
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173
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Schedule 11
ORIGINAL BORROWER’S D
ETAILS
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174
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Schedule 12 AGREED SECURITY PRINCIPLES
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175
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Schedule 13 FORM OF AFFIDAVIT
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179
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Schedule 14 SELF DECLARATION FORM
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186
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ii
THIS SENIOR FACILITIES AGREEMENT
(this “
Agreement
”) is dated 29 January 2015 and made
BETWEEN
:
(1)
GTECH S.P.A.,
a company incorporated in Italy as a società per azioni, having its registered office in Viale del Campo Boario 56/D 00154 Rome, Italy, corporate capital of €190,502,053.00 fully paid-up, tax code and registration number with the Register of Companies of Rome 08028081001 (“
GTECH
” and the “
Original Borrower
”);
(2)
GTECH
or, following completion of the Holdco Merger,
GEORGIA WORLDWIDE PLC,
a public limited company organised under the laws of England and Wales (the “
Parent
”);
(3)
GTECH CORPORATION
, a corporation organised under the laws of Delaware (the “
Original Guarantor
”);
(4)
BANCA IMI S.P.A., BNP PARIBAS, ITALIAN BRANCH, MEDIOBANCA
—
BANCA DI CREDITO FINANZIARIO S.P.A. and UNICREDIT BANK AG, MILAN BRANCH,
as mandated lead arrangers (the “
Mandated Lead Arrangers
”);
(5)
BNP PARIBAS, ITALIAN BRANCH and UNICREDIT BANK AG, MILAN BRANCH
as lenders (the “
Original International Lenders
”);
(6)
INTESA SANPAOLO S.P.A. and MEDIOBANCA
—
BANCA DI CREDITO FINANZIARIO S.p.A.
as lenders (the “
Original Italian Lenders
”); and
(7)
MEDIOBANCA
—
BANCA DI CREDITO FINANZIARIO S.P.A.
as facility agent of the other Finance Parties (the “
Agent
”).
IT IS AGREED
as follows:
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
In this Agreement:
“
Acceptable Bank
” means:
(a)
a bank or financial institution which has a rating for its long term unsecured and non-credit-enhanced debt obligations of BBB- or higher by S&P or Fitch or Baa3 or higher by Moody’s or a comparable rating from an internationally recognised credit rating agency; or
(b)
an Original Lender or any of its Affiliates; or
(c)
any other bank or financial institution approved by the Agent.
1
“
Accession Letter
” means a document substantially in the form set out in Schedule 6 (
Form of Accession Letter
) or in any other form acceptable to the Parent and the Agent.
“
Accounting Principles
” means generally accepted accounting principles in the United States, the United Kingdom and Italy or IFRS.
“
Additional Guarantor
” means a person which becomes a Guarantor in accordance with Clause 26 (
Changes to the Obligors
).
“
Additional Obligor
” means the New Facility B Borrower or an Additional Guarantor.
“
Administrative Questionnaire
” means an Administrative Questionnaire in a form supplied by the Agent.
“
Affidavit
” means the affidavit substantially in the form set out in Schedule 13 (
Form of Affidavit
) as approved by the Italian Revenues Agency and made available on the website
www.agenziaentrate.gov.it.
“
Affiliate
” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.
“
Agent’s Fee Letter
” means the fee letter dated on or about the date of this Agreement between the Agent and the Original Borrower.
“
Agent’s Spot Rate of Exchange
” means, for a currency, the rate determined by the Agent to be the rate quoted by the person acting in such capacity as the spot rate for the purchase by such person of such currency with another currency through its principal foreign exchange trading office at approximately 11:00 a.m. on the date two (2) Business Days prior to the date as of which the foreign exchange computation is made;
provided that
the Agent may obtain such spot rate from another financial institution designated by the Agent if the person acting in such capacity does not have as of the date of determination a spot buying rate for any such currency.
“
Agreed Security Principles
” means the principles set out in Schedule 12 (
Agreed Security Principles
).
“
Anti-Corruption Laws
” means all laws, rules and regulations of any jurisdiction applicable to a Borrower or its Subsidiaries from time to time concerning or relating to bribery or corruption.
“
Anti-Terrorism Law
” means each of:
(a)
the Executive Order;
(b)
the USA PATRIOT Act;
(c)
the Money Laundering Control Act of 1986, Public Law 99-570;
(d)
the Foreign Asset Control Laws;
2
(e)
the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq.);
(f)
the Money Laundering Control Act of 1986 (18 U.S.C. §§ 1956 et seq.);
(g)
the International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq.);
(h)
the Trading with the Enemy Act (50 U.S.C. App. §§1 et seq.); and
(i)
any similar law enacted in the United States of America subsequent to the date of this Agreement.
“
Assignment Agreement
” means an agreement substantially in the form set out in Schedule 5 (
Form of Assignment Agreement
) or any other form agreed between the relevant assignor and assignee.
“
Auditors
” means PricewaterhouseCoopers or any other firm approved in advance by the Agent (such approval not to be unreasonably withheld or delayed).
“
Authorisation
” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.
“
Availability Period
” means the Facility A Availability Period or the Facility B Availability Period.
“
Available Commitment
” means, in relation to a Facility, a Lender’s Commitment under that Facility minus:
(a)
the amount of its participation in any outstanding Loans under that Facility; and
(b)
in relation to any proposed Utilisation, the amount of its participation in any Loans that are due to be made under that Facility on or before the proposed Utilisation Date.
“
Available Facility
” means, in relation to a Facility, the aggregate for the time being of each Lender’s Available Commitment in respect of that Facility.
“
B&D Holding
” means B&D Holding di Marco Drago e C. S.a.p.a., a company incorporated in Italy as a
società in accomandita per azioni
.
“
Base Reference Bank Rate
” means the arithmetic mean of the rates (rounded upwards to four (4) decimal places) as supplied to the Agent at its request by the Base Reference Banks at which the Base Reference Banks could borrow funds in the European interbank market in Euro and for the relevant period, were it to do so by asking for and then accepting interbank offers for deposits in reasonable market size in that currency and for that period.
“
Base Reference Banks
” means the principal Milan office of BNP Paribas, Italian Branch, Intesa SanPaolo S.p.A., Mediobanca — Banca di Credito Finanziario S.p.A., Milan and UniCredit Bank AG, Milan Branch or such other banks as may be
3
appointed by the Agent (acting on the instructions of the Majority Lenders) in consultation with the Parent.
“
Blacklisted Jurisdiction
” means:
(a)
any country or territory listed as having a privileged tax regime in the Italian Ministerial Decree dated 23 January 2002 and issued by the Italian Minister of Finance, as amended or updated from time to time; or
(b)
(as from the fiscal year in which the decree to be issued pursuant to article 168-bis of Italian Presidential Decree of 22 December 1986, No. 917 is effective, any country or territory which is not included in the list of countries and territories (the “
White List
”) allowing an adequate exchange of information with the Italian Tax authorities (for the five (5) years starting on the date of publication of such decree in the Official Gazette, countries and territories that are not included in the current black-lists set forth by Italian Ministerial Decrees of 4 May 1999, 21 November 2001 and 23 January 2002, nor in the current white list set forth by Italian Ministerial Decree of 4 September 1996 or included under article 2 of Ministerial Decree 21 November 2001, with regards to the persons therein enclosed, and under article 3 of Ministerial Decree 21 November 2001, with the exclusions of the persons therein enclosed, are deemed to be included in the White List); or
(c)
upon the occurrence of any Change of Tax Law, any country or territory listed in any regulation referred to under Article 110, Paragraph 10 of Italian Presidential Decree of 22 December 1986, No. 917, as from time to time amended or restated, as not allowing an adequate exchange of information with the Italian Tax authorities.
“
Blacklisted Resident Entity
” means any person that is resident, domiciled, located for Tax purposes, or acting through a lending office qualifying as a Permanent Establishment to which any payment under the Finance Document is effectively connected, in a Blacklisted Jurisdiction.
“
Borrower
” means:
(a)
with respect to Facility A, the Original Borrower; and
(b)
with respect to Facility B:
(i)
until such time at which the Original Borrower has resigned pursuant to Clause 26.2 (b) (
New Facility B Borrower Accession
), the Original Borrower; and
(ii)
from and including such time at which the New Facility B Borrower Accession has been effected in accordance with Clause 26.2 (a) (
New Facility B Borrower Accession
), the New Facility B Borrower.
“
Borrower Materials
” shall have the meaning ascribed thereto in Clause 21.7 (
Posting on electronic system
).
“
Break Costs
” means the amount (if any) by which:
4
(a)
the interest (excluding the Margin) which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds:
(b)
the amount which such Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the European interbank market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.
“
Bridge Facilities
” means the 364-day senior bridge facility to be entered into in accordance with the terms of the commitment letter dated 15 July 2014 among
inter alios
the Parent and Credit Suisse AG, Cayman Islands Branch, Barclays Bank PLC, Citigroup Global Markets Limited and Citibank N.A., London Branch, as joint lead bookrunners and joint lead arrangers.
“
Business
” means, with respect to the Group:
(a)
the design, manufacture, sale, lease, delivery, installation, operation or maintenance of hardware and equipment (e.g. computers, computer terminals, on-line lottery terminals, instant ticket vending and dispensing machines, self-service terminals, gaming devices and machines, video lottery terminals, slot machines and amusement with prize machines) (collectively, “
Gaming Hardware
”) and the design, development, sale, licensing, delivery, installation, operation or maintenance of software or game content (collectively, “
Gaming Software
”) pertaining to the operation of games of chance or skill or pari-mutuel or fixed odds games (including lotteries (e.g. on-line, off-line, passive ticket, instant/scratch ticket, break-open ticket and video), pari-mutuel betting, bingo, race tracks, jai alai, legalized bookmaking, off-track betting, casino games, racino, keno, lotto and sports betting) (collectively, “
Games
”) and the provision of any type of ancillary service or product related to or connected with the foregoing;
(b)
the management, ownership or operation of (i) Games; (ii) Gaming Hardware; (iii) Gaming Software; and (iv) sales channels (retail, interactive and mobile) and the exercise of any governmental power or authority granted to any member of the Group in connection with any of the foregoing businesses set out at (i) to (iv) (including acting as operator/private manager of legal gaming licenses and concessions) and the provision of any products or services related to any of the foregoing businesses set out at (i) to (iv) (including, without limitation, marketing activities and services, player tracking activities and loyalty management, back-office software (player management tools), field service, field sales force management and security and consulting services to customers including software, telecommunications, marketing and other related advisory services or other ancillary tools and platform related services);
5
(c)
(i) the provision of any type of government or state benefits processing or eligibility, or payment processing (including tax, utility, fines, fees and duties payment processing) and any products or services related to any of the foregoing businesses set out at paragraphs (a) and (b) and this paragraph (c); and (ii) the exercise of any governmental power or authority granted to any member of the Group in connection with the foregoing businesses described in paragraphs (a) and (b) above and in this paragraph (c);
(d)
the provision of any type of commercial transaction processing or distribution services, including (i) debit, credit and bill payment transactions and money transfer transactions; (ii) distribution services such as electronic top-up services for pre-paid mobile and fixed-line telephone accounts and ticketing services for sporting, musical and other events; (iii) stored value services such as pre-paid cards for pay TV channels and debit cards; and (iv) any products or services related to the foregoing businesses described in paragraphs (a) through (c) above and in this paragraph (d);
(e)
the provision of any type of information technology or any services derived from the technical, management, operational or other expertise developed or used by any member of the Group in connection with any business described herein and any products or services related to the foregoing businesses described in paragraphs (a) through (d) above and in this paragraph (e);
(f)
the provision of any type of telecommunication services and other communications services similar to those or provided in connection with the businesses described in paragraphs (a) through (d) above;
(g)
the design, manufacture, printing, sale or distribution (whether physically, electronically or by any other method) of instant, scratch, traditional or other lottery tickets (whether such tickets are physical, electronic or expressed through any other medium and whether such tickets allow the player to remove a cover layer (or any semblance thereof) physically, electronically or by any other method, to reveal whether the ticket is a prize winner) and the provision of any products or services related to the foregoing business described in paragraphs (a) through (f) above and in this paragraph (g);
(h)
the employment of any hardware or software utilised in any of the businesses described in paragraphs (a) through (g) above whether by sale, lease, license or service in either government or commercial enterprises worldwide;
(i)
the provision of social games, including, without limitation, through Internet websites and applications for smart phones, tablets and other devices; and
(j)
any other business that is related to, or which is an extension, development or expansion of, any of the foregoing businesses described in paragraphs (a) through (i).
“
Business Day
” means a day (other than a Saturday or Sunday) on which banks are open for general business in Milan and London and any TARGET Day.
“
Calculation Date
” has the meaning given to it in Clause 22.1 (
Financial definitions
).
6
“
Capital Securities
” means the €750,000,000 Subordinated Interest-Deferrable Capital Securities due 2066 and issued on 17 May 2006 by the Original Borrower.
“
Cash Equivalent Investments
” means at any time:
(a)
demand or overnight deposits, time deposits, Eurodollar time deposits, bankers acceptances or certificates of deposit (in any case maturing within one (1) year after the relevant date of calculation):
(i)
with or issued by an Acceptable Bank; or
(ii)
with or issued by a Non-Acceptable Bank;
provided that
the amount of any such investments does not at any time exceed in the aggregate US$50,000,000 (or its equivalent in any other currencies);
(b)
any investment in marketable debt obligations issued or guaranteed by the government of the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State or by an instrumentality or agency of any of them having an equivalent credit rating and any auction rate, variable rate or demand securities issued or guaranteed by any federal, state or municipal governmental authority of the United States of America, in each case, having a credit rating equal to BBB or higher by S&P or Baa2 or higher by Moody’s, maturing or having a scheduled auction within one (1) year after the relevant date of calculation and not convertible or exchangeable to any other security;
(c)
commercial paper not convertible or exchangeable to any other security:
(i)
for whic
h a recognised trading market exists;
(ii)
issued by an issuer incorporated in the United States of America, the United Kingdom, any member state of the European Economic Area or any Participating Member State;
(iii)
which matures within one (1) year after the relevant date of calculation; and
(iv)
which
has a credit rating of either A-1 or higher by S&P or F-1 or higher by Fitch or P-1 or higher by Moody’s, or, if no rating is available in respect of the commercial paper, the issuer of which has, in respect of its long-term unsecured and non-credit enhanced debt obligations, an equivalent rating;
(d)
sterling bills of exchange eligible for rediscount at the Bank of England and accepted by an Acceptable Bank (or their dematerialised equivalent);
(e)
any investment accessible within thirty (30) days in money market funds which have a credit rating of either A-1 or higher by S&P or F-1 or higher by Fitch Rating Ltd or P-1 or higher by Moody’s and which invest substantially all their assets in securities of the types described in paragraphs (a) through (d) above; or
7
(f)
any other debt security approved by the Majority Lenders,
in each case to which any member of the Group is beneficially entitled at that time and which is not issued or guaranteed by any member of the Group or subject to any Security.
“
Change of Control
” means:
(a)
any person or group of persons acting in concert (other than any of the entities or companies constituting the Principal Shareholders) gains control of the Parent; or
(b)
any person or group of persons acting in concert (other than any of the entities or companies constituting members of the Group) gains control of the New Facility B Borrower.
For the purpose of the paragraph above “control” means:
(a)
the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:
(i)
cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the Parent or the New Facility B Borrower, as applicable; or
(ii)
appoint or remove all, or the majority, of the directors or other equivalent officers of the Parent or the New Facility B Borrower, as applicable; or
(iii)
give directions with respect to the operating and financial policies of the Parent or the New Facility B Borrower, as applicable, with which the directors or other equivalent officers of the Parent or the New Facility B Borrower, as applicable, are obliged to comply; or
(b)
the holding of more than thirty per cent. (30%) of the issued share capital of the Parent (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital) save, in circumstances where the Principal Shareholders between them continue to hold directly or indirectly (whether by way of ownership of shares, proxy, contract, agency or otherwise) more of such issued share capital than the relevant person or group of persons; or
(c)
the holding of more than fifty per cent. (50%) of the issued share capital of the New Facility B Borrower (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital).
For the purpose of the paragraph above “acting in concert” means a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them, either directly or indirectly, of shares in the Parent or the New Facility B Borrower, as applicable, to
8
obtain or consolidate control of the Parent or the New Facility B Borrower, as applicable.
“
Change of Tax Law
” shall have the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Code
” means the United States Internal Revenue Code of 1986 (26 U.S.C. §§ 1 et seq.), as amended from time to time.
“
Commitment
” means a Facility A Commitment or a Facility B Commitment.
“
Commodity Exchange Act
” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“
Compliance Certificate
” means a certificate substantially in the form set out in Schedule 8 (
Form of Compliance Certificate
) or otherwise in form and substance satisfactory to the Agent.
“
Confidential Information
” means all information relating to the Parent, any Obligor, the Group, the Finance Documents or the Facilities of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facilities from either:
(a)
any member of the Group or any of its advisers; or
(b)
another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:
(i)
is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of the terms of this Agreement; or
(ii)
is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or
(iii)
is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.
“
Confidentiality Undertaking
” means a confidentiality undertaking substantially in the recommended form of the LMA or in any other form agreed between the Borrowers and the Agent.
9
“
Consolidated Interest Expense
” has the meaning given to it in Clause 22.1 (
Financial Definitions
).
“
Default
” means an Event of Default or any event or circumstance specified in Clause 24 (
Events of Default
) which would (with the expiry of a grace period or the giving of notice, the making of any determination (where any provision of Clause 24 expressly requires a determination to be made) or any combination of any of the foregoing) be an Event of Default.
“
Defaulting Lender
” means any Lender:
(a)
which has failed to make its participation in a Loan available or has notified the Agent that it will not make its participation in a Loan available by the Utilisation Date of that Loan in accordance with Clause 5.4 (
Lenders’ participation
);
(b)
which has otherwise rescinded or repudiated a Finance Document; or
(c)
with respect to which an Insolvency Event has occurred and is continuing.
Unless, in the case of paragraph (a) above:
(i)
its failure to pay is caused by:
(A)
administrative or technical error; or
(B)
a Disruption Event; and,
payment is made within one (5) Business Days of its due date; or
(ii)
the Lender is disputing in good faith whether it is contractually obliged to make the payment in question.
“
Designated Person
” means a person or entity:
(a)
listed in the annex to, or otherwise subject to the provisions of, the Executive Order;
(b)
named as a “Specially Designated National and Blocked Person” on the most current list published by OFAC at its official website or any replacement website or other replacement official publication of such list; or
(c)
to the best of the Obligor’s knowledge, with which any Finance Party is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law.
“
Designated Website
” has the meaning given to that term in Clause 32.7 (
Use of websites
).
“
Dispute
” has the meaning given to that term in paragraph (a) of Clause 42.1 (
Jurisdiction
).
10
“
Disruption Event
” means either or both of:
(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facilities (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:
(i)
from performing its payment obligations under the Finance Documents; or
(ii)
from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
“
Distribution
” means:
(a)
any dividend, charge, fee or other distribution (or interest on any unpaid dividend, charge, fee or other distribution) (whether in cash or in kind) on or in respect of share capital (or any class of share capital); or
(b)
the payment or distribution of any dividend or share premium reserve.
“
Double Taxation Treaty
” means a double taxation agreement made between any Relevant Tax Jurisdiction and any other jurisdiction which makes provision for full exemption from, or a reduction in, Tax imposed by such Relevant Tax Jurisdiction on interest.
“
EBITDA
” has the meaning given to it in Clause 22.1 (
Financial Definitions
).
“
ERISA
” means the Employee Retirement Income Security Act of 1974 of the United States of America as amended from time to time and any applicable regulations promulgated thereunder.
“
ERISA Affiliate
” means, with respect to any Obligor, any person that for the purposes of Title IV of ERISA is from time to time a member of the controlled group of any Obligor or under common control with any Obligor within the meaning of Section 414 of the Code.
“
ERISA Event
” means:
(a)
the occurrence of a reportable event, within the meaning of Section 4043(c) of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC; or
11
(b)
the requirements of Section 4043(b) of ERISA applied with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following thirty (30) days;
(c)
the application for a minimum funding waiver with respect to a Plan;
(d)
the provision by the administrator of any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA);
(e)
the cessation of operations at a facility of any Obligor or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA;
(f)
the withdrawal by any Obligor or any ERISA Affiliate from a Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(g)
the failure to make a required contribution to any Plan that would result in the imposition of an encumbrance under the Code or ERISA;
(h)
the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan;
(i)
a determination that any Plan is, or is expected to be, in at-risk status (within the meaning of Title IV of ERISA); or
(j)
the receipt by any Obligor or ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Obligor or ERISA Affiliate of any notice that a Multiemployer Plan is in endangered or critical status (within the meaning of Section 305 of ERISA).
“
EURIBOR
” means, in relation to any Loan:
(a)
the applicable Screen Rate; or
(b)
(if no Screen Rate is available for the Interest Period of that Loan) the Interpolated Screen Rate for that Loan; or
(c)
if:
(i)
no Screen Rate is available for the currency of that Loan; or
(ii)
no Screen Rate is available for the Interest Period of that Loan and it is not possible to calculate an Interpolated Screen Rate for that Loan,
the Base Reference Bank Rate,
12
as of, in the case of paragraphs (a) and (c) above, 11:00 a.m. (Brussels time) on the Quotation Day for Euro and for a period equal in length to the Interest Period of that Loan and, if that rate is less than zero, EURIBOR shall be deemed to be zero.
“
Euro
” or “
€
” means the single currency of the Participating Member States.
“
Event of Default
” means any event or circumstance specified as such in Clause 24 (
Events of Default
).
“
Excluded Assets
” means (i) loans to and receivables from other members of the Group, (ii) investments in Subsidiaries and (iii) consolidation entries (e.g., purchase accounting entries for goodwill and fair value adjustments to assets and liabilities) and elimination entries.
“
Excluded EBITDA Entries
” means consolidation entries and elimination entries.
“
Executive Order
” means the US Executive Order No. 13224 on Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support Terrorism.
“
Exempt Lender
” shall have the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Existing GTECH Notes
” means each of the following issuances of debt securities by the Original Borrower:
(a)
€500,000,000 5.375% Guaranteed Notes due 2018;
(b)
€500,000,000 3.500% Guaranteed Notes due 2020; and
(c)
the Capital Securities.
“
Existing GTECH Revolving Credit Facilities
” means the US$1,500,000,000 and €850,000,000 multicurrency revolving credit facilities for the Original Borrower and the Original Guarantor made available under a senior facilities agreement dated 4 November 2014 among the Original Borrower, as GTECH and as a Borrower; Original Guarantor, as a Borrower; J.P. Morgan Limited and Mediobanca — Banca di Credito Finanziario S.p.A., as the Global Coordinators, Bookrunners and Mandated Lead Arrangers; the entities listed in Part III of Schedule 1 thereto, as the Bookrunners and Mandated Lead Arrangers, the entities listed in Part IV of Schedule 1 thereto, as the Mandated Lead Arrangers; the entities listed in Part V of Schedule 1 thereto, as the Arrangers, the financial institutions listed in Part II of Schedule 1 thereto, as the Original Lenders; The Royal Bank of Scotland plc, as the Agent; The Royal Bank of Scotland plc, as the Issuing Agent; and the other parties thereto.
“
Existing Indebtedness
” means any Financial Indebtedness outstanding at any time under the Bridge Facilities, the Existing GTECH Revolving Credit Facilities, the Existing GTECH Notes and the Existing Target Facility.
“
Existing Lender
” has the meaning given to that term in Clause 25.1 (
Assignments and transfers by the Lenders
).
13
“
Existing Target Facility
” means the revolving credit facility made available under an amended and restated credit agreement dated as of 23 April 2013 and made among inter alios Target, as the Borrower, Wells Fargo Securities, LLC, RBS Securities Inc. and Union Bank, N.A., as Joint Lead Arrangers and Joint Book Runners and The Royal Bank of Scotland plc as Administrative Agent and Swing Line Lender.
“
Facility Office
” means in respect of a Lender, the office or offices notified by such Lender to the Agent in writing on or before the date it becomes a Lender (and, following that date, by not less than five (5) Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.
“
Facilities
” means Facility A and Facility B and “
Facility
” means any one of them.
“
Facility A
” means the term loan facility made available by the International Lenders under this Agreement as described in Clause 2 (
Facility
).
“
Facility A Availability Period
” means the period from and including the date of this Agreement to and including 27 February 2015.
“
Facility A Commitment
” means:
(a)
in relation to an Original International Lender, the amount set opposite its name under the heading “Commitment” in Part II A of Schedule 1 (
The Original Parties
) and the amount of any other Facility A Commitment transferred to it under this Agreement; and
(b)
in relation to any other Lender, the amount of any Facility A Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
“
Facility A Loan
”
means a loan made or to be made under Facility A or the principal amount outstanding for the time being of such loan.
“
Facility B
”
means the term loan facility made available by the Italian Lenders under this Agreement as described in Clause 2 (
Facility
).
“
Facility B Availability Period
” means, as applicable the First Facility B Availability Period or the Second Facility B Availability Period.
“
Facility B Commitment
” means:
(a)
in relation to an Original Italian Lender, the amount set opposite its name under the heading “Commitment” in Part II B of Schedule 1 (
The Original Parties
) and the amount of any other Facility B Commitment transferred to it under this Agreement; and
(b)
in relation to any other Lender, the amount of any Facility B Commitment transferred to it under this Agreement,
14
to the extent not cancelled, reduced or transferred by it under this Agreement and subject always to Clause 8.2 (
Facility B Repayment and Reinstatement of Facility B Commitments
).
“
Facility B Loan
”
means a loan made or to be made under Facility B or the principal amount outstanding for the time being of such loan.
“
Facility B Repayment
” has the meaning given to such term in Clause 8.2 (
Facility B Repayment and Reinstatement of Facility B Commitments
).
“
FATCA
” means:
(a)
Sections 1471 to 1474 of the Code or any associated regulations;
(b)
any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or
(c)
any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
“
FATCA Application Date
” means:
(a)
in relation to a “withholdable payment” described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;
(b)
in relation to a “withholdable payment” described in section 1473(1)(A)(ii) of the Code (which relates to “gross proceeds” from the disposition of property of a type that can produce interest from sources within the US), 1 January 2017; or
(c)
in relation to a “passthru payment” described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.
“
FATCA Deduction
” means a deduction or withholding from a payment under a Finance Document required by FATCA.
“
FATCA Exempt Party
” means a Party that is entitled to receive payments free from any FATCA Deduction.
“
Federal Reserve Board
” means the Board of Governors of the Federal Reserve System of the United States (or any successor thereto).
“
Fee Letter
” means any Agent’s Fee Letter and any Upfront Fee Letter(s).
15
“
Final Maturity Date
” means in relation to each of Facility A and Facility B the date falling four (4) years after the date of this Agreement.
“
Finance Document
” means this Agreement, any Accession Letter, any Compliance Certificate, any Fee Letter, any Resignation Letter, any Utilisation Request and any other document designated as a “Finance Document” by the Agent and the Borrowers.
“
Finance Party
” means the Agent, the Mandated Lead Arrangers and the Lenders.
“
Financial Indebtedness
” means any indebtedness for or in respect of (without double counting):
(a)
monies borrowed;
(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;
(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;
(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with the Accounting Principles, be treated as a finance or capital lease;
(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
(f)
for the purposes of paragraph (e) of the definition of Permitted Guarantee, Clause 23.12 (
Priority Financial Indebtedness
) and an Event of Default only, any Treasury Transaction (and, when calculating the value of that Treasury Transaction, only the marked to market value as at the relevant date on which Financial Indebtedness is calculated (or, if any actual amount is due as a result of the termination or close-out of that Treasury Transaction, that amount) shall be taken into account);
(g)
any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution;
(h)
any amount of any liability under an advance or deferred purchase agreement if (i) one of the primary reasons behind entering into the agreement is to raise finance or (ii) the agreement is in respect of the supply of assets or services and payment is due more than one hundred and fifty (150) days after the date of supply;
(i)
any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; and
(j)
the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) through (i) above;
16
provided that
any counter-indemnity obligation in respect of performance or similar bonds, letters of credit or guarantees, in each case, guaranteeing performance by a member of the Group in relation to a liability (other than a liability in respect of Financial Indebtedness) which arises in the ordinary course of those activities described in the definition of “Business” shall not constitute Financial Indebtedness unless and until, and to the extent that, such performance or similar bonds, letters of credit or guarantees are drawn or called (as applicable).
“
Financial Quarter
” means, with respect to the Parent, each of the quarterly periods ending on 31 March, 30 June, 30 September and 31 December in each Financial Year by reference to which the quarterly accounts of members of the Group are prepared.
“
Financial Year
” means each period ending on 31 December in respect of which annual audited consolidated financial statements of the Group are required to be prepared.
“
First Facility B Availability Period
” means the period from and including the date of this Agreement to and including 27 February 2015.
“
Fitch
” means Fitch Ratings Ltd.
“
Foreign Asset Control Laws
” means the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., the Trading with the Enemy Act, 50 U.S.C. App. §§ 1 et seq., any Executive Order or regulation promulgated thereunder and administered by OFAC.
“
Fraudulent Transfer Law
” means any applicable US Bankruptcy Law or any applicable US state fraudulent transfer or conveyance law.
“
Group
” means the Original Borrower (or, following completion of the Merger, Holdco) and its Subsidiaries from time to time and “
member of the Group
” means any one of them.
“
Guarantor
” means the Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 26 (
Changes to the Obligors
).
“
Holdco
” means Georgia Worldwide PLC, a public limited company organised under the laws of England and Wales and a wholly owned Subsidiary of the Original Borrower.
“
Holdco Merger
” means the series of transactions which consist principally of (i) the merger of the Original Borrower with and into Holdco and (ii) the payment to the Original Borrower’s shareholders exercising withdrawal rights following such merger, each in accordance with the steps set out in the Structure Memorandum.
“
Holding Company
” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.
“
IFRS
” means international accounting standards within the meaning of IAS Regulation 1606/2002 to the extent applicable to the relevant financial statements.
“
Impaired Agent
” means the Agent at any time when:
17
(a)
it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;
(b)
it otherwise rescinds or repudiates a Finance Document;
(c)
(if it is also a Lender) it is a Defaulting Lender under paragraph (a) or (b) of the definition of “Defaulting Lender”; or
(d)
an Insolvency Event has occurred and is continuing with respect to it;
(e)
unless, in the case of paragraph (a) above:
(i)
its failure to pay is caused by:
(A)
administrative or technical error; or
(B)
a Disruption Event; and
payment is made within five (5) Business Days of its due date; or
(ii)
it is disputing in good faith whether it is contractually obliged to make the payment in question.
“
Imposta Sostitutiva
” means the tax provided by article 15 et seq. of Italian Presidential Decree No. 601 of 29 September 1973.
“
Increased Costs
” has the meaning given to it in paragraph (b) of Clause 15.1 (
Increased Costs
).
“
Initial Margin Trigger Event
” means the first to occur of the following events:
(a)
the completion of the Transactions;
(b)
a change of at least one of the two Public Debt Ratings issued by S&P and Moody’s; and
(c)
termination of the Merger Agreement, or the public disclosure by the Parent that it no longer intends to proceed with the completion of the Mergers;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, paragraph (b) shall be interpreted so as to mean a change of at least two of the three Public Debt Ratings.
“
Initial Utilisation
” means the Utilisation of the Facilities by the Original Borrower.
“
Initial Utilisation Date
” the date of the Initial Utilisation.
“
Insolvency Event
” in relation to a Finance Party means that the Finance Party:
(a)
is dissolved (other than pursuant to a consolidation, amalgamation or merger);
18
(b)
becomes insolvent or is unable to pay its debts as they become due or fails or admits in writing its inability generally to pay its debts as they become due;
(c)
makes a general assignment, arrangement or composition with or for the benefit of its creditors generally;
(d)
institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official;
(e)
has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition is instituted or presented by a person or entity not described in paragraph (d) above and:
(i)
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation; or
(ii)
is not dismissed, discharged, stayed or restrained in each case within thirty (30) days of the institution or presentation thereof;
(f)
has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);
(g)
seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets;
(h)
has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within thirty (30) days thereafter;
(i)
causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in paragraphs (a) through (h) above; or
(j)
takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts.
“
Insufficiency
” means, with respect to any Plan, the amount, if any, of its unfunded liabilities.
“
Intellectual Property
” means:
19
(a)
any patents, trademarks, service marks, designs, business names, copyrights, design rights, moral rights, inventions, confidential information, know-how and other intellectual property rights and interests, whether registered or unregistered; and
(b)
the benefit of all applications and rights to use such assets of each member of the Group.
“
Interest Period
” means, in relation to a Loan, each period determined in accordance with Clause 11 (
Interest Periods
) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 10.4 (
Default interest
).
“
International Lender
” means:
(a)
any Original International Lender; and
(b)
any bank, financial institution, trust, fund or other entity which has become a Party as an International Lender in accordance with Clause 25 (
Changes to the Lenders
),
which, in each case, has not ceased to be a Party in accordance with the terms of this Agreement.
“
Interpolated Screen Rate
” means, for any Loan, the rate which results from interpolating on a linear basis between:
(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of that Loan; and
(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of that Loan,
each as of 11:00 a.m. (Brussels time) on the Quotation Day for the currency of that Loan.
“
IRAP
” means the Italian Regional tax on productive activities set forth by Italian Legislative Decree of 15 December 1997, No. 446.
“
ITA
”
means the Income Tax Act 2007 of the United Kingdom.
“
Italian Borrower
” means a Borrower which is resident in Italy for Tax purposes and not acting for the purposes of the Finance Documents through a Permanent Establishment located outside Italy.
“
Italian Bankruptcy Law
” means Royal Decree n. 267 of 16 March 1942, as amended and supplemented from time to time.
“
Italian Civil Code
” means the Italian civil code, enacted by Royal Decree No. 262 of 16 March 1942.
“
Italian Guarantor
” means a Guarantor which is resident in Italy for Tax purposes pursuant to article 73 of Italian Presidential Decree No. 917 of 22 December 1986 not
20
acting for the purposes of the Finance Documents through a Permanent Establishment located outside Italy.
“
Italian Holdco
” means Lottomatica Holding S.r.l., a company organised under the laws of Italy as a società responsabilità limitata with its registered office at Viale del Campo Boario 56/D 00154 Rome, Italy, and having registration number 13044331000.
“
Italian Insolvency Proceeding
” means, with respect to the Parent, each Obligor incorporated in Italy and each Material Subsidiary incorporated in Italy (i) any proceeding concerning its liquidation, bankruptcy, dissolution, reorganisation, moratorium or proceedings similar or analogous thereto including bankruptcy (
fallimento
), arrangements with creditors (
concordato preventivo
), forced administration liquidation (
liquidazione coatta amministrativa
), extraordinary administration of large companies in insolvency (
amministrazione straordinaria delle grandi imprese in stato di insolvenza
), assignments for the benefit of creditors (
cessione di beni ai creditori
), arrangements with creditors in the context of Article 67, paragraph 2, letter d) of the Italian Insolvency Law or restructuring arrangements pursuant to Article 182 bis of Italian Insolvency Law, out-of-court restructurings or winding-up (
liquidazione
) set out in the Italian Insolvency Law, the Italian Civil Code or any other applicable Italian laws, as well as any other proceeding defined as “
procedura di risanamento
” or “
procedura concorsuale
” under Legislative Decree No. 170 dated 21 May 2004, and (ii) any equivalent or analogous liquidation, insolvency or reorganisation proceedings under the applicable laws, legislation, rules and regulations of any other jurisdiction.
“
Italian Insolvency Law
” means Royal Decree No. 267 of 16 March 1942.
“
Italian Lender
” means:
(a)
any Original Italian Lender; and
(b)
any bank, financial institution, trust, fund or other entity which has become a Party as an Italian Lender in accordance with Clause 25 (
Changes to the Lenders
),
which, in each case, has not ceased to be a Party in accordance with the terms of this Agreement.
“
Italian Obligor
” means an Italian Borrower or an Italian Guarantor.
“
Italian Qualifying Lender
” shall have the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Italian Reorganisation
” means the series of transactions which consists principally of (i) the contribution of the operating assets of the Original Borrower to the New Facility B Borrower, (ii) the assumption of the liabilities related to such assets by the New Facility B Borrower and (iii) the contribution of shares in the New Facility B Borrower and certain other Subsidiaries of the Original Borrower by the Original Borrower into Italian Holdco, each in accordance with the steps set out in the Structure Memorandum.
21
“
Italian Treaty Lender
” shall have the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Joint Venture
” means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity in which the Group has a 50 per cent. or a minority interest and which is accordingly not consolidated in the financial statements of that member of the Group as a Subsidiary, it being understood however that in each case the proportion of the Group’s interest in the joint venture entity may be consolidated in the financial statements of the relevant member of the Group on a proportional basis.
“
Legal Opinion
” means any legal opinion delivered to the Agent under Clause 4.1 (
Initial Conditions Precedent
) or Clause 26 (
Changes to the Obligors
).
“
Legal Reservations
” means any matters which are set out as qualifications or reservations as to matters of law of general application in the Legal Opinions.
“
Lender
” means an Italian Lender or an International Lender.
“
LMA
” means the Loan Market Association.
“
Loan
” means a Facility A Loan or a Facility B Loan.
“
Majority Lenders
” means a Lender or Lenders whose Commitments aggregate more than 66
2
/
3
per cent. of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66
2
/
3
per cent. of the Total Commitments immediately prior to that reduction).
“
Margin
” means:
(a)
at any time prior to an Initial Margin Trigger Event, 1.60 per cent. per annum; and
(b)
from and including an Initial Margin Trigger Event until the Final Maturity Date for the Facilities, such percentage per annum as is set out below in the column “Applicable Margin” in respect of the Public Debt Rating applicable below:
|
Public Debt Ratings
|
|
Applicable Margin
|
|
|
BBB/Baa2 or higher
|
|
0.95
|
%
|
|
BBB-/Baa3
|
|
1.45
|
%
|
|
BB+/Ba1
|
|
1.75
|
%
|
|
BB/Ba2
|
|
2.05
|
%
|
|
BB-/Ba3 or lower
|
|
2.55
|
%
|
22
Provided that
:
(a)
in the event of split Public Debt Ratings, the Applicable Margin shall be the average of the two (2) Applicable Margins;
(b)
in the event of withdrawal of a Public Debt Rating, the Applicable Margin shall be such rate which is the average of the applicable rate for the remaining Public Debt Rating and 2.55%; and
(c)
in the event of withdrawal of all Public Debt Ratings, the Applicable Margin shall be 2.55% until at least one Public Debt Rating is reinstated;
(d)
any increase or decrease in the Margin for a Loan shall take effect on the date which is the first day of the next Interest Period for that Loan following the occurrence of the relevant Margin Rating Event; and
(e)
notwithstanding paragraphs (a) through (c) above, when an Event of Default is continuing, the highest rate set out in the table in paragraph (b) above shall apply effective from the date on which the Event of Default occurs,
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, then the Public Debt Ratings in the table above and the references to Public Debt Ratings in paragraphs (a) through (c) above shall be interpreted on the basis of the three Public Debt Ratings such that references to “two (2)” shall be to “three (3)”.
“
Margin Rating Event
” means:
(a)
the Initial Margin Trigger Event; and
(b)
subsequently, a change of at least one of the two Public Debt Ratings issued by S&P and Moody’s;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, paragraph (b) shall be interpreted so as to mean a change of at least two of the three Public Debt Ratings.
“
Margin Stock
” means “margin stock” as defined in Regulation U.
“
Market Disruption Event
” has the meaning given to it in Clause 12.2 (
Market disruption
).
“
Material Adverse Effect
” means a material adverse effect on:
(a)
the ability of the Obligors (taken as a whole) to perform in a timely manner their payment obligations arising under the Finance Documents, the obligations arising under Clause 22 (
Financial Covenants
) or any other material obligations under any of the Finance Documents;
(b)
the business, financial condition, assets or revenues of the Group taken as a whole; or
23
(c)
the legality, validity or enforceability against the Obligors of any Finance Document subject always to the Legal Reservations.
“
Material Subsidiary
” means a Subsidiary of the Parent whose:
(a)
total unconsolidated assets excluding the Excluded Assets are greater than or equal to ten per cent. (10%) (if the Subsidiary of the Parent is not a Guarantor) or five per cent. (5%) (if the Subsidiary is a Guarantor) of the total consolidated assets of the Group excluding the Excluded Assets, or
(b)
unconsolidated earnings before interest, taxes, depreciation and amortization (calculated on the same basis that EBITDA of the Group is calculated but excluding the Excluded EBITDA Entries are greater than or equal to ten per cent. (10%) (if the Subsidiary of the Parent is not a Guarantor) or five per cent. (5%) (if the Subsidiary is a Guarantor) of the EBITDA of the Group excluding the Excluded EBITDA Entries.
A Material Subsidiary will be determined by reference to the latest balance sheet and income statement (or, if available, audited financial statements) of such Subsidiary and the latest audited consolidated financial statements of the Group. However, if a Subsidiary has been acquired since the date as at which the latest audited consolidated financial statements of the Group were prepared, the balance sheet and income statement (or, if available, audited financial statements) shall be deemed to be adjusted in order to take into account the acquisition of that Subsidiary (that adjustment being certified by an authorised officer of the Parent as representing an accurate reflection of the revised consolidated assets or EBITDA of the Group if so requested by the Agent).
“
Merger Agreement
” means the agreement and plan of merger agreement dated 15 July 2014 and entered into among the Original Borrower, the Original Guarantor (solely with respect to Section 5.02(a) and Article VIII), Holdco, Target Merger Sub and Target relating to the Mergers.
“
Merger Capital Reduction
” means the initial proposed court-approved reduction of capital of Holdco under the UK Companies Act 2006, to be implemented following completion of the Mergers as described in and effected in accordance with, the Structure Memorandum.
“
Mergers
” means the Holdco Merger and the Target Merger.
“
Month
” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a)
(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;
(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and
24
(c)
if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.
The above rules will only apply to the last Month of any period. “
Monthly
” shall be construed accordingly.
“
Moody’s
” means Moody’s Investor Services Limited.
“
Multiemployer Plan
” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, then or at any time during the previous five (5) years maintained for, or contributed to (or to which there is or was an obligation to contribute) on behalf of, employees of any Obligor or ERISA Affiliates.
“
Multiple Employer Plan
” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that:
(a)
is maintained for employees of any Obligor or any ERISA Affiliate and at least one person (other than the Obligors and the ERISA Affiliates); or
(b)
was so maintained and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
“
New Facility B Borrower
” means Lottomatica S.p.A., a company organised under the laws of Italy as a società per azioni with its registered office at Viale del Campo Boario 56/D 00154 Rome, Italy, and having registration number 13109741002.
“
New Facility B Borrower Accession
” shall have the meaning ascribed thereto in Clause 26.2 (
New Facility B Borrower Accession
).
“
New Lender
” has the meaning given to it in Clause 25.1 (
Assignment and transfers by the Lenders
).
“
Non-Acceptable Bank
” means any bank or financial institution that does not meet the requirements of paragraph (a) or (b) of the definition of “Acceptable Bank”.
“
Non-Consenting Lender
” has the meaning given to it in paragraph (c) of Clause 37.3 (
Replacement of Lender
).
“
Obligor
” means a Borrower or a Guarantor.
“
Obligor’s Agent
” means the Parent, appointed to act on behalf of each Obligor in relation to the Finance Documents pursuant to Clause 2.3 (
Obligors’ Agent
).
“
OFAC
” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“
Original Financial Statements
” means in relation to the Parent, the audited consolidated financial statements of the Group for the Financial Year ended 31 December 2013.
25
“
Original Guarantor
” has the meaning given to it in the preamble to this Agreement.
“
Original International Lender
” has the meaning given to it in the preamble to this Agreement.
“
Original Italian Lender
” has the meaning given to it in the preamble to this Agreement.
“
Original Lenders
” means the Original International Lenders and the Original Italian Lenders.
“
Original Obligor
” means the Original Borrower or the Original Guarantor.
“
Paper Form Lender
” has the meaning given to it in paragraph (a) of Clause 32.7 (
Use of Websites
).
“
Pari Passu Indebtedness
” has the meaning given to it in Clause 23.23 (
Security following Debt Ratings decrease
).
“
Participating Member State
” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.
“
Party
” means a party to this Agreement.
“
PBGC
” means the Pension Benefit Guaranty Corporation of United States of America established pursuant to Section 4002 of ERISA (or any successor).
“
Permanent Establishment
” means any fixed base of business (
stabile organizzazione
) regulated by article 162 of Presidential Decree No. 917 of 22 December 1986, Article 5 of the Organization for Economic Cooperation and Development Model Tax Convention and or any equivalent provision provided for by any relevant legislation.
“
Permitted Acquisition
” means any and all of the following:
(a)
any acquisition which constitutes a Permitted Transaction;
(b)
an acquisition by a member of the Group of an asset sold, leased, transferred or otherwise disposed of by another member of the Group in circumstances constituting a Permitted Disposal;
(c)
an acquisition of shares or securities pursuant to a Permitted Acquisition Share Issue;
(d)
an acquisition of securities or other investments which are Cash Equivalent Investments;
(e)
an acquisition in circumstances constituting a Joint Venture or the incorporation of a Joint Venture;
26
(f)
the incorporation or other organization of a person who upon incorporation or other organization becomes a member of the Group (and such incorporation may be by way of subscription for shares in cash or a transfer of assets permitted by this Agreement in lieu of cash); or
(g)
an acquisition by way of purchase, merger, consolidation or otherwise, of (A) at least a controlling interest in a person or (B) a business, line of business, division, or other business unit of a person, or an undertaking carried on as a going concern, but only if:
(i)
no Default is continuing on the closing date for the acquisition or would occur as a result of the acquisition;
(ii)
the acquired company, business or undertaking is (A) principally engaged in any part of the Business or is a Holding Company with respect to a company which is principally engaged in any part of the Business or (B) is empowered under its constitutional documents or by-laws to be engaged in any part of the Business; and
either
(A)
the consideration (including associated costs and expenses) for the acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in the acquired company (or any such business) at the date of acquisition (when aggregated with the consideration (including associated costs and expenses) for any other Permitted Acquisition and any Financial Indebtedness or other assumed actual or contingent liability, in each case remaining in any such acquired companies or businesses at the time of acquisition (A) does not exceed in aggregate in any Financial Year of the Parent, ten per cent. (10%) of the consolidated total assets of the Group and (B) does not exceed in aggregate at any time, US$2,250,000,000 (or its equivalent in other currencies) unless and until the Group obtains a Public Debt Rating upgrade to BBB by S&P and Baa2 by Moody’s, in which case the cap of US$2,250,000,000 (or its equivalent in other currencies) will cease to apply for such time as the Group retains such ratings upgrade;
or
(B)
upon confirmation of the acquisition, each of Moody’s and S&P disclose publicly that the Group has a Public Debt Rating and its indebtedness has, in each case, a credit rating of at least Baa3 and BBB-, respectively;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (g) shall be interpreted so as to mean the date on which at least two of the three Public Debt Ratings issued by the Rating Agencies are so upgraded or disclosed.
27
“
Permitted Acquisition Share Issue
” means:
(a)
an issue of shares constituting a Permitted Transaction;
(b)
an issue of shares by one wholly owned Subsidiary of the Parent to its direct Holding Company which is another wholly owned Subsidiary of the Parent or to the Parent (or to another member of the Group which is the shareholder); or
(c)
an issue of shares by a Subsidiary of the Parent to the member of the Group which is its direct Holding Company and any minority shareholder in the relevant Subsidiary.
“
Permitted Disposal
” means any sale, lease, licence, transfer or other disposal:
(a)
which constitutes a Permitted Transaction;
(b)
of trading stock or inventory, supplies, materials, assets or cash made by any member of the Group in the ordinary course of business of the disposing entity;
(c)
of any asset by a member of the Group (the “
Disposing Company
”) to another member of the Group (the “
Acquiring Company
”), but if:
(i)
the Disposing Company is an Obligor, the Acquiring Company must also be an Obligor; and
(ii)
the Disposing Company is a Guarantor, the Acquiring Company must be a Guarantor guaranteeing at all times an amount no less than that guaranteed by the Disposing Company,
it being understood that (A) if any of the assets being sold, leased, licensed, transferred or otherwise disposed of are at such time subject to Security in favour of the Lenders, then the Agent is reasonably satisfied that the Lenders will continue to benefit from the same or equivalent Security; and (B) any disposal of assets by a member of the Group to another member of the Group which sale is made as an intermediate step for the purpose of effecting a subsequent disposal to a third party that is not a member of the Group and that is otherwise permitted under the definition of “Permitted Disposal” shall not be considered for the purposes of this sub-paragraph (c) or sub-paragraph (i) as long as such subsequent disposal is completed within a period of two (2) months from the date of such first disposal. For the avoidance of doubt, any subsequent disposal to a third party that is not a member of the Group shall be considered for the purposes of sub-paragraph (i);
(d)
of assets (other than shares), in exchange for other assets substantially comparable or superior as to type, value or quality;
(e)
of (i) obsolete, worn out, inefficient or redundant vehicles, plant fixtures, equipment or other property or (ii) leases or subleases of Real Property (including surplus office and parking space);
(f)
of Cash Equivalent Investments for cash or in exchange for other Cash Equivalent Investments;
28
(g)
constituted by a licence of intellectual property rights permitted by Clause 23.14 (
Intellectual Property
);
(h)
by a member of the Group of any of its receivables on non-recourse terms where the relevant sale or disposal of such receivables does not constitute Financial Indebtedness for the purposes of the relevant applicable Accounting Principles and;
provided that
it is on normal commercial terms and in the ordinary course of business; or
(i)
of assets for cash where the greater of the fair market value and net consideration receivable (when aggregated with the greater of the fair market value and net consideration receivable for any other sale, lease, licence, transfer or other disposal not allowed under the preceding paragraphs or as a Permitted Merger) does not exceed (A) in any Financial Year of the Parent, five per cent. (5%) of the consolidated total assets of the Group or (B) at any time, US$1,125,000,000 (or its equivalent in other currencies),
it being understood that nothing in this Agreement will be taken to permit the disposal of a Guarantor or Borrower (whether by Third Party Disposal or otherwise) save in circumstances where prior to the disposal the relevant Guarantor or Borrower resigns as Guarantor or Borrower (or both, as they case may be) in accordance with paragraph (a) of Clause 26.4 (
Resignation of an Obligor
), satisfies the conditions set out in and has its resignation is accepted pursuant to, paragraph (b) of Clause 26.4 (
Resignation of an Obligor
).
“
Permitted Guarantee
” means:
(a)
any guarantee or counter-indemnity by a member of the Group which constitutes a Permitted Transaction;
(b)
the endorsement of negotiable instruments in the ordinary course of business;
(c)
any guarantee guaranteeing performance by a member of the Group in relation to an obligation or liability (other than an obligation or liability in respect of Financial Indebtedness) which arises in the ordinary course of business;
(d)
any counter-indemnities for performance or similar bond or letters of credit, or any guarantees, in each case guaranteeing performance by a member of the Group in relation to a liability (other than a liability in respect of Financial Indebtedness, save to the extent arising under the relevant performance or similar bond, letter of credit or guarantee itself) which arises in the ordinary course of business or by operation of law, including by way of example and without limitation, counter-indemnities for guarantees or bonds issued on behalf of any member of the Group in the ordinary course of business in respect of tax claims or otherwise as a result of any legal proceedings brought against any member of the Group, in each case which are being contested in good faith;
(e)
any guarantee by a Guarantor of Financial Indebtedness not restricted under Clause 23.12 (
Priority Financial Indebtedness
), including any guarantee issued pursuant to the terms of this Agreement;
29
(f)
any guarantee given in respect of the netting or set-off arrangements permitted pursuant to paragraph (d) of the definition of “Permitted Security”; or
(g)
any other guarantee made by any member of the Group so long as the aggregate amount of all such guarantees outstanding does not exceed US$75,000,000 (or its equivalent in other currencies) at any time.
“
Permitted Loan
” means:
(a)
any loan extended or made which constitutes a Permitted Transaction;
(b)
any trade credit extended by any member of the Group to its customers on normal commercial terms and in the ordinary course of business;
(c)
any financing extended in connection with the sale of products manufactured by a member of the Group by (i) a member of the Group or (ii) a distributor of products manufactured by a member of the Group to a customer, in each case on normal commercial terms and in the ordinary course of such member’s trade or business;
(d)
a loan extended or made by a member of the Group to another member of the Group;
(e)
a loan extended or made by a member of the Group to an employee or director of any member of the Group if the amount of such loan when aggregated with the amount of all loans outstanding to employees and directors by members of the Group does not exceed US$15,000,000 (or its equivalent in other currencies) at any time; and
(f)
loans extended or made by any member of the Group (other than a loan made by a member of the Group to another member of the Group) so long as the aggregate amount of all such loans outstanding does not exceed US$35,000,000 (or its equivalent in other currencies) at any time.
“
Permitted Merger
” means:
(a)
any solvent amalgamation, merger, consolidation, intra-group demerger, corporate reconstruction, liquidation or reorganisation which constitutes a Permitted Transaction;
(b)
any amalgamation, merger or consolidation by and between Obligors on a solvent basis or any intra-group demergers or corporate reconstructions by Obligors on a solvent basis;
provided that
in the case of a merger between a Borrower and an Obligor which is not a Borrower, such Borrower shall be the surviving entity, obtain all of the rights and assume all of the obligations and liabilities of the other Obligor and confirm all existing Security granted by such other Obligor and such Security is not materially and adversely affected;
(c)
any amalgamation, merger or consolidation by and between an Obligor and any member of the Group on a solvent basis which is not an Obligor;
provided that
either (i) the Obligor is the surviving entity, obtains all of the rights and assumes all of the obligations and liabilities of the other member of
30
the Group and confirms all existing Security granted by such other member of the Group or (ii) the non-Obligor is the surviving entity, accedes to this Agreement as a Borrower or a Guarantor, as applicable, obtains all of the rights and assumes all of the obligations and liabilities of the other member of the Group and confirms all existing Security previously granted by such Obligor and such Security is not materially and adversely affected;
(d)
any amalgamation, merger or consolidation by and between members of the Group which are not Obligors;
(e)
any intra-group de-merger, corporate reconstruction, liquidation or reorganisation of any member of the Group which is not an Obligor; and
(f)
the Merger Reduction of Capital.
“
Permitted Restricted Payment
” means the any of the following:
(a)
a Permitted Transaction;
(b)
subject to the proviso below, for the Financial Year ending on 31 December 2014, any Restricted Payments;
provided that
the aggregate amount of all Restricted Payments made in the Financial Year ending on 31 December 2014 shall not exceed the applicable limit set forth in paragraph (c) and which shall reduce the applicable limit set forth in paragraph (c) for the Financial Year ending on 31 December 2015;
(c)
subject to the proviso below, for the Financial Year ending on 31 December 2015 and each Financial Year thereafter, Restricted Payments in an aggregate amount up to:
(i)
US$400,000,000 for each Financial Year if the Public Debt Ratings are equal to or higher than BB+ and Ba1;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BB+ or Ba1 as applicable; and
(ii)
US$300,000,000 for each Financial Year if any Public Debt Rating is lower than BB+ or Ba1 or any Public Debt Rating is withdrawn;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (ii) shall be interpreted to mean two of the three Public Debt Ratings issued by the Rating Agencies being lower than BB+ or Ba1 as applicable,
subject in each case to the Parent certifying pro forma compliance with ninety per cent (90%) of the Total Net Debt to EBITDA ratio applicable for the immediately preceding Relevant Period pursuant to Clause 22.2(b) (
Financial Condition
);
(d)
subject to the proviso below, Rescission Payments in an aggregate amount which is greater than twenty per cent. (20%) of the aggregate share capital of the Original Borrower and which, with respect to the period starting on the
31
date of this Agreement and ending on 30 June 2015, do not exceed an aggregate amount (in addition to the limits set forth in paragraph (c) above) US$400,000,000;
provided that
, for the period starting on the date of this Agreement and ending on 31 December 2015, the aggregate amount of Restricted Payments and Rescission Payments under paragraphs (b), (c) and (d) shall not exceed:
(i)
US$690,000,000 if the Public Debt Ratings are equal to or higher than BB+ or Ba1;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BB+ or Ba1 as applicable; and
(ii)
US$540,000,000 if the Public Debt Ratings are lower than BB+ or Ba1 or any Public Debt Rating is withdrawn;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (ii) shall be interpreted to mean two of the three Public Debt Ratings issued by the Rating Agencies being lower than BB+ or Ba1 as applicable;
(e)
for the period starting on 1 January 2016 and ending on the Final Maturity Date and for so long as the Public Debt Ratings are equal to or higher than BB+ and Ba1 (in addition to amounts permitted under paragraphs (a) through (d) above), Share Buy Backs in an aggregate amount up to US$150,000,000;
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (e) shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BB+ or Ba1 as applicable;
(f)
any Shareholder Payments in the ordinary course of business and on market terms in an aggregate amount up to US$3,000,000 in any Financial Year; and
(g)
any Restricted Payments made in connection with share capital of the Parent owned by management of the Group as part of an employee compensation plan, including, without limitation, stock based compensation and management incentive plans.
“
Permitted Security
” means:
(a)
any Security granted pursuant to Clause 23.23(a) (
Security following Debt Ratings Decrease
);
(b)
any Security or Quasi-Security arising as a result of a Permitted Transaction and subject always to Clause 23.23(a) (
Security following Debt Ratings Decrease
);
(c)
any lien arising by operation of law and in the ordinary course of its trading and not as a result of any default or omission on the part of any member of the Group;
32
(d)
Security constituted by any netting or set off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances (other than cash collateral) of members of the Group;
provided that
such arrangement does not (i) permit or require credit balances of Obligors to be netted or set off against debit balances of non-Obligors or (ii) give rise to other Security over the assets of Obligors in support of the liabilities of non-Obligors;
(e)
any Security or Quasi-Security over or affecting any assets acquired by a member of the Group after the date of this Agreement if:
(i)
the Security or Quasi-Security was not created in contemplation of the acquisition of that asset by a member of the Group;
(ii)
the principal amount secured has not been increased in contemplation of or since the acquisition of that asset by a member of the Group and is not guaranteed by a member of the Group; and
(iii)
the Security or Quasi-Security is removed or discharged within three (3) months of the date of acquisition of such asset;
(f)
any Security or Quasi-Security over or affecting any asset of any company which becomes a member of the Group after the date of this Agreement, where the Security or Quasi-Security is created prior to the date on which that company becomes a member of the Group if
(i)
the Security or Quasi-Security was not created in contemplation of the acquisition of that company;
(ii)
the principal amount secured has not increased in contemplation of or since the acquisition of that company; and
(iii)
the Security or Quasi-Security is removed or discharged within three (3) months of the date of acquisition of such asset;
(g)
any Security arising under any retention of title, hire purchase or conditional sale arrangement in respect of goods or assets supplied to any member of the Group in the ordinary course of the trading of such Group member and on the supplier’s standard or usual terms in respect of the goods or assets supplied (and not arising as a result of any default or omission by any member of the Group);
(h)
any Security or Quasi-Security arising as a result of any disposal which is a Permitted Disposal;
(i)
any Security constituted by rights of set off existing in the ordinary course of trading activities between any member of the Group and its respective suppliers or customers (and not as a result of any default or omission by any member of the Group);
33
(j)
any rights of set-off or netting on market standard terms arising under derivative transactions not prohibited by Clause 23.15 (
No Speculative Hedging Arrangements
);
(k)
any Security over cash or goods or documents of title to goods and insurances in favour of the Issuing Agent (as defined in the Existing GTECH Revolving Credit Facilities) by a member of the Group arising in the ordinary course of its trade or as a result of Clause 8.6 (
Cash cover by a Borrower
) (and not by reason of a default or omission by any member of the Group) of the agreement for the Existing GTECH Revolving Credit Facilities;
(l)
any Security arising pursuant to an order of attachment or injunction restraining disposal of assets or similar legal process arising in connection with court proceedings which are contested by any member of the Group in good faith by appropriate proceedings with a reasonable prospect of success and which legal process does not constitute a Default;
(m)
any Security arising (other than by way of affirmative action taken by or in favour of any taxation authority or any government authority or organization) in respect of Taxes, assessments or governmental charges which are either (i) being contested by the relevant member of the Group in good faith by appropriate proceedings and with a reasonable prospect of success, with respect to which appropriate reserves have been made on the relevant financial statement of the subject member of the Group, or (ii) not yet due and payable;
(n)
any Security arising in connection with, and deposits made to secure, the payment and performance of bids, trade contracts (other than for borrowed money), contracts with respect to the business of the Group, leases, statutory obligations, surety and appeal bonds, performance bonds, indemnity agreements in favour of issuers of bonds and other obligations of a like nature, and rights of usufruct and similar rights to continued use and possession of lottery equipment or other property in favour of lottery customers, in each case incurred in the ordinary course of business; and
(o)
any Security not permitted by Clause 23.7 (
Negative Pledge
) securing Financial Indebtedness incurred in the ordinary course of business of the Group which in aggregate does not at any time exceed US$125,000,000 (or its equivalent in other currencies).
“
Permitted Transaction
” means:
(a)
any guarantee or Security granted by any member of the Group pursuant to the terms of this Agreement;
(b)
any transaction set out in the Structure Memorandum, as well as any other transaction which is necessary as a consequence of or ancillary to the implementation of such transactions, including, without limitation, the payment of any Rescission Payments in an aggregate amount which is less than or equal to twenty per cent. (20%) of the aggregate share capital of the Original Borrower;
34
(c)
any loans, bond or other financing contracted or incurred by any member of the Group constituting Pari Passu Indebtedness, including, without limitation, pursuant to the Bridge Facilities, subject, always to Clause 23.25 (
MFN to Financial Covenants and Mandatory Prepayments
);
(d)
Security granted by any member of the Group in favour of the creditors of Pari Passu Indebtedness, subject always to Clause 23.23 (
Security following Debt Ratings Decrease
); and
(e)
any guarantee granted by any member of the Group in favour of the creditors of Pari Passu Indebtedness, subject always to Clause 23.24(c) (
Guarantor Threshold Test and Additional Guarantors
).
“
Plan
” means a Single Employer Plan or a Multiple Employer Plan.
“
Platform
” has the meaning given to it in Clause 21.7 (
Posting on electronic system
).
“
Principal Shareholders
” means De Agostini S.p.A. (a company incorporated in Italy as a
società per azioni
), its Subsidiaries or B&D Holding, or any other entity;
provided that
in each case, it is controlled by one or more of the beneficial holders,
provided further that
for the purposes of this definition, an entity or B&D Holding shall be treated as being controlled, directly or indirectly, by any such holder(s) if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) have or has (as applicable) the power to (i) appoint or remove all, or the majority, of its directors or other equivalent officers or (ii) direct its operating and financial policies. For the purpose of this definition, “
beneficial holder
” means each of the beneficial holders that directly or indirectly control B&D Holding as at 4 November 2014 (an “
original beneficial holder
”) and any spouse, legal or testamentary heir, legal or testamentary executor and legal or testamentary administrator of an original beneficial holder.
“
Prohibited Jurisdiction
” means:
(a)
the United States of America, Hong Kong, Israel and Turkey;
(b)
any jurisdiction in which a licence is required to conduct online gaming activities and in which the Group does not possess the relevant licence; and
(c)
each other jurisdiction which the Group reasonably believes, based on advice of reputable and experienced counsel, prohibits, or is reasonably capable of enforcing against any member of the Group prohibitions on, internet gaming.
“
Protected Party
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Public Debt Rating
” means each solicited long-term credit rating of the Parent issued by a Rating Agency for an issue of debt or debt securities issued or guaranteed by, the Parent, where such rating is based primarily on the unsecured credit risk of the Parent.
“
Qualifying Lender
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Quasi-Security
” has the meaning given to it in Clause 23.7 (
Negative pledge
).
35
“
Quotation Day
” means, in relation to any period for which an interest rate is to be determined, two (2) TARGET Days before the first day of that period.
“
Rating Agencies
” means Fitch, Moody’s and S&P and “Rating Agency” means any of them.
“
Real Property
” means:
(a)
any freehold, leasehold or immovable property; and
(b)
any buildings, fixtures, fittings, fixed plant or machinery from time to time situated on or forming part of that freehold, leasehold or immovable property.
“
Recovering Finance Party
” has the meaning given to Clause 29.1 (
Payments to Finance Parties
).
“
Regulation T
”, “
Regulation U
” or “
Regulation X
” means Regulation T, U or X, as the case may be, of the Board of Governors of the Federal Reserve System of the United States, as from time to time in effect and all official rulings and interpretations thereunder or thereof.
“
Related Fund
” in relation to a trust, fund or other entity (the “first fund”), means another trust, fund or other entity which has the same fund manager or asset manager as is owned by the same person as the first trust, fund or other entity.
“
Reinstated Facility B Commitments
” has the meaning given to such term in Clause 8.2(b).
“
Related Parties
” means, with respect to any person, such person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such person and of such person’s Affiliates.
“
Relevant Jurisdiction
” means, in relation to an Obligor:
(a)
its jurisdiction of incorporation; and
(b)
any jurisdiction where it conducts its business.
“
Relevant Sub-Participant
” means any sub-participant who, under Italian law or the application of the Organization for Economic Cooperation and Development’s guidance relating to the meaning of “beneficial ownership” as set out in the Organization for Economic Cooperation and Development’s Model Tax Convention (as amended from time to time), is required to be treated for tax purposes as the beneficial owner of any interest payable under any Finance Document.
“
Relevant Tax Jurisdiction
” means, in relation to any Obligor, the jurisdiction where it is resident, or deemed to be resident for Tax purposes.
“
Repeating Representations
” means the representations in Clauses 20.2 (
Status
) to 20.7 (
Governing Law and enforcement
) (inclusive), Clause 20.10 (
No Default
), Clause 20.11 (
No Misleading information
), Clause 20.13 (
No proceedings pending or threatened
), Clause 20.16 (
US Government Regulations
), Clause 20.17 (
ERISA
),
36
Clause 20.21 (
US Margin Regulations
), and Clause 20.22 (
Sanctions, Anti-Corruption and other laws
).
“
Replacement Lender
” has the meaning given to it in Clause 37.3(c) (
Replacement of Lender
);
“
Representative
” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
“
Rescission Payments
” mean any payments which the Original Borrower is required to make to its shareholders in connection with the exercise of the right of rescission (
recesso
) by its shareholders in the context of the Holdco Merger.
“
Resignation Letter
” means a letter substantially in the form set out in Schedule 7 (
Form of Resignation Letter
).
“
Restricted Payment
” means a Distribution, a Share Buy Back or a Shareholder Payment.
“
Retiring Guarantor
” has the meaning given to it in Clause 19.9 (
Release of Guarantors’ right of contribution
).
“
S&P
” means Standard & Poor’s Ratings Services, a Standard & Poor’s LLC business.
“
Sanctions
” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by a Sanctions Authority.
“
Sanctions Authority
” means (i) the US government; (ii) the European Union; (iii) the United Kingdom; (v) the respective governmental institutions and agencies of any of the foregoing, including without limitation, OFAC, the US Department of State and Her Majesty’s Treasury; or (vi) the United Nations Security Council.
“
Sanctioned Country
” means, at any time, a country or territory which is itself the subject or target of any country-wide or territory-wide Sanctions (at the time of this Agreement, Cuba, Iran, North Korea, North Sudan, South Sudan and Syria).
“
Sanctioned Person
” means, at any time, (a) any person listed in any Sanctions-related list of designated persons maintained by a Sanctions Authority, (b) any person operating, organised or resident in a Sanctioned Country or (c) any person owned or controlled by any such person or persons.
“
Screen Rate
” means the euro interbank offered rate administered by the European Money Markets Institute (or any other person which takes over the administration of that rate) for the relevant period displayed on page EURIBOR01 of the Reuters screen (or any replacement Reuters page which displays that rate) on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Parent.
“
Second Facility B Availability Period
” means the period from and including the date on which the Italian Reorganisation is completed to and including the date which is the earlier of (a) the date on which the Facility B Repayment is effected and (b) the
37
date falling five (5) Business Days from the date on which the Holdco Merger is completed.
“
Second Facility B Utilisation
” means the Utilisation of Facility B by the New Facility B Borrower.
“
Second Facility B Utilisation Date
” the date of the Second Facility B Utilisation.
“
Security
” means a mortgage, charge, lien, encumbrance, pledge or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
“
Security Documents
” has the meaning given to that term in Clause 23.23 (
Security following Date Ratings Decrease
).
“
Selection Notice
” means a notice substantially in the form set out in Part II of Schedule 3 (
Requests
) given in accordance with Clause 11 (
Interest Periods
).
“
Self-Declaration Form
” means the self-declaration form substantially in the form set out in Schedule 14 (
Self Declaration Form
) of this Agreement.
“
Separate Loan
” has the meaning given to that term in Clause 6 (
Repayment
).
“
Share Buy Back
” means the redemption, repurchase, defeasement, retirement or repayment of any of the Parent’s share capital (including under any transaction pursuant to which shares issued to a third party are taken back into treasury) or the resolving to do so.
“
Shareholder Payment
” means the payment of any management, advisory or other fee to or to the order of any of the shareholders of the Parent.
“
Single Employer Plan
” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that:
(a)
is maintained for employees of any Obligor or any ERISA Affiliate and no person other than the Obligors and the ERISA Affiliates; or
(b)
was so maintained and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.
“
Special Notice Currency
” means, at any time, an Optional Currency other than the currency of a country that is a member of the Organization for Economic Cooperation and Development at such time located in North America or Europe.
“
Specified Lender
” means any Lender that notifies the relevant Borrower and the Agent that it is a Specified Lender.
“
Structure Memorandum
” means the “Project Cleopatra Structure Memorandum”, together with the annexes, dated 31 October 2014, as may be updated from time to time to reflect the implementation of the Transactions subject to the provisions of Clause 23.26 (
Structure Memorandum
).
38
“
Subrogation Rights
” has the meaning given to it in paragraph (a)(ii) of Clause 19.8 (
Deferral of Guarantor’s rights
).
“
Subsidiary
” means, in relation to any company, corporation or other legal entity (a “
holding company
”), a company, corporation or other legal entity:
(a)
which is controlled, directly or indirectly, by the holding company;
(b)
more than half the issued share capital of which is beneficially owned directly or indirectly by the holding company;
(c)
which is a subsidiary of another Subsidiary of the holding company; or
(d)
whose financial statements are in accordance with applicable law and generally accepted accounting principles applicable to the Parent consolidated with those of that company or corporation.
For the purposes of this definition, a company or corporation shall be treated as being controlled by another entity if the latter (whether by way of ownership of shares, proxy, contract, agency or otherwise) has the power to (a) appoint or remove all, or the majority, of its directors or other equivalent officers or (b) direct its operating and financial policies.
“
Super Majority Lenders
” means a Lender or Lenders whose Commitments aggregate more than eighty five per cent. (85%) of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than eighty five per cent. (85%) of the Total Commitments immediately prior to that reduction).
“
Target
” means International Game Technology, a corporation organised under the laws of Nevada.
“
Target Merger
” means the series of transactions which consist principally of the merger of Target Merger Sub with and into Target, in accordance with the steps set out in the Structure Memorandum.
“
Target Merger Sub
” means Georgia Worldwide Corporation, a corporation organised under the laws of Nevada and a wholly owned Subsidiary of Holdco.
“
TARGET2
” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007.
“
TARGET Day
” means any day on which TARGET2 is open for the settlement of payment in Euro.
“
Tax
” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
“
Tax Credit
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Tax Deduction
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
39
“
Tax Payment
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Terminated Lender
” has the meaning given to it in paragraph c of Clause 7.4 (
Right of cancellation and repayment in relation to a single Lender
).
“
Third Party Disposal
” means the disposal of an Obligor to a person which is not a member of the Group (and the Borrowers have confirmed this is the case) where that disposal is permitted under Clause 23.8 (
Disposals
) or made with the approval of the Majority Lenders.
“
Total Commitments
” means the aggregate of the Total Facility A Commitments and the Total Facility B Commitments, being €800,000,000 at the date of this Agreement.
“
Total Facility A Commitments
” means the aggregate of the Facility A Commitments, being €400,000,000 at the date of this Agreement.
“
Total Facility B Commitments
” means the aggregate of the Facility B Commitments, being €400,000,000 at the date of this Agreement.
“
Total Net Debt
” has the meaning given to it in Clause 22.1 (
Financial definitions
).
“
Total Net Interest Costs
” has the meaning given to it in Clause 22.1 (
Financial definitions
).
“
Transactions
” means the Italian Reorganisation and the Mergers.
“
Transfer Certificate
” means a certificate substantially in the form set out in Schedule 4 (
Form of Transfer Certificate
) or any other form agreed between the Agent and the Borrowers.
“
Transfer Date
” means, in relation to any assignment or transfer, the later of:
(a)
the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and
(b)
the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate.
“
Transparency Rules
” has the meaning given to that term in Clause 40 (
Italian Transparency Rules
).
“
Treasury Transaction
” means any derivative transaction entered into in connection with protection against or benefit from fluctuations in any rate or price including, for the avoidance of doubt, foreign exchange transactions.
“
Treaty Lender
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
UK Borrower
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
UK Non Bank Lender
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
40
“
UK Treaty Lender
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
UK Treaty State
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
United States Person
” has the meaning ascribed thereto in Clause 14.1 (
Definitions
).
“
Unpaid Sum
” means any sum due and payable but unpaid by an Obligor under the Finance Documents.
“
Upfront Fee Letter(s)
” means each arrangement fee letter dated on or about the date of this Agreement between the Original Borrower and the Mandated Lead Arrangers.
“
US
” and “
United States
” means the United States of America, its territories and possessions.
“
USA Patriot Act
” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 of the United States.
“
US Bankruptcy Law
” means the United States Bankruptcy Code (Title 11 of the United States Code), any other United States federal or state bankruptcy, insolvency or similar law.
“
US Dollars
” or “
US$
” means the lawful currency for the time being of the United States of America.
“
US Obligor
” means an Obligor that is organised, incorporated or formed under the laws of the United States or any State thereof (including the District of Columbia).
“
US Solvent
” means, with respect to any person on a particular date, that on such date:
(a)
the fair value of the property of such person and its Subsidiaries on a consolidated basis is greater than the total amount of liabilities, including contingent liabilities, of such person and its Subsidiaries on a consolidated basis;
(b)
the present fair saleable value of the assets of such person and its Subsidiaries on a consolidated basis is not less than the amount that will be required to pay the liability of such person and its Subsidiaries on a consolidated basis on their debts as they become absolute and matured;
(c)
such person and its Subsidiaries on a consolidated basis do not intend to, and do not believe that they will, incur debts or liabilities beyond the ability of such person and its Subsidiaries on a consolidated basis to pay such debts and liabilities as they mature; and
(d)
such person and its Subsidiaries on a consolidated basis are not engaged in business or a transaction, and are not about to engage in business or a transaction, for which the property of such person and its Subsidiaries on a consolidated basis would constitute an unreasonably small capital.
41
The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
For purposes of the foregoing, (i) “debt” means liability on a “claim” and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
“
US Tax Obligor
” means:
(a)
a Borrower which is resident for tax purposes in the US; or
(b)
an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
“
Utilisation
” means a utilisation of a Facility.
“
Utilisation Date
” means the date of a Utilisation, being the date on which the relevant Loan is to be made.
“
Utilisation Request
” means a notice substantially in the relevant form set out in Part I of Schedule 3 (
Requests
).
“
VAT
” means:
(a)
any tax imposed in compliance with the council directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112) (including, in relation to the United Kingdom, value added tax imposed by the Value Added Tax Act 1994 and supplemental legislation and regulations and, in relation to Italy, value add tax imposed by Presidential Decree No. 633 of 26 October 1972 and Legislative Decree No. 331 of 30 August 1993 and supplemental legislation and regulations); and
(b)
any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or elsewhere.
“
Website Lenders
” has the meaning given to it in Clause 32.7 (
Use of websites
).
“
Withdrawal Liability
” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.
1.2
Construction
(a)
Unless a contrary indication appears, a reference in this Agreement to:
(i)
the “
Agent
”, any “
Mandated Lead Arranger
”, any “
Borrower
”, any “
Finance Party
”, any “
Guarantor
”, any “
Lender
”, any “
Obligor
”,
42
any “
Party
” or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees;
(ii)
a document in “
agreed form
” is a document which is on terms previously agreed in writing by or on behalf of the relevant Obligors and the Agent or, if not so agreed, is in the form agreed by or on behalf of the relevant Obligors and the Agent;
(iii)
“
assets
” includes present and future properties, revenues and rights of every description (including, without limitation shares and receivables);
(iv)
a “
Finance Document
” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;
(v)
“
guarantee
” means (other than in Clause 19 (
Guarantee and Indemnity
)) any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness;
(vi)
the words “
including
” and “
in particular
” shall be construed as illustrative and not as limiting the generality of any preceding words;
(vii)
“
indebtedness
” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(viii)
a “
person
” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two (2) or more of the foregoing;
(ix)
a “
regulation
” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation as well as guidelines or rules of conduct adopted by any member of the Group under applicable laws (including but not limited to “
Modelli di organizzazione e gestione
” and the “
Codici Etici
” provided for under Legislative Decree No. 231 dated 8 June 2001 of Italy);
(x)
the furtherance of any transaction that is not restricted under the terms of this Agreement shall, for the avoidance of doubt, be considered to fall within the general corporate purposes of the Group;
(xi)
a provision of law or regulation or an accounting standard is a reference to that provision or accounting standard as amended,
43
replaced or re-enacted from time to time under applicable law or regulation;
(xii)
any reference to any consent to be given by any Finance Party shall be deemed to be given only to the extent the same is given in writing; and
(xiii)
a time of day is a reference to Milan time unless otherwise stated.
(b)
Section, Clause and Schedule headings are for ease of reference only.
(c)
Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(d)
A Default or an Event of Default is “
continuing
” if it has not been remedied or waived.
1.3
Italian Terms
In this Agreement a reference to:
(a)
a winding up, administration or dissolution includes, without limitation, any
liquidazione
and any
procedura concorsuale
(including, without limitation,
fallimento
,
concordato preventivo
,
amministrazione straordinaria delle grandi imprese insolventi
),
cessione dei beni ai creditori
or any other similar proceedings;
(b)
a receiver, administrative receiver, administrator or the like includes, without limitation, a
curatore
,
commissario giudiziale
,
liquidatore
, or any other person performing the same function of each of the foregoing;
(c)
a matured obligation refers to and includes, without limitation, any
credito liquido ed esigibile
;
(d)
a Security includes, without limitation, any
pegno
,
ipoteca
,
privilegio speciale
(including the
privilegio speciale
created pursuant to Article 46 of Italian Legislative Decree No. 385 dated 1 September 1993),
cessione del credito in garanzia
,
diritto reale di garanzia
and any other transactions having the same effect as each of the foregoing;
(e)
an insolvency proceeding includes, without limitation, any
procedura concorsuale
(including
fallimento
,
concordato preventivo
, the execution of an
accordo di ristrutturazione dei debiti
pursuant to article 182-bis of the Italian Bankruptcy Law,
liquidazione coatta amministrativa
,
amministrazione straordinaria
and
cessione dei beni ai creditori
pursuant to Article 1977 of the Italian Civil Code) and any other proceedings or legal concepts similar to the foregoing;
(f)
a step or procedure taken in connection with insolvency proceedings in respect of any person includes such person formally making a proposal to assign its assets pursuant to Article 1977 of the Italian Civil Code (
cessione dei beni ai
44
creditori
) or filing a petition for a
concordato preventivo
,
accordo di ristrutturazione dei debiti
, or entering into a similar arrangement for the majority of such person’s creditors; and
(g)
an attachment includes a
pignoramento
.
2.
THE FACILITIES
2.1
The Facilities
(a)
Subject to the terms of this Agreement, the International Lenders make available to the Original Borrower and, following the Holdco Merger, Holdco, a Euro term loan facility in an aggregate amount equal to the Total Facility A Commitments.
(b)
Subject to the terms of this Agreement, the Italian Lenders make available to the Original Borrower and, following the New Facility B Borrower Accession and contemporaneously with the Facility B Repayment, the New Facility B Borrower, a Euro term loan facility in an aggregate amount equal to the Total Facility B Commitments.
2.2
Finance Parties’ rights and obligations
(a)
The obligations of each Finance Party under the Finance Documents are several and not joint. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b)
The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.
(c)
A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.
2.3
Obligors’ Agent
(a)
Each Obligor (other than the Parent) by its execution of this Agreement or an Accession Letter irrevocably appoints the Parent to act on its behalf as the Obligors’ Agent in relation to the Finance Documents and irrevocably authorises:
(i)
the Obligors’ Agent on its behalf to supply all information concerning itself contemplated by this Agreement to the Finance Parties and to give all notices and instructions, to execute on its behalf any Accession Letter, to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Obligor notwithstanding that they may affect the Obligor, without further reference to or the consent of that Obligor; and
45
(ii)
each Finance Party to give any notice, demand or other communication to that Obligor pursuant to the Finance Documents to the Obligors’ Agent,
and in each case the Obligor shall be bound as though the Obligor itself had given the notices and instructions or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.
(b)
Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Obligors’ Agent or given to the Obligors’ Agent under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Obligors’ Agent and any other Obligor, those of the Obligors’ Agent shall prevail.
3.
PURPOSE
3.1
Purpose
(a)
The Original Borrower shall apply all amounts borrowed by it under each Facility towards the general corporate purposes of the Group including, without limitation, the refinancing of Existing Indebtedness.
(b)
The New Facility B Borrower shall apply all amounts borrowed by it under Facility B towards its general corporate purposes.
3.2
Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
4.
CONDITIONS OF UTILISATION
4.1
Initial conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 (
Lenders’ participation
) in relation to any Utilisation if on or before the Initial Utilisation Date, the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 (
Conditions Precedent
) which documents, shall be in form and substance satisfactory to the Agent. The Agent shall notify the Parent and the Lenders promptly upon being so satisfied.
4.2
Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 (
Lenders’ participation
), if on the date of each Utilisation Request and on each proposed Utilisation Date:
46
(a)
no Default is continuing or would result from the proposed Loan;
(b)
the Repeating Representations to be made by each Obligor are true in all material respects; and
(c)
with respect to the Second Facility B Utilisation only, the Agent has been provided with satisfactory evidence that the Facility B Repayment has been or will be effected by close of business on the Second Facility B Utilisation Date.
4.3
Maximum number of Loans
(a)
A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation:
(i)
two (2) or more Facility A Loans would be outstanding; or
(ii)
two (2) or more Facility B Loans would be outstanding (other than on the Second Facility B Utilisation Date).
(b)
A Borrower may not request that a Facility A Loan or a Facility B Loan be divided if, as a result of the proposed division four (4) or more Loans would be outstanding under the relevant Facility.
5.
UTILISATION
5.1
Delivery of a Utilisation Request
A Borrower may utilise a Facility by delivery to the Agent of a duly completed Utilisation Request not later than 9 a.m. (Brussels time) on the date falling three (3) Business Days prior to the proposed Utilisation Date or such later time as may be agreed between the Parent and the Agent acting on the instructions of the Original Lenders.
5.2
Completion of a Utilisation Request
(a)
Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:
(i)
the proposed Utilisation Date is a Business Day within the applicable Availability Period provided that in the case of the Second Facility B Utilisation, such Utilisation Date is also the Facility B Repayment Date;
(ii)
it specifies the Facility to be utilised;
(iii)
the currency and amount of the Utilisation comply with Clause 5.3 (
Currency and amount
);
(iv)
the proposed Interest Period complies with Clause 11 (
Interest Periods
);
(v)
with respect to the Initial Utilisation, a Utilisation Request is delivered contemporaneously under both Facility A and Facility B respectively
47
and in respect of pro-rata Utilisations under Facility A and Facility B; and
(vi)
with respect to the Second Facility B Utilisation, the amount of the proposed Loan must be equal to the Reinstated Facility B Commitments.
(b)
Only one Loan may be requested in each Utilisation Request.
5.3
Currency and amount
(a)
The currency specified in a Utilisation Request must be Euros.
(b)
The amount of the proposed Loan must be an amount which is not more than the Available Facility and which is a minimum of €50,000,000 (or integral multiples thereof) or, if less, the Available Facility.
5.4
Lenders’ participation
(a)
If the conditions set out in this Agreement have been met:
(i)
each International Lender shall make its participation in each Facility A Loan available; and
(ii)
each Italian Lender shall made its participation in each Facility B Loan available,
in each case by the Utilisation Date through its Facility Office not later than 1:00 p.m. (Milan time) on the Utilisation Date for the Loan.
(b)
The amount of each Lender’s participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Loan.
(c)
The Agent shall notify each Lender of the amount of each Loan and the amount of its participation in that Loan by 10:00 a.m. (Brussels time) on the relevant Utilisation Date (or such later time as the Agent and each Lender may agree).
5.5
Cancellation of Commitments
(a)
The Facility A Commitments which, at that time, are unutilised shall be immediately cancelled at the end of the Facility A Availability Period.
(b)
Without prejudice to paragraph (b) of Clause 8.2 (
Facility B Repayment and Reinstatement of Facility B Commitments
) and paragraph (c) of Clause 9.4 (
No reinstatement of commitment
) the Facility B Commitments which, at that time, are unutilised shall be immediately cancelled at the end of the First Facility B Availability Period and the Second Facility B Availability Period, respectively.
48
6.
REPAYMENT
6.1
Repayment of Loans
A Borrower shall repay each Loan in full on the Final Maturity Date.
6.2
Reborrowing
(a)
A Borrower may not reborrow any part of a Facility which is repaid or prepaid.
(b)
Paragraph (a) above does not apply to any utilisation under Facility B by the New Facility B Borrower within the Second Facility B Availability Period.
7.
ILLEGALITY, VOLUNTARY PREPAYMENT AND CANCELLATION
7.1
Illegality
If it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan:
(a)
such Lender shall promptly notify the Agent upon becoming aware of that event;
(b)
upon the Agent notifying each Borrower, the Commitment of such Lender will be immediately cancelled; and
(c)
to the extent that the Lender’s participation has not been transferred pursuant to paragraph (c) of Clause 7.4 (
Right of cancellation and repayment in relation to a single Lender
) a Borrower shall repay such Lender’s participation in the Loans made to that Borrower on the last day of the Interest Period for each Loan occurring after the Agent has notified that Borrower or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law) and that Lender’s Commitment shall be cancelled in the amount of the participations repaid.
7.2
Voluntary cancellation
(a)
The relevant Borrower may, if it gives the Agent not less than five (5) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of €5,000,000 of the Available Facility.
(b)
Any cancellation under this Clause 7.2 shall reduce the Commitments of the Lenders rateably.
7.3
Voluntary prepayment of Loans
(a)
Each Borrower may, if it gives the Agent not less than five (5) Business Days’ (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Loan drawn by it under a Facility made available to it
49
(but, if in part, being an amount that reduces that Loan by a minimum amount of €5,000,000.
(b)
In the event that any prepayment is effected pursuant to paragraph (a) above, the relevant Borrower shall, on the date of the prepayment, pay to the Agent (for the account of each Lender) a prepayment fee equal to 0.30% per annum on the relevant amount which has been prepaid calculated from the date on which the relevant prepayment is effected until the Final Maturity Date.
7.4
Right of cancellation and repayment in relation to a single Lender
(a)
If:
(i)
any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 14.2 (
Tax gross-up
); or
(ii)
any Lender claims indemnification from the Parent or an Obligor under Clause 14.3 (
Tax indemnity
) or Clause 15.1 (
Increased costs
); or
(iii)
any Lender is a Defaulting Lender,
(iv)
any amount payable to any Lender by an Italian Obligor under a Finance Document is not, or will not be treated as a deductible charge or expense for Italian Tax purposes for that Italian Obligor by reason of that amount originating from transactions occurred with Blacklisted Resident Entities, other than where any limitation in the deduction of that amount results from any inaction of the Italian Obligor which is not the consequence of the lack of cooperation of the entity residing or localized in a Blacklisted Jurisdiction in providing the documentation necessary for that Obligor to treat the payment as a deductible charge or expense; or
(v)
the Parent (on behalf of each Borrower) may (but shall not be obligated to), whilst the circumstance giving rise to the events referred to above continues, give the Agent notice of cancellation of the Commitment of the relevant Lender or its intention to procure the repayment of such Lender’s participation in the Utilisations or give the Agent notice of its intention to replace that Lender in accordance with paragraph (c) below.
(b)
On receipt of a notice referred to in paragraph (a) above in relation to a Lender or an Affiliate of a Lender, the Available Commitment of such Lender and any such Affiliate shall immediately be reduced to zero. The Parent shall ensure that a Borrower shall promptly, and in any event within five (5) Business Days, repay such Lender’s and any such Affiliate’s participation in each Loan together with all interest and other amounts accrued under the Finance Documents.
(c)
In lieu of the cancellations referred to in Clause 7.1 (
Illegality
) and above in this Clause 7.4, each Borrower shall have the right, but not the obligation, at its own expense, upon notice from that Borrower to such Lender (the “
Terminated Lender
”) and the Agent, to replace such Terminated Lender (together with any
50
Affiliate of that Terminated Lender) with a New Lender (in accordance with and subject to the restrictions contained in Clause 25 (
Changes to Lenders
)) approved by the Agent and such Terminated Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Clause 25 (
Changes to Lenders
)) all its interests, rights and obligations under this Agreement to such assignee;
provided that
no Terminated Lender shall be obligated to make any such assignment:
(i)
unless such assignee or that Borrower shall pay to the affected Terminated Lender such Terminated Lender’s and such Affiliate’s participation in all Utilisations together with all interest and other amounts accrued under the Finance Documents; and
(ii)
if to make such transfer or assignment would cause such Terminated Lender or such Affiliate to breach, or such transfer or assignment is of and in itself in breach of, in each case, any provision of law or regulation.
8.
MANDATORY PREPAYMENT
8.1
Change of Control or Sale
(a)
Upon the occurrence of:
(i)
a Change of Control; or
(ii)
the sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions (other than as a result of a Permitted Transaction):
(A)
a Lender shall not be obliged to fund a Utilisation; and
(B)
the Agent shall, upon written instructions from an individual Lender and, by not less than thirty (30) days’ notice, cancel the Commitment of such Lender and require repayment of the participation of such Lender in the Loans, whereupon the Commitment of such Lender will be cancelled and all outstanding participations of such Lender together with accrued interest, and all other amounts accrued under the Finance Documents and owing to such Lender shall become immediately due and payable and the Borrowers shall repay or prepay such amounts.
8.2
Facility B Repayment and Reinstatement of Facility B Commitments
(a)
Holdco shall, within five (5) Business Days from completion of the Holdco Merger, repay all Loans drawn by the Original Borrower under Facility B together with any accrued interest (the “
Facility B Repayment
”).
(b)
The Italian Lenders agree that:
51
(i)
subject always to Holdco complying with its obligations under paragraph (a) above, the Italian Lenders’ Facility B Commitments shall be reinstated for the benefit of the New Facility B Borrower following its accession to this Agreement in accordance with Clause 26.2 (
New Facility B Borrower Accession
) (the “
Reinstated Facility B Commitments
”); and
(ii)
the New Facility B Borrower may utilise Facility B on the date on which the Facility B Repayment is effected in amount equal to the Reinstated Facility B Commitments by delivery to the Agent of a duly completed Utilisation Request in accordance with Clause 5 (
Utilisation
) and subject always to Clause 4.2 (c) (
Further Conditions Precedent
).
9.
RESTRICTIONS
9.1
Notices of cancellation or prepayment
Any notice of cancellation, prepayment, authorisation or other election given by any Party under Clause 7 (
Illegality, voluntary prepayment and cancellation
) shall (subject to the terms of those Clauses) be irrevocable and, unless a contrary indication appears in this Agreement, any such notice shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.
9.2
Interest and other amounts
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.
9.3
Prepayment in accordance with Agreement
The Borrowers shall not repay or prepay all or any part of the Utilisations or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.
9.4
No reinstatement of Commitments
(a)
Subject to paragraph (b) of Clause 8.2 (
Facility B Repayment and Reinstatement of Facility B Commitments
), no amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
(b)
If all or part of any Lender’s participation in a Loan is repaid or prepaid an amount of that Lender’s Commitment (equal to the amount of the participation which is repaid or prepaid) will be deemed to be cancelled on the date of repayment or prepayment.
9.5
Agent’s receipt of notices
If the Agent receives a notice under Clause 7 (
Illegality, Voluntary Prepayment and Cancellation
), it shall promptly forward a copy of that notice or election to either the Borrowers or the affected Lender, as appropriate.
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9.6
Application of prepayments
Any prepayment of a Loan pursuant to Clause 7.3 (
Voluntary Prepayment of Loans
) shall be applied
pro rata
to each Lender’s participation in that Loan.
10.
INTEREST
10.1
Calculation of interest
The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:
(a)
Margin; and
(b)
EURIBOR.
10.2
Usury Cap
Notwithstanding any other provision of this Agreement, if at any time the rate of interest applicable to a Loan made available under this Agreement to any Borrower incorporated in Italy (including the relevant component of any applicable fee and expense) exceeds the maximum rate permitted by the Italian law 7 March 1996 No. 108 and related implementation regulations (the “
Italian Usury Legislation
”), the rate of interest payable by the relevant Borrower shall be deemed to be automatically reduced, for the shortest possible period, to the maximum rate permitted under the Italian Usury Legislation.
10.3
Payment of interest
Each Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if pursuant to Clause 11.1(d) the Agent and the Borrowers have agreed to an Interest Period which is longer than six (6) Months, on the dates falling at six (6) Monthly intervals after the first day of the Interest Period).
10.4
Default interest
(a)
If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is one per cent. (1%) higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 10.4 shall be immediately payable by the Obligor on demand by the Agent.
(b)
If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:
53
(i)
the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and
(ii)
the rate of interest applying to the overdue amount during that first Interest Period shall be one per cent. (1%) higher than the rate which would have applied if the overdue amount had not become due.
(c)
Default interest (if unpaid) arising on an overdue amount will be compounded (to the extent permitted under any applicable law and regulation, including article 1283 of the Italian Civil Code, as amended, supplemented or implemented from time to time) with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
10.5
Notification of rates of interest
The Agent shall promptly notify the Lenders and the relevant Borrower of the determination of a rate of interest under this Agreement.
11.
INTEREST PERIODS
11.1
Selection of Interest Periods and Terms
(a)
Each Borrower may (if pursuant to Clause 11.1(c) the Agent and the Borrowers have agreed to an Interest Period other than six (6) Months) select an Interest Period for a Loan in the Utilisation Request for that Loan or (if the Loan has already been borrowed) in a Selection Notice.
(b)
Each Selection Notice for a Loan is irrevocable and must be delivered to the Agent not later than 10:00 a.m. (Brussels time) on the relevant Quotation Date.
(c)
Subject to this Clause 11 a Borrower may select an Interest Period of six (6) Months or any other period agreed between it and the Agent (acting on the instructions of all the Lenders).
(d)
An Interest Period for a Loan shall not extend beyond the Final Maturity Date applicable to its Facility.
(e)
Each Interest Period for a Loan shall start on the Utilisation Date or (if already made) on the last day of its preceding Interest Period.
(f)
The Parent and the Agent may select an Interest Period of two (2) weeks (or a shorter period) for the purpose of aligning the Interest Period with the effective date of the Holdco Merger.
11.2
Non-Business Days
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
54
11.3
Consolidation and Division of Loans
(a)
Subject to paragraph (b) below, if two (2) or more Interest Periods end on the same date, those Loans will, provided that they were made under the same Facility and unless the relevant Borrower specifies to the contrary in the Selection Notice for the next Interest Period, be consolidated into, and treated as, a single Loan on the last day of the Interest Period.
(b)
Subject to Clause 4.3 (
Maximum number of Loans
) and Clause 5.3 (
Currency and amount
), if a Borrower requests in a Selection Notice that a Loan be divided into two (2) or more Loans, that Loan will, on the last day of its Interest Period, be so divided into the amounts specified in that Selection Notice, being an aggregate amount equal to the amount of the Loan immediately before its division.
12.
CHANGES TO THE CALCULATION OF INTEREST
12.1
Absence of quotations
(a)
Subject to Clause 12.2 (
Market disruption
) if EURIBOR is to be determined by reference to the Base Reference Banks but a Base Reference Bank does not supply a quotation by 12:00 p.m. (Brussels time) on the Quotation Day, then the applicable EURIBOR shall be determined on the basis of the quotations of the remaining Base Reference Banks.
(b)
If a Market Disruption Event occurs, then the Agent shall, as soon as is practicable, notify the Parent.
12.2
Market disruption
(a)
If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender’s share of that Loan for the Interest Period shall be the percentage rate per annum which is the sum of:
(i)
the Margin; and
(ii)
the rate notified to the Agent by such Lender, as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to such Lender of funding its participation in that Loan from whatever source it may reasonably select;
(b)
In this Agreement “
Market Disruption Event
” means:
(i)
at or about noon on the Quotation Day for the relevant Interest Period (i) the Screen Rate is not available or (ii), EURIBOR is to be determined by reference to the Base Reference Banks and none or only one of the Base Reference Banks supplies a rate to the Agent to determine EURIBOR for the relevant currency and Interest Period; or
(ii)
before close of business in Milan on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or
55
Lenders (whose participations in a Loan exceed thirty-five per cent. (35%) of that Loan) that the cost to it of obtaining matching deposits in the European interbank market would be in excess of EURIBOR.
12.3
Alternative basis of interest or funding
(a)
If a Market Disruption Event occurs and the Agent or a Borrower so requires, the Agent and that Borrower shall enter into negotiations (for a period of not more than thirty (30) days) with a view to agreeing a substitute basis for determining the rate of interest.
(b)
Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the relevant Borrower, be binding on all Parties.
12.4
Break Costs
(a)
Each Borrower shall, within three (3) Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.
(b)
Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.
13.
FEES
13.1
Upfront fee
The Parent shall pay to the Mandated Lead Arrangers an upfront fee for the purposes of remunerating their activities as Mandated Lead Arrangers in the amount and at the times agreed in each Upfront Fee Letter(s).
13.2
Agency fee
The Parent shall pay to the Agent (for its own account) an agency fee to remunerate its activities as Agent in the amount and at the times agreed in the Agent’s Fee Letter.
14.
TAX GROSS UP AND INDEMNITIES
14.1
Definitions
In this Agreement:
“Borrower DTTP Filing
” means an HM Revenue & Customs’ Form DTTP2 duly completed and filed by the relevant Borrower, which:
(a)
where it relates to a UK Treaty Lender that is an Original Lender, contains the scheme reference number and jurisdiction of tax residence stated opposite such Lender’s name in Schedule 1Part II (
The Original Parties
) or (in the case of the scheme reference number, that is subsequently communicated to the
56
Agent and the relevant Borrower promptly upon it becoming available), and where the Borrower is the Original Borrower, is filed with HM Revenue & Customs within thirty (30) days of the date of on which the Holdco Merger is completed; or
(b)
where it relates to a UK Treaty Lender that is a New Lender, contains the scheme reference number and jurisdiction of tax residence stated in respect of such Lender in the relevant Transfer Certificate or Assignment Agreement, and where the Holdco Merger is completed as at the relevant Transfer Date, is filed with HM Revenue & Customs within thirty (30) days of that Transfer Date or where the Holdco Merger is not completed as at the relevant Transfer Date, is filed with HM Revenue & Customs within thirty (30) days of the date of on which the Holdco Merger is completed.
“
Change of Tax Law
” means with respect to the Lender, any change in, or in the published interpretation, administration or the application of, any law or regulation or Double Taxation Treaty or any published practice or published concession of any relevant taxing authority.
“
Exempt Lender
” means a Lender that is a financial institution or any other entity (including, any entity included in the provision of article 26, paragraph 5-bis, of Presidential Decree No. 600 of 29 September 1973 as introduced by the Law Decree No. 91 of 24 June 2014, converted into law by the Law No. 116 of 11 August 2014 and subsequently amended by Law Decree No.133 of 29 September 2014, converted into law by the Law No. 164 of 11 November 2014 and by Law Decree No.3 of 24 January 2015) which is authorised to provide finance to an Italian Borrower and to which any payment of interest under the Finance Documents can be made without a Tax Deduction in respect of Tax being imposed by the Republic of Italy;
provided that
such Lender is not a Blacklisted Resident Entity.
“
Italian Qualifying Lender
” means:
(a)
a bank or financial institution duly authorised or licensed to carry out banking activity in Italy pursuant to Legislative Decree No. 385 dated 1 September 1993 that is a resident of Italy for Tax purposes pursuant to article 73 of Italian Presidential Decree No. 917 of 22 December 1986 not acting for the purposes of the Finance Document through a Facility Office qualifying as a Permanent Establishment, or in any case a Permanent Establishment, located outside of Italy; or
(b)
a Facility Office qualifying as a Permanent Establishment, or in any case a Permanent Establishment, in Italy of a bank or financial institution duly authorised or licensed to carry out banking activity in Italy — other than a Blacklisted Resident Entity — for which any payment received under the Finance Document is business income (
reddito di impresa
) pursuant to article 81, 151 and 152, paragraph 1, of Italian Presidential Decree No. 917 of 22 December 1986.
“
Italian Treaty Lender
” means a Lender which:
57
(a)
is resident for Tax purposes in a country which has a Double Taxation Treaty in force with Italy, pursuant to which no withholding on account of Tax is required to be made on the interest and similar payments deriving from Italy;
(b)
is entitled to benefit of such Double Taxation Treaty and consequently (subject to the completion of procedural formalities) such full exemption from Tax;
(c)
does not carry on business in Italy through a Permanent Establishment with which any payment under the Finance Document is effectively connected; and
(d)
it is not a Blacklisted Resident Entity.
“
Protected Party
” means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
“
Qualifying Lender
” means a Lender:
(a)
in respect of any payment under or in connection with a Loan made to an Italian Borrower, which is beneficially entitled to interest payable to such Lender in respect of such Loan and, at any time, is a Lender which is:
(i)
an Exempt Lender;
(ii)
an Italian Qualifying Lender; or
(iii)
an Italian Treaty Lender.
(b)
in respect of any payment under or in connection with a Loan made to a US Tax Obligor, which is beneficially entitled to interest payable to such Lender in respect of such Loan and, at any time, is a Lender which is:
(i)
a United States Person; or
(ii)
not a United States Person but is entitled to complete exemption from withholding of United States federal income tax on all payments made pursuant to this Agreement; and
(c)
in respect of any payment under or in connection with a Loan made to a UK Borrower, which is:
(i)
beneficially entitled to interest payable to such Lender in respect of such Loan and, at any time is:
(A)
a Lender:
(1)
which is a bank (as defined for the purpose of section 879 of the ITA) making such Loan and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of
58
that advance or would be within such charge as respects such payments apart from section 18A of the CTA; or
(2)
which was a bank (as defined for the purpose of section 879 of the ITA) at the time that that Loan was made and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or
(B)
(1)
a company resident in the United Kingdom for United Kingdom tax purposes;
(2)
a partnership each member of which is:
(X)
a company so resident in the United Kingdom; or
(Y)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of Section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(3)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of Section 19 of the CTA) of that company;
(C)
a Lender which is a UK Treaty Lender; or
(ii)
a Lender which is a building society (as defined for the purpose of Section 880 of the ITA) making an advance under a Finance Document;
and
(d)
in relation to any other payment, any Lender.
“
Tax Confirmation
” means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:
(a)
a company resident in the United Kingdom for United Kingdom tax purposes; or
(b)
a partnership each member of which is:
59
(i)
a company so resident in the United Kingdom; or
(ii)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of Section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or
(c)
a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of Section 19 of the CTA) of that company.
“
Tax Credit
” means a credit against, relief or remission for, or repayment of any Tax.
“
Tax Deduction
” means a deduction or withholding for or on account of Tax from a payment or a deemed payment under a Finance Document, other than a FATCA Deduction.
“
Tax Jurisdiction
” means, in relation to the Obligor, the jurisdiction in which it is resident for tax purposes on the date it becomes an Obligor.
“
Tax Payment
” means either the increase in a payment made by an Obligor to a Finance Party under Clause 14.2 (
Tax gross-up
) or a payment under Clause 14.3 (
Tax indemnity
).
“
Treaty Lender
” means an Italian Treaty Lender or a UK Treaty Lender.
“
UK Borrower
” means a Borrower which is incorporated in the United Kingdom.
“
UK Non-Bank Lender
” means a Lender which gives a Tax Confirmation in the Assignment Agreement or Transfer Certificate which it executes on becoming a Party.
“
UK Treaty Lender
”
means a Lender which:
(a)
is treated as a resident of a UK Treaty State for the purposes of the UK Treaty; and
(b)
does not carry on a business in the United Kingdom through a permanent establishment with which that Finance Party’s participation in the Loans is effectively connected; and
(c)
fulfils any conditions which must be fulfilled under the Treaty by residents of that Treaty State for such residents to obtain full exemption from taxation on interest imposed by the United Kingdom, subject to the completion of procedural formalities.
“
UK Treaty State
” means a jurisdiction having a double taxation agreement with the United Kingdom (a “
UK Treaty
”) which makes a provision for full exemption from tax imposed by the United Kingdom on interest.
60
“
United States Person
” means a United States Person as defined in Section 7701(a)(30) of the Code and includes an entity that is disregarded as separate from a United States Person (as defined in such Section) for United States federal income tax purposes.
Unless a contrary indication appears, in this Clause 14 a reference to “determines” or “determined” means a determination made in the sole discretion of the person making the determination.
14.2
Tax gross-up
(a)
Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.
(b)
A Borrower shall promptly upon becoming aware that an Obligor must make a Tax Deduction from any payment made under a Finance Document (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent of (i) the Lender with respect to which such Tax Deduction applies and (ii) the rate at which such Tax Deduction is required to be made. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to such Lender. If the Agent receives such notification from a Lender it shall promptly notify the Borrowers and, if necessary, any Obligors making the payment.
(c)
Except as provided in this Clause 14.2 and subject to paragraph (d) below, if a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d)
An Obligor is not required to make an increased payment to a Lender under paragraph (c) above for a Tax Deduction from any payment under this Agreement if on the date on which the payment falls due:
(i)
with reference to any payment made under the Finance Document by any Obligor, the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender in relation to that payment, but on that date such Lender is not or has ceased to be a Qualifying Lender in relation to that payment other than as a result of:
(A)
any Change of Tax Law;
(B)
a change in the jurisdiction in which an Obligor is established or resident for tax purposes at the date it becomes an Obligor under this Agreement other than, subject to paragraph (C) below, as a result of a Permitted Merger; or
(C)
with respect to the Original Italian Banks only, a change, as a result of the Holdco Merger, in the jurisdiction in which the Original Borrower is established or resident for tax purposes at
61
the date of this Agreement
provided that
this paragraph (C) shall apply only for the period from and including the date of the Holdco Merger to and including the date on which the Facility B Repayment is effected;
(ii)
a Tax Deduction is required to be made in respect of any payment under or in connection with a Loan made to a US Tax Obligor for United States federal withholding tax, other than any such Tax Deduction that is required as a result of any Change of Tax Law occurring after the date the relevant Lender becomes a Lender under this Agreement; or
(iii)
the relevant Lender is an Exempt Lender, an Italian Treaty Lender or a UK Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without a Tax Deduction had such Lender complied with its obligations under paragraph (f) below;
(iv)
with reference to any payment made under the Finance Document by a US Tax Obligor, the Tax Deduction would not be required but for the Lender’s failure to comply with paragraph (i)(iv) below;
(v)
the relevant Lender is a Qualifying Lender in relation to a payment by an Obligor solely by virtue of sub-paragraph (c)(i)(B) of the definition of Qualifying Lender and:
(A)
an officer of Her Majesty’s Revenue & Customs has given (and not revoked) a direction (a “
Direction
”) under section 931 of the ITA which relates to the payment and that Lender has received from the Obligor making the payment or from the Parent a certified copy of that Direction; and
(B)
the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made; or
(vi)
the relevant Lender is a Qualifying Lender in relation to the payment solely by virtue of sub-paragraph (c)(i)(B) of the definition of Qualifying Lender and:
(A)
the relevant Lender has not given a Tax Confirmation to the Obligor; and
(B)
the payment could have been made to the Lender without any Tax Deduction if the Lender had given a Tax Confirmation to the Obligor, on the basis that the Tax Confirmation would have enabled the Obligor to have formed a reasonable belief that the payment was an “excepted payment” for the purpose of section 930 of the ITA.
(e)
If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax
62
Deduction within the time allowed and in the
minimum
amount required by law. Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
(f)
A Lender and each Obligor which makes a payment to which that Lender is entitled, shall cooperate in completing any procedural formalities, from time to time required or necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction, or with a reduced Tax Deduction, including, but not limited to, the provision of the information and documentation specified in the following paragraphs (g), (h) and (i) of this Clause 14.2 to the extent applicable.
(g)
With respect to each Italian Obligor, each Italian Treaty Lender, each Lender requiring the application of a Double Taxation Treaty with respect to any interest payable by such Italian Obligor and each Exempt Lender agree to provide the Italian Obligor with an Affidavit, any Self-Declaration Form or any other form necessary for that Obligor to be entitled to make any payment under this Agreement without a Tax Deduction on a date which falls, in case of any interest payment made by an Italian Borrower, at least ten (10) Business Days prior to the date upon which interest is first due to be paid to it or, in case of any payment made by an Italian Guarantor, upon ten (10) Business Days of request by a such Italian Obligor, and thereafter: (i) within the end of January of any subsequent calendar year (or, if earlier, within at least five (5) Business Days prior to the subsequent date upon which the interest is due to be paid) and, (ii) whenever there is a change in the Lender’s status under a Double Taxation Treaty (including if it changes its tax residence) within twenty (20) Business Days from the time such change is effective (or, if earlier, within at least five (5) Business Days prior to the subsequent date upon which interest is due to be paid by an Italian Obligor).
(h)
With respect to each UK
Borrower
:
(i)
(A)
a Lender which becomes a Party on the day on which this Agreement is entered into that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence opposite its name in Part II of Schedule 1 (
The Original Parties
); and
(B)
a New Lender that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence in the Transfer Certificate or Assignment Agreement which it executes, and, having done
63
so, such Lender shall be under no obligation pursuant to paragraph (f) above.
(ii)
If a Lender has confirmed its scheme reference number and its jurisdiction of tax residence in accordance with paragraph (h)(i) above and:
(A)
a Borrower making a payment to such Lender has not made a Borrower DTTP Filing in respect of such Lender; or
(B)
a Borrower making a payment to such Lender has made a Borrower DTTP Filing in respect of such Lender but:
(1)
such Borrower DTTP Filing has been rejected by HM Revenue & Customs; or
(2)
HM Revenue & Customs has not given such Borrower authority to make payments to such Lender without a Tax Deduction within sixty (60) Business Days of the date of the Borrower DTTP Filing,
and in each case, such Borrower has notified such Lender in writing, such Lender and such Borrower shall co-operate in completing any additional procedural formalities necessary for such Borrower to obtain authorisation to make that payment without a Tax Deduction;
(iii)
if a Lender has not confirmed its scheme reference number and jurisdiction of tax residence in accordance with paragraph (h)(ii) above, no Obligor shall make a Borrower DTTP Filing or file any other form relating to the HMRC DT Treaty Passport scheme in respect of such Lender’s Commitment(s) or its participation in any Loan unless the Lender otherwise agrees;
(iv)
an Obligor shall, promptly on making a Borrower DTTP Filing, deliver a copy of that Borrower DTTP Filing to the Agent for delivery to the relevant Lender;
(v)
a UK Non-Bank Lender which becomes a Party on the day on which this Agreement is entered into gives a Tax Confirmation to the Parent by entering into this Agreement; and
(vi)
a UK Non-Bank Lender shall promptly notify the Parent and the Agent if there is any change in the position from that set out in the Tax Confirmation.
(i)
If the Borrower is a US Tax Obligor:
(i)
with respect to a Tax Deduction made on account of Tax imposed by the United States, the Obligor shall certify (under the signature of either its Director, International Tax or another Director or superior officer) on the GTECH Withholding Schedule (as defined in paragraph (j) below) for the immediately succeeding payment period and within
64
the time period specified therefor, the amount of each (if any) Tax Deduction that has been made with respect to a payment made on behalf of any Finance Party and the amount of the related payment made to the relevant taxing authority on account of such Tax Deduction in each case with respect to the immediately preceding payment period; and
(ii)
the Obligor will provide the relevant Finance Party with IRS Forms 1042-S and 1099, as applicable (and relevant) (or any successor form or forms) relating to such Tax Deduction in a manner and at a time in accordance with United States law, and in any case as soon as practicable following the close of the Obligor’s taxable year, and will simultaneously provide the Agent with a copy thereof. With respect to a Tax Deduction on account of non-United States Taxes, within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment an original receipt (or certified copy thereof), or if unavailable, evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority;
(iii)
in the case of any payment of interest hereunder by or on behalf of an Obligor through an account or branch outside the United States or by or on behalf of an Obligor by a payer that is not a United States Person (other than a payment made pursuant to a Guarantee), if such Obligor determines that no Taxes are payable in respect thereof, such Obligor shall furnish, or shall cause such payer to furnish, to the Agent, an opinion of counsel acceptable to the Agent stating that such payment is exempt from Taxes; and
(iv)
promptly after becoming a Party to this Agreement, but in any event before a payment pursuant to this Agreement is due, each Lender will provide, as relevant, to each US Tax Obligor two original executed IRS forms or certifications that establish the Lender is entitled to a complete exemption or reduction (as applicable) from US withholding Taxes on all payments made pursuant to this Agreement and in the case of a Lender claiming the portfolio interest exemption, IRS Form W-8BEN-E (or any successor form) together with a statement certifying that such Lender is not (i) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (ii) a “10 percent shareholder” of the relevant US Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (iii) a “controlled foreign corporation” that is related to such US Tax Obligor within the meaning of Section 881(c)(3)(C) of the Code. Upon a change of facts which causes the prior forms to no longer be valid or upon the reasonable request of a US Tax Obligor, a Lender shall again provide the forms and documents described above unless it is unable to do so because of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or treaty, or any published
65
practice or concession of any relevant taxing authority; if a Lender is unable to provide such forms and documents, then such Lender shall provide such other forms and certifications to establish any exemption or reduction from US withholding Taxes for which such Lender is eligible.
(j)
At least three (3) Business Days prior to the due date of any amount payable by an Obligor under any Finance Document, the Agent shall provide to each Borrower by pdf or facsimile a schedule setting forth the portion of the total amount of such payment that will be payable to each Lender on such due date. Within a reasonable amount of time prior to the close of business on the date on which such scheduled amount becoming payable by an Obligor under any Finance Document, each Borrower shall provide to the Agent by pdf or facsimile a reciprocal schedule setting forth the amount of any Tax Deduction that the Obligor will withhold from each payment to be made to each Lender included on such schedule on the due date for such payment (the “
GTECH Withholding Schedule
”). No failure or delay of the Agent to provide the Borrowers with the schedule contemplated hereunder shall affect the obligation of any Obligor to make the payments otherwise required to be made by them under this Agreement.
(k)
Any Lender which enters into any sub-participation or other risk sharing arrangement with a Relevant Sub-Participant shall only be entitled to receive payments under this Clause 14.2(k) with reference to any interest paid on the sub-participated commitment (i) to the same extent as such Lender would have been if it had not entered into such sub-participation or (ii) for an amount equivalent to the Tax Deduction required by law to be applied on any payment made under this Agreement and beneficially owned by the Relevant Sub-Participant, if lower;
provided that
this paragraph (k) shall not apply to limit any entitlement to receive payments under this Clause 14.2(k) if the right to receive a greater payment results from a Change of Tax Law that occurs after the Relevant Sub-Participant acquired the applicable sub-participated commitment.
14.3
Tax indemnity
(a)
The relevant Obligor shall (within five (5) Business Days of demand by the Agent) pay (or cause to be paid) to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document (and for which it has provided, or will provide, documentary evidence).
(b)
Paragraph (a) above shall not apply:
(i)
with respect to any Tax assessed on a Finance Party:
(A)
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident or engaged in a trade or business for tax purposes; or
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(B)
under the law of the jurisdiction in which that Finance Party’s Permanent Establishment or Facility Office is located in respect of amounts received or receivable in that jurisdiction,
if that Tax is imposed on or calculated by reference to the net income received or receivable, including for the avoidance of any doubt the value of production determined for IRAP purposes (but not any sum deemed to be received or receivable) by that Finance Party, including branch profits tax and minimum tax; or
(ii)
to the extent a loss, liability or cost:
(A)
is compensated for by an increased payment under Clause 14.2 (
Tax gross-up
); or
(B)
would have been compensated for by an increased payment under Clause 14.2 (
Tax gross-up
) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 14.2 (
Tax gross-up
) applied; or
(C)
is compensated for by Clause 14.6(c) (
Stamp taxes
) (or would have been so compensated for under that Clause but was not so compensated solely because any of the exceptions set out therein applied); or
(D)
relates to a FATCA Deduction required to be made by a Party.
(c)
A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the relevant Obligor.
(d)
Such claim and Agent notification shall set forth in reasonable detail the basis for the claim being made by the relevant Finance Party and appropriate documentation supporting such claim.
(e)
A Protected Party shall, on receiving a payment from an Obligor under this Clause 14.3 notify the Agent.
14.4
Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines that:
(a)
a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and
(b)
that Finance Party has obtained, utilised and fully retained that Tax Credit on an affiliated group basis,
the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.
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14.5
Lender Status Confirmation
(a)
In respect of an Italian Obligor, each Lender which becomes a Party to this Agreement after the date of this Agreement (or which enters into any sub-participation or other risk sharing arrangement with a Relevant Sub-Participant) shall indicate in the Transfer Certificate or Assignment Agreement which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it (or the Relevant Sub-Participant, if on the date of the Sub-Participation or risk arrangement, such Relevant Sub-Participant was treated as if it were a Lender under this Agreement) falls in:
(i)
an Exempt Lender;
(ii)
an Italian Qualifying Lender;
(iii)
an Italian Treaty Lender; or
(iv
)
not a Qualifying Lender.
(b)
In respect of a UK Obligor, each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate or Assignment Agreement which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it falls in:
(i)
not a Qualifying Lender;
(ii)
a Qualifying Lender other than a UK Treaty Lender; or
(iii)
a UK Treaty Lender.
(c)
If a New Lender fails to indicate its status in accordance with this Clause 14.5 then such New Lender shall be treated for the purposes of this Agreement (including by each Obligor) as if it is not a Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Obligors). If in respect of an Italian Obligor, any Lender fails to indicate the status of the Relevant Sub-Participant or the Relevant Sub-Participant fails to provide the Agent with any Affidavit possibly required or necessary in accordance with this Clause 14.5, then such Lender shall with respect to the Relevant Sub-Participant be treated for the purposes of this Agreement (including by each Obligor) as if it is not an Italian Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Borrower) or the Relevant Sub-Participant provides the Agent with such Affidavit.
(d)
For the avoidance of doubt, a Transfer Certificate or Assignment Agreement shall not be invalidated by any failure of any Lender to comply with this Clause 14.5.
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14.6
Stamp taxes
The relevant Borrower shall, or shall procure that an Obligor shall, pay and, within ten (10) Business Days of demand, indemnify each Finance Party against any duly documented liability, loss, cost or expense that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document;
provided that
no Obligor shall be liable for the aforementioned liability, loss, cost or expense:
(a)
in relation to any such Taxes payable in respect of an assignment, transfer or sub-participation by a Finance Party, unless that assignment, transfer or sub-participation is carried out at the request of any Obligor and the Finance Party agrees to such request voluntarily (in circumstances where it is not required to agree to such request on the terms of this Agreement);
(b)
to the extent that such Taxes become payable upon a voluntary registration made by any Finance Party if such registration is not necessary to evidence, prove, maintain, enforce, compel or otherwise assert the rights of such Party or obligations of any Party under an Finance Document or when such registration is necessary in order to produce or rely on such document for any other purposes; or
(c)
in case it arises as a consequence of, or in connection to, any claims by any authority, including, but not limited to, any Tax authority, and the Lender has not provided the relevant Borrower with copies of any relevant written communications relating to the Finance Document, including, but not limited to, any notices of payment, (the “
Tax Notice
”) received from that authority within fifteen (15) Business Days from receipt (the “
Tax Notice Term
”). If the Lender notifies the relevant Borrower with the Tax Notice within the Tax Notice Term, then the Parties will agree, without prejudice of any rights of the relevant Lender, including the right to be indemnified, under this Clause 14.6, as far as reasonably practicable acting in good faith, possible defensive strategies and the substance and conduct of such defensive strategies and such Lender will, as far as reasonably practicable acting in good faith, share in a timely fashion any relevant information for the relevant Borrower in relation to the development of any litigation proceedings or any settlement or other procedures which may be in progress as the result of the implementation of such defensive strategies.
14.7
Value added tax
(a)
All amounts set out, or expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on each supply, and accordingly, subject to paragraph (b) below, if VAT is chargeable on any supply made by any Finance Party to any Party under a Finance Document and such Finance Party is required to account for the VAT to the relevant Tax Authority that Party shall pay to the Finance Party (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT (and such Finance Party shall promptly provide an appropriate VAT invoice to such Party).
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(b)
If VAT is or becomes chargeable on any supply made by any Finance Party (the “
Supplier
”) to any other Finance Party (the “
Recipient
”) under a Finance Document, and any Party other than the Recipient (the “
Relevant Party
”) is required by the terms of any Finance Document to pay an amount equal to the consideration for such supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):
(i)
(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this paragraph (i) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and
(ii)
(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.
(c)
Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any costs or expenses, that Party shall reimburse or indemnify the Finance Party in respect of the full amount of such costs or expenses, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment from the relevant tax authority in respect of such VAT.
(d)
Any reference in this Clause 14.7 to any Party shall, at any time when such Party is treated as a member of a group or unity (or fiscal unity) for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the person who is treated at that time as making the supply, or (as appropriate) receiving the supply, under the grouping rules (provided for in Article 11 of Council Directive 2006/112/EC (or as implemented by the relevant member state of the European Union) or any other similar provision in any jurisdiction which is not a member state of the European Union) so that a reference to a Party shall be construed as a reference to that Party or the relevant group or unity (or fiscal unity) of which that Party is a member for VAT purposes at the relevant time or the relevant representative member (or head) of that group or unity (or fiscal unity) at the relevant time (as the case may be).
(e)
In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party’s VAT registration and such other information as is reasonably requested in connection with such Finance Party’s VAT reporting requirements in relation to such supply.
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14.8
Imposta Sostitutiva
Pursuant to article 17 of Presidential Decree No. 601 of 29 September, 1973, as amended by article 12 of Decree Law No. 145 of 23 December 2013, which, starting from 24 December 2013, provides for the application of the
Imposta Sostitutiva
on medium term financings provided that the parties exercise the applicable option in the relevant facilities agreement, the Original Borrower declares to the Lenders that, for the purposes of the aforementioned article 17, it does not require the application of the
Imposta Sostitutiva
in place of the ordinary documentary taxes. Accordingly, the Lenders agree to not subject the Facilities made available by them under this Agreement to
Imposta Sostitutiva.
14.9
FATCA Information
(a)
Subject to paragraph (c) below, each Party shall, within ten (10) Business Days of a reasonable request by another Party:
(i)
confirm to that other Party whether it is:
(A)
a FATCA Exempt Party; or
(B)
not a FATCA Exempt Party;
(ii)
supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party’s compliance with FATCA;
(iii)
supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party’s compliance with any other law, regulation, or exchange of information regime.
(b)
If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c)
Paragraph (a) above shall not oblige any Finance Party to do anything, and paragraph (a)(iii) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:
(i)
any law or regulation;
(ii)
any fiduciary duty; or
(iii)
any duty of confidentiality.
(d)
If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of
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the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
(e)
If a Borrower is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within ten (10) Business Days of:
(i)
where the Original Borrower is a US Tax Obligor and the relevant Lender is an Original Lender, the date of this Agreement;
(ii)
where a Borrower is a US Tax Obligor on a Transfer Date and the relevant Lender is a New Lender, the relevant Transfer Date;
(iii)
the date a new US Tax Obligor accedes as a Borrower; or
(iv)
where a Borrower is not a US Tax Obligor, the date of a request from the Agent,
supply to the Agent:
(A)
a withholding certificate on Form W-8, Form W-9 or any other relevant form; or
(B)
any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation.
(f)
The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) above to the relevant Borrower.
(g)
If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, such Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the relevant Borrower.
(h)
The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) or (g) above without further verification. The Agent shall not be liable for any action taken by it under or in connection with paragraph (e), (f) or (g) above.
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14.10
FATCA Deduction
(a)
Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(b)
Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify the Parent and the Agent and the Agent shall notify the other Finance Parties.
15.
INCREASED COSTS
15.1
Increased Costs
(a)
Subject to Clause 15.3 (
Exceptions
) the Obligors shall, within three (3) Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation; (ii) compliance with any law or regulation (
provided that
, notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder issued in connection therewith or in implementation thereof shall be deemed to be a “change in law”, regardless of the date enacted, adopted, issued or implemented) made after the date of this Agreement or (iii) the implementation or application of or compliance with Basel III or CRD IV or any law or regulation that implements or applies Basel III or CRD IV.
(b)
In this Agreement:
“
Basel III
” means:
(i)
the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;
(ii)
the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement — Rules text” published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and
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(iii)
any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”.
“
CRD IV
” means:
(i)
Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms; and
(ii)
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.
“
Increased Costs
” means:
(i)
a reduction in the rate of return from a Facility or on a Finance Party’s (or its Affiliate’s) overall capital;
(ii)
an additional or increased cost; or
(iii)
a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.
15.2
Increased Cost claims
(a)
A Finance Party intending to make a claim pursuant to Clause 15.1 (
Increased Costs
) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Borrowers.
(b)
Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
15.3
Exceptions
Clause 15.1 (
Increased Costs
) does not apply to the extent any Increased Cost is:
(a)
attributable to a Tax Deduction required by law to be made by an Obligor;
(b)
compensated for by Clause 14.3 (
Tax indemnity
) (or would have been compensated for under Clause 14.3 (
Tax indemnity
) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 14.3 (
Tax indemnity
) applied);
(c)
attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation;
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(d)
attributable to the implementation or application of or compliance with the “International Convergence of Capital Measurement and Capital Standards, a Revised Framework” published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (but excluding any amendment arising out of Basel III) (“
Basel II
”) or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Finance Party or any of its Affiliates); or
(e)
attributable to a FATCA Deduction required to be made by a Party.
16.
OTHER INDEMNITIES
16.1
Currency indemnity
(a)
If any sum due from an Obligor under the Finance Documents (a “
Sum
”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “
First Currency
”) in which that Sum is payable into another currency (the “
Second Currency
”) for the purpose of:
(i)
making or filing a claim or proof against that Obligor; or
(ii)
obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall as an independent obligation, within three (3) Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b)
Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.
16.2
Other indemnities
Each Borrower shall (or shall procure that an Obligor will), within three (3) Business Days of demand, indemnify the Mandated Lead Arrangers and each other Finance Party against any cost, loss or liability incurred by it as a result of:
(a)
the occurrence of any Event of Default;
(b)
a failure by an Obligor to pay any amount due under a Finance Document on its due date, including, without limitation, any cost, loss or liability arising as a result of Clause 29 (
Sharing among the Finance Parties
);
(c)
funding, or making arrangements to fund, its participation in a Utilisation requested by it in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or
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(d)
a Utilisation (or part of a Utilisation) not being prepaid in accordance with a notice of prepayment given by it.
16.3
Indemnity to the Agent
Each Borrower shall promptly indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:
(a)
investigating any event which it reasonably believes is a Default;
(b)
entering into or performing any foreign exchange contract for the purposes of paragraph (b) of Clause 30.10 (
Change of currency
); or
(c)
acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.
17.
MITIGATION
17.1
Mitigation by the Lenders
(a)
Each Finance Party shall, in consultation with the Parent, take all reasonable steps, including to the extent possible, but not limited to, making any Utilisation available from an Affiliate, to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 7.1 (
Illegality
), Clause 14 (
Tax Gross Up and Indemnities
) or Clause 15.1 (
Increased Costs
) or in any amount payable under a Finance Document by an Italian Obligor becoming not deductible from that Italian Obligor’s taxable income for Italian tax purposes by reason of that amount originating from transactions occurred with Blacklisted Resident Entities including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.
(b)
Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.
17.2
Mitigation by the Obligors
Should a Finance Party become subject to Taxes because of its failure to deliver a form, certificate or other document required under Clause 14.2 (
Tax gross-up
), the Obligors shall take such steps as such Finance Party shall reasonably request to assist such Finance Party to recover such Taxes.
17.3
Limitation of liability
(a)
Each Borrower shall indemnify each Finance Party, for all costs and expenses reasonably incurred by that party as a result of steps taken by it under Clause 17.1 (
Mitigation by the Lenders
).
(b)
A Finance Party is not obliged to take any steps under Clause 17.1 (
Mitigation by the Lenders
) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.
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18.
COSTS AND EXPENSES
18.1
Transaction expenses
The Borrowers shall within ten (10) Business Days of demand pay each Finance Party the amount of all reasonable and documented out-of-pocket costs and expenses (including legal fees up to the amount agreed with the Parent) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication (and previously approved by the Borrowers) and perfection of:
(a)
this Agreement and any other documents referred to in this Agreement; and
(b)
any other Finance Documents executed after the date of this Agreement, and
if, requested, the Borrowers shall pay directly the relevant advisers upon receipt of the relevant reasonably detailed invoice.
18.2
Amendment costs
If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 30.10 (
Change of currency
), the Borrowers shall, within three (3) Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with that request or requirement.
18.3
Enforcement and preservation costs
The Borrowers shall, within three (3) Business Days of demand, pay to the Mandated Lead Arrangers and each other Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of or the preservation of any rights under any Finance Document and any proceedings instituted by or against the Agent as a consequence of taking or holding or enforcing these rights.
19.
GUARANTEE AND INDEMNITY
19.1
Guarantee and indemnity
Each Guarantor irrevocably and unconditionally jointly and severally:
(a)
guarantees to each Finance Party as primary obligor the punctual performance by a member of the Group of all of such member of the Group’s obligations under the Finance Documents and the punctual payment when due by such member of the Group of all sums payable under the Finance Documents;
(b)
undertakes with each Finance Party that whenever a member of the Group fails to perform any obligation or pay any of the indebtedness referred to in paragraph (a) above, it will perform such obligation or pay to such Finance Party such sum on demand, in each case, as if it were the primary obligor; and
(c)
indemnifies, as an independent and primary obligation, each Finance Party immediately on demand against any cost, loss or liability suffered by that
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Finance Party if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover.
19.2
Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
19.3
Reinstatement
If any payment by an Obligor or any discharge given by a Finance Party (whether in respect of the obligations of any Obligor or any Security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:
(a)
the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and
(b)
each Finance Party shall be entitled to recover the value or amount of such Security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.
19.4
Waiver of defences
The obligations of each Guarantor under this Clause 19 will not, to the extent permitted under mandatory law, be affected by an act, omission, matter or thing which, but for this Clause 19, would reduce, release or prejudice any of its obligations under this Clause 19 (without limitation and whether or not known to it or any Finance Party) including:
(a)
any time, waiver or consent granted to, or composition with, any Obligor or other person;
(b)
the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;
(c)
the making or absence of any demand on a member of the Group or any other person (other than the notice referred to in Clause 19.1(b) (
Guarantee and indemnity
)) for payment or performance of any other obligations, or the application of any moneys at any time received from a member of the Group or any other person;
(d)
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or Security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any Security;
(e)
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
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(f)
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document, or any other document or Security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or Security;
(g)
any unenforceability or illegality or invalidity of any obligation of any person under any Finance Document or any other document or Security; or
(h)
any insolvency or similar proceedings,
(other than the irrevocable payment in full of such obligations).
19.5
Guarantor intent
Without prejudice to the generality of Clause 19.4 (
Waiver of defences
), each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Finance Documents or any facility or amount made available under any of the Finance Documents for the purposes of or in connection with any of the following: acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs or expenses associated with any of the foregoing.
19.6
Immediate recourse
Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or Security or claim payment from any person before claiming from that Guarantor under this Clause 19. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
19.7
Appropriations
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
(a)
refrain from applying or enforcing any other moneys, Security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise), and no Guarantor shall be entitled to the benefit of the same; and
(b)
hold in an interest-bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 19.
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19.8
Deferral of Guarantors’ rights
(a)
Each Obligor acknowledges and agrees with each Guarantor that, subject to the terms and conditions of this Clause 19.8 and to the extent permitted by applicable law, upon the payment by the Guarantors of any of their obligations under this guarantee (whether pursuant to the guarantees, undertakings or indemnities given in Clause 19.1 (
Guarantee and indemnity
) or otherwise):
(i)
each Obligor shall indemnify the Guarantors for the full amount of such payment; and
(ii)
the Guarantors shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment (such rights of indemnification and subrogation, together with all other rights of the Guarantors, by reason of the performance of any of their obligations under this guarantee, or any action taken pursuant to any rights conferred by or pursuant to this guarantee, to be indemnified by any person, to prove in respect of any liability in the winding-up of any person or to take the benefit of or enforce any Security or guarantees or to exercise any rights of contribution are, collectively, the “
Subrogation Rights
”).
(b)
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:
(i)
to be indemnified by an Obligor;
(ii)
to claim any contribution from any other Guarantor of any Obligor’s obligations under the Finance Documents; or
(iii)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or Security taken pursuant to, or in connection with, the Finance Documents by any Finance Party.
From and after the date when all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, the Subrogation Rights of the Guarantors may be exercised and enforced by the Guarantors in their sole discretion.
19.9
Release of Guarantors’ right of contribution
If any Guarantor (a “
Retiring Guarantor
”) ceases to be a Guarantor in accordance with the terms of the Finance Documents for the purpose of any sale or other disposal of that Retiring Guarantor, then on the date such Retiring Guarantor ceases to be a Guarantor:
(a)
that Retiring Guarantor is released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a
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contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents; and
(b)
each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Finance Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under any Finance Document or of any other Security taken pursuant to, or in connection with, any Finance Document where such rights or Security are granted by or in relation to the assets of the Retiring Guarantor.
19.10
Additional security
This guarantee is in addition to and is not in any way prejudiced by any other guarantee or Security now or subsequently held by any Finance Party.
19.11
Limitations on US Guarantees
(a)
Each US Guarantor acknowledges that it will receive valuable direct or indirect benefits as a result of the transactions contemplated by the Finance Documents (including utilisations thereunder).
(b)
Each US Guarantor represents, warrants and agrees that:
(i)
it is US Solvent; and
(ii)
it has not made a transfer or incurred any obligation under any Finance Document with the intent to hinder, delay or defraud any of its present or future creditors.
(c)
Notwithstanding anything to the contrary contained herein or in any other Finance Document:
(i)
each Finance Party agrees that the maximum liability of each US Guarantor under Clause 19 (
Guarantee and indemnity
) shall in no event exceed an amount equal to the greatest amount that would not render such US Guarantor’s obligations hereunder and under the other Finance Documents subject to avoidance under US Bankruptcy Law or to being set aside, avoided or annulled under any Fraudulent Transfer Law, in each case after giving effect to:
(A)
all other liabilities of such US Guarantor, contingent or otherwise, that are relevant under such Fraudulent Transfer Law (specifically excluding, however, any liabilities of such US Guarantor in respect of intercompany indebtedness to any Borrower to the extent that such Financial Indebtedness would be discharged in an amount equal to the amount paid by such US Guarantor hereunder) and
(B)
the value as assets of such US Guarantor (as determined under the applicable provisions of such Fraudulent Transfer Law) of any rights to subrogation, contribution, reimbursement,
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indemnity or similar rights held by such US Guarantor pursuant to
(1)
applicable law or
(2)
any other agreement providing for an equitable allocation among such US Guarantor and the Borrowers and other Guarantors of obligations arising under this Agreement or other guarantees of such obligations by such parties: and
(ii)
each party agrees that, in the event any payment or distribution is made on any date by a Guarantor under this Clause 19, each such Guarantor shall be entitled to be indemnified from each other Guarantor in an amount equal to such payment, in each case multiplied by a fraction of which the numerator shall be the net worth of the contributing Guarantor and the denominator shall be the aggregate net worth of all the Guarantors.
19.12
Controlled Foreign Corporations
Notwithstanding any term or provision of this Clause 19.12 or any other term in this Agreement or any Finance Document in the event that a Borrower is a US Tax Obligor:
(a)
no member of the Group that is a controlled foreign corporation for US federal income tax purposes (a “
CFC
”) will have any obligation or liability, directly or indirectly, as guarantor or otherwise under this Agreement or any Finance Document with respect to any obligation or liability arising under any Finance Document of a US Tax Obligor (a “
US Obligation
”); and
(b)
not more than sixty-five per cent. (65%) of the stock or other equity interests (measured by the total combined voting power of the issued and outstanding voting stock or other equity interests) of, and none of the assets or property of, a person that is a CFC will be required to be pledged directly or indirectly as Security for any US Obligations.
19.13
Italian guarantee limitations
(a)
In the case of any Guarantor incorporated in Italy (an “
Italian Guarantor
”), its liability as Guarantor under this Clause 19 shall not exceed, at any time, the aggregate at that time of:
(i)
the highest outstanding principal amount at any time of the indebtedness of such Italian Guarantor (or any of its direct or indirect Subsidiaries) as a Borrower under any Facility; and
(ii)
the highest outstanding principal amount at any time of all inter-company loans advanced (or granted) to such Italian Guarantor (or any of its direct or indirect Subsidiaries) by any Obligor or any other member of the Group after the date of this Agreement.
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(b)
In any event, pursuant to article 1938 of the Italian Civil Code, the maximum amount an Italian Guarantor may be required to pay in respect of its obligations as Guarantor under this Agreement shall not exceed the amount equal to €440,000,000 in respect of Facility A and €440,000,000 in respect of Facility B.
20.
REPRESENTATIONS
20.1
General
On the date of this Agreement and at the times set out in Clause 20.24 (
Repetition
) each Obligor makes the representations and warranties set out in this Clause 20 to each Finance Party.
20.2
Status
(a)
It and each of its Material Subsidiaries is a limited liability corporation, duly incorporated or organised (as applicable) and validly existing under the law of its jurisdiction of incorporation.
(b)
It and each of its Material Subsidiaries has the power to own its material assets and carry on its business as it is being conducted.
20.3
Binding obligations
Subject to the Legal Reservations, the obligations expressed to be assumed by it in each Finance Document to which it is a party and which have been executed by it are legal, valid, binding and enforceable obligations.
20.4
Non-conflict with other obligations
The entry into and performance by it of its obligations under, and the transactions contemplated by, the Finance Documents, to which it is a party do not and will not conflict with:
(a)
any law or regulation applicable to it;
(b)
its constitutional documents; or
(c)
any agreement or instrument binding upon it or any of its assets or constitute a default or termination event (however described) under any such agreement or instrument, unless any such conflict does not and is not reasonably likely to have a Material Adverse Effect.
20.5
Power and authority
(a)
It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.
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(b)
No limit on its powers will be exceeded as a result of the borrowing or giving of guarantees or indemnities contemplated by the Finance Documents to which it is a party.
20.6
Validity and admissibility in evidence
(a)
All Authorisations required:
(i)
to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and
(ii)
to make the Finance Documents to which it is a party admissible in evidence in its jurisdictions of incorporation,
have been obtained or effected and are in full force and effect.
(b)
All Authorisations necessary for the conduct of the business, trade and ordinary activities of members of the Group have been obtained or effected and are in full force and effect other than those Authorisations the failure of which to obtain or effect has not and is not reasonably likely to have a Material Adverse Effect.
20.7
Governing law and enforcement
(a)
Subject to the Legal Reservations, the choice of governing law of the Finance Documents will be recognised and enforced in its Relevant Jurisdictions.
(b)
Subject to the Legal Reservations, any judgment obtained in relation to a Finance Document in the jurisdiction of the governing law of that Finance Document will be recognised and enforced in its Relevant Jurisdictions.
20.8
Deduction of Tax
It is not required to make any Tax Deduction from any payment it may make under any Finance Document to a Lender which is:
(a)
a Qualifying Lender,
(i)
falling within paragraphs (a)(i), (a)(ii), (b), (c)(i)(A) or (c)(ii) of the definition of Qualifying Lender; or
(ii)
except where a Direction has been given under section 931 of the ITA in relation to the payment concerned, falling within paragraph (c)(i)(B) of the definition of Qualifying Lender; or
(b)
a Treaty Lender;
provided that
in the case of a UK Treaty Lender the payment is one specified in a direction given by the Commissioners of Revenue and Customs under Regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488) and in the case of a US Borrower the Lender has satisfied its obligations under Clause 14.2(i)(iv) (
Tax gross-up
).
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20.9
No filing or stamp taxes
Under the laws of its Relevant Jurisdictions it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents, subject always to the Legal Reservations, except with reference to Italy:
(a)
where any Finance Document is executed before or deposited with an Italian notary public or in any case formed and executed within the Italian territory in the form of a deed;
(b)
on voluntarily registration of any Finance Document with the Italian tax authority;
(c)
in any “case of use” (
caso d’uso
), including the filing, recording or enrolment of any Finance Document with any Italian judicial authority (when carrying out any administrative activity) or administrative authority (unless such filing is mandatory at law);
(d)
in the event any of the provisions of the Finance Document is mentioned (according to the
enunciazione
principle) in any separate document entered into between the same parties (alone or together with other parties) which have not been previously registered and in respect of which any of the conditions described at paragraphs (a) through (c) above is met; or
(e)
if any Finance Document is enforced in Italy either by way of a direct court judgment or an exequatur of a judgment rendered outside Italy.
20.10
No default
(a)
No Event of Default or Default is continuing or will result from the making of any Utilisation or the entry into, the performance of, or any transaction contemplated by any Finance Document.
(b)
No other event or circumstance is outstanding which constitutes a default or termination event (however described) under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries’) assets are subject which has had or is reasonably likely to have a Material Adverse Effect.
20.11
No misleading information
All of the written factual information supplied by each of the Original Obligors in connection with the Finance Documents and the matters contemplated therein was (to the best of its knowledge after due and careful enquiry) true, complete and accurate in all material respects as at the date it was given and was not misleading in any material respect.
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20.12
Financial statements
(a)
The Original Financial Statements were prepared in accordance with the Accounting Principles consistently applied unless expressly disclosed therein or otherwise disclosed to the Agent in writing to the contrary prior to the date of this Agreement.
(b)
Its Original Financial Statements give a true and fair view of its financial condition and results of operations during the relevant Financial Year unless expressly disclosed therein to the contrary or otherwise disclosed to the Agent in writing to the contrary prior to the date of this Agreement.
20.13
No proceedings pending or threatened
No litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency which are reasonably likely, if adversely determined, to have a Material Adverse Effect (to the best of the Parent’s knowledge and belief) have been started or threatened against it or any of its Subsidiaries.
20.14
Security
No Security or Quasi-Security exists over all or any of the present or future assets of any member of the Group other than as permitted by this Agreement.
20.15
Pari Passu Ranking
Its payment obligations under the Finance Documents rank at least
pari passu
with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
20.16
US Government Regulations
(a)
It is not a “public utility” within the meaning of, or subject to regulation under, the United States Federal Power Act of 1920 (16 U.S.C. §§791
et seq
.).
(b)
It is not an “investment company” as defined in, or subject to regulation under, the United States Investment Company Act of 1940 (15 U.S.C. §§ 80a-1
et seq
.) or in violation of regulation under any United States federal or state law or regulation that limits its ability to incur or guarantee indebtedness.
(c)
It has not made (or attempted to make) an “unlawful payment” within the meaning of, and is not in any other way in violation of, the Foreign Corrupt Practices Act (15 U.S.C. §§ 78dd-1
et seq
.) or any similar laws.
20.17
ERISA
(a)
No ERISA Event has occurred or is reasonably expected to occur that has resulted in or is reasonably expected to result in a material liability of it or its Subsidiaries or any ERISA Affiliate.
(b)
Schedule B (
Actuarial Information
) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal
86
Revenue Service of the United States of America, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status.
(c)
Neither it, nor any of its Subsidiaries, nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan.
(d)
Neither it, nor any of its Subsidiaries, nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganisation or has been terminated, within the meaning of Title IV of ERISA, and to the best of its knowledge, no such Multiemployer Plan is reasonably expected to be in reorganisation or to be terminated, within the meaning of Title IV of ERISA.
(e)
Except as does not have and could not reasonably be expected to have, a Material Adverse Effect, and except to the extent required under Section 4980B of the Code, no Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of the Obligors, any of their Subsidiaries or any of their respective ERISA Affiliates.
20.18
Solvency (US Obligors)
The Original Guarantor is, on a consolidated basis, as of the date hereof, US Solvent.
20.19
Material Adverse Effect
No Material Adverse Effect has occurred since the date of the most recent financial statements delivered pursuant to Clause 21.1 (
Financial statements
).
20.20
Anti-Terrorism laws
(a)
It, and to the best of its knowledge, each of its Material Subsidiaries:
(i)
has taken reasonable measures to ensure compliance with Anti-Terrorism Laws;
(ii)
is not a Designated Person; and
(iii)
does not deal in any property or interest in property known by it to be blocked pursuant to any Anti-Terrorism Law.
20.21
US Margin Regulations
No part of the proceeds of any Utilisation will be used (i) in contravention of Regulation T, U or X of the Federal Reserve Board, or (ii) for “buying” or “carrying” (within the meaning of Regulation T, U or X) any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock. Following the application of the proceeds of each Utilisation, not more than twenty five per cent. (25%) of the value of the assets of the Obligors subject to any restriction contained in this Agreement or any other agreement or instrument between the Obligors, on the
87
one hand, and any Lender or Affiliate of any Lender, on the other hand, relating to Financial Indebtedness will be Margin Stock.
20.22
Sanctions, Anti-Corruption and other laws
(a)
The Parent represents that:
(i)
each member of the Group has implemented and maintains in effect policies and procedures designed to promote and achieve compliance by each such member and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and each member of the Group and their respective directors and officers and, to the knowledge of the Parent, their respective employees and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects and are not knowingly engaged in any activity that would reasonably be expected to result in a Borrower being designated as a Sanctioned Person;
(ii)
none of (a) the Parent, any member of the Group or any of their respective directors, officers or employees, or (b) to the knowledge of the Parent, any agent of the Parent or any member of the Group that will act in any capacity in connection with or benefit from the Facilities, is a Sanctioned Person; and
(iii)
no Utilisation or use of proceeds pursuant to this Agreement will violate Anti-Corruption Laws or applicable Sanctions.
(b)
Notwithstanding anything to the contrary contained in this Agreement or in any other Finance Document, in relation to any Specified Lender the representations and warranties under this Clause 20.22 shall only apply for the benefit of such Specified Lender to the extent that the provisions would not result in (i) any violation of, conflict with or liability under EU Regulation (EC) 2271/96 or a similar anti-boycott statute. In connection with any amendment, waiver, determination or direction relating to any part of this Clause 20.22 of which a Specified Lender does not have the benefit, the Commitments of that Specified Lender will be excluded for the purpose of determining whether the consent of the Majority Lenders has been obtained or whether the determination or direction by the Majority Lenders has been made.
20.23
Compliance with laws
Each Obligor complies in all respects with all laws to which it may be subject to the extent that failure so to comply would have or would be reasonably likely to have a Material Adverse Effect.
20.24
Repetition
(a)
The Repeating Representations are deemed to be made by each Obligor by reference to the facts and circumstances then existing on:
88
(i)
the date of each Utilisation Request and the first day of each Interest Period; and
(ii)
in the case of an Additional Obligor, the day on which the company becomes (or it is proposed that the company becomes) an Additional Obligor.
(b)
Each representation or warranty deemed to be made after the date of this Agreement shall be deemed to be made by reference to the facts and circumstances existing at the date the representation or warranty is deemed to be made.
21.
INFORMATION UNDERTAKINGS
The undertakings in this Clause 21 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
21.1
Financial statements
The Parent shall supply to the Agent, who will distribute to each Lender, each of the following:
(a)
within one hundred twenty (120) days after the end of each of its Financial Years, its annual audited consolidated financial statements by making the same available on the Parent’s public website;
(b)
as soon as they become available but in any event within seventy-five (75) days after the end of each of its financial half years its consolidated financial statements for its financial half year by making the same available on the Parent’s public website;
(c)
as soon as they are available, but in any event within sixty (60) days after the end of the first and third Financial Quarter of each of its Financial Years, its consolidated financial statements for those Financial Quarters by making the same available on the Parent’s public website; and
(d)
as soon as the same become available, but in any event within one hundred and twenty (120) days after the end of each of its financial years, the balance sheet and income statement or, if available, audited financial statements of each Guarantor other than the Parent.
21.2
Provision and contents of Compliance Certificate
(a)
The Parent shall supply to the Agent, who will distribute to each Lender:
(i)
with each set of financial statements delivered pursuant to paragraphs (a) and (b) of Clause 21.1 (
Financial statements
) if the Public Debt Ratings are equal to or higher than BBB- and Baa3 (with at least a stable outlook);
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph (i) shall be interpreted to mean at least two of the three Public Debt Ratings issued
89
by the Rating Agencies being equal to or higher than BBB- or Baa3 as applicable; or
(ii)
otherwise with each set of financial statements delivered pursuant to paragraphs (a), (b) and (c) of Clause 21.1 (
Financial statements
),
(b)
a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 22 (
Financial Covenants
) as at the date as at which those financial statements were prepared, including, prior to the completion of the Mergers, an explanation as to how the average US$/€ rate has been calculated and disclosure of items included in EBITDA, Total Net Debt and Total Net Interest Costs with an indication of the value of each item expressed as per the consolidated financial statements.
(c)
Commencing with the Compliance Certificate that is deliverable with respect to the first Financial Quarter ending after the date on which the Mergers are completed, the Compliance Certificate delivered in respect of the Financial Quarters ending in June and December in each Financial Year shall set out (in reasonable detail) computations as to compliance with Clause 23.24 (
Guarantor Threshold Test and Additional Guarantors
).
(d)
Commencing with the Compliance Certificate that is deliverable with respect to the Financial Quarter ending on 31 March 2015, the Compliance Certificate delivered in respect of the Financial Quarters ending December in each Financial Year shall list the Material Subsidiaries or confirm that there has been no change to the list of Material Subsidiaries since the previous Compliance Certificate for the Financial Quarter ending 31 December.
(e)
Each Compliance Certificate shall be signed by duly authorised signatory of the Parent and shall be reported on by the Auditors with respect to the information provided pursuant to Clause 20.2(a) (in the form agreed by the Auditors) when the audited consolidated Financial Statements for the Group are delivered pursuant to paragraph (a) of Clause 21.1 (
Financial statements
).
21.3
Requirements as to financial statements
The Parent shall procure that each set of financial statements delivered pursuant to Clause 21.1 (
Financial statements
) is prepared using the Accounting Principles and financial reference periods consistent with those applied in the presentation of the Original Financial Statements for the Parent unless, in relation to any set of financial statements, the Parent notifies the Agent that there has been a change in the Accounting Principles or the accounting practices and its Auditors deliver to the Agent, who will distribute to each Lender:
(a)
a description of any change necessary for those financial statements to reflect the Accounting Principles or accounting practices upon which the Parent’s Original Financial Statements were prepared; and
(b)
sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 22 (
Financial Covenants
) has been complied with, to determine the Margin as set out in the
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definition of “Margin”, and to make an accurate comparison between the financial positions indicated in those financial statements.
Any reference in this Agreement to any financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements of the Parent were prepared.
21.4
Information: miscellaneous
The Parent shall supply to the Agent who will distribute to each Lender:
(a)
promptly, copies of all documents dispatched by the Parent to its shareholders generally (or any class of them) or dispatched by any Obligor to its creditors generally (or any class of them);
(b)
promptly upon becoming aware of them, the details of any material environmental issues, material litigation, arbitration or administrative proceedings which are, in each case, current, threatened or pending against any member of the Group, which if adversely determined has or is reasonably likely to have a Material Adverse Effect;
(c)
promptly upon it becoming publicly available information, notice of any change to, or withdrawal of, any Public Debt Rating;
(d)
promptly upon completion, notice that the Transactions are completed;
(e)
promptly upon termination or upon publication (as the case may be), notice that the Merger Agreement has been terminated or that the Parent has disclosed publicly that it no longer intends to proceed with the completion of the Mergers; and
(f)
promptly on request, such further information regarding the financial condition, assets and operations of the Group or any member of the Group as any Finance Party through the Agent may reasonably request,
it being understood that the Parent may satisfy its obligations under this Clause 21.4 by publishing the relevant information on its website and notifying the Agent in writing that the relevant information has been so published.
21.5
Notification of Default
Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).
21.6
“Know your customer” checks
(a)
If:
(i)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
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(ii)
any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this Agreement; or
(iii)
a proposed assignment or transfer by a Lender of any of its rights or obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Agent such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied with the results of all necessary “know your customer” or other checks in relation to any relevant person pursuant to the transactions contemplated in the Finance Documents.
(b)
Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order to carry out and be satisfied with the results of all necessary “know your customer” or other checks on Lenders or prospective new Lenders pursuant to the transactions contemplated in the Finance Documents.
(c)
The Parent shall, by not less than ten (10) Business Days’ prior written notice to the Agent, notify the Agent (which shall promptly notify the Lenders) of its intention to request that one of its Subsidiaries becomes an Additional Guarantor pursuant to Clause 26 (
Changes to the Obligors
).
(d)
Following the giving of any notice pursuant to paragraph (c) above, if the accession of such Additional Guarantor obliges the Agent or any Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Parent shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent or such Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other checks in relation to any relevant person pursuant to the accession of such Subsidiary to this Agreement as an Additional Guarantor.
21.7
Posting on electronic system
Each of the Borrowers hereby acknowledges that (a) the Agent will make available to the other Finance Parties materials or information provided by or on behalf of the Borrowers hereunder (collectively, “
Borrower Materials
”) by posting the Borrower
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Materials on Debt Domain (the “
Platform
”) and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrowers or their securities) (each, a “
Public Lender
”). Each of the Borrowers hereby agrees that so long as such Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities; (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC”, the Borrowers shall be deemed to have authorised the Finance Parties to treat such Borrower Materials as not containing any material non-public information with respect to the Borrowers or their securities for purposes of United States Federal and state securities laws (
provided that
such Borrower Materials shall be treated as set forth in Clause 39 (
Confidentiality
)); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor”; and (z) the Agent shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor”. Notwithstanding the foregoing, each Borrower shall not be under any obligation to mark any Borrower Materials “PUBLIC”.
22.
FINANCIAL COVENANTS
22.1
Financial definitions
In this Clause 22:
“
Calculation Date
” means (i) at any time the Public Debt Ratings are equal to or higher than BBB- (with at least a stable outlook) and Baa3 (with at least a stable outlook) 30 June and 31 December of each year (
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being equal to or higher than BBB- (with at least a stable outlook) or Baa3 (with at least a stable outlook) as applicable) and (ii) at any time any Public Debt Rating is lower than BBB- (with at least a stable outlook) or Baa3 (with at least a stable outlook), or any Public Debt Rating is withdrawn, 31 March, 30 June, 30 September and 31 December of each year (
provided that
if at any time after the date hereof three Public Debt Ratings have been issued, this paragraph shall be interpreted to mean at least two of the three Public Debt Ratings issued by the Rating Agencies being lower than BBB- (with at least a stable outlook) or Baa3 (with at least a stable outlook) as applicable).
“
Consolidated Interest Expense
” means the amount of interest, discount, acceptance and commitment fees, amounts payable under interest rate hedging agreements and the interest element of payments under finance leases, including, for the avoidance of doubt, interest payable on the Capital Securities.
“
EBITDA
” means the amount of the consolidated operating income of the Group:
(a)
plus
depreciation, amortization and impairment loss; and
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(b)
plus
extraordinary and non-cash items of expense but only to the extent such items have been deducted in the determination of operating income; and
(c)
minus
extraordinary and non-cash items of income, but only to the extent such items are included in operating income; and
(d)
minus
amounts attributable to minority interests in excess of US$60,000,000.
“
Relevant Period
” means a period of twelve (12) months ending on the last day of a Financial Year or half year or, as the case may be, financial quarter of the Parent.
“
Total Net Debt
” means the total Financial Indebtedness of the Group (including, for the avoidance of doubt, the outstanding amount of the Capital Securities and excluding, for the avoidance of doubt, any accrued Consolidated Interest Expense)
minus
the aggregate amount of cash and Cash Equivalent Investments held by the Group.
“
Total Net Interest Costs
” means Consolidated Interest Expense of the Group less interest received and amounts received under interest rate hedging agreements less capitalised up-front debt issuance costs recorded as interest expense.
22.2
Financial condition
The Parent shall ensure that:
(a)
EBITDA to Total Net Interest Costs
: EBITDA to Total Net Interest Costs at each Calculation Date shall not be less than the ratio set out next to the relevant Calculation Date in the table below:
|
EBITDA
to Total
Net
Interest
Costs
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
March
|
|
2.75:1.00
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
June
|
|
2.75:1.00
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
September
|
|
2.75:1.00
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
December
|
|
2.75:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
|
3.00:1.00
|
(b)
Total Net Debt to EBITDA
: Total Net Debt to EBITDA at each Calculation Date shall:
(i)
if the Mergers are not completed, not be greater than 4.00:1.00 as tested at each Calculation Date in accordance with Clause 22.3 (
Financial testing
) below; and
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(ii)
if the Mergers are completed, not be greater than the ratio set out next to the relevant Calculation Date in the table below:
|
Total Net
Debt to
EBITDA
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
March
|
|
5.50:1.00
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.50:1.00
|
|
4.25:1.00
|
|
June
|
|
5.50:1.00
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.50:1.00
|
|
4.00:1.00
|
|
September
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.75:1.00
|
|
4.25:1.00
|
|
4.00:1.00
|
|
December
|
|
5.50:1.00
|
|
5.00:1.00
|
|
4.75:1.00
|
|
4.25:1.00
|
|
4.00:1.00
|
22.3
Financial testing
The financial covenants set out in Clause 22.2 (
Financial condition
) shall be calculated in accordance with the Accounting Principles and tested in relation to the Group on a consolidated basis by reference to each Compliance Certificate delivered in accordance with Clause 21.2 (
Provision and contents of Compliance Certificate
).
23.
GENERAL UNDERTAKINGS
The undertakings in this Clause 23 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.
23.1
Authorisations
Each Obligor shall promptly:
(a)
obtain, comply with and do all that is necessary to maintain in full force and effect; and
(b)
supply certified copies to the Agent (at its request) of, any Authorisation required under any law or regulation of a Relevant Jurisdiction to:
(i)
enable it to perform its obligations under the Finance Documents; and
(ii)
ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document to which it is a party.
23.2
Compliance with laws
(a)
Each Obligor shall (and the Obligors shall ensure that each member of the Group will) comply in all respects with all laws to which it may be subject, if (except as regards (i) Sanctions, to which Clause 23.20 (
Use of proceeds and Sanctions
) below applies, and (ii) Anti-Corruption Laws, to which Clause 23.21
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(
Anti-Corruption
) below applies) failure so to comply has or is reasonably likely to have a Material Adverse Effect.
(b)
The Borrowers will maintain in effect and enforce policies and procedures designed to promote and achieve compliance by the Borrowers, their Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
23.3
Merger
No Obligor shall (and the Obligors shall ensure that no other member of the Group will) enter into any amalgamation, demerger, merger, consolidation or corporate reconstruction other than a Permitted Merger or Permitted Acquisition.
23.4
Change of business
The Obligors shall ensure that no substantial change is made to the general nature of the business of the Group from the Business.
23.5
Acquisitions
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no other member of the Group will):
(i)
acquire a company or any shares or securities or a business or undertaking (or, in each case, any interest in any of them); or
(ii)
incorporate a company.
(b)
Paragraph (a) above does not apply to an acquisition of a company, of shares, securities or a business or undertaking (or, in each case, any equity or partnership interest in any of them), or the incorporation of a company or Joint Venture which is a Permitted Acquisition.
23.6
Pari passu ranking
Each Obligor shall ensure that at all times any unsecured and unsubordinated claims of a Finance Party against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.
23.7
Negative pledge
(a)
In this Clause 23.7, “
Quasi-Security
” means a transaction described in paragraph (b) below.
(b)
Except as permitted under paragraph (c) below:
(i)
No Obligor shall (and the Obligors shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets.
96
(ii)
No Obligor shall (and the Obligors shall ensure that no other member of the Group will):
(A)
sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor or any other member of the Group;
(B)
sell, transfer or otherwise dispose of any of its receivables on recourse terms (it being understood for the avoidance of doubt that a member of the Group may sell, transfer or otherwise dispose of its receivables on non-recourse terms);
(C)
enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or
(D)
enter into any other preferential arrangement having a similar effect,
in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.
(c)
Paragraphs (a) and (b) above do not apply to any Security or (as the case may be) Quasi-Security, which is Permitted Security.
23.8
Disposals
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no member of the Group will) enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset.
(b)
Paragraph (a) above does not apply to any sale, lease, transfer or other disposal which is a Permitted Disposal.
23.9
Loans or credit
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no member of the Group will) be a creditor in respect of any Financial Indebtedness.
(b)
Paragraph (a) above does not apply to a Permitted Loan.
23.10
No Guarantees or indemnities
(a)
Except as permitted under paragraph (b) below, no Obligor shall (and the Obligors shall ensure that no member of the Group will) incur or allow to remain outstanding any guarantee in respect of any obligation of any person.
(b)
Paragraph (a) does not apply to a guarantee which is a Permitted Guarantee.
97
23.11
Dividends and share redemption
(a)
The Parent shall not declare, make or pay or allow any member of the Group to declare, make or pay any Restricted Payment.
(b)
Paragraph (a) does not apply to a Restricted Payment which is a Permitted Restricted Payment and, for the avoidance of doubt, does not prohibit the Merger Capital Reduction.
23.12
Priority Financial Indebtedness
(a)
The Obligors shall ensure that at no time will Financial Indebtedness incurred or allowed to remain outstanding by all members of the Group (including members of the Group which are not Guarantors) that are not Obligors exceed in the aggregate five per cent. (5%) of the consolidated total assets of the Group.
23.13
Pensions and employee benefit schemes
(a)
The Parent shall ensure that all pension schemes operated or maintained for the benefit of members of the Group or any of its employees are maintained and fully funded on the basis of reasonable actuarial assumptions and valuations prepared by actuaries of recognised standing most recently used to account for such obligations in accordance with the Accounting Principles and, in any case, in compliance with applicable law and the contracts governing their provision and that no action or omission is taken by any member of the Group in relation to such a pension scheme which has or is reasonably likely to have a Material Adverse Effect.
(b)
The Parent shall ensure that no member of the Group establishes any defined benefit occupational pension scheme.
(c)
The Parent shall deliver to the Agent copies of any actuarial reports prepared in relation to the pension schemes for the time being operated by or maintained for the benefit of members of the Group or any of its employees promptly after those reports are prepared in order to comply with the then current statutory or auditing requirements (as applicable either to the trustees of any relevant schemes or to the Parent) or otherwise.
(d)
The Parent shall promptly notify the Agent of any material change in the rate of contributions to any pension schemes referred to in paragraph (a) above paid or recommended to be paid (whether by the scheme actuary or otherwise) or required (by law or otherwise).
(e)
The Parent shall (and shall ensure that each of its Subsidiaries incorporated in Italy will):
(i)
fully and timely pay and discharge all mandatory and supplementary social security and health care assistance contributions (including interest and penalties) which the same companies are requested to pay under applicable laws, regulations, by-laws and any agreement entered into by the same companies;
98
(ii)
duly and timely file or cause to be filed, according to applicable law, all social security returns and social security reports which are required to be filed by same companies;
(iii)
properly and entirely accrue in the financial statements the TFR (
Trattamento di fine rapporto
) with regard to all its employees according to the applicable laws; and
(iv)
make adequate provisions in their accounts, pertaining to mandatory and supplementary social security and health care contributions which have not been paid because they are not yet due under the terms of any applicable laws, regulations, by-laws and any agreement entered into by the same companies.
23.14
Intellectual Property
Each Obligor shall (and the Obligors shall procure that each Group member will):
(a)
preserve and maintain the subsistence and validity of the Intellectual Property necessary for the business of the relevant Group member;
(b)
use reasonable endeavours to prevent any infringement in any material respect of the Intellectual Property;
(c)
make registrations and pay all registration fees and taxes necessary to maintain the Intellectual Property in full force and effect and record its interest in that Intellectual Property;
(d)
not use or permit the Intellectual Property to be used in a way or take any step or omit to take any step in respect of that Intellectual Property which may materially and adversely affect the existence or value of the Intellectual Property or imperil the right of any member of the Group to use such property; and
(e)
not discontinue the use of the Intellectual Property,
where failure to do so, in the case of paragraphs (a), (b) and (c) above, or in the case of paragraphs (d) and (e) above, such use, permission to use, omission or discontinuation, is reasonably likely to have a Material Adverse Effect.
23.15
No speculative Hedging Arrangements
No Borrower shall enter into any derivative transaction other than any derivative transaction entered into in connection with protection against or benefit from fluctuations in any rate or price.
23.16
ERISA reporting requirements
Each Obligor shall (and the Parent shall ensure that each relevant member of the Group will):
(a)
ERISA Events and ERISA Reports
99
(i)
promptly and in any event within ten (10) days after such Obligor or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, deliver to the Agent a statement of the finance director of the Parent describing such ERISA Event and the action, if any, that such Obligor or such ERISA Affiliate has taken and proposes to take with respect thereto; and
(ii)
on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information;
(b)
Plan Terminations
: promptly and in any event within five (5) Business Days after receipt thereof by any Obligor or any ERISA Affiliate, deliver to the Agent copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan;
(c)
Plan Annual Reports
: promptly upon the written request of the Agent, deliver to the Agent copies of each Schedule B (
Actuarial Information
) to the annual report (Form 5500 Series) most recently filed by it with the Employee Benefits Security Administration of the United States with respect to each Plan; and
(d)
Multiemployer Plan notices
: promptly and in any event within five (5) Business Days after receipt thereof by it or any ERISA Affiliate from the sponsor of a Multiemployer Plan, deliver to the Agent copies of each notice concerning:
(i)
the imposition of Withdrawal Liability by any such Multiemployer Plan;
(ii)
the reorganisation or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan; or
(iii)
the amount of liability incurred, or that may be incurred, by such Obligor or any ERISA Affiliate in connection with any event described in paragraph (a)(i) or (a)(ii) above.
23.17
Italian segregation of assets or
finanziamenti destinati
No Italian Obligor shall:
(a)
segregate assets or revenues pursuant to Article 2447
bis
(
Patrimoni Destinati ad uno Specifico Affare
) of the Italian Civil Code;
(b)
enter into any transaction which could qualify as a
finanziamento destinato
pursuant to article 2447-decies; or
(c)
issue any class of stock or any other financial instruments under article 2447-ter of the Italian Civil Code,
in each case, without the prior written consent of the Agent (acting on the instructions of the Majority Lenders).
100
23.18
Anti-Terrorism Laws
(a)
No Obligor shall engage in any transaction that violates any of the applicable prohibitions set forth in any Anti-Terrorism Law.
(b)
None of the funds or assets of such Obligor or its Subsidiaries that are used to repay the Facilities shall constitute property of, or shall be beneficially owned by, any Designated Person or be derived from transactions known to an Obligor to violate the prohibitions set forth in any Anti-Terrorism Law, and no Designated Person shall have any direct or indirect interest in such Obligor that would constitute a violation of any Anti-Terrorism Laws.
23.19
US Margin Regulations
No part of the proceeds of any Utilisation will be used (i) in contravention of Regulation T, U or X of the Federal Reserve Board, or (ii) for “buying” or “carrying” (within the meaning of Regulation T, U or X) any Margin Stock or to extend credit to others for the purpose of buying or carrying any Margin Stock. Following the application of the proceeds of each Utilisation, not more than twenty five per cent. (25%) of the value of the assets of the Obligors subject to any restriction contained in this Agreement or any other agreement or instrument between the Obligors, on the one hand, and any Lender or Affiliate of any Lender, on the other hand, relating to Financial Indebtedness will be Margin Stock.
23.20
Use of proceeds and Sanctions
(a)
The undertakings in this Clause 23.20 remain in force from the date of this Agreement for as long as any amount is outstanding under the Finance Documents or any Commitment is in force:
(i)
a Borrower will not request any Utilisation, and a Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Utilisation (A) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (B) in any manner that would result in the violation of any Sanctions applicable to any party hereto. Each Obligor shall, and shall procure that each other member of the Group shall, not knowingly use any revenue or benefit derived from any activity or dealing with a Sanctioned Person to be used in discharging any obligation due or owing to the Finance Parties; and
(ii)
each Obligor shall, and shall procure that each other member of the Group shall, to the extent permitted by law promptly upon becoming aware of them supply to the Agent, who will distribute to each Lender, details of any claim, action, suit, proceedings or investigation against it with respect to Sanctions by any Sanctions Authority.
(b)
Notwithstanding anything to the contrary contained in this Agreement or in any other Finance Document, in relation to any Specified Lender the undertakings under this Clause 23.20 shall only apply for the benefit of such Specified
101
Lender to the extent that the provisions would not result in (i) any violation of, conflict with or liability under EU Regulation (EC) 2271/96 or a similar anti-boycott statute. In connection with any amendment, waiver, determination or direction relating to any part of this Clause 23.20 of which a Specified Lender does not have the benefit, the Commitments of that Specified Lender will be excluded for the purpose of determining whether the consent of the Majority Lenders has been obtained or whether the determination or direction by the Majority Lenders has been made.
23.21
Anti-Corruption
(a)
Neither the Parent nor any Obligor shall (and the Parent shall ensure that no other member of the Group will) directly or indirectly use the proceeds of the Facilities in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any Anti-Corruption Laws.
(b)
The Parent and each Obligor shall (and the Parent shall ensure that each other member of the Group will) not violate applicable Anti-Corruption Laws and Sanctions in any material respect.
23.22
Existing Target Facility Repayment
The Parent shall procure that following the completion of the Mergers and the accession of Target to this Agreement pursuant to Clause 26.2 (
Additional Obligors
) any amounts outstanding under the Existing Target Facility shall be promptly repaid, cancelled and discharged in full and any guarantees with respect to the Existing Target Facility shall be released.
23.23
Security following Debt Ratings decrease
(a)
If following completion of the Mergers:
(i)
any two Public Debt Ratings (or any Public Debt Rating, if two Public Debt Ratings are issued) are either equal to BB or Ba2 or lower or have been withdrawn, then the Parent shall procure that, as soon as practicable and in any event within ninety (90) days after the relevant Public Debt Rating(s) or Public Debt Rating withdrawal(s) or reduction(s) become(s) public, Security:
(A)
is granted by Holdco over the shares of the Target and the quotas of Italian Holdco;
(B)
is granted by:
(1)
each Obligor over each intercompany note or loan in excess of US$10,000,000 (or its equivalent in any other currency or currencies) between the Obligor as creditor and a member of the Group as debtor; and
(2)
each member of the Group over each intercompany note or loan in excess of US$10,000,000 (or its equivalent in
102
any other currency or currencies) between such member of the Group as creditor and an Obligor as debtor,
whether documented by a promissory note or otherwise and including any such intercompany note or loan between Holdco and any of the Target, Italian Holdco or the Original Guarantor at completion of the Transaction; and
(ii)
any Public Debt Rating is equal to BB- or Ba3 or lower (in circumstances where the remaining Public Debt Ratings are equal to BB+ or Ba1 or lower) or any Public Debt Rating has been withdrawn, then the Parent shall procure that, as soon as practicable and in any event within ninety (90) days after the relevant Public Debt Rating(s) or Public Debt Rating withdrawal(s) or reduction(s) become(s) public, Security is granted over:
(A)
the assets referred to in paragraph (a)(i) above, to the extent it has not already been granted; and
(B)
all of the accounts receivable under contracts for the supply of goods and services to customers of the Material Subsidiaries,
it being understood that granting of Security under this paragraph (a)(ii) will not be required to the extent that it would cause a default (however defined) under any “equal and rateable security” or “most favoured nation” provisions (or other provisions of equivalent effect) under the Pari Passu Indebtedness due to an inability (despite the exercise of reasonable commercial endeavours) to overcome any obstacle to compliance with such provisions.
(b)
If at any time after the date of this Agreement:
(i)
any new Security or Quasi-Security is granted over assets of the Group in favour of the holders or creditors of Pari Passu Indebtedness; or
(ii)
any existing Security or Quasi Security is amended on terms favourable to the holders or creditors of Pari Passu Indebtedness;
then, at the same time any such grant or amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including accessions pursuant to Clause 26 (
Changes to the Obligors
)) to procure that the Finance Parties receive the benefit of the same or substantially the same new Security or Quasi-Security (on the same or substantially the same terms and conditions) or receive the benefit of the same or substantially the same amended terms (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(c)
With respect to any Security or Quasi-Security granted or to be granted by any member of the Group pursuant to paragraphs (a) and (b) above (the “
Transaction Security
”), each Obligor shall, as soon as reasonably practicable following the relevant public announcement (or in the case of any Transaction
103
Security granted to holder of Pari Passu Indebtedness, at the same time as such Transaction Security is so granted), do all such acts or execute all such documents as the Agent may reasonably specify (and in such form as the Agent may reasonably require) to grant and perfect the Transaction Security created or intended to be created under or evidenced by the relevant security documents entered into with respect to the Transaction Security (the “
Security Documents
”) and shall thereafter take all such action as is available to it (including making all filings and registrations and entering into any deeds of confirmation) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Transaction Security conferred or intended to be conferred by or pursuant to the Security Documents, in each case promptly following a reasonable request of the Agent (including without limitation following the completion of any Permitted Merger).
(d)
With respect to the granting of any Security or Quasi-Security granted or to be granted by any member of the Group pursuant to paragraphs (a) and (b) above, the obligation shall be subject always to the Agreed Security Principles. With respect to the granting of Security over accounts receivable referred to in paragraph (b) above in circumstances where Agreed Security Principle 2.1(d) relating to third party arrangements would apply due to the requirement of third party consent, then the Parent shall request such consent within the applicable timeframe in respect of accounts receivable that together, at that time, constitute a percentage of consolidated Group revenues that is at least the greater of (i) the percentage of revenues represented by the ten (10) largest relevant contracts by revenue and (ii) twenty five per cent. (25%).
(e)
In this Agreement, “
Pari Passu Indebtedness
” means any Financial Indebtedness incurred by any member of the Group pursuant to any loan, facility, any public or private financing in the domestic or international debt capital markets (including any public or private bond issue, placement or note, security or other debt issuance or indebtedness), in each case incurred by any member of the Group (including, without limitation, the Bridge Facilities and the Existing GTECH Notes) as well as any Financial Indebtedness incurred by any member of the Group for the purposes of refinancing any of the aforementioned Financial Indebtedness but excludes Financial Indebtedness which is secured by Security that falls within the basket set out in paragraph (o) of the definition of “Permitted Security”.
(f)
The provisions of Clause 23.23 (
Security following Debt Ratings decrease
) shall continue with full force and effect notwithstanding any intervening application of Clause 37.7 (
Release of Security on Permitted Disposal and Investment Grade Rating
) and in the event that the relevant trigger conditions are met subsequently, the Parent shall again be obliged to procure the granting of Security in accordance with this Clause 23.23.
23.24
Guarantor Threshold Test and Additional Guarantors
(a)
Subject in each case to the Agreed Security Principles, the Parent shall do all acts and deliver all documents as are necessary, including procuring accessions pursuant to Clause 26 (
Changes to the Obligors
), to ensure that commencing from the date on which the Mergers are completed, and by reference to the
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Compliance Certificate and accompanying financial statements to be delivered pursuant to Clause 21.2(c) (
Provision and contents of Compliance Certificate
): (i) the ratio of (A) the aggregate of the total unconsolidated assets of the Guarantors excluding the Excluded Assets to (B) the consolidated total assets of the Group excluding Excluded Assets is greater than or equal to eighty five per cent. (85%) and (ii) the ratio of (A) the unconsolidated aggregate earnings before interest, taxes, depreciation and amortisation (calculated on the same basis as EBITDA is calculated but excluding the Excluded EBITDA Entries) of the Guarantors to (B) EBITDA of the Group excluding Excluded EBITDA Entries is greater than or equal to eighty five per cent. (85%).
(b)
For the purposes of paragraph (a) above, the consolidated total assets and EBITDA of the Group (i) may exclude the total assets and EBITDA of Subsidiaries with negative assets or negative EBITDA and (ii) shall exclude the total assets and EBITDA of all Subsidiaries which the Agent (acting reasonably) is satisfied are either not eligible (on the basis of the Agreed Security Principles) to be a Guarantor or over whose shares (on the basis of the Agreed Security Principles) no Security is required to be granted.
(c)
If at any time after the date of this Agreement:
(i)
any new guarantee is granted in favour of any holder or creditor of Pari Passu Indebtedness; or
(ii)
any guarantee is amended on terms favourable to the holders or creditors of Pari Passu Indebtedness;
then, at the same time any such grant or amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including accessions pursuant to Clause 26 (
Changes to the Obligors
)) to procure that the Finance Parties receive the benefit of the same or substantially the same new guarantee (on the same or substantially the same terms and conditions) or receive the benefit of the same or substantially the same amended terms (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(d)
With respect to any guarantee granted or to be granted by any member of the Group pursuant to paragraph (c) above, the obligation shall be subject always to the Agreed Security Principles.
23.25
MFN to Financial Covenants and Mandatory Prepayments
(a)
If at any time:
(i)
any new financial covenant is put in place in favour of any holder or creditor of Pari Passu Indebtedness; or
(ii)
the levels of any financial covenant in favour of the holders or creditors of Pari Passu Indebtedness is or is amended to become more stringent than the levels of the same or an equivalent financial covenant in favour of the Finance Parties under this Agreement;
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then, at the same time any such financial covenant is put in place, becomes more stringent or such amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including entering into an amendment and restatement of this Agreement) to procure that the Finance Parties receive the benefit of the same or substantially the same financial covenants (on the same or substantially the same terms and conditions and at substantially the same levels) (as the case may be) in substance and form satisfactory to the Agent (acting reasonably).
(b)
If at any time:
(i)
any new mandatory prepayment provision is put in place in favour of any holder or creditor of Pari Passu Indebtedness; or
(ii)
any mandatory prepayment provision in favour of the holders or creditors of Pari Passu Indebtedness is or is amended to become more favourable than any mandatory prepayment provision in favour of the Finance Parties under this Agreement;
then, at the same time any such mandatory prepayment provision is put in place, or such amendment becomes effective, the Parent shall do all acts and deliver all documents as are necessary (including entering into an amendment and restatement of this Agreement) to procure that the Finance Parties receive the benefit of the same or substantially the same mandatory prepayment provisions (on the same or substantially the same terms and conditions) (as the case may be) in substance and form satisfactory to the Agent (acting reasonably), it being understood, for the avoidance of doubt, that the application of a premium or make-whole to the amount of a mandatory prepayment that, in each case, is customary for the relevant type of note or instrument will not be taken into account in determining whether or not the relevant mandatory prepayment is more favourable.
23.26
Structure Memorandum
The Parent shall not amend the Structure Memorandum in a way that is reasonably likely to be materially prejudicial to the interests of the Lenders without the consent of the Majority Lenders (acting reasonably).
24.
EVENTS OF DEFAULT
Each of the events or circumstances set out in this Clause 24 is an Event of Default. Without prejudice to any right or remedy available to the Finance Parties under this Agreement or any applicable law, any Event of Default constitutes, as applicable, a termination event (
clausola risolutiva espressa
) pursuant to article 1456 of the Italian Civil Code, a withdrawal event (
causa di recesso
) pursuant to article 1845 of the Italian Civil Code and/or an event or circumstance having the same effects as the circumstances set out in article 1186 of the Italian Civil Code.
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24.1
Non-payment
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless such failure to pay is due to administrative or technical error and payment is made within three (3) Business Days of its due date.
24.2
Financial covenants and other obligations
Any requirement of Clause 22 (
Financial Covenants
) is not satisfied or an Obligor does not comply with the provisions of Clauses 23.7 (
Negative pledge
), 23.8 (
Disposals
), 23.20 (
Use of proceeds and Sanctions
), 23.21 (
Anti-Corruption
), 23.11 (
Dividends and share redemption
) or Clause 23.12 (
Priority Financial Indebtedness
).
24.3
Other obligations
(a)
An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 24.1 (
Non-payment
) and Clause 24.2 (
Financial covenants and other obligations
)).
(b)
No Event of Default under paragraph (a) above will occur if (i) the failure to comply is capable of remedy and is remedied within twenty (20) Business Days of the Agent giving notice to the Parent or relevant Obligor or the Parent or an Obligor becoming aware of the failure to comply.
24.4
Misrepresentation
Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made and, if capable of cure, is not cured within twenty (20) Business Days.
24.5
Cross-default
(a)
Any Financial Indebtedness of any member of the Group is not paid when due nor within any originally applicable grace period.
(b)
Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
(c)
Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).
(d)
Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).
(e)
No Event of Default will occur under this Clause 24.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling
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within paragraphs (a) through (d) above is less than €50,000,000 or its equivalent in any other currency or currencies (or, following completion of the Mergers, US$75,000,000 or its equivalent in any other currency or currencies).
24.6
Insolvency
(a)
An Obligor or Material Subsidiary is unable or admits inability to pay its debts as they fall due or is deemed to or declared to be unable to pay its debts under applicable law, suspends or threatens to suspend making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
(b)
The value of the assets of any Obligor (other than the Parent) or Material Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities) and such circumstances continue for sixty (60) days commencing on the earlier of the date when the directors of such Obligor acknowledge or have evidence that such circumstances exist; or
(c)
Any circumstance contemplated under Section 2447 of the Italian Civil Code occurs in relation to the Parent and:
(i)
no shareholders meeting takes place for the recapitalisation of the Parent; or
(ii)
the recapitalisation of the Parent is not completed,
in each case within sixty (60) days of the earlier of the date when the directors of the Parent acknowledge or have evidence that the aforementioned circumstance is in existence.
(d)
A moratorium is declared in respect of any indebtedness of an Obligor or Material Subsidiary. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.
24.7
Insolvency proceedings
(a)
Any corporate action, legal proceedings or other procedure or step (including a petition or a judicial or court order) is taken or filed in relation to:
(i)
the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration, bankruptcy, other insolvency proceedings or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of an Obligor (other than the Parent) or Material Subsidiary;
(ii)
a composition, compromise, assignment or arrangement with any creditor of an Obligor (other than the Parent) or Material Subsidiary;
(iii)
the appointment of a liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of an
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Obligor (other than the Parent) or Material Subsidiary or any of its assets;
(iv)
enforcement of any Security over any assets of an Obligor (other than the Parent) or Material Subsidiary;
(v)
enforcement of any Security over any asset or assets of the Parent having an aggregate value greater than or equal to €50,000,000 or its equivalent in any other currency or currencies (or, following completion of the Mergers, US$75,000,000 or its equivalent in any other currency or currencies); or
(vi)
Italian Insolvency Proceedings,
or any analogous procedure or step is taken in any jurisdiction.
(b)
Paragraph (a) shall not apply to:
(i)
any winding-up petition against any Obligor (other than the Parent) or Material Subsidiary which is frivolous or vexatious and is discharged, stayed or dismissed within sixty (60) days of commencement or, if earlier, the date on which it is advertised; or
(ii)
any petition filed by creditors against the Parent in respect of an Italian Insolvency Proceeding to the extent that (a) the Parent is contesting in good faith and by appropriate means such petition, (b) the Parent provides evidence to the Lenders that it is reasonably likely that such petition will be discharged within ninety (90) days of its filing and (c) such petition is discharged within ninety (90) days of its filing.
24.8
Creditors’ process
Pursuant to any creditor’s process, any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of an Obligor or Material Subsidiary having an aggregate value greater than or equal to €25,000,000 or its equivalent in any other currency or currencies (or, following completion of the Mergers, US$35,000,000 or its equivalent in any other currency or currencies) and is not discharged within sixty (60) days.
24.9
Unlawfulness and invalidity
(a)
It is or becomes unlawful for an Obligor to perform any of its material obligations under the Finance Documents.
(b)
Any obligation or obligations of any Obligor under any Finance Documents are not or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lenders under the Finance Documents.
(c)
Any Finance Document ceases to be in full force and effect in any material respect ceases to be legal, valid, binding, enforceable or effective or is alleged by a party to it (other than a Finance Party) to be ineffective.
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24.10
Cessation of business
Any Obligor or any Material Subsidiary suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a substantial part of its business except as a result of a Permitted Disposal or a Permitted Merger.
24.11
Repudiation and rescission of agreements
An Obligor (or any other relevant party) rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or a material provision thereof or evidences an intention to rescind or repudiate a Finance Document or a material provision thereof.
24.12
Litigation
Any litigation, or administrative, proceedings are commenced or threatened in writing against an Obligor or any Material Subsidiary which have been adversely determined, or would be reasonably likely to be adversely determined and if so determined, be reasonably likely to have, a Material Adverse Effect.
24.13
Material adverse change
Any event or circumstance occurs which has or is reasonably likely to have a Material Adverse Effect.
24.14
ERISA Events of Default
(a)
Any ERISA Event shall have occurred with respect to a Plan and such ERISA Event taken together with the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Obligors and the ERISA Affiliates related to such ERISA Event) and shall have caused, or shall reasonably be expected to cause, a Material Adverse Effect.
(b)
Any ERISA Event shall have occurred with respect to a plan that shall have caused or shall be reasonably be expected to have a Material Adverse Effect.
(c)
Any Obligor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Obligors and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), shall be reasonably expected to cause a Material Adverse Effect.
(d)
Any Obligor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is being terminated, within the meaning of title IV of ERISA, and as a result of such termination the aggregate annual contributions of the Obligors and the ERISA Affiliates to all Multiemployer Plans that are then in reorganisation or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer plans immediately preceding the
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plan year in which such termination occurs by an amount that shall be reasonably expected to cause a Material Adverse Effect.
24.15
US Insolvency Proceedings
(a)
An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction in the United States seeking:
(i)
relief in respect of any Obligor or Material Subsidiary, or of a substantial part of the property or assets of any Obligor or Material Subsidiary, under US Bankruptcy Law;
(ii)
the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or Material Subsidiary or for a substantial part of the property or assets of any Obligor or Material Subsidiary; or
(iii)
the winding-up or liquidation of any Obligor or Material Subsidiary,
and such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered.
(b)
Any Obligor or Material Subsidiary shall:
(i)
voluntarily commence any proceeding or file any petition seeking relief under US Bankruptcy Law; or
(ii)
apply for or consent to the appointment, pursuant to the laws of the United States or any state thereof, of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Obligor or Material Subsidiary or for a substantial part of the property or assets of any Obligor or Material Subsidiary.
24.16
Acceleration
(a)
On and at any time after the occurrence of an Event of Default:
(i)
set forth in Clauses 24.1 (
Non-payment
), 24.2 (
Financial covenants and other obligations
),
and 24.5 (
Cross default
), which is continuing, the Agent may (and, if so instructed by the Majority Lenders, shall) by notice to the Parent, declare that an Event of Default has occurred and terminate (
risolvere
) this Agreement in accordance with article 1456 of the Italian Civil Code;
(ii)
set forth in Clauses 24.3 (
Other obligations
), 24.4 (
Misrepresentation
), 24.6 (
Insolvency
), 21.7 (
Insolvency proceedings
), 24.8 (
Creditors’ process
), 24.9 (
Unlawfulness and invalidity
), 24.10 (
Cessation of business
), 24.11 (
Repudiation and rescission of agreements
), 24.12 (Litigation), 21.13 (
Material Adverse Change
), and 24.15 (
US Insolvency Proceedings
), which is continuing, the Agent may (and, if so instructed by the Majority Lenders, shall) withdraw (
recedere
) from
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this Agreement by notice to the Parent pursuant to article 1845 of the Italian Civil Code.
(b)
This Agreement will further be considered terminated pursuant to article 1454 of the Italian Civil Code upon occurrence of an Event of Default which is continuing (includ
ing with respect to an Event of Default which allow to terminate this Agreement pursuant to paragraph (a)(i) or to withdraw from this Agreement pursuant to paragraph (a)(ii) above) if the Majority Lenders do not want to proceed to terminate or withdraw from this Agreement pursuant to, respectively, paragraph (a)(i) and/or paragraph (a)(ii) above, provided that:
(i)
the default is not immaterial (
non riveste scarsa importanza
);
(ii)
such default is not remedied within fifteen (15) Business Days following the receipt by the Parent of a warning of compliance (
diffida ad adempiere
) within a specified period of time as determined in writing by the Agent in compliance with the applicable law.
(c)
Upon receipt a notice of termination or withdrawal pursuant to the above paragraphs (a)(i), (a)(ii) and/or (b) above, or after the occurrence of one of the circumstances set forth in article 1186 of the Italian Civil Code, and with immediate effect (in the case of a notice set pursuant to paragraph (a)(i) above or in the case of occurrence of one of the circumstances set forth in article 1186 of the Civil Code) or with effect upon the elapse of fifteen (15) Business Days (in the case of a notice sent pursuant to paragraphs (a)(ii) and (b) above):
(i)
the Total Commitments shall immediately be cancelled;
(ii)
all the Utilizations shall become payable on demand by the Agent on the instructions of the Majority Lenders; and
(iii)
the Majority Lenders shall be entitled to exercise or direct the Agent to exercise any or all of their rights, remedies, powers or discretions under the Finance Documents.
(d)
The Parties agree that the provisions set out in Clause 14 (
Tax Gross Up and Indemnities
), Clause 15 (
Increased Costs
), and Clause 18 (
Costs and Expenses
) shall survive the termination (
risoluzione
), withdrawal (
recesso
) and/or acceleration (
decadenza dal beneficio del termine
).
(e)
The rights and remedies set out in this Clause 24.16 are in addition to any other right or remedy available to the Finance Parties under this Agreement or any applicable law.
(f)
If an Event of Default occurs under Clause 24.15 (
US Insolvency Proceedings
) in respect of an Obligor:
(i)
the Commitments shall immediately be cancelled; and
(ii)
all of the Loans, together with accrued interest, and all other amounts accrued under the Finance Documents shall be immediately due and payable;
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in each case automatically and without any direction, notice, declaration or other act.
25.
CHANGES TO THE LENDERS
25.1
Assignments and transfers by the Lenders
Subject to this Clause 25.1, a Lender (the “
Existing Lender
”) may, pursuant to articles 1406 and following, and articles 1263 and following (as applicable), of the Italian Civil Code:
(a)
assign any of its rights; or
(b)
transfer any of its rights and obligations,
under any Finance Document to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “
New Lender
”) and it is (i) not a Blacklisted Resident Entity and (ii) a person authorised under applicable Italian law or regulation to (x) make loans to a borrower incorporated in Italy; or (y) acquire participations in or provide guarantees or cash cover in relation to loans made to a borrower incorporated in Italy.
Any transfer under this Clause 25.1 shall be construed and interpreted as full or partial transfer of contract (
cessione del contratto totale o parziale
) pursuant to article 1406
et seq.
of the Italian Civil Code (or, to the extent necessary, as an assignment of rights (
cessione dei crediti
) pursuant to article 1260
et seq.
of the Italian Civil Code and, to the extent that in the Transfer Certificate the Existing Lender seeks to transfer its obligations under the Finance Documents, an assumption without recourse of obligations (
accollo liberatorio
) pursuant to article 1273 of the Italian Civil Code).
25.2
Conditions of assignment or transfer
(a)
Except where such assignment or transfer is from a Lender to an Affiliate, another Lender or a Related Fund, the minimum amount of any assignment or transfer undertaken pursuant to this Clause 25 must be greater than or equal to €5,000,000.
(b)
The consent of the Parent shall be required for any assignment or transfer by an Existing Lender of any of such Existing Lender’s rights or obligations under this Agreement, unless the transfer or assignment is:
(i)
to another Lender or an Affiliate of a Lender; or
(ii)
following an Event of Default which is continuing.
Where the consent of the Parent is required it shall not be unreasonably withheld or delayed, and shall be deemed to have been given if no response has been received from the Parent within five (5) Business Days of the date of the request for its consent.
(c)
An assignment will only be effective on:
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(i)
receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties and the other Secured Parties as it would have been under if it had been an Original Lender;
(ii)
if there is a Register, the recordation of such assignment on the Register; and
(iii)
the performance by the Agent of all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Lender and the New Lender.
(d)
If:
(i)
a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(ii)
as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 14 (
Tax Gross Up and Indemnities
) or Clause 15.1 (
Increased costs
),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This paragraph (e) shall not apply in relation to Clause 14.2 (
Tax gross-up
), to a Treaty Lender that has included a confirmation of its scheme reference number and its jurisdiction of tax residence in accordance with paragraph (h)(ii)(B) of Clause 14.2 (
Tax gross-up
) if the Obligor making the payment has not made a Borrower DTTP Filing in respect of that Treaty Lender.
(e)
Any Lender may, without the consent of any Obligor, at any time sub-participate or sub-contract any of its rights or obligations under the Finance Documents.
(f)
By becoming party to this Agreement each Obligor expressly grants its consent to any assignment or transfer of the rights and obligations from an Existing Lender to a New Lender for the purposes of article 1407 of the Italian Civil Code.
25.3
Assignment or transfer fee
Unless the Agent otherwise agrees and excluding an assignment or transfer (i) to an Affiliate of a Lender, (ii) to a Related Fund or (iii) made in connection with primary syndication of the Facilities, the New Lender shall, on the date upon which an
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assignment or transfer takes effect, pay to the Agent (for its own account) a fee of €1,500 (or, following completion of the Mergers, €2,000).
25.4
Limitation of responsibility of Existing Lenders
(a)
Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
(i)
the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;
(ii)
the financial condition of any Obligor;
(iii)
the performance and observance by any Obligor or any other member of the Group of its obligations under the Finance Documents or any other documents; or
(iv)
the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,
and any representations or warranties implied by law are excluded.
(b)
Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
(i)
has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any other Finance Party in connection with any Finance Document; and
(ii)
will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
(c)
Nothing in any Finance Document obliges an Existing Lender to:
(i)
accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 25; or
(ii)
support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.
25.5
Procedure for transfer
Subject to the conditions set out in Clause 25.2 (
Conditions of assignment or transfer
), a transfer is effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the
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Existing Lender and the New Lender and, if there is a Register, the transfer is recorded on the Register.
(a)
The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.
(b)
The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender upon its completion of all “know your customer” or other checks relating to any person that it is required to carry out in relation to the transfer to such New Lender.
(c)
Subject to Clause 25.9 (
Pro rata interest settlement
) on the Transfer Date:
(i)
to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by way of transfer of contract, by assignment or by assumption and its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the “
Discharged Rights and Obligations
”);
(ii)
each of the Obligors and the New Lender shall assume obligations towards one another or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor or other member of the Group and the New Lender have assumed or acquired the same in place of that Obligor and the Existing Lender;
(iii)
the Agent, the New Lender, the other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights, or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and
(iv)
the New Lender shall become a Party as a “
Lender
”.
25.6
Procedure for assignment
(a)
Subject to the conditions set out in Clause 25.2 (
Conditions of assignment or transfer
) an assignment may be effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.
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(b)
The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary “know your customer” or similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.
(c)
Subject to Clause 25.9 (
Pro rata interest settlement
), on the Transfer Date:
(i)
the Existing Lender will assign absolutely to the New Lender its rights under the Finance Documents expressed to be the subject of the assignment in the Assignment Agreement;
(ii)
the Existing Lender will be released by the Borrowers and the other Finance Parties from the obligations owed by it (the “
Relevant Obligations
”) expressed to be the subject of the release in the Assignment Agreement; and
(iii)
the New Lender shall become a Party as a “Lender” and will be bound by obligations equivalent to the Relevant Obligations.
(d)
Lenders may utilise procedures other than those set out in this Clause 25.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with Clause 25.5 (
Procedure for transfer
), to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender);
provided that
they comply with the conditions set out in Clause 25.2 (
Conditions of assignment or transfer
).
25.7
Copy of Transfer Certificate or Assignment Agreement to Parent
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Parent a copy of that Transfer Certificate or Assignment Agreement.
25.8
Security over Lenders’ rights
In addition to the other rights provided to Lenders under this Clause 25, each Lender may without consulting with or obtaining consent from any Obligor, at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of such Lender including, without limitation:
(a)
any charge, assignment or other Security to secure obligations to a federal reserve or central bank, including using such rights as “
attività non negoziabili
” to be assigned by way of security for the benefit of the European Central Bank or the Bank of Italy for refinancing purposes in the context of the so called “Abaco” procedure (
attivi bancari collateralizzati
), pursuant to the rules named “
Strumenti di politica monetaria dell’Eurosistema
” applicable from time to time; and
(b)
in the case of any Lender which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of
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obligations owed, or securities issued, by such Lender as Security for those obligations or securities,
except that no such charge, assignment or Security shall:
(i)
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Lender as a party to any of the Finance Documents; or
(ii)
require any payments to be made by an Obligor other than or in excess of, or grant to any person any more extensive rights than, those required to be made or granted to the relevant Lender under the Finance Documents.
25.9
Pro rata
interest settlement
If the Agent has notified the Lenders that it is able to distribute interest payments on a “
pro rata basis
” to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 25.5 (
Procedure for transfer
) or any assignment pursuant to Clause 25.6 (
Procedure for assignment
) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):
(a)
any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date (“Accrued Amounts”) and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six (6) Months, on the next of the dates which falls at six (6) Monthly intervals after the first day of that Interest Period); and
(b)
the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:
(i)
when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and
(ii)
the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 25.9, have been payable to it on that date, but after deduction of the Accrued Amounts.
25.10
Disclosure to numbering service providers
(a)
Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facilities and one or more Obligors the following information:
(i)
names of Obligors;
(ii)
country of domicile of Obligors;
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(iii)
place of incorporation of Obligors;
(iv)
date of this Agreement;
(v)
the names of the Agent and the Arrangers;
(vi)
date of each amendment and restatement of this Agreement;
(vii)
amount of Total Commitments;
(viii)
currencies of the Facilities;
(ix)
type of Facilities;
(x)
ranking of Facilities;
(xi)
Final Maturity Date for Facilities;
(xii)
changes to any of the information previously supplied pursuant to paragraphs (i) to (xi) above; and
(xiii)
such other information agreed between such Finance Party and the Parent,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
(b)
The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facilities and one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.
(c)
Each Obligor represents that none of the information set out in paragraphs (i) to (xiii) of paragraph (a) above is, nor will at any time be, unpublished price-sensitive information.
(d)
The Agent shall notify the Parent and the other Finance Parties of:
(i)
the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facilities and one or more Obligors; and
(ii)
the number or, as the case may be, numbers assigned to this Agreement, the Facilities and one or more Obligors by such numbering service provider.
25.11
The Register
In the event that a Borrower is a US Tax Obligor:
(a)
the Agent, acting solely for this purpose as the agent of the Obligors (and to the extent necessary for the Facilities to be considered as being in registered form
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for US federal income tax purposes), shall maintain at its address referred to in Clause 32 (
Notices
):
(i)
a copy of each notice and written confirmation referred to in Clause 25.2 (
Conditions of assignment or transfer
) and in Clause 25.5 (
Procedure for transfer
) delivered to and accepted by it; and
(ii)
with respect to each Facility, a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts (and related interest amounts) owing to, each Lender from time to time (the “
Register
”) under such Facility.
The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Obligors, the agents and the Lenders shall treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Obligor at any reasonable time and from time to time upon reasonable prior notice. This Clause 25.11 shall be construed so that each Facility is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations (or any other relevant or successor provisions of the Code or of such Treasury regulations).
Each Party to this Agreement irrevocably authorises the Agent to make the relevant entry in the Register on its behalf for the purposes of this Clause 25.11 without any further consent of, or consultation with, such Party.
26.
CHANGES TO THE OBLIGORS
26.1
Assignment and transfers by Obligors
Save in the context of a Permitted Merger or as contemplated by this Clause 26, no Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
26.2
New Facility B Borrower Accession
(a)
During the Second Facility B Availability Period:
(i)
the New Facility B Borrower shall accede to this Agreement as the Borrower under Facility B by delivering a duly completed Accession Letter; and
(ii)
the Agent shall receive all of the documents and other evidence listed in Part II of Schedule 2 (
Conditions Precedent
) in relation to the New Facility B Borrower, each in form and substance satisfactory to the Agent,
(collectively, the “
New Facility B Borrower Accession
”).
(b)
The Parent undertakes to resign as the Borrower under Facility B with effect from such time at which the Facility B Repayment is effected, at which time the Parent shall cease to be the Borrower under Facility B (but in each case not, for
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the avoidance of doubt, under Facility A) and shall have no further rights or obligations under the Finance Documents as the Borrower under Facility B.
(c)
If the accession of the New Facility B Borrower as the Borrower under Facility B obliges the Agent or any Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Parent shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent or such Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other checks in relation to any relevant person pursuant to the accession of the New Facility B Borrower to this Agreement as the Borrower under Facility B.
26.3
Additional Guarantors
(a)
Subject to compliance with the provisions of paragraphs (b) and (c) of Clause 21.6 (
“Know your customer” checks
), the Parent may request that any of its wholly owned Subsidiaries become a Guarantor.
(b)
Subject always to the provisions of Clause 23.24 (
Guarantor Threshold Test and Additional Guarantors
), the Parent shall procure that:
(i)
such members of the Group which are listed at Part V of Schedule 1 will accede to this Agreement as Additional Guarantors on the same date as such members of the Group accede as guarantors of the Existing GTECH Revolving Credit Facilities; and
(ii)
from time to time thereafter, each member of the Group required to comply with Clause 23.24 (
Guarantor Threshold Test and Additional Guarantors
) will accede to this Agreement as an Additional Guarantor,
in each case subject to delivery of the documentation referred to in paragraph (c)(iii) below.
(c)
A member of the Group which is a wholly owned Subsidiary of the Parent shall become an Additional Guarantor if:
(i)
other than with respect to those Additional Obligors set out at paragraph (b) above, the Majority Lenders have approved that member of the Group;
(ii)
the Parent and the proposed Additional Guarantor deliver to the Agent a duly completed and executed Accession Letter; and
(iii)
the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 (
Conditions Precedent
) in relation to that Additional Obligor, each in form and substance satisfactory to the Agent.
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(d)
In the case of an Additional Guarantor incorporated in Italy, the Parties have agreed to make an appropriate increase to the guarantee limitation set out in Clause 19.13 (
Italian guarantee limitations
).
(e)
The Agent shall notify the Parent and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (
Conditions Precedent
).
(f)
Notwithstanding anything to the contrary in this Agreement, a Subsidiary of the Parent that is a controlled foreign corporation (as such term is defined in Section 957 of the Code) may not (and shall not be obligated to) become a Guarantor for purposes of the Finance Documents.
26.4
Resignation of a Guarantor
(a)
The Parent may request that a Guarantor ceases to be a Guarantor by delivering to the Agent a Resignation Letter if:
(i)
that Guarantor is being disposed of by way of a Third Party Disposal and the Parent has confirmed this is the case;
(ii)
following the completion of any Permitted Transaction, any Guarantor ceases to be a Material Subsidiary; or
(iii)
all the Lenders have consented to the resignation of that Guarantor.
(b)
The Agent shall accept a Resignation Letter and notify the Parent and the Lenders of its acceptance if:
(i)
the Parent has confirmed that no Default is continuing or would result from the acceptance of the Resignation Letter; and
(ii)
no payment is due from the Guarantor under Clause 19.1 (
Guarantee and indemnity
).
(c)
The resignation of that Guarantor shall not be effective until the date of the relevant Third Party Disposal at which time that company shall cease to be a Guarantor and shall have no further rights or obligations under the Finance Documents as a Guarantor.
26.5
Repetition of Representations
Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the representations and warranties referred to in paragraph (a)(ii) of Clause 20.24 (
Repetition
) are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.
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27.
ROLE OF THE AGENT, THE MANDATED LEAD ARRANGERS AND OTHERS
27.1
Appointment
(a)
Each of the Mandated Lead Arrangers and the Lenders hereby irrevocably appoints Mediobanca — Banca di Credito Finanziario S.p.A. to act on its behalf as the Agent (and, in particular, for the purposes of Italian law, as
mandatario con rappresentanza
(common representative)) hereunder and under the other Finance Documents and authorises the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.
(b)
Each of the Mandated Lead Arrangers and the Lenders authorises the Mandated Lead Arrangers to exercise the rights, powers, authorities and discretions specifically given to the Mandated Lead Arrangers under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
(c)
Unless otherwise expressly stated, the provisions of this Clause 27 are solely for the benefit of the Agent, the Mandated Lead Arrangers, the Lenders and no Obligor shall have rights as a third party beneficiary of any of such provisions.
27.2
Rights as a Lender
The person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the person serving as the Agent hereunder in its individual capacity. Such person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if such person were not the Agent hereunder and without any duty to account therefor to the Lenders.
27.3
Duties of the Agent
(a)
The Agent shall promptly forward to a Party the original or a copy of any document which is delivered to it for that Party by any other Party.
(b)
Without prejudice to Clause 25.7 (
Copy of Transfer Certificate or Assignment Agreement to Parent
), paragraph (a) above shall not apply to any Transfer Certificate or Assignment Agreement.
(c)
Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(d)
If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
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(e)
If the Agent is aware of the non-payment of any principal, interest or fee payable to a Finance Party (other than the Agent or the Arrangers) under this Agreement, it shall promptly notify the other Finance Parties.
(f)
The duties of the Agent under the Finance Documents are solely mechanical and administrative in nature.
(g)
The Agent, acting solely for this purpose as agent of the Obligors, shall maintain the Register referred to in Clause 25.11 (
The Register
).
(h)
Notwithstanding any other provision of any Finance Document to the contrary, none of the Agent or the Mandated Lead Arrangers is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law, regulation or a breach of a fiduciary duty or duty of confidentiality.
27.4
Roles of the Mandated Lead Arrangers
Except as specifically provided in the Finance Documents, the Mandated Lead Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document.
27.5
No fiduciary duties
(a)
Nothing in this Agreement constitutes the Agent or the Mandated Lead Arrangers as a trustee or fiduciary of any other person.
(b)
None of the Agent and Mandated Lead Arrangers shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.
27.6
Business with the Group
The Agent and Mandated Lead Arrangers may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
27.7
Rights and discretions of the Agent
The Agent:
(a)
may rely on any representation, notice or document believed by them to be genuine, correct and appropriately authorised;
(b)
may rely on any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and
(c)
may disclose the identity of a Defaulting Lender to the other Finance Parties and the Parent and shall disclose the same upon the written request of the Parent or the Majority Lenders.
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27.8
Majority Lenders’ instructions
(a)
Unless a contrary indication appears in a Finance Document, the Agent shall exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent).
(b)
Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.
(c)
The Agent is not authorised to act on behalf of a Lender (without first obtaining such Lender’s consent) in any legal or arbitration proceedings relating to any Finance Document.
(d)
In making any determination with a view to granting or refusing a consent under this Agreement, the Majority Lenders shall act reasonably in making such determination.
27.9
Exculpatory Provisions
The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Finance Documents. Without limiting the generality of the foregoing, the Agent:
(a)
shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b)
shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Finance Documents that it is required to exercise as directed in writing by the Majority Lenders (or such other number of percentage of the Lenders as shall be expressly provided for herein or in the Finance Documents);
provided that
it shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose it to liability or that is contrary to any Finance Document or applicable law;
(c)
shall not, except as expressly set forth herein and in the other Finance Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to a Borrower or any of its Affiliates that is communicated to or obtained by the person serving as the Agent or any of its Affiliates in any capacity;
(d)
shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as it shall believe in good faith shall be necessary, under the circumstances as provided in Clauses 37.1 (
Required consents
) and 24.16 (
Acceleration
)) or (ii) in the absence of its own gross negligence or wilful misconduct. The Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is
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given to it by the Borrowers, a Lender or another agent of the Finance Parties under this Agreement; and
(e)
shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Finance Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Finance Document or any other agreement, instrument or document.
27.10
Reliance by the Agent
(a)
The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person.
(b)
The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon.
(c)
In determining compliance with any condition hereunder to the making of a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, the Agent may presume that such condition is satisfactory to such Lender unless the Agent shall have received notice to the contrary from such Lender prior to the making of such Loan.
(d)
The Agent may consult with legal counsel (who may be counsel for a Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
27.11
Replacement of the Agent
(a)
After consultation with the Parent, the Majority Lenders may, by giving thirty (30) days’ notice to the Agent (or, where any one of them is an Impaired Agent, by giving such shorter notice agreed to by the Majority Lenders), replace the Agent by appointing a successor which shall be a bank with offices in the United States and Italy, or an Affiliate of any such bank with offices in the United States and Italy.
(b)
The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.
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(c)
The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 27 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date).
(d)
Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
27.12
Delegation of Duties
(a)
The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Finance Document by or through any one or more sub-agents appointed by the Agent.
(b)
The Agent and any such sub-agent may perform all of its duties and exercise its rights and powers by or through their respective Related Parties.
(c)
The provisions of Clause 27.9 (
Exculpatory Provisions
) shall apply to any such sub-agent and to the Related Parties of the Agent and shall apply to their respective activities in connection with the syndication of the Facilities provided for herein as well as activities as the Agent.
27.13
Resignation of the Agent
(a)
The Agent may at any time give notice of its resignation to the Lenders, the other agents to the Finance Parties under this Agreement and the Borrowers.
(b)
Upon receipt of any such notice of resignation, the Majority Lenders shall have the right, in consultation with the Borrowers, to appoint a successor, which shall be a bank with offices in the United States and Italy, or an Affiliate of any such bank with offices in the United States and Italy.
(c)
If no such successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent gives notice of its resignation, then the retiring agent may on behalf of the Lenders and the other agents to the Finance Parties under this Agreement, appoint a successor agent meeting the qualifications set forth above and any such appointment made by the agent shall be deemed to be accepted by the Lenders and the relevant agents.
(d)
Upon the acceptance of a successor’s appointment as the Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) agent, and the retiring agent shall be discharged from all of its duties and obligations hereunder or under the other Finance Documents.
(e)
The fees payable by the Borrowers to a successor agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor.
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(f)
After the retiring agent’s resignation hereunder and under the other Finance Documents, the provisions of this Clause 27 and Clause 18 (
Costs and Expenses
) shall continue in effect for the benefit of such retiring agent and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring agent was acting as agent.
(g)
Upon the acceptance of a successor’s appointment as the Agent hereunder, (i) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring agent and (ii) the retiring agent shall be discharged from all of its respective duties and obligations hereunder or under the other Finance Documents.
(h)
The retiring agent shall, at its own cost, make available to the successor agent such documents and records and provide such assistance as the successor agent may reasonably request for the purposes of performing its functions under the Finance Documents.
(i)
The Agent shall resign in accordance with paragraph (a) and (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the date which is three (3) months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:
(i)
the Agent fails to respond to a request under Clause 14.9 (
FATCA Information
) and the Parent or a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(ii)
the information supplied by the Agent pursuant to Clause 14.9 (
FATCA Information
) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(iii)
the Agent notifies the Parent and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) the Parent or a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and the Parent or such Lender, by notice to the Agent, requires it to resign.
27.14
Non-Reliance on the Agent and the Other Finance Parties
Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Finance Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender acknowledges that it will, independently and without reliance upon the Agent or any other Finance Party or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not
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taking action under or based upon this Agreement, any other Finance Document or any related agreement or any document furnished hereunder or thereunder and that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including:
(a)
the financial condition, status and nature of each member of the Group;
(b)
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;
(c)
whether that Finance Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and
(d)
the adequacy, accuracy or completeness of any other information provided by the Agent, any Party or any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.
27.15
Responsibility for documentation
None of the Agent and Mandated Lead Arrangers:
(a)
is responsible for the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Agent and Mandated Lead Arrangers, an Obligor or any other person given in or in connection with any Finance Document or the transactions contemplated in the Finance Documents; or
(b)
is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document.
27.16
Exclusion of liability
(a)
Without limiting paragraph (b) below (and without prejudice to the provisions of paragraph (e) of Clause 30.11 (
Disruption to Payment Systems, etc.
)), the Agent will not be liable (including, without limitation, for negligence or any other category of liability whatsoever) for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
(b)
No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee
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or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause 27.16.
(c)
The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by it if it has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the relevant agent for that purpose.
(d)
Nothing in this Agreement shall oblige the Agent or the Mandated Lead Arrangers to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender, and each Lender confirms to the Agent and Mandated Lead Arrangers that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or Mandated Lead Arrangers.
27.17
Lenders’ indemnity to the Agent
Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent within three (3) Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the agent’s gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 30.11 (
Disruption to Payment Systems, etc.
), notwithstanding the Agent’s negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as the Agent under the Finance Documents (unless the relevant agent has been reimbursed by an Obligor pursuant to a Finance Document).
27.18
Confidentiality
(a)
In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b)
If information is received by another division or department of the Agent it may be treated as confidential to that division or department, and the relevant agent shall not be deemed to have notice of it.
(c)
Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Mandated Lead Arrangers are obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or a breach of a fiduciary duty.
27.19
Relationship with the Lenders
Subject to Clause 25.9 (
Pro rata interest settlement
), the Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility
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Office unless it has received not less than five (5) Business Days’ prior notice from such Lender to the contrary in accordance with the terms of this Agreement.
27.20
Deduction from amounts payable by the Agent
If any Party owes an amount to the Agent under the Finance Documents, the relevant agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents, that Party shall be regarded as having received any amount so deducted.
28.
CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
(a)
interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;
(b)
oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
(c)
oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.
29.
SHARING AMONG THE FINANCE PARTIES
29.1
Payments to Finance Parties
(a)
If a Finance Party (a “
Recovering Finance Party
”) receives or recovers any amount from an Obligor other than in accordance with Clause 30 (
Payment Mechanics
) and applies that amount to a payment due under the Finance Documents, then:
(i)
the Recovering Finance Party shall, within three (3) Business Days, notify details of the receipt or recovery to the Agent;
(ii)
the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 30 (
Payment Mechanics
), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
(iii)
the Recovering Finance Party shall, within three (3) Business Days of demand by the Agent, pay to the Agent an amount (the “Sharing Payment”) equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 30.6 (
Partial payments
).
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29.2
Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 30.6 (
Partial payments
).
29.3
Recovering Finance Party’s rights
(a)
On a distribution by the Agent under Clause 29.2 (
Redistribution of payments
), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.
(b)
If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph (a) above, the relevant Obligor shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.
29.4
Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a)
each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 29.2 (
Redistribution of payments
) shall, upon request of the Agent, pay to the Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and
(b)
that Recovering Finance Party’s rights of subrogation in respect of any reimbursement shall be cancelled, and the relevant Obligor will be liable to the reimbursing Finance Party for the amount so reimbursed.
29.5
Exceptions
(a)
This Clause 29 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause 29, have a valid and enforceable claim against the relevant Obligor.
(b)
A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings if:
(i)
it notified the other Finance Party of the legal or arbitration proceedings; and
(ii)
the other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
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30.
PAYMENT MECHANICS
30.1
Payments to the Agent
(a)
On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date not later than 1:00 p.m. (Milan time) and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment. All payments received by the Agent after the above mentioned times, shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrowers shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.
(b)
Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to Euro, in a principal financial centre in a Participating Member State or London) with such bank as the Agent specifies.
30.2
Distributions by the Agent
Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 30.3 (
Distributions to an Obligor
) and Clause 30.4 (
Clawback
), be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office) to such account as that Party may notify to the Agent by not less than five (5) Business Days’ notice with a bank in the principal financial centre of a Participating Member State or London).
30.3
Distributions to an Obligor
The Agent may (with the consent of the Obligor or in accordance with Clause 31 (
Set-Off
)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
30.4
Clawback
(a)
Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b)
If the Agent pays an amount to another Party and it proves to be the case that the agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the relevant agent shall on demand refund the same to the Agent together with
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interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.
30.5
Impaired Agent
(a)
If, at any time, the Agent becomes an Impaired Agent, then an Obligor or a Lender which is required to make a payment under the Finance Documents to the relevant agent in accordance with Clause 30.1 (
Payments to the Agent
) may instead either pay that amount direct to the required recipient or pay that amount to an interest-bearing account held with an Acceptable Bank within the meaning of paragraph (a) of the definition of “Acceptable Bank” and in relation to which no Insolvency Event has occurred and is continuing, in the name of the Obligor or the Lender making the payment and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents. In each case such payments must be made on the due date for payment under the Finance Documents.
(b)
All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the beneficiaries of that trust account
pro rata
to their respective entitlements.
(c)
A Party which has made a payment in accordance with this Clause 30.5 shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.
(d)
Promptly upon the appointment of a successor agent in accordance with Clause 27.10 (
Reliance by the Agent
), each Party which has made a payment to a trust account in accordance with this Clause 30.5 shall give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor agent for distribution in accordance with Clause 30.2 (
Distributions by the Agent
).
30.6
Partial payments
(a)
Subject to this Clause 30.6 if the Agent receives a payment for application against amounts due in respect of any Finance Documents that is insufficient to discharge all the amounts then due and payable by an Obligor under those Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under those Finance Documents in the following order:
(i)
first
, in or towards payment
pro rata
of any unpaid fees, costs and expenses of the Agent under those Finance Documents;
(ii)
secondly
, in or towards payment
pro rata
of any accrued interest, fee or commission due but unpaid under those Finance Documents;
(iii)
thirdly
, in or towards payment
pro rata
of any principal due but unpaid under those Finance Documents; and
(iv)
fourthly
, in or towards payment
pro rata
of any other sum due but unpaid under the Finance Documents.
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(b)
The Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.
(c)
Paragraphs (a) and (b) above will override any appropriation made by an Obligor.
30.7
No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) counterclaim, recoupment or setoff.
30.8
Business Days
(a)
Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)
During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement, interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
30.9
Currency of account
(a)
Subject to paragraph (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.
(b)
A repayment of a Utilisation or Unpaid Sum or a part of a Utilisation or Unpaid Sum shall be made in the currency in which that Utilisation or Unpaid Sum is denominated on its due date.
(c)
Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.
(d)
Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(e)
Any amount expressed to be payable in a currency other than Euro shall be paid in that other currency.
30.10
Change of currency
(a)
Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(i)
any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country
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designated by the Agent (after consultation with the Borrowers and with the consent of each Lender); and
(ii)
any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably and with the consent of each Lender).
(b)
If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Borrowers and with the consent of each Lender) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the European interbank market and otherwise to reflect the change in currency.
30.11
Disruption to Payment Systems, etc.
If either the Agent determines (in its discretion) that a Disruption Event has occurred or the Agent is notified by a Borrower that a Disruption Event has occurred:
(a)
the Agent may, and shall if requested to do so by a Borrower, consult with the Borrowers with a view to agreeing with the Borrowers such changes to the operation or administration of the Facilities as the Agent may deem necessary in the circumstances;
(b)
the Agent shall not be obliged to consult with the Borrowers in relation to any changes mentioned in paragraph (a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;
(c)
the Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;
(d)
any such changes agreed upon by the Agent and the Borrowers shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 37 (
Amendments and Waivers
);
(e)
the Agent shall not be liable for any damages, costs or losses whatsoever (including, without limitation, for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 30.11; and
(f)
the Agent shall notify the Finance Parties of all changes agreed upon pursuant to paragraph (d) above.
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30.12
USA Patriot Act notice
(a)
Each Lender and the Agent (for itself and not on behalf of any Lender) hereby notifies the Obligors that, pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies each Obligor, which information includes the name and address of such Obligor and other information that will allow such Lender or the Agent (as applicable) to identify such Obligor in accordance with the USA Patriot Act. Each of the Obligors shall, and shall cause each of its Subsidiaries to, provide such information and take such actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and the Lenders in maintaining compliance with the USA Patriot Act.
(b)
Notwithstanding anything to the contrary contained in this Agreement or in any other Finance Document, the covenants under paragraph (a) above shall not be made to or for the benefit of any Specified Lender, no Specified Lender shall have any rights under such paragraph and each Specified Lender shall be deemed not to be a Lender solely for purposes of calculating any consent or vote of the Majority Lenders under Clause 24.16 (
Acceleration
) with respect to any breach of such paragraph (but in each case without prejudice to any other rights or obligations of any Specified Lender as a consequence of any Default occurring as a result of any breach of such paragraph).
31.
SET-OFF
A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
32.
NOTICES
32.1
Notices generally
Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Clause 32.3 (
Electronic Communications
) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(a)
if to the Original Obligors, to the address, fax number, electronic mail address or telephone number specified for such person below, with respect to the Original Borrower as set out in Schedule 11 (
Original Borrower’s Details
);
(b)
if to any Mandated Lead Arranger, to the address, fax number, electronic mail address or telephone number specified for such person below;
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(c)
if to the Agent, to the address, fax number, electronic mail address or telephone number specified in Schedule 10 (
Agent’s Details
); and
(d)
if to any other Finance Party, to the address, fax number, electronic mail address or telephone number specified in the Administrative Questionnaire supplied by the Agent.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by fax shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in Clause 32.3 (
Electronic Communications
) below shall be effective as provided in such Clause.
32.2
Communication with Impaired Agent
If the Agent is an Impaired Agent, then the Parties other than the Impaired Agent may, instead of communicating with each other through the relevant agent, communicate with each other directly and (while the relevant agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the relevant agent shall be varied so that communications may be made and notices given to or by the relevant Parties directly. This provision shall not operate after a replacement agent has been appointed.
32.3
Electronic Communications
Notices and other communications to or by the Lenders or the Agent hereunder or in connection with any Finance Document may be delivered or furnished by electronic mail (including in unencrypted form) or other electronic means pursuant to procedures approved by the Agent;
provided that
the foregoing shall not apply to notices to any Lender pursuant to Clause 5 (
Utilisation
) if such Lender has notified the Agent that it is incapable of receiving notices under such Clause by electronic communication. Each agent for a Finance Party or a Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it;
provided that
approval of such procedures may be limited to particular notices or communications.
Unless an agent for a Finance Party otherwise prescribes, notices and other communications sent to an electronic mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return electronic mail or other written acknowledgement);
provided that
if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.
32.4
The Platform
The platform is provided “as is” and “as available”. The Agent Parties (as defined below) do not warrant the accuracy or completeness of the Borrower Materials or the
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adequacy of the platform, and expressly disclaim liability for errors in or omissions from the Borrower Materials. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any agent party in connection with the Borrower Materials or the platform. In no event shall the Agent or any of its Related Parties (collectively, the “
Agent Parties
”) have any liability to any Borrower, any Lender or any other person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and non-appealable judgment to have resulted from the gross negligence or wilful misconduct of such Agent Party;
provided that
in no event shall any Agent Party have any liability to any Borrower, any Lender or any other person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
32.5
Change of address, etc.
Each of the Mandated Lead Arrangers, the Obligors and the Agent, may change its address, fax or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Finance Party may change its address, fax or telephone number for notices and other communications hereunder by notice to the Borrowers and the Agent. In addition, each Lender agrees to notify the Agent from time to time to ensure that the Agent has on record an effective address, contact name, telephone number, fax number and electronic mail address to which notices and other communications may be sent and accurate wire instructions for such Lender.
32.6
Reliance by the Agent
The Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Utilisation Requests) purportedly given by or on behalf of a Borrower even if (a) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (b) the terms thereof, as understood by the recipient, varied from any confirmation thereof. Each Borrower shall indemnify the Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such person on each notice purportedly given by or on behalf of a Borrower. All telephonic notices to and other telephonic communications with the Agent may be recorded by the Agent, and each of the parties hereto hereby consents to such recording.
32.7
Use of websites
(a)
Each Borrower may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the “
Website Lenders
”) who accept this method of communication by posting this information onto an electronic website designated by the Borrowers and the Agent (the “
Designated Website
”) if:
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(i)
the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;
(ii)
both the Borrower and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and
(iii)
the information is in a format previously agreed between the Borrowers and the Agent.
If any Lender (a “
Paper Form Lender
”) does not agree to the delivery of information electronically, then the Agent shall notify the Borrowers accordingly, and each Borrower shall at its own cost supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event, each Borrower shall at its own cost supply the Agent with at least one copy in paper form of any information required to be provided by it.
(b)
The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Borrowers and the Agent.
(c)
The Borrowers shall promptly upon becoming aware of its occurrence notify the Agent if:
(i)
the Designated Website cannot be accessed due to technical failure;
(ii)
the password specifications for the Designated Website change;
(iii)
any new information which is required to be provided under this Agreement is posted onto the Designated Website;
(iv)
any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or
(v)
the Borrowers become aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.
If a Borrower notifies the Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by a Borrower under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.
(d)
Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. Each Borrower shall at its own cost comply with any such request within ten (10) Business Days.
32.8
English language
(a)
Any notice given under or in connection with any Finance Document must be in English.
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(b)
All other documents provided under or in connection with any Finance Document must be:
(i)
in English; or
(ii)
if not in English and if so required by the Agent, accompanied by a certified English translation, and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
33.
CALCULATIONS AND CERTIFICATES
33.1
Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
33.2
Certificates and determinations
Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
33.3
Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of three hundred and sixty (360) days or, in any case where the practice in the European interbank market differs, in accordance with that market practice.
34.
TAX CHARACTERIZATION
Each party hereto agrees that, consistent with the specific terms of this Agreement, the loan relationships created hereby shall be treated as resulting in borrowings by and loans to the Borrowers for all US Tax purposes.
35.
PARTIAL INVALIDITY
If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
36.
REMEDIES AND WAIVERS
No failure to exercise nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies
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provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
37.
AMENDMENTS AND WAIVERS
37.1
Required consents
(a)
Subject to Clause 37.2 (
Exceptions
), any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Borrowers, and any such amendment or waiver will be binding on all Parties.
(b)
The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 37.
(c)
Each Obligor agrees to any such amendment or waiver permitted by this Clause 37 which is agreed to by the Borrowers. This includes any amendment or waiver which would, but for this paragraph (c), require the consent of all of the Guarantors.
37.2
Exceptions
(a)
An amendment or waiver that has the effect of changing or which relates to:
(i)
the definition of “
Change of Control
” in Clause 1.1 (
Definitions
);
(ii)
the definition of “
Majority Lenders
” in Clause 1.1 (
Definitions
);
(iii)
an extension to the date of payment of any amount under the Finance Documents;
(iv)
a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;
(v)
a change in currency of payment of any amount under the Finance Documents;
(vi)
an increase in or an extension of any Commitment or the Total Commitments, an extension of the Availability Period, or any requirement that a cancellation of the Commitments reduces the Commitments of the Lenders rateably;
(vii)
a change to the Borrowers or Guarantors other than in accordance with Clause 26 (
Changes to the Obligors
);
(viii)
any provision which expressly requires the consent of all the Lenders;
(ix)
Clause 2.2 (
Finance Parties’ rights and obligations
), Clause 8 (
Mandatory Prepayment
), Clause 19 (
Guarantee and Indemnity
), Clause 25 (
Changes to the Lenders
), Clause 26.4 (
Resignation of an Obligor
), this Clause 37, Clause 41 (
Governing Law
) or Clause 42.1 (
Jurisdiction
),
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shall not be made without the prior consent of all the Lenders.
(b)
An amendment or waiver which relates to the rights or obligations of the Agent, the Mandated Lead Arrangers may not be effected without the consent of the Agent, the Mandated Lead Arrangers.
(c)
Any amendment or waiver that has the effect of changing or which relates to:
(i)
other than as expressly permitted by the provisions of this Agreement, any release of any guarantee or indemnity; or
(ii)
any Security (or the nature or scope of the assets expressed to be subject to a Security Document) unless expressly permitted under this Agreement or relating to a sale or disposal of such asset where such sale or disposal is expressly permitted under this Agreement,
in each case following the date on which it is created and perfected pursuant to the provision of this Agreement shall not be made without the consent of the Super Majority Lenders. For the avoidance of doubt any amendment or waiver of the provisions of Clauses 23.23 (
Security following Debt Ratings decrease
), 23.24 (
Guarantor Threshold Test and Additional Guarantors
) and to the Agreed Security Principles shall be governed by Clause 37.1 (
Required consents
).
37.3
Replacement of Lender
(a)
If at any time any Lender becomes a Non-Consenting Lender (as defined in paragraph (c) below) then the Parent may, on five (5) Business Days’ prior written notice to the Agent and such Lender, replace such Lender by requiring such Lender to (and such Lender shall) transfer pursuant to Clause 25 (
Changes to the Lenders
) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity (a “
Replacement Lender
”) selected by the Parent, and which is acceptable to the Agent and which confirms its willingness to assume and does assume all the obligations of the transferring Lender (including the assumption of the transferring Lender’s participations on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lender’s participation in the outstanding Utilisations and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents.
(b)
The replacement of a Lender pursuant to this Clause 37.3 shall be subject to the following conditions:
(i)
the Borrowers shall have no right to replace the Agent pursuant to this Clause 37.3;
(ii)
neither the Agent nor the Non-Consenting Lender shall have any obligation to the Borrowers to find a Replacement Lender;
(iii)
the replacement must take place no later than ninety (90) days after the date the Non-Consenting Lender notifies the Borrowers and the Agent
143
of its failure or refusal to agree to any consent, waiver or amendment to the Finance Documents requested by the Borrowers; and
(iv)
in no event shall the Lender replaced under this paragraph (b) be required to pay or surrender to such Replacement Lender any of the fees received by such Lender pursuant to the Finance Documents.
(c)
In the event that:
(i)
the Borrowers or the Agent (at the request of the Borrowers) has requested the Lenders to consent to a waiver or amendment of any provisions of the Finance Documents;
(ii)
the waiver or amendment in question requires the consent of all the Lenders; and
(iii)
Lenders whose Commitments aggregate more than eighty per cent. (80%) of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than eighty per cent. (80%) of the Total Commitments prior to that reduction) have consented to such waiver or amendment,
then any Lender who does not and continues not to agree to such waiver or amendment shall be deemed a “Non-Consenting Lender”.
37.4
Disenfranchisement of Defaulting Lenders
(a)
For so long as a Defaulting Lender has any Available Commitment, in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments or Total Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, that Defaulting Lender’s Commitment will be reduced by the amount of its Available Commitment.
(b)
For the purposes of this Clause 37.4, the Agent may assume that the following Lenders are Defaulting Lenders:
(i)
any Lender which has notified the Agent that it has become a Defaulting Lender;
(ii)
any Lender in relation to which it is aware that any of the events or circumstances referred to in paragraphs (a), (b) or (c) of the definition of “Defaulting Lender” has occurred,
unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.
144
37.5
Replacement of a Defaulting Lender
(a)
The Parent may, at any time a Lender has become and continues to be a Defaulting Lender, by giving five (5) Business Days’ prior written notice to the Agent and such Lender:
(i)
replace such Lender by requiring such Lender to (and such Lender shall) transfer pursuant to Clause 25 (
Changes to the Lenders
) all (and not part only) of its rights and obligations under this Agreement;
(ii)
require such Lender to (and such Lender shall) transfer pursuant to Clause 25 (
Changes to the Lenders
) all (and not part only) of the undrawn Commitment of the Lender; or
(iii)
require such Lender to (and such Lender shall) transfer pursuant to Clause 25 (
Changes to the Lenders
) all (and not part only) of its rights and obligations in respect of the Facilities,
to a Lender or a Replacement Lender selected by the Parent, and which (unless the Agent is an Impaired Agent) is acceptable to the Agent (acting reasonably), which confirms its willingness to assume and does assume all the obligations of the transferring Lender (including the assumption of the transferring Lender’s participations in Loans on the same basis as the transferring Lender).
(b)
Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause 37.5 shall be subject to the following conditions:
(i)
the Borrowers shall have no right to replace the Agent pursuant to this Clause 37.5;
(ii)
neither the Agent nor the Defaulting Lender shall have any obligation to the Parent to find a Replacement Lender;
(iii)
the transfer must take place no later than ninety (90) days after the notice referred to in paragraph (a) above; and
(iv)
in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents.
37.6
Amendment to correct manifest error
The Agent may (without receiving any instructions from the Majority Lenders) agree with the Borrowers any amendment to or the modification of the provisions of any Finance Document or any schedule or annex thereto, which is necessary to correct a manifest error.
37.7
Release of Security on Permitted Disposal and Investment Grade Rating
(a)
The Finance Parties shall procure that if an Obligor or a Material Subsidiary has created Security over any of its assets (other than shares) in favour of any of the Finance Parties, which assets subsequently become the subject of a Permitted
145
Disposal or any other disposal approved by the Majority Lenders to a person which is not a member of the Group the Finance Parties which are the beneficiaries of such Security will, at the cost and request of the Parent (to the extent that such cost is duly documented), release the Security promptly following the Parent’s request.
(b)
The release of the Security referred to in paragraph (a) above shall not become effective until the date of that Permitted Disposal or such earlier date agreed between the Agent and the Parent.
(c)
The Finance Parties shall further procure that if at any time following the granting of Security pursuant to Clause 23.23 (
Security following Debt Ratings Decrease
) all Public Debt Ratings received are at least BBB- or higher by S&P or Fitch or Baa3 or higher by Moody’s (in each case with a stable outlook), the Finance Parties which are the beneficiaries of such Security will at the cost and request of the Parent (to the extent that such cost is duly documented), release the Security promptly following the Parent’s request. It is understood however that following any such release, the provisions of Clause 23.23 (
Security following Debt Ratings Decrease
) shall continue with full force and effect and in the event that the relevant trigger conditions are met, the Parent shall again be obliged to procure the granting of Security in accordance with Clause 23.23.
38.
NEGOTIATED AGREEMENT
For the purposes of the transparency rules set forth in the CICR Resolution of March 4, 2003 and by the
Disposizioni sulla trasparenza delle operazioni e dei servizi bancari e finanziari
issued by the Bank of Italy on 20 June 2012 and published in the Italian Official Gazette on 30 June 2012, the Parties hereby acknowledge and confirm that this Agreement (and each of the provisions hereof) has been specifically negotiated with the support of legal advisors on each side.
39.
CONFIDENTIALITY
39.1
Confidential Information
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 39.2 (
Disclosure of Confidential Information
) and Clause 25.10 (
Disclosure to numbering service providers
), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.
39.2
Disclosure of Confidential Information
Any Finance Party may disclose:
(a)
to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-
146
sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;
(b)
to any person:
(i)
to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;
(ii)
with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, any securitisation (or similar transaction of broadly equivalent economic effect), or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents or one or more Obligors and to any of that person’s Affiliates, Related Funds, Representatives and professional advisers;
(iii)
appointed by any Finance Party or by a person to whom paragraph (b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf;
(iv)
who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph (b)(i) or (b)(ii) above;
(v)
to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;
(vi)
to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 25.8 (
Security over Lenders’ rights
);
(vii)
to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;
(viii)
who is a Party; or
(ix)
with the consent of the Parent;
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(A)
in relation to paragraphs (b)(i), (b)(ii) and (b)(iii) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there
147
shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(B)
in relation to paragraph (b)(iv) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(C)
in relation to paragraphs (b)(v), (b)(vi) and (b)(vii) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;
(c)
to any person appointed by that Finance Party or by a person to whom paragraph (b)(i) or (b)(ii) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Parent and the relevant Finance Party;
(d)
to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents or the Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information;
(e)
to any insurer (including its professional advisers) such Confidential Information as required to be disclosed to enable it to carry out its normal insurance activities in relation to the Finance Documents, the Obligors or its assets if the insurer is informed of its confidential nature; and
(f)
to any Sanctions Authority.
148
39.3
Continuing obligations
The obligations in this Clause 39 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of one (1) year from the earlier of:
(a)
the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and the Commitment has been cancelled or otherwise cease to be available; and
(b)
the date on which such Finance Party otherwise ceases to be a Finance Party.
40.
ITALIAN TRANSPARENCY RULES
Pursuant to and in accordance with the transparency rules (
Disposizioni in materia di trasparenza delle operazioni e dei servizi bancari e finanziari.
Correttezza delle relazioni tra intermediary e clienti
) applicable to transactions and banking and financial services issued by Bank of Italy on 20 June 2012 and published in the Italian official gazette (
Gazzetta Ufficiale
) on 30 June 2012 (the “
Transparency Rules
”), the Parties mutually acknowledge and declare that this Agreement and any of its terms and conditions have been negotiated, with the assistance of their respective legal counsels, on an individual basis and, as a result, this Agreement falls into the category of the agreements “
che costituiscono oggetto di trattativa individuale
” which are exempted from the application of Section II of the Transparency Rules.
41.
GOVERNING LAW
This Agreement and any non-contractual obligations arising out of or in connection with it are governed by Italian law.
42.
ENFORCEMENT
42.1
Jurisdiction
(a)
The courts of Milan have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a “
Dispute
”).
(b)
This Clause 42.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.
(c)
The parties expressly agree that any Dispute in relation to which a preliminary attempt of the mediation must be mandatorily carried out as condition to the commencement of a judicial action pursuant to Article 5 of Italian Legislative Decree No. 28 of 4 March 2010 (the “
Mediation Decree
”) shall be submitted to a mediator appointed by Camera di Conciliazione di Milano, a company registered with the register held by Italian Minister of Justice with No. 88 and in accordance with the rules of mediation of Mediation Service — Arbitration Chamber of Milan (the “
Mediation Rules
”). The mediation shall be carried out pursuant to the Mediation Rules and takes place in Milan.
149
(d)
The parties agree that the mediator will not be entitled to make any offer of mediation (
proposta di mediazione
) unless expressly required to do so by all of the negotiating parties.
(e)
Nothing in this Clause 42.1 precludes the parties from seeking, from the courts of Milan or any other court of appropriate jurisdiction, injunctions proceedings (
procedimenti per ingiunzione
), precautionary measures (
provvedimenti urgenti e cautelari
) and any other judicial actions which fall under one of the categories excluded from the application of the Mediation Decree.
(f)
If the matter is not resolved by the mediation process pursuant to the Mediation Rules and in accordance with the maximum period of time set out in the Mediation Decree, paragraph (a) above will apply.
42.2
Waiver of Jury Trial
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY LITIGATION IN ANY UNITED STATES FEDERAL OR STATE COURT DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER FINANCE DOCUMENTS OR ANY DEALINGS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE LENDER/ BORROWER/GUARANTOR RELATIONSHIP. Each party hereto hereby acknowledges that this waiver is a material inducement to enter into a business relationship, it has relied on this waiver in entering into this Agreement, and it will continue to rely on this waiver in related future dealings. Each party hereto hereby further warrants and represents that it has reviewed this waiver with its legal counsel and it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE AND MAY NOT BE MODIFIED OTHER THAN BY A WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS CLAUSE 42.2 AND EXECUTED BY EACH OF THE PARTIES HERETO. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.
This Agreement has been entered into on the date stated at the beginning of this Agreement.
150
SCHEDULE 1
THE ORIGINAL PARTIES
PART I
THE ORIGINAL OBLIGORS
|
Name of Original Borrower
|
|
Registration number (or equivalent, if
any) and Jurisdiction of Incorporation
|
|
|
|
|
|
GTECH S.p.A.
|
|
08028081001 Italy
|
|
|
|
|
|
Name of Original Guarantor
|
|
Registration number (or equivalent, if
any) and Jurisdiction of Incorporation
|
|
|
|
|
|
GTECH Corporation
|
|
090517 Delaware
|
151
PART II A
THE ORIGINAL INTERNATIONAL LENDERS
|
Name of Original
International Lender
|
|
Commitment
Euro
|
|
Treaty Passport
Scheme Reference
Number
|
|
Jurisdiction of
Tax Residence
|
|
|
|
|
|
|
|
|
|
|
|
BNP Paribas, Italian Branch
|
|
200,000,000
|
|
005/B/0255139/DTTP
|
|
France
|
|
|
|
|
|
|
|
|
|
|
|
UniCredit Bank AG, Milan Branch
|
|
200,000,000
|
|
7/U/237605/DTTP
|
|
Germany
|
|
PART II B
THE ORIGINAL ITALIAN LENDERS
|
Name of Original Italian
Lender
|
|
Commitment
Euro
|
|
Treaty Passport
Scheme Reference
Number
|
|
Jurisdiction of
Tax Residence
|
|
|
|
|
|
|
|
|
|
|
|
Intesa SanPaolo S.p.A.
|
|
200,000,000
|
|
n/a
|
|
Italy
|
|
|
|
|
|
|
|
|
|
|
|
Mediobanca — Banca di Credito Finanziario S.p.A.
|
|
200,000,000
|
|
n/a
|
|
Italy
|
|
152
PART III
THE MANDATED LEAD ARRANGERS
Banca IMI S.p.A.
BNP Paribas, Italian Branch
Mediobanca — Banca di Credito Finanziario S.p.A.
UniCredit Bank AG, Milan Branch
153
PART IV
THE INITIAL MATERIAL SUBSIDIARIES
As at the date of this Agreement:
·
GTECH Corporation
·
GTECH Global Services Corporation Limited
·
Lotterie Nazionali S.r.l.
·
Lottomatica Scommesse S.r.l.
·
Lottomatica Videolot Rete S.p.A.
154
PART V
MERGER ACCEDING GUARANTORS
·
Double Down Interactive LLC
·
Georgia Worldwide PLC (with respect to Facility B only)
·
GTECH Canada ULC
·
GTECH Foreign Holdings Corporation
·
GTECH Germany GmbH
·
GTECH Rhode Island LLC
·
GTECH USA, LLC
·
IGT
·
International Game Technology
·
Lottomatica Holding S.r.l.
·
GTECH Holdings Corporation
·
Invest Games S.A.
155
SCHEDULE 2
CONDITIONS PRECEDENT
PART I
CONDITIONS PRECEDENT TO INITIAL UTILISATION
1.
The Original Obligors
(a)
A certificate of the Parent (signed by an authorised signatory) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on any Original Obligor to be exceeded.
(b)
A certificate of an authorised signatory of each Original Obligor certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
(c)
A copy of the constitutional documents of the Original Borrower, being its
statuto
and
atto costititutivo
.
(d)
In the case of the Original Guarantor:
(i)
a solvency certificate signed by the chief financial officer or chief accounting officer in form and substance satisfactory to the Agent and its counsel; and
(ii)
a certificate as to existence and good standing from the appropriate governmental authorities in its jurisdiction of organisation.
(e)
A copy of a resolution of the board of directors or, if applicable, equivalent body of each Original Obligor:
(i)
approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;
(ii)
authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and
(iii)
authorising a specified person or persons, on its behalf, to sign or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed or despatched by it under or in connection with the Finance Documents to which it is a party.
(f)
A specimen of the signature of each person authorised by the resolution referred to in paragraph (e) above.
(g)
A certificate (
certificato di vigenza
) issued by the competent
Registro delle Imprese
in respect of the Original Borrower dated no earlier than five (5) Business Days prior to the date of this Agreement.
156
2.
“Know your customer” checks
Copies of any information and any other evidence reasonably requested by any Lender prior to the first Utilisation Date required in order to comply with “know your customer” or anti-money laundering requirements under applicable laws.
3.
Legal opinions
Executed forms of the following legal opinions, in each case addressed to, and capable of being relied on by the Finance Parties and dated as at the date of this Agreement:
(a)
a legal opinion of Studio Legale Associato, in associazione con Clifford Chance, legal advisers to the Obligors as to Italian law as to due incorporation and capacities, powers and authority to enter into the Finance Documents in the form distributed to the Original Lenders prior to signing of this Agreement;
(b)
a legal opinion of Clifford Chance US LLP as advisors to the Obligors as to the laws of Delaware as to due incorporation and capacities, powers and authority to enter into the Finance Documents in the form distributed to the Original Lenders prior to signing of this Agreement; and
(c)
a legal opinion of Linklaters Studio Legale Associato, legal advisers to the Mandated Lead Arrangers and the Agent in Italy, substantially in the form distributed to the Original Lenders prior to signing this Agreement.
4.
Other documents and evidence
(a)
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Parent accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.
(b)
The Original Financial Statements.
(c)
Evidence that the fees, costs and expenses then due from the Borrowers pursuant to Clause 13 (
Fees
) and Clause 18 (
Costs and Expenses
) have been paid or will be paid by the first Utilisation Date.
157
PART II
CONDITIONS PRECEDENT TO BE DELIVERED
BY ADDITIONAL OBLIGORS
1.
An Accession Letter, duly executed by the Additional Obligor and the Parent.
2.
A copy of the constitutional documents of the Additional Obligor.
3.
A copy of a resolution of the board of directors of the Additional Obligor:
(a)
approving the terms of, and the transactions contemplated by, the Accession Letter and the Finance Documents and resolving that it execute the Accession Letter;
(b)
authorising a specified person or persons to execute the Accession Letter on its behalf; and
(c)
authorising a specified person or persons, on its behalf, to sign or despatch all other documents and notices (including, in relation to the New Facility B Borrower, any Utilisation Request or Selection Notice) to be signed or despatched by it under or in connection with the Finance Documents.
4.
A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above.
5.
If required by applicable law, a copy of a resolution signed by all the holders of the issued shares of the Additional Obligor, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Additional Guarantor is a party.
6.
A certificate of the Additional Obligor (signed by a director (or an officer if the Additional Obligor is a US Obligor)) confirming that borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on it to be exceeded.
7.
A certificate of an authorised signatory of the Additional Obligor certifying that each copy document listed in this Part II of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Letter.
8.
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Accession Letter or for the validity and enforceability of any Finance Document.
9.
If available, the latest audited financial statements of the Additional Obligor.
10.
A legal opinion of Linklaters Studio Legale Associato, legal advisers to the Lenders and the Agent in Italy.
11.
If the Additional Obligor is incorporated in a jurisdiction other than Italy, a legal opinion of the legal advisers to the Arranger and the Agent in the jurisdiction in which the Additional Obligor is incorporated.
158
12.
A legal opinion of from Clifford Chance LLP or other reputable counsel to the relevant Additional Obligor as advisors to the Obligors as to the laws of the jurisdiction of incorporation of the proposed Additional Obligors in relation to due incorporation and capacities, powers and authority to enter into the Finance Documents.
13.
If the proposed Additional Obligor is a US Obligor:
(a)
a solvency certificate signed by the chief financial officer or chief accounting officer of such Obligor in form and substance satisfactory to the Agent and its counsel; and
(b)
a certificate as to the existence and good standing of such US Obligor from the appropriate governmental authorities in such US Obligor’s jurisdiction of organisation.
14.
Copies of any information and any other evidence reasonably requested by any Lender required in order to comply with “know your customer” or anti-money laundering requirements under applicable laws.
159
SCHEDULE 3
REQUESTS
PART I
UTILISATION REQUEST
From:
[
Borrower
]
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
Dated: [
Date
]
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 29 January 2015 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Utilisation Request. Terms defined in the Facilities Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.
2.
We wish to borrow a Loan on the following terms:
(a)
Borrower:
[
·
]
(b)
Proposed Utilisation Date:
[
·
] (or, if that is not a Business Day, the next Business Day)
(c)
Facility to be Utilised: [Facility A] [Facility B](1)
(d)
Currency of Loan:
[
·
]
(e)
Amount:
[
·
] or, if less, the Available Facility
(f)
Interest Period:
[
·
]
3.
We confirm that each condition specified in Clause 4.2 (
Further conditions precedent
) is satisfied on the date of this Utilisation Request.
4.
[The proceeds of this Loan should be credited to [account]].
5.
This Utilisation Request is irrevocable.
Yours faithfully
(1) Delete as appropriate
160
PART II
PART SELECTION NOTICE
From:
[
Borrower
]
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 29 January 2015 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Selection Notice. Terms defined in the Facilities Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.
2.
We refer to the following Loan[s] with an Interest Period ending on [ ]
*
.
3.
[We request that the above Loan[s] be divided into [ ] Loans with the following amounts and Interest Periods:]**
or
[We request that the next Interest Period for the above Loan[s] is [ ]].***
4.
This Selection Notice is irrevocable.
|
|
Yours faithfully
|
|
|
|
|
|
|
|
|
|
|
|
authorised signatory for
|
|
|
|
[
name of the Borrower
]
|
|
|
*
|
|
Insert details of all Loans which have an Interest Period ending on the same date.
|
|
|
|
|
|
**
|
|
Use this option if division of Loans is requested.
|
|
|
|
|
|
***
|
|
Use this option if sub-division is not required.
|
162
SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
From:
[
The Existing Lender
] (the “
Existing Lender
”) and [
The New Lender
] (the “
New Lender
”)
Dated: [
insert date
]
GTECH Senior Facilities Agreement
dated 29 January 2015 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Transfer Certificate. Terms defined in the Facilities Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2.
We refer to Clause 25.5 (
Procedure for transfer
):
(a)
The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender — pursuant to articles 1406 and following, and articles 1263 and following (as applicable), of the Italian Civil Code — all or part of the Existing Lender’s Commitment, rights and obligations referred to in the Schedule in accordance with Clause 25.5 (
Procedure for transfer
).
(b)
The proposed Transfer Date is [
·
].
(c)
The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 32.1 (
Notices generally
) are set out in the Schedule.
3.
The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 25.4 (
Limitation of responsibility of Existing Lenders
).
4.
The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a)
[in respect of an Italian Obligor,:
(i)
[an Exempt Lender];
(ii)
[an Italian Qualifying Lender];
(iii)
[an Italian Treaty Lender];
(iv)
[not a Qualifying Lender].]
(b)
[in respect of a UK Borrower,:
[not a Qualifying Lender];
163
(v)
[a Qualifying Lender other than a UK Treaty Lender]; or
(vi)
[a UK Treaty Lender].]
5.
[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [
·
]) and is tax resident in [
·
], so that interest payable to it by borrowers is generally subject to [full exemption from][a reduced rate of] UK withholding tax, and requests that the Parent notify
each UK Borrower which is a Party as a Borrower as at the Transfer Date and Holdco, to the extent that the Holdco Merger is not completed, that it wishes that scheme to apply to the Agreement.]
(2)
6.
The New Lender expressly acknowledges that the assignment of receivables (
cessione del credito
) effected under this Transfer Certificate is without recourse (
pro soluto
) and any warranty by the Existing Lender is expressly excluded, save for the existence of the assigned receivable for the purposes of articles 1410 and 1266, first paragraph, of the Italian Civil Code.
7.
The transfer of Commitments and rights and obligations contemplated by this Transfer Certificate will take effect and shall be construed as an assignment in part of a contract (
cessione parziale di contratto
) for the purposes of article 1406 of the Italian Civil Code and an assignment of receivables (
cessione di crediti
) for the purposes of articles 1260 and following of the Italian Civil Code, as applicable (or as a transfer (
cessione
) of rights and an assumption (
accollo liberatorio
) of obligations) and the New Lender shall be assigned the rights and assume the obligations of the Existing Lender in its capacity as Lender, in their entirety or, in the case of Transfer of a part only of the participation of the Existing Lender, pro-rata, under the Facilities Agreement and the other Finance Documents, and the terms of the Facilities Agreement will apply to the relevant Commitments, rights and obligations as transferred under this Transfer Certificate. The New Lender shall be entitled to any right and benefit which are ancillary to the participation of such New Lender as a lender under the Facilities Agreement, including, without limitation, the benefit of the Security at any time granted in relation to the Facilities Agreement.
8.
The New Lender hereby appoints (i) the Security Agent to act as its agent (
mandatario con rappresentanza
) pursuant to Clause 27.1 (
Appointment of the Security Agent
) of the Facilities Agreement and the other provisions of the Finance Documents.
9.
The New Lender confirms that is not a Blacklisted Resident Entity.
10.
This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by Italian law.
(2) delete as applicable
164
THE SCHEDULE
Commitment/rights and obligations to be transferred
[
insert relevant details
]
[
Facility Office address, fax number and attention details for notices and account details for payments
]
|
[
Existing Lender
]
|
|
[
New Lender
]
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
|
|
|
|
This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as [
·
].
[
Agent
]
165
SCHEDULE 5
FORM OF ASSIGNMENT AGREEMENT
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
From:
[
the Existing Lender
] (the “
Existing Lender
”) and [
the New Lender
] (the “
New Lender
”)
Dated: [
insert date
]
GTECH Senior Facilities Agreement
dated 29 January 2015 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is an Assignment Agreement. Terms defined in the Facilities Agreement have the same meaning in this Assignment Agreement unless given a different meaning in this Assignment Agreement.
2.
We refer to Clause 25.5 (
Procedure for assignment
):
(a)
The Existing Lender assigns absolutely to the New Lender [all the rights]/[its credit claims] (
cessione dei diritti contrattuali/cessione del credito
) of the Existing Lender under the Facilities Agreement and the other Finance Documents which relate to that portion of the Existing Lender’s Commitment and participations in Loans under the Facilities Agreement as specified in the Schedule.
(b)
The Existing Lender is released from all the obligations of the Existing Lender which correspond to that portion of the Existing Lender’s Commitment and participations in Loans under the Facilities Agreement specified in the Schedule.
(c)
The New Lender becomes a Party as a Lender and is bound by obligations equivalent to those from which the Existing Lender is released under paragraph (b) above.
3.
The proposed Transfer Date is [
·
].
4.
On the Transfer Date the New Lender becomes Party to the Finance Documents as a Lender.
5.
The Facility Office and address, fax number and attention details for notices of the New Lender are set out in the Schedule.
6.
The New Lender expressly acknowledges the limitations on the Existing Lender’s obligations set out in paragraph (c) of Clause 25.4 (
Limitation of responsibility of Existing Lenders
).
7.
The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:
(a)
[in respect of an Italian Obligor,:
166
[an Exempt Lender];
(i)
[an Italian Qualifying Lender];
(ii)
[an Italian Treaty Lender];
(iii)
[not a Qualifying Lender].]
(b)
[in respect of a UK Borrower,:
[not a Qualifying Lender];
(i)
[a Qualifying Lender other than a UK Treaty Lender]; or
(ii)
[a UK Treaty Lender].]
8.
[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [
·
]) and is tax resident in [
·
], so that interest payable to it by borrowers is generally subject to [full exemption from][a reduced rate of] UK withholding tax, and requests that the Parent notify
each UK Borrower which is a Party as a Borrower as at the Transfer Date and Holdco (to the extent that the Holdco Merger is not completed), that it wishes that scheme to apply to the Agreement.]
(3)
9.
The New Lender expressly acknowledges that the assignment of receivables (
cessione del credito
) effected under this Assignment Agreement is without recourse (
pro soluto
) and any warranty by the Existing Lender is expressly excluded, save for the existence of the assigned receivable for the purposes of article 1266, first paragraph, of the Italian Civil Code.
|
[8/9].
|
The New Lender confirms that is not a Blacklisted Resident Entity.
|
|
|
|
|
[9/10].
|
This Assignment Agreement acts as notice to the Agent (on behalf of each Finance Party) and, upon delivery in accordance with Clause 25.7 (
Copy of Transfer Certificate or Assignment Agreement to Parent
), to the Parent (on behalf of each Obligor) of the assignment referred to in this Assignment Agreement.
|
|
|
|
|
[10/11].
|
This Assignment Agreement [and any non-contractual obligations arising out of or in connection with it] [is/are] governed by Italian law.
|
|
|
|
|
[12/13].
|
This Assignment Agreement has been entered into on the date stated at the beginning of this Assignment Agreement.
|
(3) delete as applicable
167
THE SCHEDULE
Rights to be assigned and obligations to be released and undertaken
[
insert relevant details
]
[
Facility office address, fax number and attention details for notices and account details for payments
]
|
[Existing Lender]
|
|
[New Lender]
|
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
|
|
|
|
This Assignment Agreement is accepted by the Agent and the Transfer Date is confirmed as [ ].
Signature of this Assignment Agreement by the Agent constitutes confirmation by the Agent of receipt of notice of the assignment referred to herein, which notice the Agent receives on behalf of each Finance Party.
[Agent]
168
SCHEDULE 6
FORM OF ACCESSION LETTER
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
From:
[
Subsidiary
]/[
New Facility B Borrower
] and Parent
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 29 January 2015 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is an Accession Letter. Terms defined in the Facilities Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.
2.
[
Subsidiary
]/[
New Facility B Borrower
] agrees to become [
an Additional Guarantor
][
the New Facility B Borrower
] and to be bound by the terms of the Facilities Agreement and the other Finance Documents as [
an Additional Guarantor
] [
the Borrower under Facility B
] pursuant to [Clause 26.3 (
Additional Obligors
)]/[Clause 26.2 (
New Facility B Borrower Accession
)] of the Facilities Agreement.
3.
[
Subsidiary
]/[
New Facility B Borrower
] is a [company] duly incorporated in [name of relevant jurisdiction] [and is a limited liability company and its registered number is [
·
]].
4.
[
Subsidiary’s
][/
New Facility B Borrower’s
] administrative details are as follows:
Address:
Fax No.:
Attention:
5.
[The guarantee to be granted by [
Subsidiary
] pursuant to Clause 24 (
Guarantee and Indemnity
) of the Facilities Agreement shall be subject to the following limitations [
insert as applicable — subject to agreement with Agent (acting reasonably)
].
6.
This Accession Letter is governed by Italian law.
[
Parent
] [
Subsidiary
]
169
SCHEDULE 7
FORM OF RESIGNATION LETTER
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
From:
[
resigning Obligor
] and [
Parent
]
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 29 January 2015 (the “Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Resignation Letter. Terms defined in the Facilities Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.
2.
Pursuant to Clause 26.4 (
Resignation of an Obligor
), we request that [resigning Obligor] be released from its obligations as a [Guarantor] [Borrower] under the Facilities Agreement and the other Finance Documents.
3.
We confirm that:
(a)
no Default is continuing or would result from the acceptance of this request; and
(b)
this request is given in relation to [a Third Party Disposal of [
resigning Obligor
]]/[(
resigning Obligor
) ceasing to be a Material Subsidiary]; [the all Lender consent obtained on [
insert date
]];
4.
This letter is governed by Italian law.
|
[Parent]
|
|
[resigning Obligor]
|
|
|
|
|
|
|
|
|
|
By:
|
|
By:
|
170
SCHEDULE 8
FORM OF COMPLIANCE CERTIFICATE
To:
Mediobanca — Banca di Credito Finanziario S.p.A., as Agent
From:
[
Parent
]
Dated:
Ladies and Gentlemen
GTECH Senior Facilities Agreement
dated 29 January 2015 (“Facilities Agreement”)
1.
We refer to the Facilities Agreement. This is a Compliance Certificate. Terms defined in the Facilities Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.
We confirm that:
[Insert details of covenants to be certified].
[Insert details and calculations required pursuant to Clause 21.1 of the Facilities Agreement].
3.
[
When applicable
] We confirm that the Parent has complied with Clause 22 (
Financial Covenants
) of the Facilities Agreement.
4.
[
When applicable
] We confirm that the Parent has complied with Clause 23.24 (
Guarantor Threshold Test and Additional Guarantors
) of the Facilities Agreement. Following are the computations (in reasonable detail): [
·
]
5.
[
When applicable
] Pursuant to Clause 21.2(d) of the Facilities Agreement, we confirm that [there have been no change to the list of Material Subsidiaries since the Compliance Certificate for the Financial Quarter ending 31 December [
·
].]/[The following is the list of Material Subsidiaries as at (
insert date
):]
|
Signed
|
|
|
|
Chief Financial Officer
|
|
[
PARENT
]
|
171
SCHEDULE 9
TIMETABLES — LOANS
- NOTICES TO THE AGENT
INTENTIONALLY LEFT BLANK
172
SCHEDULE 10
AGENT’S DETAILS
Notices to the Agent:
|
|
Mediobanca — Banca di Credito Finanziario S.p.A.
|
|
|
Via Siusi, 7 - 20132 Milan
|
|
|
Italy
|
|
|
|
|
|
Attention: Stefania Peverelli — Simona Gherardi
|
|
|
Facsimile: +39 02 26814995
|
173
SCHEDULE 11
ORIGINAL BORROWER’S D
ETAILS
Notices to the Original Borrower:
GTECH S.p.A.
Via del Campo Boario 19
00156 Rome
Italy
Attention: Treasury Department
Facsimile: 00 39 06 51894205
174
SCHEDULE 12
AGREED SECURITY PRINCIPLES
1.
SECURITY PRINCIPLES
1.1
The Security to be provided pursuant to Clause 23.23 (
Security following Debt Ratings decrease
) will be given in accordance with these agreed security principles and the limitations set forth in Clauses 19.11 (
Limitations on US Guarantees
) to 19.12 (
Controlled Foreign Corporations
) (the “
Agreed Security Principles
”). This Schedule addresses the manner in which the Agreed Security Principles will impact on the guarantees and Security proposed to be taken pursuant to Clause 23.23 (
Security following Debt Ratings decrease
) or Clause 23.24 (
Guarantor Threshold Test and Additional Guarantors
). Terms defined in Clause 23.23 (
Security following Debt Ratings decrease
) or Clause 23.24 (
Guarantor Threshold Test and Additional Guarantors
) shall have the
s
ame meaning where used in this Schedule.
1.2
The Security Principles embody a recognition by all parties that there may be certain legal and practical difficulties in obtaining effective guarantees and security from members of the Group in the relevant jurisdictions of incorporation. In particular:
(a)
general statutory limitations, financial assistance, corporate benefit, fraudulent preference, tax restrictions or costs, retention of title claims and similar principles may limit the ability of a member of the Group to provide Security or any guarantee or may require that the Security or guarantee be limited by an amount or otherwise;
(b)
a key factor in determining whether or not Security shall be taken or the extent of its perfection is the applicable cost (including but not limited to adverse effects on interest deductibility and stamp duty, notarisation and registration fees) which shall not be disproportionate to the benefit to the Lenders of obtaining such Security. In particular, the Parties acknowledge that
Imposta Sostitutiva
pursuant to article 15 and subsequent of Italian Presidential Decree No. 601/1973 as amended and supplemented from time to time will not be available with respect to the Agreement. Accordingly, Security that requires payment of an
ad valorem
registration tax on the amount of the Secured obligations will not be taken subject to paragraph (c) below;
(c)
the maximum guaranteed or secured amount may be limited to minimise stamp duty, notarisation, registration or other applicable fees, taxes and duties where the benefit of increasing the guaranteed or secured amount is disproportionate to the level of such fee, taxes and duties;
(d)
where there is material incremental cost involved in creating Security over assets owned by an Obligor in a particular category the principle stated at paragraph 1.2(b) above shall apply and, subject to the Agreed Security Principles, only the material assets in that category shall be subject to Security;
(e)
it is acknowledged that in certain jurisdictions it may be either impossible or impractical to create Security over certain categories of assets in which event Security will not be taken over such assets;
175
(f)
any assets subject to third party arrangements which may prevent those assets from being charged will be excluded from any relevant Security Document;
provided that
such third party arrangements are permitted under this Agreement and provided that the consent of that third part has been requested. In particular, in certain circumstances, the granting of Security over the shares of a member of the Group which holds a gaming license or concession will require the prior consent of the relevant gaming or licensing authority. No guarantee or assurance can be given in such respect;
(g)
members of the Group will not be required to enter into Security Documents or guarantees if the same would conflict with the fiduciary duties of the directors (or other officers) of the relevant member of the Group or contravene any legal prohibition or would result in (or in a material risk of) personal or criminal liability on the part of any director (or other officer) of any member of the Group;
provided that
the relevant member of the Group shall use reasonable endeavours to overcome any such obstacle;
(h)
members of the Group will not be required to enter into Security Documents or guarantees if the same would conflict with the terms of any applicable shareholder agreements or if the granting of the relevant Security or guarantee would be prohibited for regulatory reasons;
(i)
no Joint Venture shall be required to become a Guarantor nor shall any member of the Group be required to grant Security over any interest in any Joint Venture;
(j)
the granting of Security or the perfection of the Security granted will not be required if it would restrict the ability of the relevant member of the Group to conduct its operations and business in the ordinary course as otherwise permitted by the Finance Documents. Accordingly, no Security shall be granted over bank accounts or insurance policies of members of the Group;
(k)
to the extent possible and without prejudice to the rights of the Finance Parties, all Security shall be given in favour of a security agent and not the Finance Parties individually; “Parallel debt” provisions will be used where necessary, subject to applicable law. Where Security is granted in respect of more than one instrument or category of creditor of Pari Passu Indebtedness, there shall be a single security agent or trustee appointed in respect of each relevant Security Document and customary intercreditor arrangements shall be entered into between the relevant creditors of the Pari Passu Indebtedness setting out,
inter alia
, a common waterfall on enforcement and customary security agent or trustee protections; and
(l)
with regard to Security over any intercompany notes, the fact they are secured shall not prevent the relevant debtors from repaying or prepaying or otherwise discharging the relevant outstandings at any time prior to the taking of any action pursuant to Clause 24.16 (
Acceleration
).
1.3
The Parent need only perform its obligations to procure that any member of the Group becomes an Additional Guarantor or to procure the granting of Security over its shares or other ownership interests if: (i) it is not unlawful for the relevant person to
176
become a Guarantor and that person becoming a Guarantor would not result in personal liability for that person’s directors or other management, and (ii) the guarantee would have some economic value having regard to corporate benefit and other relevant restrictions applicable to the person granting the guarantee. Each Obligor must use, and must procure that the relevant person uses, all reasonable endeavours lawfully available to avoid any such unlawfulness or personal liability. This includes agreeing to a limit on the amount guaranteed. The Agent may (but shall not be obliged to) agree to such a limit if, in its opinion, to do so would avoid the relevant unlawfulness or personal liability. The Agent and the relevant Additional Guarantor (each acting reasonably and on the basis of the advice of their respective local counsel) may agree to other limitations for the purpose of avoiding any obstacle to the grating of an additional guarantee.
2.
TERMS OF SECURITY DOCUMENTS
2.1
The following principles will be reflected in the terms of any Security taken:
(a)
Security will not be enforceable until an Event of Default has occurred and notice of acceleration has been given by the Agent under this Agreement;
(b)
the Security Documents should only operate to create Security rather than to impose new commercial obligations; accordingly, they should not contain additional representations, warranties, undertaking and indemnities, unless these are (i) required to be included in any Security Document for the validity and enforceability of the Security Documents or (ii) are the same as or consistent with those contained in this Agreement;
(c)
until an Event of Default has occurred and notice of acceleration has been given by the Agent under this Agreement, pledgors of shares in Obligors shall be permitted to retain and to exercise voting rights to any shares pledged by them in a manner which does not adversely affect the validity or enforceability of the Security or cause an Event of Default to occur and the Obligors shall be permitted to pay dividends on pledged shares to the pledgors and the pledgors shall be entitled to retain such dividends to the extent permitted under this Agreement;
(d)
any accounts receivable which, if charged, such charge would be prohibited by anti-assignment provisions of contracts or applicable law or would breach the terms of any contract relating to such accounts receivable or would be a default or event of default under the relevant contract or entitle the counterparty to the relevant contract a right to terminate the relevant contract will be excluded from any relevant Security Document;
provided that
the consent of that counterparty has been sought;
(e)
notification to debtors of Security over accounts receivable will only be given if an Event of Default has occurred and notice of an acceleration has been given by the Agent under this Agreement;
(f)
security over any loan or note intercompany receivables will be perfected upon execution of the Security Document either by virtue of notification to
177
debtors or by acknowledgement in writing by such debtor (as may be required by local law to perfect such Security) subject to no adverse tax consequences;
(g)
the Finance Parties should only be able to exercise any power of attorney granted to them under the Security Documents following the occurrence of an Event of Default in respect of which notice of acceleration has been given by the Agent under this Agreement or material failure to comply with a written request to fulfil a further assurance or perfection obligation;
(h)
the Security Documents shall not operate so as to prevent transactions which are permitted under this Agreement or to require additional consents or authorisations;
(i)
unless the restriction is required by law, the constitutional documents of the Obligors whose shares have been pledged will be amended to remove any restriction on the transfer or the registration of the transfer of the shares on enforcement of the Security granted over them. If the pledging of shares of an Obligor under the Agreed Security Principles requires the prior consent of any gaming or licensing authority, the Parent shall use its commercial reasonable efforts to obtain such consent in a reasonable time frame; and
(j)
in furtherance of Clause 19.11 (
Limitations on US Guarantees
),
(i)
no member of the Group that is a CFC will have any obligation or liability, directly or indirectly, to grant Security with respect to any US Obligation; and
(ii)
not more than sixty-five per cent. (65%) of the stock or other equity interests (measured by the total combined voting power of the issued and outstanding voting stock or other equity interests) of, and none of the assets or property of, a person that is a CFC will be required to be pledged directly or indirectly as security for any US Obligations.
3.
FIRST RANKING SECURITY
3.1
Subject to the due execution of all relevant Security Documents, completion of relevant perfection formalities within statutorily prescribed time limits, payment of all registration fees and documentary taxes, any other rights arising by operation of law, and any qualifications contained in any legal opinion delivered under this Agreement, the Agent shall (in the case of those Security Documents creating pledges of shares in an Obligor) obtain a first priority valid pledge of the shares in issue at any time in that Obligor which are owned by another Obligor. Such Security Document shall be governed by the laws of the jurisdiction in which such Obligor whose shares are being pledged is formed.
3.2
It is further acknowledged that pursuant to each Security Document (or, if applicable, this Agreement) any costs, fees, taxes or other amounts payable in connection with any re-taking, re-notarisation, perfection, presentation, novation or re-registration of any Security or any interest in any Finance Document in connection with an assignment or transfer by any Lender shall be borne by the applicable Lender.
178
SCHEDULE 13
FORM OF AFFIDAVIT
COVER PAGE
Claim for the refund, exemption or application of the reduced tax rate on income paid to non-residents
|
Conventions for the avoidance of double taxation
|
|
o
dividends
(FORM A)
|
|
o
interest
(FORM B)
|
|
o
royalties
(FORM C)
|
|
o
other income
(FORM D)
|
|
|
|
|
|
|
|
|
|
|
|
EU Directives
|
|
o
parent-subsidiary tax regime
dir. 90/435/EEC (FORM E)
|
|
o
interest and royalty tax regime
dir. 2003/49/EC (FORM F)
|
o
DETAILS OF THE BENEFICIAL OWNER
|
Natural person
|
|
Surname
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Name
|
Place of Birth
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Date of Birth
|
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Legal person
|
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Business Name
|
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|
o
cross in the case of a permanent establishment
|
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Foreign TIN
|
|
No.
|
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|
|
|
|
|
o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
|
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Italian TIN (if issued)
|
|
|
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|
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Residence
|
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State
|
Full address
|
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Domicile
(if different from residence)
|
|
State
|
Full address
|
|
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|
|
|
|
|
|
|
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P.O. Box (optional)
|
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E-MAIL (optional)
|
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179
o
DETAILS OF THE LEGAL REPRESENTATIVE
|
Natural person
|
|
Surname
|
Name
|
Place of Birth
|
Date of Birth
|
|
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|
Legal person
|
|
Business Name
|
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|
TIN
|
|
No.
|
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|
o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
|
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Italian TIN (if issued)
|
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Residence
|
|
State
|
Full address
|
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|
Domicile
(if different from residence)
|
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State
|
Full address
|
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P.O. Box (optional)
|
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E-MAIL (optional)
|
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o
OTHER CO-BENEFICIARIES OF THE INCOME FOR WHICH REFUND IS BEING REQUESTED
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Natural person
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Surname
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Name
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Place of Birth
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Date of Birth
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Legal person
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Business Name
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TIN
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No.
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o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
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Italian TIN (if issued)
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Residence
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State
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Full address
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Domicile
(if different from residence)
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State
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Full address
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P.O. Box (optional)
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E-MAIL (optional)
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180
o
DETAILS OF THE PROXY APPOINTED TO SUBMIT THE APPLICATION (IF PRESENT) (4)
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Natural person
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Surname
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Name
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Place of Birth
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Date of Birth
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Legal person
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Name
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TIN
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No.
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o
My country of residence does not issue a TIN for residents or I cannot obtain a TIN from my country of residence.
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Italian TIN (if issued)
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Residence
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State
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Full address
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Domicile
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State
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Full address
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(if different from the residence)
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P.O. Box (optional)
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E-MAIL (optional)
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PAYMENT METHOD (for refunds)
FINANCIAL ISTITUTION:
BANK ACCOUNT HOLDER
(5)
(if part of the Economic and Monetary Union): BIC
(6)
IBAN
(if outside the Economic and Monetary Union)
(7)
: BANK ACCOUNT DETAILS
(4)
Attach the original copy of the relative power of attorney
(5)
If the beneficiary uses a proxy for the payment, fill in the application with the bank account of the proxy. For powers of attorney released abroad, the original copy with translation must be sent to Centro Operativo di Pescara. If the proxy for the collection is also the proxy for the submission of the application and/or for making the requested declarations, only one original copy with translation is required.
(6)
If Economic and Monetary Union: the BIC code is mandatory.
(7)
If not Economic and Monetary Union: the BIC code is an alternative to the address of the financial institutions.
181
ADDRESS OF THE FINANCIAL INSTITUTION
182
FORM B - INTEREST
o
EXEMPTION/APPLICATION OF THE TAX RATE PROVIDED BY THE CONVENTION
o
REFUND
Article of the Convention for the avoidance of double taxation between Italy and
ITALIAN INTEREST PAYER
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Person
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Surname Name / Business Name
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Italian TIN
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Residence
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Full address
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DEPOSITARY BANK (FOR CUSTODY OF SECURITIES)
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Legal Person
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Business Name
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Italian TIN
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Residence
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Full address
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DESCRIPTION OF THE INTEREST RECEIVED
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Payment
date
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Amount of
interest
gross of the
Italian tax
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Amount of
the tax paid
in Italy
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Applicable
tax rate
according to
the
Convention
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Amount of
the tax due
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Requested
refund
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TOTAL
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183
DECLARATION OF THE BENEFICIARY OR ITS AUTHORISED REPRESENTATIVE
The undersigned acting as
Declares
·
to reside / that the entity is resident in pursuant to the Convention with for the tax period / periods ;
·
to be / that the entity above mentioned is the beneficial owner of the interest;
·
not to have / that the above mentioned entity does not have a permanent establishment or a fixed base in Italy to which the income effectively connects;
o
to be / that the above mentioned entity is subject to tax for the specified interest in the Country of residence;
o
NOT to be / that the above mentioned entity is NOT subject to tax for the specified interest in the Country of residence (explain the reasons for exemption) ;
·
to comply with all other necessary requirement for applying the benefits granted by the Convention regarding the income received;
·
that all information in this declaration is correct and complete, and that the undersigned shall communicate if one or more of the requirements described above ceases to be, as well as of any variations in the supplied data and information.
Requests
o
exemption from Italian tax or application within the limits provided by the mentioned Convention;
o
refund of taxes regarding the income specified above;
·
that the refund should be made according to the payment methods specified on the cover page.
184
CERTIFICATION OF THE TAX AUTHORITY
The Tax Authority of certifies that for the tax period/s the beneficiary described above is resident in according to Article of the Convention with Italy and that the declarations given in this form are true to the best of the knowledge of this Tax administration.
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Date
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Signature and Office stamp
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185
SCHEDULE 14
SELF DECLARATION FORM
The undersigned [Lender’s legal representative], domiciled at [Lender’s legal representative address], legal representative of [Lender’s Name], with its registered office at [Lender’s registered address]
CONSIDERING THAT
pursuant to article 26, paragraph 5-bis, of Presidential Decree No. 600 of 29 September 1973 as amended by (i) article 22 of Law Decree No. 91 of 24 June 2014, converted into law by Law No. 144 of 11 August 2014, (ii) article 10, paragraph 2, of Law Decree No. 133 dated 12 September 2014, converted into law by the Law No. 164 of 11 November 2014 and (iii) article 6, paragraph 1, of Law Decree No.3 of 24 January 2015, no Italian withholding tax applies to interest payments made by Italian entities to:
·
Credit institutions established in a EU Member State;
·
Insurance companies incorporated in a EU Member State and authorised under the legislative provisions of a EU Member State;
·
Institutional investors, whether or not subject to tax, which are established in a country or territory included within the list provided for by article 168-bis of Italian Presidential Decree No. 917 of 22 December 1986, as amended and implemented from time to time, to the extent they are subject to regulatory supervision in the place of establishment;
·
Entities listed under Article 2, paragraph 5, numbers from 4) to 23), of Directive 2013/36/EU.
DECLARES
(Please check one of the following three boxes, if applicable)
·
That [Lender’s Name] is a credit institution established in a EU Member State.
·
That [lender’s Name] is an insurance company incorporated in a EU Member State and authorized under the legislative provisions of a EU Member State.
·
That [Lender’s Name] is an institutional investor, whether or not subject to tax, established in a country or territory included within the list provided for by article 168-bis of Italian Presidential Decree No. 917 of 22 December 1986, as amended and implemented from time to time and therein, subject to regulatory supervision.
·
That [Lender’s Name] is an entities listed under Article 2, paragraph 5, numbers from 4) to 23), of Directive 2013/36/EU.
and as such is entitled to receive interest payments under the term loan facility for GTECH S.p.A without the application of any tax deduction to interest payments made by Italian entities.
186
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Place and date of signature
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Signature of Legal Representative of
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[Name and Surname]
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[Title]
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187
