As filed with the Securities and Exchange Commission on February 10, 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of The Securities Exchange Act of 1934
AP GAMING HOLDCO, INC.
(Exact name of registrant as specified in its charter)
Delaware | 46-3698600 | |
(State of incorporation) |
(I.R.S. Employer Identification Number) |
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6680 Amelia Earhart Court Las Vegas, NV |
89119 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number: (702) 722-6700
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to be so registered |
Name of each exchange on which
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Not Applicable | Not Applicable |
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | þ (Do not check if a smaller reporting company) | Smaller Reporting Company | ¨ |
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ITEM 1. |
BUSINESS | 3 | ||||
ITEM 1A. |
RISK FACTORS | 17 | ||||
ITEM 2. |
FINANCIAL INFORMATION | 30 | ||||
ITEM 3. |
PROPERTIES | 62 | ||||
ITEM 4. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 62 | ||||
ITEM 5. |
DIRECTORS AND EXECUTIVE OFFICERS | 62 | ||||
ITEM 6. |
EXECUTIVE COMPENSATION | 64 | ||||
ITEM 7. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 67 | ||||
ITEM 8. |
LEGAL PROCEEDINGS | 68 | ||||
ITEM 9. |
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND RELATED EQUITY HOLDER MATTERS | 69 | ||||
ITEM 10. |
RECENT SALES OF UNREGISTERED SECURITIES | 69 | ||||
ITEM 11. |
DESCRIPTION OF REGISTRANTS SECURITIES TO BE REGISTERED | 69 | ||||
ITEM 12. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS | 70 | ||||
ITEM 13. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 70 | ||||
ITEM 14. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 70 | ||||
ITEM 15. |
FINANCIAL STATEMENTS AND EXHIBITS | 71 |
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EXPLANATORY NOTE
This Amendment No. 1 ( Amendment No. 1 ) to our registration statement on Form 10 ( Registration Statement ) is being filed by AP Gaming Holdco, Inc. ( AP Gaming ) in order to register its voting common stock, par value $0.01 per share ( Common Stock ), voluntarily pursuant to Section 12(g) under the Securities Exchange Act of 1934, as amended (the Exchange Act ). Unless otherwise noted or indicated by the context, the terms the Company , we , us and our refer to AP Gaming and its consolidated subsidiaries, including AGS Capital, LLC ( AGS Capital ) and AGS, LLC. The Company is not required to file this Registration Statement pursuant to the Securities Act of 1933, as amended (the Securities Act ).
We are an emerging growth company as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking statements. Forward-looking statements include any statements that address future results or occurrences. In some cases you can identify forward-looking statements by terminology such as may, might, will, would, should, could or the negatives thereof. Generally, the words anticipate, believe, continue, expect, intend, estimate, project, plan and similar expressions identify forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance contained in this Registration Statement in Item 1. Business, Item 1A. Risk Factors and Item 2. Financial InformationManagements Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements. These forward-looking statements include statements that are not historical facts, including statements concerning our possible or assumed future actions and business strategies.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, which could cause our actual results, performance or achievements to differ materially from any results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:
| our ability to develop and manage frequent introductions of innovative products; |
| changing economic conditions and other factors that adversely affect the casino and gaming industry, the play levels of our participation games, product sales and our ability to collect outstanding receivables from our customers; |
| the effect of our substantial indebtedness on our ability to raise additional capital to fund our operations, react to changes in the economy or our industry and make debt service payments; |
| changes in player and operator preferences in participation games, which may adversely affect demand for our products; |
| increased competition in the gaming industry; |
| changing regulations, new interpretations of existing laws, or delays in obtaining or maintaining required licenses or approvals, which may affect our ability to operate in existing markets or expand into new jurisdictions; |
| changes in the regulatory scheme governing tribal gaming impacting our games and Native American customers, which could adversely affect revenues; |
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| legal and regulatory uncertainties of gaming markets, including, without limitation, the ability to enforce contractual rights on Native American land; |
| legislation in states and other jurisdictions which may amend or repeal existing gaming legislation; |
| decreases in our revenue share percentage in our participation agreements with customers; |
| slow growth in the establishment of new gaming jurisdictions, declines in the rate of replacement of existing gaming machines and ownership changes and consolidation in the casino industry; |
| our ability to realize satisfactory returns on money lent to new and existing customers to develop or expand gaming facilities or to acquire gaming positions in gaming facilities; |
| adverse local economic, regulatory or licensing changes in Oklahoma, the state in which the majority of our revenue has been derived, or material decreases in our revenue with our largest customer, which comprised approximately 35% of our gaming revenue for the fiscal year ended December 31, 2012; |
| inability to protect or enforce our intellectual property; |
| future claims of litigation or intellectual property infringement or invalidity, and adverse outcomes of those claims; |
| failure to attract, retain and motivate key employees; |
| the security and integrity of our systems and products; |
| losses due to technical problems or fraudulent activities related to our gaming machines and online operations; |
| product defects which could damage our reputation and our results of operations; |
| quarterly fluctuation of our business; |
| certain restrictive open source licenses requiring us to make the source code of some of our products available to third parties and potentially granting third parties certain rights to the software; |
| recently introduced or proposed smoking bans on smoking at our facilities that may adversely affect our operations; |
| AP Gaming VoteCo, LLC is the sole holder of our Common Stock and may have conflicts of interest with us in the future or interests that differ from the interests of holders of our non-voting common stock; |
| failure of our suppliers to meet our performance and quality standards or requirements could result in additional costs or loss of customers; |
| risks related to casino operations which are conducted at the discretion of our customers; |
| risks related to operations in foreign countries and outside of traditional U.S. jurisdictions; and |
| the other factors discussed under Item 1A. Risk Factors. |
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. These forward-looking statements are made only as of the date of this Registration Statement. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments unless required by federal securities law. New factors emerge from time to time, and it is not possible for us to predict all such factors.
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ITEM 1. | BUSINESS. |
Overview
We are a leading designer and manufacturer of Class II gaming machines for the Native American gaming market with an emerging presence in a broad range of commercial markets in the United States. As of September 30, 2013, we had 8,135 gaming machines in 169 gaming facilities in 18 U.S. states, with 145 gaming facilities under revenue sharing agreements and 24 facilities under daily fixed fee agreements. The majority of our systems are used by Native American gaming operators in both Class II and Class III environments, with a recent expansion into the Illinois video gaming terminal, or VGT, market. Our products include electronic gaming machines, server-based systems and back-office systems that are used by casinos and other gaming locations.
We currently derive substantially all of our gaming revenues from lease agreements whereby we place gaming machines and systems at a customers facility in return for either a share of the revenues that these games and systems generate or a daily fee, which we collectively refer to as participation agreements and as our participation model. For the twelve months ended September 30, 2013, approximately 98% of our total revenue was recurring, generated from participation agreements and other licensing fees. We believe that our participation model provides our customers with distinct advantages. By leasing our gaming machines to customers, we enable our customers to introduce new games in their facilities with minimal cost and financial risk. Additionally, the participation model directly aligns our interests with our customers through a shared dependence on the games performance. We successfully grew our domestic installed base of participation gaming machines every year from 2003 to September 30, 2013, and we remain highly focused on continuing to expand our domestic installed base of participation gaming machines in both our current and new markets. We have also substantially increased the number of markets in which we have participation gaming machines, from four U.S. states in 2006 to 18 U.S. states as of September 30, 2013. We also have historically generated revenue from the sale of gaming machines and systems. We expect gaming machine sales and systems sales to continue to play a role in our business and complement our core participation model as we expand into new gaming markets.
Our focus has been in the Native American segment of the gaming market, particularly Class II gaming, with 5,648 Class II machines installed in over 97 facilities across eight states. We also believe that we have a strong market position within Class II games in Oklahoma. The Oklahoma Native American gaming market is the third largest gaming market in the United States, with gaming revenues of approximately $3.8 billion in 2012, according to the Oklahoma Indian Gaming Association. Since the signing of Oklahomas compact in 2004, which permitted Class III games, the Oklahoma gaming market has experienced rapid unit growth, expanding from 27,830 gaming machines in 2004 to 64,786 in 2012, with a significant portion of the growth coming from new Class II machines. During this period, we nearly doubled our installed base of Class II machines and increased our Class II market share from 9.7% to 20.4%. Unlike Class III gaming, which requires a compact with the state, Native American tribes have the authority to operate an unlimited number of Class II games without executing a compact so long as the states permit bingo-style gaming. Class II games are an attractive option for Native American tribes because, among other things:
| revenue from Class II gaming is not shared with the state; |
| there are no limits on the number of Class II gaming machines that may be operated in any one facility; and |
| a strong Class II offering improves a tribes position when negotiating a Class III compact and the related taxes it pays to the respective state, as it lessens the tribes reliance on Class III games. |
We have significant technical expertise in catering to local tastes within fragmented markets and are thus positioned to be a leading supplier of Class III machines to Illinois recently regulated route-based market. The Illinois route-based market is the result of the Illinois Video Gaming Act, which legalizes licensed liquor businesses to have up to five gaming terminals in locations such as bars, restaurants, truck stops, and fraternal
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and veterans organizations. The video gaming terminals in these establishments are operated by route operators who generally have games in multiple locations. We provide the games to the route operators through a lease. In order to maximize operator and location revenue, we developed a new multi-game terminal called Gamblers Choice , which is offered with a portfolio of games that are well-suited to player preferences for the route operated segment. We are also working in conjunction with select route operators to acquire and consolidate undercapitalized routes across Illinois in exchange for long-term contractual rights to provide our gaming machines at a fixed daily fee of approximately $13.00. Based on the number of locations that our eight existing route operator relationships have to date, we estimate contracted placements of approximately 2,769 gaming machines, of which 1,975 placements are located in municipalities which have already opted in to permit route gaming and 794 placements are located in municipalities that have not yet opted in. As of September 30, 2013, we had 926 terminals operating in Illinois.
Class III markets represent a large untapped opportunity for us. Over the last three years, we have aggressively secured licenses in key commercial markets. As a result of our investments, we have more than tripled our addressable markets to 776 casinos and 614,000 gaming machines. We recently placed Class III units in Nevada and Louisiana and expect to commence placement of Class III gaming machines in New Jersey and Mississippi in the near term. Our key initiatives for the Class III market include (i) building a robust proprietary platform to enable us to develop customized product solutions and (ii) developing unique game concepts (such as the It Pays to Know series of games, pachinko-based topper games such as Caribbean Pearls , and engaging games with strong player appeal such as Blackbeards Treasure ). We intend to focus on niche placements (targeting six to ten units per location) of these and other premium games to drive growth. As of September 30, 2013, we have successfully placed our gaming machines in 23 casinos with an average of 57 games per location (excluding Oklahoma).
We have leveraged our leadership position in Class II content, our flexible technology platform that offers titles in both Class II and Class III formats, and our strong customer relationships to penetrate our core markets. Under our participation model, customers rely on us to select the mix of titles, maintain and service the equipment, and oversee promotional efforts for our titles. These dynamics foster strong long-term customer relationships, as demonstrated by the fact that our top ten participation model customers have been with us for an average of over eight years. In addition, our customer location retention rate as of September 30, 2013 was 96%.
Within Native American and other segments of the gaming industry, we focus on providing content for the local player. We believe that locals-oriented markets have greater consistency and visibility in performance than larger destination markets and have strong growth characteristics. Based on our internal research, we believe local players visit casinos with high frequency and demonstrate strong loyalty to gaming titles. Locals-oriented markets have proven to be more resilient during economic downturns, and we believe we are well-positioned to benefit from gaming expansion as states with recently passed legislation such as Florida, Illinois, Maryland, Massachusetts, Ohio and Pennsylvania continue to legalize various forms of gaming. We believe our understanding of these locals-oriented markets, early focus on new market opportunities and market-specific strategies and products distinguish us from many of our competitors.
We have built a strong management team and increased our product development capability in order to capitalize on our attractive market position and growth opportunities in our current and new markets. In addition, we have significantly increased our pipeline of new titles through continued investment in internal content development capabilities and increased efforts on leveraging third-party developers. We believe our expanded content library consisting of our core and new titles will allow us to drive incremental revenue from our domestic installed base of 8,135 participation gaming machines, gain additional placements in our current markets, and penetrate new markets.
Business Strategy
We have invested and expect to continue to invest in new business strategies, products, services and technologies. We intend to pursue the following strategies as part of our overall business strategy:
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Continue to expand our library of proprietary content . We will continue our focused efforts to develop games, both internally and through partnerships with third parties, tailored to our target markets. |
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Investments in expanding our content have created a new title pipeline of 28 games that we released in 2013 (22 of which were developed internally), which equals the 28 titles we brought to market from 2002 to 2010 combined. Our proprietary game library grew from nine active titles in 2011 to 87 active titles at the end of 2013. |
| Improve yield on existing customer installed base by managing title mix. We believe that more effective management of the title mix across our domestic installed base of 8,135 participation gaming machines in 169 gaming facilities represents an opportunity to generate incremental earnings growth without requiring growth in our domestic installed base of participation gaming machines. In addition, we expect improved game performance will likely drive incremental gaming machine placements within our customers facilities. |
| Develop niche products for expansion into traditional gaming markets. With 979 casinos in 41 U.S. states as of December 31, 2012 and the replacement cycle on equipment at a cyclical low, we believe the market potential for new games is favorable. We will target the introduction of a small number of niche participation gaming machines to a large number of casinos. As of September 30, 2013, we are licensed to operate in 24 U.S. states, containing approximately 776 casinos in the aggregate. |
| Execute on contracted Illinois VGT rollout . We have significant technical expertise in catering to the local tastes within fragmented markets and are positioned to be a leading supplier to Illinois recently regulated route gaming market. To target this nascent route-based market, we have developed new products and features, including games, titles and bonus features specifically for the Illinois VGT market and a statewide player reward program. |
| Continue expansion into Class III markets and increase penetration in Class II markets . We have a foothold of 1,561 Class III recurring revenue placements (excluding Illinois), and we plan to continue expanding in this market. Utilizing new recently issued gaming licenses, we expect to begin placing and selling Class III products in five new jurisdictions (Nevada, Mississippi, Louisiana, New Jersey and Connecticut). We also anticipate growing our presence in Class III markets where we currently operate, such as Oklahoma, Florida and California, by placing additional content from our expanding library of games in these states. In addition, we believe that our existing core Class II product offering is among the strongest in the industry today. We expect to continue gaining market share in existing Class II jurisdictions and are focused on penetrating newly licensed jurisdictions. |
Company History
In September 2005, AGS, LLC, a direct wholly owned subsidiary of AGS Capital, LLC, acquired Clapper Enterprises, Inc. and Worldwide Game Technology Corp., collectively referred to as CEI. Prior to 2002, CEI focused on the Class II market, utilizing new game and system software provided through its partnership with Bluberi. CEIs primary market was Oklahoma, which was a non-compacted, Class II-only Native American market at this time. From 2002 to 2004, CEI grew their installed base of participation gaming machines from several hundred to approximately 3,000, of which approximately 89% were located in Oklahoma, with the remaining machines located in New York, Wyoming and Texas. See Item 2. Financial InformationManagements Discussion and Analysis of Financial Condition and Results of OperationsAcquisitions and Divestitures.
Our historical growth primarily has been accomplished by expanding our installed base of participation gaming machines through increased penetration of existing markets and the expansion into new markets. As of September 30, 2013, we had 8,135 gaming machines in 18 U.S. states. We added the game sale model in 2008 to complement our participation strategy. In 2010, we recruited a new CEO and several highly accomplished executives to our management team. In July 2010, we reorganized our business by reducing staff and consolidating our field service operations to our Oklahoma facility which led to the closure of our Canoga Park, California facility and the closure of our Simpsonville, South Carolina facility. In January 2012, we agreed to
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terminate our existing distribution agreement with Bluberi, which provided gaming content and software systems in exchange for certain royalties, and to acquire certain rights to gaming content and software systems covered thereunder.
The Acquisition
On September 16, 2013, AGS Holdings, LLC, AGS Capital and AP Gaming Acquisition, LLC ( AP Gaming Acquisition ), an indirect wholly owned subsidiary of AP Gaming and an affiliate of Apollo Global Management, LLC ( Apollo ), entered into an Equity Purchase Agreement (as subsequently amended and restated on December 3, 2013, the Acquisition Agreement ). The Acquisition Agreement provided for the purchase of 100% of the equity of AGS Capital from AGS Holdings, LLC (the Acquisition ) by AP Gaming Acquisition for an aggregate purchase price of approximately $221.9 million.The Acquisition was consummated on December 20, 2013.
The Acquisition was financed in part by the Senior Secured Credit Facilities (as defined herein), which are comprised of the $155 million Term Facility and the $25 million Revolving Facility (each, as defined herein). AP Gaming I, LLC, an indirect wholly owned subsidiary of AP Gaming, is the borrower of the Senior Secured Credit Facilities, which are guaranteed by AP Gaming Holdings, LLC ( AP Gaming Holdings ), AP Gaming I, LLCs direct parent company, and each of AP Gaming I, LLCs direct and indirect material wholly owned domestic subsidiaries including AGS Capital.
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Corporate Structure
The following chart summarizes our corporate structure:
Apollo Overview
Founded in 1990, Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Hong Kong and Mumbai, and a team of 691 employees, including 274 investment professionals. As of September 30, 2013, Apollo had total assets under management of $112.7 billion, including approximately $42.8 billion in private equity, $59.4 billion in credit and $9.3 billion in real estate.
Apollo has a long history of successfully investing in leisure and site-based entertainment. Investments include resorts, cruise lines, gaming, spas, golf and restaurants. Apollo has a deep understanding and significant experience in the development / construction, marketing and cross-selling activities for these assets, as well as a
broad network of industry professionals.
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Apollo is currently invested in Caesars Entertainment Corporation, the worlds largest and most diversified casino-entertainment provider and the most geographically diverse U.S. casino-entertainment company with 61,900 slot machines, Gala Coral Group, one of Europes pre-eminent betting and gaming businesses with 7,082 slot machines and three cruise line companies, Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises, with approximately 2,950 slot machines in the aggregate.
Our Operations
Under our participation agreements, we provide customers with gaming machines, systems software, computer hardware, signage and other equipment for operation within their gaming facilities. In return we receive a share of the revenue generated by these gaming machines and systems or a daily fee. The determination of whether our agreement results in a revenue share or daily fee arrangement is generally governed by local gaming jurisdictions. For our revenue share arrangements, we have historically shared between 15 20% of the revenues generated by the gaming machines. For our daily fee arrangements, the average daily fee for our current installed base is approximately $32.00 per day for non-Illinois markets and $13.00 per day for Illinois markets. Under our participation agreements, we participate in selecting the mix of titles, maintain and service the equipment, and oversee certain promotional efforts. In support of our business and operations, we employ a professional staff including field service technicians, production, sales, account management, marketing, technology and game development, licensing and compliance, finance and administration.
Our field service technicians are responsible for installing, maintaining and servicing our player terminals and systems. Our field service operation including our call center, which operates 24 hours a day, seven days a week, is managed out of our Oklahoma facility. We can also access most of our gaming machines and systems remotely from approved remote locations to provide software updates and routine maintenance. In addition, our gaming machine and system production facility is also located in and managed out of Oklahoma.
Sales, account management and marketing are managed through our Oklahoma, Las Vegas and Illinois locations. Sales and account management oversees the customer relationship both at the individual location and corporate level and are responsible for developing new customer relationships. Account management is in charge of running on-site promotions and corporate sponsorship programs. In addition, our marketing team is in charge of general corporate marketing, including advertisements and participation at industry trade shows.
Our technology and game development division operates primarily out of our Toronto location and secondarily out of our Las Vegas location. We employ game developers, software and system programmers, project managers and other development and administrative staff that oversee our internal game development efforts and manage third party relationships.
Our legal, licensing and compliance division operates out of our Las Vegas and Oklahoma locations. Our licensing and compliance division oversees the application and renewal of our corporate gaming licenses, findings of suitability for key officers and directors and certification of our gaming equipment and systems for specific jurisdictions, as well as coordinating gaming equipment and software shipping and onsite and remote service of our equipment with gaming authorities.
Our finance and administration division is located in our corporate headquarters in Las Vegas. Finance and administration oversees financial reporting, cash management, human resources and other administrative and corporate functions.
Products
We provide our customers with gaming machines, systems software, computer hardware, signage and other equipment for operation within their gaming facilities.
Roadrunner Platform
We received regulatory approval for the Roadrunner platform in 2012. The Roadrunner platform is one of the most advanced platforms in the industry and represents a substantial advancement from our legacy Encore platform, both in terms of user interface and platform architecture. We designed Roadrunner to be a superior
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Class II gaming platform with the capability to port Class III outcomes within a Class II construct with limited degradation in game play. Since Roadrunner is able to run in both Class II and Class III formats, we are able to develop both Class II and Class III titles for the platform, and can also easily retrofit it to certain of our existing products.
Utilizing both in-house and third party providers, we have created a sizable portfolio of new titles for the Roadrunner platform. Due to the modular and highly scalable design of Roadrunner, we believe we can increase the number of titles we produce each year using just our existing resources. The Roadrunner platform was designed with our revenue share model in mind, and title conversions can be executed by loading software off of a USB drive. Roadrunner is also compatible with downloadable conversions, however regulatory standards in most jurisdictions do not currently permit this technology.
Class II historically has suffered from diminished game play and functionality due to fewer outcomes compared to Class III games. We believe that the Roadrunner method for porting Class III outcomes to a Class II system will create a unique robust competitive Class II product, with the potential to grow the entire Class II market. This will give our Native American customers more flexibility in managing their casino floor, which represents a large opportunity as Native American gaming revenue (both Class II and Class III) constituted approximately 43% of total U.S. gambling revenue in 2012.
Gaming Titles
Prior to 2010, we relied solely on external content providers, and currently approximately 85% of our installed base runs on externally developed platforms. We have strategically shifted our focus to create new internal content, however, and our research and development program has been the largest contributor to our new titles over the past two years. As a result, we expect internally generated content to be a larger source of our installed base going forward.
We have four categories of gaming titles: Standard, Premium, Bluberi and Colossal. Our Standard and Premium products utilize internally produced content, while our Bluberi and Colossal products utilize externally produced content. We acquired rights to the Bluberi products and titles in 2012 and also signed an exclusive distribution agreement with Colossal Gaming in 2012 for the California, Oklahoma, Washington, Florida, New York and Texas markets.
Core Titles
We partnered with Bluberi beginning in 2002 to develop our initial set of Class II games for release in the Oklahoma market. Under this agreement, we paid Bluberi a licensing fee equal to a percentage of revenues earned on titles placed in casinos that operated on Bluberis proprietary platform. This collaboration resulted in the development of successful core titles, such as Royal Reels , Cool Catz and Liberty 7s , which are among the top ten Class II games in the market today. These titles have historically been the highest gross earners in our product portfolio and as of September 30, 2013, represented 52% of our installed base and 61% of our total revenue. In May 2012, we negotiated a purchase agreement with Bluberi for the licensing and royalty rights to Royal Reels , Cool Catz and Liberty 7s , among others. We believe that there is significant value in these brands, and we plan to leverage them through developing title extensions on the Roadrunner platform.
Roadrunner Titles
We continue to launch our Premium titles in three primary formats: mechanical wheel top box, mechanical pachinko top box and 42 vertical slant top. These self-merchandising cabinet formats are Premium in nature and atheistically appealing to the casino customer. The variety of formats allows for an appropriate level of experimentation of unique selling propositions within our product.
We have entered into licensing agreements with a number of top brands and are developing a series of trivia-based games which will be marketed as the It Pays to Know series. The brands include Ripleys Believe it or Not! , Are You Smarter Than a 5th Grader? and Family Feud . For each brand, we intend to take to market at
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least two different products to maximize the potential of creating a hit franchise. In December 2012, we launched Blackbeards Treasure , a culmination of the unique bonus schemes, play mechanisms and game features developed for the Roadrunner platform. It represents the first game on the Roadrunner platform which will be featured in a Premium format.
Specialty Game Concepts
Our Diamond Lotto game has quickly become one of the leading grossing games in the state of Florida since its launch in 2009, averaging WPD of approximately $268. To build on Diamond Lotto s success and increase its presence in the Florida market, we will be launching the Lottomania Multi-Game in 2013, featuring line extensions that include Shamrock Lotto, Great West Lotto , Ruby Lotto and Jewel Lotto . We plan to replicate the success of Diamond Lotto in other Class III gaming markets where we have a smaller footprint.
We introduced our Gamblers Choice multi-game unit, designed specifically for the Illinois VGT market, in September 2012. This unit runs on our Roadrunner platform and enables us to offer up to 24 titles per terminal, including traditional reel games, classic card games and specialty poker products in order to maximize operator and location revenue. We researched the market intensively to carefully create a portfolio of games that are well suited to player preferences for a route operated market. The resulting mix is a collection that includes several of our highest grossing titles as well as external content that was specifically licensed for use in the Illinois market. Among the offerings is Cherry Master , a game that we in-licensed and recreated for the Illinois VGT market.
Third Party Content
Our product strategy also involves title development utilizing independent design studios to create content on the new Roadrunner platform. In November 2011, we entered into an exclusive rights agreement to license five titles, with an option to expand, from Gametech Internationals video lottery terminal library for use in the Illinois market. We are also implementing the first of three titles that we acquired from Design Works Gaming, an independent studio based in Phoenix. The first of these titles is Armadillo Artie , which was launched in the third quarter of 2013. In addition, we also intend to partner with developers that own their own platforms as an additional source of content.
In September 2012, we entered into an exclusive distribution agreement with Colossal Gaming to distribute Colossals Class II and Class III games in California, Florida, New York, Oklahoma, Texas and Washington. As part of the distribution agreement, we will provide sales and service for Colossal designed games. Colossals products offer a unique selling proposition with creatively designed oversized games. For example, the Big Red cabinet is over eight feet wide and we believe is one of the top games in both California and Oklahoma. More recently, we expanded our development agreement with Colossal to include three Colossal titles that will be developed on our GT5000 cabinet for sale or deployment in all jurisdictions where we are licensed.
Product Strategy
Our product strategy is to develop unique Premium product offerings and create our own product categories and subcategories featuring these Premium offerings. We will also test various unique game play methods on our Standard series of games which will also be used to manage yield in the existing installed base. Our growing library of new Standard titles provides us with a broader selection to actively manage our title mix and keep our installed base fresh with new popular content.
For Premium games, we intend to become the market leader in sub-categories wherever possible. For example, our It Pays to Know series of games will feature well-known brands such as Ripleys Believe it or Not! , Are You Smarter Than a Fifth Grader? and Family Feud . All games in the It Pays to Know series will also include a trivia bonus feature, which is unique to our games. We believe this strategy will allow us to maintain our market leadership within our Class II base in existing markets and to expand into Class III casinos in other key jurisdictions.
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Manufacturing
We have a manufacturing agreement with Cole Kepro International, LLC ( Cole ) to build our gaming cabinets. We believe we have limited concentration risk with Cole, since we own the rights to our cabinet designs and thus have the ability to change manufacturers in the event of a dispute. Cole is based in Las Vegas, Nevada and is owned by Kepro International, a large international manufacturing company with multiple manufacturing facilities. We believe our gaming cabinets can easily be designed at another of Kepros plants in the event of an unforeseen interruption at Coles Las Vegas plant.
Our gaming machine and system production facility is also located in and managed out of Oklahoma. Production at this facility includes building and refurbishing gaming machines (excluding gaming cabinets) and servers, parts support and purchasing. Field service technicians are located in various jurisdictions throughout the U.S. and are dispatched from a central call center located in our Oklahoma facility. They are responsible for installing, maintaining and servicing the player terminals and systems.
Manufacturing commitments are generally based on expected quarterly sales orders from customers. Due to uneven order flow from customers, component parts common to all gaming machines are purchased and assembled into a partial product that are inventoried to be able to quickly fill final customer orders.
We generally warrant our new gaming machines sold in the United States for a period of 365 days, while we warrant our gaming machines sold internationally for a period of 180 days to one year. Our warranty costs have not been significant.
Customers
We believe the quality and breadth of our customer base is a strong testament to the effectiveness and quality of our product offerings, technological innovation and customer service. At the core of our relationship with our customers is our participation model, which aligns our financial incentives with those of our customers through a shared dependence on the games performance. The combination of our customer-aligned participation model, quality customer service and strong game performance has allowed us to develop long-term relationships with our tribal and commercial casino customers. We have a strong customer location renewal rate, which averaged 96% as of December 31, 2012. Our top ten participation customers have been with us for an average of over eight years, and we believe that we maintain long-term relationships with key customer decision-makers. The combination of our customer-aligned participation model, attentive customer service and superior game performance has allowed us to develop long-term relationships with our tribal and commercial casino customers. As of September 30, 2013, we had 8,135 gaming machines in 18 U.S. states.
Oklahoma is our largest market and our participation gaming machines in the state accounted for approximately 78% of our total revenue for the fiscal year ended December 31, 2012. Our largest customer is the Chickasaw Nation, a Native American gaming operator in Oklahoma, which accounted for approximately 35% of our gaming revenue for the fiscal year ended December 31, 2012. The revenues we earn from the Chickasaw Nation are derived from numerous agreements. One such agreement, which covers our leasing of 200 units for the Winstar project, is scheduled to expire May 11, 2014, while the other agreements are scheduled to expire between 2015 and 2018. We have historically offered select existing and prospective customers financing for casino development and expansion projects in exchange for exclusive rights to a percentage of their floor space. In addition to our long-term relationships and contractual arrangements, the consistent demand for our titles from the loyal, repeat players of our titles further ensures our strong presence on our customers casino floors.
Within the Native American market, we provide both Class II and Class III games. We also serve customers in commercial, video lottery terminal, charity bingo and route-based markets.
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Customer Contracts
We derive the majority of our gaming revenues from participation agreements whereby we place gaming machines and systems, along with our proprietary and other licensed game content, at a customers facility in return for a share of the revenues that these gaming machines and systems generate or a daily fee. We measure the performance of our domestic installed base of participation gaming machines on the net win per day per machine, often referred to as the win per day, or WPD. Under our participation agreements, we earn a percentage of the WPD of our domestic installed base of participation gaming machines. For the fiscal year ended December 31, 2012, our average revenue share was 18.9% and the average WPD of our domestic installed base of participation gaming machines was $110 , which is a 2.8% increase compared to the prior year.
Our standard participation contracts run one to three years in duration and may contain auto-renewal provisions for an additional term. Our contracts generally specify the number of gaming machines and other equipment to be provided, revenue share, daily fee or other pricing, provisions regarding installation, training, service and removal of the machines, and other terms and conditions standard in the industry. In some circumstances, we enter into trial agreements with customer that provide a free or fee-based trial period during which the customer may use our gaming machines. Each trial agreement lays out the terms of payment should the customer decide to continue using our machines.
Our development or similar agreements in the Native American and other markets may involve both a loan or advance of funds and a gaming equipment lease agreement. These agreements are typically longer term contracts, ranging from four to ten years depending on the amount of financing provided, market and other factors. These contracts specify the amount and timing of the advances that we will provide, the uses of those funds, and target timing for the construction or remodeling of the gaming facility, if applicable. In addition, the contracts specify the repayment terms of the loans which vary by customer and agreement. Typical terms contained in these agreements include the percentage of the floor, minimum number of gaming machines, or percentage of the route operation allocated to us, the associated term or period of exclusivity for that allocation or number of gaming machines, minimum game performance thresholds, cure periods and resulting obligations, if any, and other general terms and conditions. Certain of these development agreements also contain a buyout option, which provides that upon written notice and payment of a buyout fee, the customer can terminate our floor space privileges. The IGRA states that a Native American tribe must have the sole proprietary interest in its gaming (25 U.S.C. § 2710(b)(2)(A)). To the extent that any of our agreements with Native American tribes are deemed by the NIGC to create an impermissible proprietary interest, such agreements would need to be amended in order to be valid. To our knowledge, none of our current agreements with Native American tribes create an impermissible proprietary interest in Indian gaming. As of September 30, 2013, these loans, in the aggregate, amounted to approximately $13.0 million in notes receivable, $11.8 million of which is related to loans to gaming operators in the Illinois VGT market. After September 30, 2013, in the normal course of business, total payments of approximately $3.0 million have been received on these notes receivable. As of the consummation of the Acquisition, approximately $13.0 million of the notes receivable remain with the Seller.
We generally make efforts to obtain waivers of sovereign immunity in our contracts with Native American customers. However, we do not always obtain these provisions and where we do they can be limited in scope. There is no guarantee that we will continue or improve our ability to get this term in future contracts. While we have not had any experience with contract enforceability vis-à-vis our Native American customers, we are cognizant of recent cases involving other parties dealing with waivers of sovereign immunity. Those cases put into question how sovereign immunity may be viewed by courts in the future. In the event that we enter into contracts with Native American customers in the future that do not contain a waiver of sovereign immunity, such contracts may be practically unenforceable.
Our game sale contracts are typical of those in the industry. They specify the general terms and conditions of the sale, equipment and services to be provided, as well as pricing and payment terms. In some cases, we provide the central server that is used to operate the purchased equipment on a lease and charge a fee per day based on the number of gaming machines connected to the server.
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Research and Development
We conduct research and development through an internal team to develop new gaming systems and gaming content. Research and development costs consist primarily of salaries and benefits, travel and expenses and other professional services. We employ approximately 60 game developers, software and system programmers, project managers and other development and administrative staff that oversee internal game development efforts and manage third party relationships. The technology and game development division operates primarily out of our Toronto location as well as in Las Vegas. Research and development expenses were $1,199,248, $681,434, and $353,252 for the years ended December 31, 2012, 2011, and 2010, respectively, and are included as a component of general and administrative expense.
Competition
We encounter intense competition from other designers, manufacturers and operators of electronic gaming machines and systems. Our competitors range from small, localized companies to large, multi-national corporations, several of which have substantial resources and market share.
Our competitors include, but are not limited to, International Game Technologies, or IGT, WMS Industries Inc., Bally Technologies, Inc., or Bally, Aristocrat Technologies Inc., or Aristocrat, Video Gaming Technologies, Inc., or VGT, Multimedia Games, Inc., or MGAM, Konami Co. Ltd., or Konami, and Cadillac Jack. Many of our competitors are large, well-established companies with substantially larger operating staffs and greater capital resources and have been engaged in the design, manufacture and operation of electronic gaming equipment business for many years. Some of these companies contain significant intellectual property including patents in gaming technology and hardware design, systems and game play and trademarks. In addition, the larger competitors contain significantly larger content portfolios and content development capability and resources, are licensed in markets throughout the United States, and have international distribution. Bally, IGT, Konami, and Aristocrat all have a presence in the back-office accounting and player tracking business which expands their relationship with casino customers. VGT, Cadillac Jack and MGAM are our primary competitors in the Class II market.
To compete effectively, we must, among other things, continue to develop high performing games for the Class II market, provide excellent service and support to our existing customers, effectively manage our installed base of participation gaming machines, expand our library of proprietary content, develop niche products with strong appeal to local players, be first to market in new non-traditional markets, implement effective marketing and sales functions, and offer competitive pricing and terms on our participation and sale agreements.
Intellectual Property
We have a combination of internally developed and third-party intellectual property, all of which we believe maintain and enhance our competitive position and protect our products. Such intellectual property includes owned or licensed patents, patent applications, trademarks and trademark applications in the United States and Canada. In addition, pursuant to our license agreements with third-party game developers, we license and distribute gaming software.
Seasonality
See Item 2. Financial InformationManagements Discussion and Analysis of Financial Condition and Results of OperationsSignificant Accounting Policies and Critical EstimatesSeasonality.
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Employees
We employ a professional staff, including field service technicians, production, sales, account management, marketing, technology and game development, licensing and compliance, finance and administration, to support our business and operations. As of September 30, 2013, we had 208 full-time employees in 11 different U.S. states and Toronto, Canada and no part-time employees. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages in the past.
Regulation and Licensing
We operate in numerous gaming jurisdictions, and our operations are subject to applicable federal, state, tribal and foreign governmental regulations as applicable in each of the gaming jurisdictions in which we operate. A significant portion of our operations take place at facilities conducting gaming activities on the tribal lands of Native American tribes resulting in our operations being subject to tribal and/or federal and sometimes state regulations depending on the classification of gaming being conducted in each such case as defined in the Indian Gaming Regulatory Act, or IGRA. In states where commercial gaming has been legalized, our operations are conducted subject to the applicable law of each such state and applicable federal laws.
While the specific regulatory requirements of each state and tribal jurisdiction vary, gaming regulatory authorities typically require licenses, permits, findings of integrity and financial ability, and other forms of approval to conduct operations as a gaming equipment manufacturer and/or provider of gaming related services. It is common for regulators to require reporting and disclosure concerning our activities in other gaming jurisdictions, resulting in the possibility that business activities or disciplinary action against us in one jurisdiction could result in disciplinary action in other jurisdictions. In addition, our officers, key employees, directors, major stockholders and, in some cases, equity holders and lenders are also each subject to licensure and/or suitability findings in connection with our operations. If regulators in any jurisdiction in which we conduct business determine that any officer, key employee, director, major stockholder (or other person or entity affiliated with us and subject to regulatory scrutiny under the regulations of such jurisdiction) is unsuitable to participate in the gaming industry in such jurisdiction, then we could be required to terminate our relationship with such person. In addition, many jurisdictions require our products to be tested for compliance with the jurisdictions regulations prior to our being permitted to distribute our products.
Our officers, key employees and operational entities have obtained or applied for all required government licenses, permits, registrations, findings of suitability, and approvals necessary to manufacture and distribute gaming products in all jurisdictions where we currently do business. In most jurisdictions, even once licensed or approved, we remain under the on-going obligation to keep the applicable gaming regulators informed of any material changes in the information provided to regulators as part of the licensing and approval process, and all licenses and approvals must be periodically renewed, in some cases as often as annually. In connection with any initial application or renewal of a gaming license or approval, we (and any individual required to submit to background review or licensure in connection with our application or renewal) are typically required to make broad and comprehensive disclosures concerning our business, including our finances, ownership and corporate structure, operations, compliance controls and business relationships. We must regularly report changes in our officers, key employees and other licensed positions to applicable gaming regulators. Gaming regulators typically have the right to disapprove any change in position by one of our officers, directors, or key employees, or require us to suspend or dismiss officers, directors, or other key employees and cause us to sever relationships with other persons or entities who refuse to file appropriate applications, or whom are found to be unsuitable.
Certain gaming jurisdictions in which we are licensed may prohibit us from making a public offering of our securities without their prior approval. Similarly, changes in control of a licensee through merger, consolidation, acquisition of assets or stock, management or any form of takeover typically cannot occur without the prior approval of applicable gaming regulators. Such regulators may also require controlling stockholders, officers, directors, and other persons or entities having a material relationship or involvement with the entity proposing to acquire control, to be investigated, and licensed as part of the approval process relating to the transaction.
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Gaming regulators often have the power to investigate the holders of our debt or equity securities. If any holder of our debt or equity securities is found unsuitable by any gaming regulator in a jurisdiction in which we conduct business, our licensure or approval to conduct business in such jurisdiction could be subject to non-renewal, suspension or forfeiture.
Most gaming jurisdictions impose fees and taxes that are payable by us in connection with our application, maintenance and renewal of our licensure or our approval to conduct business.
Federal Registration
The Gambling Devices Act of 1962 makes it unlawful for a person to manufacture, transport, or receive gaming devices, or components across interstate lines unless that person has first registered with the Attorney General of the U.S. Department of Justice. This act also imposes gambling device identification and record keeping requirements. Violation of this act may result in seizure and forfeiture of the equipment, as well as other penalties. As an entity involved in the manufacture and transportation of gaming devices, we are required to register annually.
Native American Gaming
The rules for Native American gaming were established in 1988 under the IGRA. Under the IGRA, gaming activities conducted by federally recognized Native American tribes are segmented into three classes of gaming activities:
Class I. Class I gaming represents traditional forms of Native American gaming as part of, or in connection with, tribal ceremonies or celebrations (e.g., contests and games of skill) and social gaming for minimal prizes. Class I gaming is regulated only by individual Native American tribes. We do not participate in any Class I gaming activities.
Class II. Class II gaming involves the game of chance commonly known as bingo (whether or not electronic, computer, or other technological aids are used in connection therewith to facilitate play) and if played in the same location as the bingo, pull tabs, punch board, tip jars, instant bingo, and other games similar to bingo. Class II gaming also includes non-banked card games, that is, games that are played exclusively against other players rather than against the house or a player acting as a bank. However, the definition of Class II gaming specifically excludes slot machines or electronic facsimiles of Class III games. Class II gaming is regulated by the National Indian Gaming Commission (the NIGC ) and the laws of the Native American tribe conducting such gaming. Subject to the detailed requirements of the IGRA, federally recognized Native American tribes are typically permitted to conduct Class II gaming on Indian lands pursuant to tribal ordinances approved by the NIGC.
Class III. Class III gaming includes all other forms of gaming that are neither Class I nor Class II and includes a broad range of traditional casino games such as slot machines, blackjack, craps and roulette, as well as wagering games and electronic facsimiles of any game of chance. The IGRA generally permits Native American tribes to conduct Class III gaming activities on reservation lands subject to the detailed requirements of the IGRA, including NIGC approval of the Native American tribes gaming ordinance and the entering into of a compact between the Native American tribe and the state in which the Native American tribe intends to conduct Class III gaming activities on its trust lands.
The IGRA is administered by the NIGC and the Secretary of the U.S. Department of the Interior. The NIGC has authority to issue regulations related to tribal gaming activities, approve tribal ordinances for regulating gaming, approve management agreements for gaming facilities, conduct investigations and monitor tribal gaming generally. The IGRA is subject to interpretation by the NIGC and may be subject to judicial and legislative clarification or amendment. The gaming ordinance of each Native American tribe conducting gaming under the IGRA and the terms of any applicable tribal/state compact establish the regulatory requirements under which we must conduct business on Native American tribal lands.
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Under the IGRA, the NIGCs authority to approve gaming related contracts is limited to management contracts and collateral agreements related to management contracts. A management contract includes any agreement between a Native American tribe and a contractor if such contract or agreement provides for the management of all or part of a gaming operation. To the extent that any of our agreements with Native American tribes are deemed to be management contracts, such agreements would require the approval of the NIGC in order to be valid. To our knowledge, none of our current agreements with Native American tribes qualify as management contracts under the IGRA.
In addition, as discussed above under CustomersCustomer Contracts, to the extent that any of our agreements with Native American tribes are deemed by the NIGC to create an impermissible proprietary interest, such agreements would need to be amended in order to be valid. To our knowledge, none of our current agreements with Native American tribes create an impermissible proprietary interest in Indian gaming.
International Regulation
Certain foreign countries permit the importation, sale, and operation of gaming equipment in casino and non-casino environments. Some countries prohibit or restrict the payout feature of the traditional slot machine or limit the operation and the number of slot machines to a controlled number of casinos or casino-like locations. Each gaming machine must comply with the individual countrys regulations. Certain jurisdictions do not require the licensing of gaming machine operators and manufacturers.
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ITEM 1A. | RISK FACTORS. |
The following risk factors should be considered carefully in addition to the other information contained in this Registration Statement. This Registration Statement contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, those discussed below as well as those discussed elsewhere in this Registration Statement. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.
Our success in the competitive gaming industry depends in large part on our ability to develop and manage frequent introductions of innovative products. If we are unable to successfully and frequently introduce innovative products, we may be at a competitive disadvantage to our competitors, which could negatively impact our business.
The gaming industry is characterized by dynamic customer demand and technological advances. As a result, we must continually introduce and successfully market new themes and technologies in order to remain competitive and effectively stimulate customer demand.
There is no assurance that our investments in research and development will lead to successful new technologies or timely new products. We invest heavily in product development in various disciplines from hardware, software and firmware engineering to game design, video, multimedia, graphics and sound. Because our newer products are generally more technologically sophisticated than those we have produced in the past, we must continually refine our production capabilities to meet the needs of our product innovation. If we cannot efficiently adapt our manufacturing infrastructure to meet the needs of our product innovations, or if we are unable to make upgrades in our production capacity in a timely manner, our business could be negatively impacted.
Our customers will generally accept a new product if it is likely to increase operator profits. The amount of operator profits primarily depends on consumer play levels, which are influenced by player demand for our products. There is no assurance that our new products will attain this market acceptance or that our competitors will not more effectively anticipate or respond to changing customer preferences. In addition, any delays by us in introducing new products on schedule could negatively impact our operating results by providing an opportunity for our competitors to introduce new products and gain market share ahead of us.
Our business is vulnerable to changing economic conditions and to other factors that adversely affect the casino industry, which have negatively impacted and could continue to negatively impact the play levels of our participation games, our product sales and our ability to collect outstanding receivables from our customers.
Demand for our products and services depends largely upon favorable conditions in the casino industry, which is highly sensitive to casino patrons disposable incomes and gaming activities. Discretionary spending on entertainment activities could further decline for reasons beyond our control, such as continued negative economic conditions, natural disasters, acts of war or terrorism or transportation disruptions, including as a result of adverse weather conditions. Any prolonged or significant decrease in consumer spending on entertainment activities could result in reduced play levels on our participation games, causing our cash flows and revenues from a large share of our recurring revenue products to decline. Unfavorable economic conditions have also resulted in a tightening in the credit markets, decreased liquidity in many financial markets, and significant volatility in the credit and equity markets.
Furthermore, the extended economic downturn has impacted and could continue to impact the ability of our customers to purchase new gaming equipment or make timely payments to us. We have incurred, and may continue to incur, additional provisions for bad debt related to credit concerns on certain receivables.
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Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments.
We have a significant amount of outstanding indebtedness. As of September 30, 2013, after giving effect to the Acquisition, we would have had approximately $ 156.0 million, net of $4.7 million of discount, of outstanding indebtedness.
Our substantial indebtedness could have significant effects on our business. For example, it could:
| make it more difficult for us to satisfy our financial obligations, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; |
| increase our vulnerability to general adverse economic, industry and competitive conditions; |
| reduce the availability of our cash flow to fund working capital and capital expenditures, because we will be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness; |
| limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
| place us at a competitive disadvantage compared to our competitors that are less highly leveraged and that, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting; and |
| limit, along with the financial and other restrictive covenants in the agreements governing our indebtedness, among other things, our ability to borrow additional funds or dispose of assets. |
Demand for our products and the level of play of our products could be adversely affected by changes in player and operator preferences.
As a supplier of gaming machines, we must offer themes and products that appeal to gaming operators and players. Our revenues are dependent on the earning power and life span of our games. We therefore face continuous pressure to design and deploy new and successful game themes and technologically innovative products to maintain our revenue and remain competitive. If we are unable to anticipate or react timely to any significant changes in player preferences, the demand for our gaming products and the level of play of our gaming products could decline. Further, our products could suffer a loss of floor space to table games or other more technologically advanced games, we could fail to meet certain minimum performance levels, or operators may reduce revenue sharing arrangements with us, each of which could negatively impact our 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 our gaming products.
The gaming industry is intensely competitive. If we are unable to compete effectively, our business could be negatively impacted.
Competition among manufacturers of electronic gaming equipment and systems is intense. Competition in our industry is primarily based on the amount of profit our products generate for our customers, together with cost savings, convenience and other benefits. We compete through the appeal of game content and features to the end player, the features and functionality of our hardware and software products, and the service and support we provide. Our competitors range from small, localized companies to large, multi-national corporations. Many of our competitors are large, well-established companies with substantially larger operating staffs and greater capital resources and have been engaged in the design, manufacture and operation of electronic gaming equipment business for many years. Some of these companies own significant intellectual property, including
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patents in gaming technology and hardware design, systems and game play and trademarks. In addition, our larger competitors may have significantly larger content portfolios and content development capability and resources, are licensed in markets throughout the United States, and have international distribution.
Obtaining space and favorable placement on casino gaming floors is also a competitive factor in our industry. In addition, the level of competition among equipment providers has increased significantly due to, among other factors, cutbacks in capital spending by casino operators resulting from the economic downturn and decreased player spend. In select instances, we may pay for the right to place gaming machines on a casinos floor and increased fee requirements from such casino operators may greatly reduce our profitability.
In addition, we face competition from other segments of the gaming industry, including internet gambling, which is currently illegal in the United States, and state lotteries. There can be no assurance that new technologies or markets, such as legalized internet gambling, will not emerge that will increase these competitive pressures.
Our ability to operate in our existing markets or expand into new jurisdictions could be adversely affected by changing regulations, new interpretations of existing laws, and difficulties or delays in obtaining or maintaining required licenses or approvals.
We operate only in jurisdictions where gaming is legal. The gaming industry is subject to extensive governmental regulation by U.S. federal, state and local governments, as well as Native American tribal governments, and foreign governments. While the regulatory requirements vary by jurisdiction, most require:
| licenses and/or permits; |
| documentation of qualifications, including evidence of financial stability; |
| other required approvals for companies who design, assemble, supply or distribute gaming equipment and services; and |
| individual suitability of officers, directors, major shareholders, key employees and business partners. |
Any license, permit, approval or finding of suitability may be revoked, suspended or conditioned at any time. We may not be able to obtain or maintain all necessary registrations, licenses, permits or approvals, or could experience delays related to the licensing process which could adversely affect our operations and our ability to retain key employees.
To expand into new jurisdictions, in most cases we will need to be licensed, obtain approvals of our products and/or seek licensure of our officers, directors, major equity holders, key employees or business partners and potentially lenders. If we fail to obtain a license required in a particular jurisdiction for our games and gaming machines, hardware or software or have such license revoked, we will not be able to expand into, or continue doing business in, such jurisdiction. Any delays in obtaining or difficulty in maintaining regulatory approvals needed for expansion within existing markets or into new jurisdictions can negatively affect our opportunities for growth. In addition, the failure of our officers, directors, key employees or business partners or lenders to obtain or receive licenses in one or more jurisdictions may require us to modify or terminate our relationship with such officers, directors, key employees or business partners or forego doing business in such jurisdiction.
Although we plan to maintain our compliance with applicable laws as they evolve, there can be no assurance that we will do so and that law enforcement or gaming regulatory authorities will not seek to restrict our business in their jurisdictions or institute enforcement proceedings if we are not compliant. Moreover, in addition to the risk of enforcement action, we are also at risk of loss of business reputation in the event of any potential legal or regulatory investigation whether or not we are ultimately accused of or found to have committed any violation. A negative regulatory finding or ruling in one jurisdiction could have adverse consequences in other jurisdictions, including with gaming regulators. Furthermore, the failure to become licensed, or the loss or conditioning of a license, in one market may have the adverse effect of preventing licensing in other markets or the revocation of licenses we already maintain.
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Further, changes in existing gaming regulations or new interpretations of existing gaming laws may hinder or prevent us from continuing to operate in those jurisdictions where we currently do business, which would harm our operating results. In particular, the enactment of unfavorable legislation or government efforts affecting or directed at manufacturers or gaming operators, such as referendums to increase gaming taxes or requirements to use local distributors, would likely have a negative impact on our operations.
Many 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 our equity securities and may require the same from our lenders. The failure of these beneficial owners or lenders to submit to such background checks and provide required disclosure could jeopardize our ability to obtain or maintain licensure in such jurisdictions.
Our revenues are vulnerable to the impact of changes to the Class II regulatory scheme.
Our Native American tribal customers that operate Class II games under the IGRA are subject to regulation by the NIGC. The NIGC is currently conducting consultations with industry participants regarding Native American gaming activities, including the clarification of regulations regarding Class II gaming machines. It is possible that any such changes in regulations, when finally enacted, could cause us to modify our Class II games to comply with the new regulations, which may result in our products becoming less competitive. Any required conversion of games pursuant to changing regulatory schemes could cause a disruption to our business. In addition, we could lose market share to competitors who offer games that do not appear to comply with published regulatory restrictions on Class II games and therefore offer features not available in our products.
Our ability to effectively compete in Native American gaming markets is vulnerable to legal and regulatory uncertainties, including the ability to enforce contractual rights on Native American land.
For the fiscal year ended December 31, 2012, we derived approximately 99.6% of our revenue from participation agreements with Native American gaming operators. Because federally recognized Native American tribes are independent governments with sovereign powers, subject to the IGRA, Native American tribes can enact their own laws and regulate gaming operations and contracts. Native American tribes maintain their own governmental systems and often their own judicial systems and have the right to tax persons and enterprises conducting business on Native American lands. Native American tribes also often have the right to require licenses and to impose other forms of regulation and regulatory fees on persons and businesses operating on their lands. In the absence of a specific grant of authority by Congress, U.S. states may regulate activities taking place on Native American lands only if the Native American tribe has a specific agreement or compact with the state. Our contracts with Native American tribal customers normally provide that only certain provisions, if any, will be subject to the governing law of the state in which a Native American tribe is located. However, these choice-of-law clauses may not always be enforceable.
Further, Native American tribes generally enjoy sovereign immunity from lawsuits similar to that of the individual U.S. states and the United States. Before we can sue or enforce contract rights with a Native American tribe, or an agency or instrumentality of a Native American tribe (for example, to collect revenue pursuant to our participation agreements or foreclose on financed gaming machines), the Native American tribe must effectively waive its sovereign immunity with respect to the matter in dispute, which we are not always able to obtain. Without a limited waiver of sovereign immunity, or if such waiver is held to be ineffective, we could be precluded from judicially enforcing any rights or remedies against a Native American tribe, including the right to enter Native American lands to retrieve our property in the event of a breach of contract by the tribe that is party to the disputed contract. Even if the waiver of sovereign immunity by a Native American tribe is deemed effective, there could be an issue as to the forum in which a lawsuit can be brought against the Native American tribe. Federal courts are courts of limited jurisdiction and generally do not have jurisdiction to hear civil cases relating to Native American tribes and we may be unable to enforce any arbitration decision effectively. In addition, courts have held that certain laws of general application, such as the United States patent, trademark
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and trade secret laws, are not binding on Native American tribes absent a binding waiver of sovereign immunity. While we have not had any experience with contract enforceability vis-à-vis our Native American customers, we are cognizant of recent cases involving other parties dealing with waivers of sovereign immunity. Those cases put into question how sovereign immunity may be viewed by courts in the future.
Our agreements with Native American tribes are often subject to review by regulatory authorities. For example, our development agreements may be subject to review by the NIGC and any such review could require substantial modifications to our agreements or result in the determination that we have a proprietary interest in a Native American tribes gaming activity, which could materially and adversely affect the terms on which we conduct our business. The NIGC may also reinterpret applicable laws and regulations, which could affect our agreements with Native American tribes.
Government enforcement, regulatory action, judicial decisions and proposed legislative action have in the past affected, and will likely continue to affect, our business, operating results and prospects. Regulatory action against our customers or equipment on Native American tribal lands or in other markets could result in machine seizures and significant revenue disruptions, among other adverse consequences. Moreover, Native American tribal policies and procedures, as well as tribal selection of gaming vendors, are subject to the political and governance environment within the Native American tribe. Changes in tribal leadership or tribal political pressure can affect our business relationships within Native American markets.
State compacts with our existing Native American tribal customers to allow Class III gaming could reduce demand for our Class II games and our entry into the Class III market may be difficult as we compete against larger companies in the tribal Class III market.
Certain of our Class II Native American tribal customers have entered into compacts with the states in which they operate to permit the operation of Class III games. While we seek to also provide Class III alternatives in these markets, we believe the number of our Class II game machine placements in those customers facilities could decline, and our operating results could be materially and adversely affected. As our Native American tribal customers continue to transition to gaming under compacts with the state, we continue to face significant uncertainty in the market that makes our business in these states difficult to manage and predict and we may be forced to compete with larger companies that specialize in Class III gaming. We believe the establishment of state compacts depends on a number of political, social, and economic factors that are inherently difficult to ascertain. Accordingly, although we attempt to closely monitor state legislative developments that could affect our business, we may not be able to timely predict if or when a compact could be entered into by one or more of our Native American tribal customers. For example, in Oklahoma, the continued introduction of Class III games since the passage of the tribal gaming compact in 2004 may put pressure our revenue and unit market share and our revenue share percentages and may result in a shift in the market from revenue share arrangements to a for sale model.
The percentage of gaming revenue we receive pursuant to our participation agreements with our Native American tribal customers has, on average, decreased in recent years and may continue to decrease in the future.
The percentage of gaming revenue we receive pursuant to our participation agreements, or our participation rates, with our Native American tribal customers has, on average, decreased in recent years, negatively affecting our profit margins. There can be no assurance that participation rates will not decrease further in the future. In addition, our Native American tribal customers may adopt policies or insist upon additional business terms during the renewal of our existing participation agreements that negatively affect the profitability of those relationships. In addition, any participation agreements we may enter into in the future with new customers or in new jurisdictions may not have terms as favorable as our existing participation agreements.
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Slow growth in the development 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 our future prospects.
Demand for our new participation gaming machine placements and game sales is partially driven by the development of new 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 jurisdiction 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. There can be no assurances that new gaming jurisdictions will be established in the future or that existing jurisdictions will expand gaming and, to the extent states such as Illinois delay, reverse or alter planned expansions in gaming, our growth strategy could be negatively impacted.
To the extent new gaming jurisdictions are established or expanded, we cannot guarantee we will be successful penetrating such new jurisdictions or expanding our business in line with the growth of existing jurisdictions. As we enter into new markets, we may encounter legal and regulatory challenges that are difficult or impossible to foresee and which could result in an unforeseen adverse impact on planned revenues or costs associated with the new market opportunity. If we are unable to effectively develop and operate within these new markets, then our business, operating results and financial condition would be impaired. Furthermore, as we attempt to generate new streams of revenue by placing our participation gaming machines with new customers we may have difficulty implementing an effective placement strategy for jurisdictional specific games. Our failure to successfully implement an effective placement strategy could cause our future operating results to vary materially from what management has forecast.
We are currently in the process of entering the emerging Illinois VGT market. The Illinois VGT market is still developing and operates pursuant to a unique regulatory structure. For example, while the state legislature in Illinois has passed laws permitting VGTs, municipalities and counties have the power to opt out of the VGT legislation and ban VGTs in their respective municipality or unincorporated areas within their respective county or repeal bans if they already exist to allow VGTs. As of the date of this Registration Statement, we believe approximately 151 municipalities and six counties have chosen to opt out of the VGT legislation and ban VGTs in their respective municipality or unincorporated areas within their respective county. Furthermore, the City of Chicago is required to affirmatively allow VGTs in order for establishments within Chicago to operate VGTs on their premises since its ordinances currently prohibit VGTs. As of the date of this Registration Statement, Chicago has not affirmatively allowed VGTs and establishments within Chicago are not permitted to operate VGTs on their premises. While we believe Chicago will allow VGTs in the future, we cannot guarantee this will happen or that other municipalities or counties will not choose to opt out of the VGT legislation and ban VGTs in their respective municipality or unincorporated areas within their respective county. We cannot guarantee that the Illinois VGT market will develop into a viable gaming market or that our business model will be as effective in the Illinois VGT market as we currently project or as effective as in other jurisdictions in which we operate. If the Illinois VGT market does not develop or our business model is not as effective as projected, we may not be able to capitalize on our investments in Illinois and our Illinois business may not be profitable.
In addition, the construction of new casinos or expansion of existing casinos fluctuates with demand, general economic conditions and the availability of financing. The rate of gaming growth in North America has decelerated and machine replacements are at historically low levels. Slow growth in the establishment of new gaming jurisdictions or delays in the opening of new or expanded casinos and continued declines in, or low levels of demand for, machine replacements could reduce the demand for our products and our future profits. Our business could be negatively affected if one or more of our customers is sold to or merges with another entity that utilizes more of the products and services of one of our competitors or that reduces spending on our products or causes downward pricing pressures. Such consolidations could lead to order cancellations, a slowing in the rate of gaming machine replacements, or require our current customers to switch to our competitors products, any of which could negatively impact our results of operations.
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We may not realize satisfactory returns on money lent to new and existing customers to develop or expand gaming facilities or to acquire gaming routes.
We enter into agreements to provide financing for construction, expansion, or remodeling of gaming facilities, primarily in the State of Oklahoma, and also have agreements in other jurisdictions, such as Illinois, where we provide loans and advances to route operators to acquire location contracts and fund working capital. Under these agreements, we secure long-term contracts for game placements under either a revenue share or daily fee basis in exchange for the loans and advances. We may not, however, realize the anticipated benefits of any of these strategic relationships or financings as our success in these ventures is dependent upon the timely completion of the gaming facility, the placement of our player terminals, and a favorable regulatory environment.
These activities may result in unforeseen operating difficulties, financial risks, or required expenditures that could adversely affect our liquidity. In connection with one or more of these transactions, and to obtain the necessary funds to enter these agreements, we may need to extend secured and unsecured credit to potential or existing customers that may not be repaid, incur debt on terms unfavorable to us or that we are unable to repay, or incur other contingent liabilities.
The failure to maintain controls and processes related to billing and collecting accounts receivable or the deterioration of the financial condition of our customers could negatively impact our business. As a result of these agreements, the collection of notes receivable has become a matter of greater significance. While we believe the increased level of these specific receivables has allowed us to grow our business, it has also required direct, additional focus of and involvement by management. Further, and especially due to the current downturn in the economy, some of our customers may not pay the notes receivable when due.
For the fiscal year ended December 31, 2012, approximately 35% of our gaming revenue was derived from one customer and approximately 78% of our revenue was generated from gaming operations in the state of Oklahoma.
For the fiscal year ended December 31, 2012, approximately 78% of our total revenue was derived from gaming operations in Oklahoma, and approximately 35% of our gaming revenue was from one Native American gaming tribe in that state. The significant concentration of our revenue in Oklahoma means that local economic, regulatory and licensing changes in Oklahoma may adversely affect our business disproportionately to changes in national economic conditions, including adverse economic declines or slower economic recovery from prior declines. While we continue to seek to diversify the markets in which we operate, changes to our business, operations, game performance and customer relationships in Oklahoma, due to changing gaming regulations or licensing requirements, higher taxes, increased competition, declines in market revenue share percentages or otherwise, could have a material and adverse effect on or financial condition and results of operations. In addition, changes in our relationship with our largest customer, including a decrease in revenue share, removal of gaming machines or non-renewal of contracts, could have a material and adverse effect on our financial condition and results of operations.
Moreover, neighboring states such as Kansas, Texas and Arkansas have passed or could pass gaming legislation, which could take market share from Oklahoma gaming facilities or otherwise negatively impact the Oklahoma gaming market and, as a result, negatively impact our business.
We may be unable to protect or enforce our intellectual property.
Protection of our proprietary processes, methods and other technology is important to our business. We generally rely on the patent, trademark and trade secret laws of the United States and certain other countries in which our products are produced or sold, as well as licenses and nondisclosure and confidentiality agreements, to protect our intellectual property rights. The patent, trademark and trade secret laws of some countries may not protect our intellectual property rights to the same extent as the laws of the United States. At least one federal court has held that United States patent, trademark and trade secret laws of general application are not binding on Native American tribes absent a binding waiver of sovereign immunity.
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A significant portion of our revenue is generated from products that use or incorporate certain intellectual property, and our operating results could be negatively impacted if we are unsuccessful in protecting these rights from infringement. In addition, some of our games and features are based on trademarks, patents and other intellectual property licensed from third parties. Our future success may depend upon our ability to develop, obtain, retain and/or expand licenses for popular products and underlying intellectual property rights on reasonable terms in a competitive market, which may not be available on terms acceptable to us, or may not be available at all. In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the games or gaming machines that use the licensed technology or bear the licensed marks.
Our success depends in part on our ability to obtain trademark protection for the names or symbols under which we market our products and to obtain patent protection for our proprietary content and technologies. We may not be able to build and maintain goodwill in our 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 us, or that our intellectual property will not be successfully challenged or circumvented by competitors. Additionally, any issued patents that cover our proprietary technology may not provide us with sufficient protection or be commercially beneficial to us. The issuance of a patent is not conclusive as to its validity or its enforceability. The U.S. federal courts or equivalent national courts or patent offices elsewhere may invalidate our patents or find them unenforceable. Competitors may also be able to design around our patents. If we are unable to protect our patented technologies, we may not be able to commercialize our technologies, products or services and our competitors could commercialize our technologies.
We also rely on trade secrets and proprietary know-how to protect certain proprietary knowledge and we generally enter into confidentiality agreements with certain of our employees and independent contractors regarding our trade secrets and proprietary information. However, there can be no guarantees that every employee and consultant will execute these agreements or that our employees and consultants will not breach these agreements. If these agreements are breached, it is unlikely that the remedies available to us will be sufficient to compensate us for the damages suffered. Additionally, despite various confidentiality agreements and other trade secret protections, our trade secrets and proprietary know-how could become known to, or independently developed by, competitors. Moreover, if our competitors independently develop equivalent knowledge, methods or know-how, it will be more difficult for us to enforce our rights and our business could be harmed.
We have a limited ability to prevent others from creating materially similar products. Despite our efforts to protect these proprietary rights, unauthorized parties may try to copy our gaming products, business models or systems, use certain of our confidential information to develop competing products, or develop independently or otherwise obtain and use our gaming products or technology, any of which could have a material adverse effect on our business.
We may be subject to claims of intellectual property infringement or invalidity and adverse outcomes of litigation could adversely affect our operating results.
Competitors and others may infringe on our intellectual property rights, or may allege that we have infringed on their intellectual property rights. Monitoring infringement and misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect infringement or misappropriation of our proprietary rights. We may also incur significant litigation expenses protecting our intellectual property or defending third-party intellectual property claims. These expenses could have an adverse effect on our future cash flows and results of operations. Although we carry general liability insurance, our insurance does not cover potential claims of this type. If we are found to infringe on the rights of others we could be required to re-design or discontinue offering certain products or systems, to pay damages or to purchase a license to use the intellectual property in question from its owner, which may not be available on reasonable terms, or at all. Litigation can also distract management from the day-to-day operations of our business. There can be no assurances that certain of our products will not be determined to have infringed upon a third-party patent.
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In addition, any of our current or future patents or patent applications, or those of our licensors, could face other challenges, such as interference proceedings, opposition proceedings and re-examination proceedings. Any such challenge, if successful, could result in the invalidation of, or in a narrowing of the scope of, any such current or future patents or patent applications. Any such challenges, regardless of their success, would likely be time-consuming and expensive to defend and resolve, and would divert management time and attention.
Failure to attract, retain and motivate key employees may adversely affect our ability to compete.
Our success depends largely on recruiting and retaining talented employees. The market for qualified, licensable executives and highly skilled, technical workers, such as content developers, is intensely competitive. The loss of key employees or an inability to hire a sufficient number of technical workers could limit our ability to develop successful products, cause delays in getting new products to market, cause disruptions to our customer relationships or otherwise adversely affect our business.
States and other jurisdictions may amend or repeal gaming enabling legislation which could materially impact our business.
States and other jurisdictions may amend or repeal gaming enabling legislation which could materially impact our business. Changes to gaming enabling legislation could increase our operating expenses and compliance costs or decrease the profitability of our operations. Repeal of gaming enabling legislation could result in losses of capital investments and revenue and limit future growth opportunities. For example, recently, charity gaming facilities in Alabama were forced to close due to regulatory uncertainties in the market pertaining to the legality of electronic bingo games which negatively impact our revenue and ability to collect on receivables. If any jurisdiction in which we operate were to repeal gaming enabling legislation, there could be no assurance that we could sufficiently increase our revenue in other markets to maintain operations or service our existing indebtedness.
Our business competes on the basis of the security and integrity of our systems and products.
We believe that our success depends, in part, on providing secure products and systems to our vendors and customers. Attempts to penetrate security measures may come from various combinations of customers, retailers, vendors, employees and others. Our ability to monitor and ensure the quality of our products is periodically reviewed and enhanced. Similarly, we assess the adequacy of our security systems to protect against any material loss to any of our customers and the integrity of the product to end-users. There can be no assurance that our business will not be affected by a security breach or lapse, which could have a material adverse impact on our results of operations, business or prospects.
Our gaming machines may experience losses due to technical problems or fraudulent activities.
Our success depends on our ability to avoid, detect, replicate and correct software and hardware anomalies and fraudulent manipulation of our gaming machines. We incorporate security features into the design of our gaming machines and other systems, which are designed to prevent us, our customers and patrons of our gaming machines from being defrauded. We also monitor our software and hardware to avoid, detect and correct any technical errors. However, there can be no guarantee that our security features or technical efforts will continue to be effective in the future. If our security systems fail to prevent fraud or if we experience any significant technical difficulties, our operating results could be adversely affected. Additionally, if third parties breach our security systems and defraud patrons of our gaming machines, or if our hardware or software experiences any technical anomalies, our customers and the public may lose confidence in our gaming machines and operations, or we could become subject to legal claims by our customers or to investigation by gaming authorities.
Our gaming machines 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
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manipulation of, our gaming machines may give rise to claims for lost revenues and related litigation by our customers and may subject us to investigation or other action by gaming regulatory authorities, including suspension or revocation of our gaming licenses or other disciplinary action.
Although our network is private, it is susceptible to outages due to fire, floods, power loss, break-ins, cyberattacks and similar events. We have multiple site back-up for our services in the event of any such occurrence. Despite our implementation of network security measures, our servers are vulnerable to computer viruses and break-ins. Similar disruptions from unauthorized tampering with our computer systems in any such event could have a material adverse effect on our business, operating results and financial condition. Adverse weather conditions, particularly flooding, tornadoes, heavy snowfall and other extreme weather conditions often deter our customers end users from traveling, or make it difficult for them to frequent the sites where our games are installed. If any of those sites experienced prolonged adverse weather conditions, or if the sites in Oklahoma, where a significant number of our games are installed, simultaneously experienced adverse weather conditions, our results of operations and financial condition would be materially and adversely affected.
We could face risks associated with, or arising out of, environmental, health and safety laws and regulations.
We are subject to various federal, state and local laws and regulations that (i) regulate certain activities and operations that may have environmental or health and safety effects, such as the use of regulated materials in the manufacture of our products by third parties or our disposal of materials, substances or wastes, (ii) impose liability for costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site, or other releases of hazardous materials or regulated substances, and (iii) regulate workplace safety. Compliance with these laws and regulations could increase our and our third-party manufacturers costs and impact the availability of components required to manufacture our products. Violation of these laws may subject us to significant fines, penalties or disposal costs, which could negatively impact our results of operations, financial position or cash flows. We could be responsible for the investigation and remediation of environmental conditions at currently or formerly operated or leased sites, as well as for associated liabilities, including liabilities for natural resource damages, third party property damage or personal injury resulting from lawsuits that could be brought by the government or private litigants, relating to our operations, the operations of facilities or the land on which our facilities are located. We may be subject to these liabilities regardless of whether we lease or own the facility, and regardless of whether such environmental conditions were created by us or by a prior owner or tenant, or by a third party or a neighboring facility whose operations may have affected such facility or land. That is because liability for contamination under certain environmental laws can be imposed on current or past owners or operators of a site without regard to fault. We cannot assure you that environmental conditions relating to our prior, existing or future sites or those of predecessor companies whose liabilities we may have assumed or acquired will not have a material adverse affect on our business.
If our products contain defects, our reputation could be harmed and our results of operations adversely affected.
Some of our products are complex and may contain undetected defects. The occurrence of defects or malfunctions in one or more of our products could result in financial losses for our customers and in turn termination of leases, cancellation of orders, product returns and diversion of our resources. Any of these occurrences could also result in the loss of or delay in market acceptance of our products and loss of revenue.
Our business is subject to quarterly fluctuation.
Historically, our operating results have been highest during the first quarter and lowest in our third and fourth quarters, primarily due to the seasonality of player demand. Our quarterly operating results may vary based on the timing of the opening of new gaming jurisdictions, the opening or closing of casinos, the expansion or contraction of existing casinos, approval or denial of our products and corporate licenses under gaming regulations, the introduction of new products, the seasonality of customer capital budgets, the mix of domestic versus international sales and the mix of lease and royalty revenue versus sales and service revenue. As a result, our operating results could be volatile, particularly on a quarterly basis.
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Some of our products contain open source software which may be subject to restrictive open source licenses, requiring us to make our source code available to third parties and potentially granting third parties certain rights to the software.
Some of our products contain open source software which may be subject to restrictive open source licenses. Some of these licenses may require that we make our source code governed by the open source software licenses available to third parties and/or license such software under the terms of a particular open source license, potentially granting third parties certain rights to our software. We may incur legal expenses in defending against claims that we did not abide by such licenses. If our defenses are unsuccessful, we may be enjoined from distributing products containing such open source software, be required to make the relevant source code available to third parties, be required to grant third parties certain rights to the software, be subject to potential damages or be required to remove the open source software from our products. Any of these outcomes could disrupt our distribution and sale of related products and adversely affect our business.
Recently introduced or proposed smoking bans at customer facilities may adversely impact our revenues.
Some U.S. jurisdictions have recently introduced or proposed smoking bans in public venues, including casinos, which may reduce player traffic in the facilities of our current and prospective customers, which may reduce revenues on our participation gaming machines or impair our future growth prospects and therefore may adversely impact our revenues in those jurisdictions. Other participants in the gaming industry have reported declines in gaming revenues following the introduction of a smoking ban in jurisdictions in which they operate and we cannot predict the magnitude or timing of any decrease in revenues resulting from the introduction of a smoking ban in any jurisdiction in which we operate.
We are controlled by AP Gaming VoteCo, LLC, which may have conflicts of interest with us in the future and may have interests that differ from the interests of holders of our non-voting common stock.
All of our outstanding shares of Common Stock, which represent 100% of our voting interests, are owned by AP Gaming VoteCo, LLC, an entity owned and controlled by Marc Rowan and David Sambur. Messrs. Rowan and Sambur will have the power to control our affairs and policies, the election of our board of directors, the appointment of management, the entering into of mergers, sales of substantially all of our assets and other extraordinary transactions.
So long as Messrs. Rowan and Sambur continue to control our Common Stock and control the election of our board of directors, which currently consists of Mr. Sambur, they have the authority, subject to the terms of the agreements that govern our outstanding debt, to issue additional shares of stock, implement share repurchase programs, declare dividends, pay advisory fees and make other decisions, and they may have an interest in our doing so. Their interests could conflict with the interests of holders of our non-voting common stock in material respects. Furthermore, Mr. Rowan is an affiliate of Apollo, which is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us, as well as businesses that represent major customers of our businesses. Accordingly, so long as Mr. Rowan continues to control our outstanding Common Stock, Apollos interests could also conflict with our interests or the interests of holders of our non-voting common stock in material respects.
We are dependent on our suppliers and any failure of these parties to meet our performance and quality standards or requirements could cause us to incur additional costs or lose customers.
The manufacturing, assembling and designing of our electronic gaming machines depends upon a continuous supply of raw materials, such as source cabinets, which we currently source primarily from one supplier. If our current supplier is unable to deliver these items in the quantity required or in accordance with our
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standards of quality and we are unable to find an alternative supplier in a timely fashion or on reasonable terms, we may not be able to meet the demands of our customers or our contractual obligations, which would adversely affect our results of operations and business.
Casino operations are conducted at the discretion of our customers.
Our casino customers are responsible for the operations of their facilities and are not required to consult us or take our advice on their operations, marketing, facility layout, gaming floor configuration, or promotional initiatives. Further, our customers are solely responsible for safety and security at their facilities. Our customers have in the past, and will in the future, remodel and expand their facilities. Our operating and financial results could suffer if our machines are not a part of an optimized facility layout or gaming floor configuration, are not supported by effective marketing or promotional initiatives or are scheduled to be out of service during a facility remodeling, or our customers facilities are closed or not visited because of end-users concern for safety, a lack of amenities, or other factors.
The risks related to operations in foreign countries and outside of traditional U.S jurisdictions could negatively affect our results.
We operate in jurisdictions outside of the United States, principally in Canada and on tribal lands of Native American tribes. The developments noted below, among others, could adversely affect our financial condition and results of operations:
| social, political or economic instability; |
| additional costs of compliance with international laws or unexpected changes in regulatory requirements; |
| tariffs and other trade barriers; |
| fluctuations in foreign exchange rates outside the United States; |
| adverse changes in the creditworthiness of parties with whom we have significant receivables or forward currency exchange contracts; |
| expropriation, nationalization and restrictions on repatriation of funds or assets; |
| difficulty protecting our intellectual property; |
| recessions in foreign economies; |
| difficulties in maintaining foreign operations; |
| changes in consumer tastes and trends; |
| acts of war or terrorism; and |
| U.S. government requirements for export. |
We are continuing to improve our internal controls over financial reporting.
In connection with the audit of our financial statements as of and for the year ended December 31, 2011, our independent accountants identified a significant deficiency in our internal controls over financial reporting. In connection with the audit of our financial statements as of and for the year ended December 31, 2010, our independent accountants identified a material weakness in our internal controls over financial reporting. Under standards established by the Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants, a material weakness is a deficiency, or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. Under standards established by the Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants, a significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting, that is less severe than a material weakness yet important enough to merit
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attention by those responsible for oversight of our financial reporting. The material weakness related to our not having adequate procedures and controls to ensure that accurate financial statements could be prepared and reviewed on a timely basis. During 2011, we undertook significant actions to remediate the material weakness. As a result of these actions, our independent accountants did not identify any material weaknesses in connection with the audit of our financial statements as of and for the year ended December 31, 2011. However, in connection with such audit our independent accountants did identify a significant deficiency in our internal controls relating to our procedures and processes for accounting for impairments of long lived assets. During 2012, we continued to undertake actions to remediate the significant deficiencies noted in the audit of our financial statements as of and for the year ended December 31, 2011. As a result of our actions, our independent accountants did not identify any significant deficiencies in connection with the audit of our financial statements as of and for the year ended December 31, 2012.
We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.
We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years following the effectiveness of this registration statement. We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the effectiveness of this registration statement, (ii) the first fiscal year after our annual gross revenues are $1.0 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this accommodation allowing for delayed adoption of new or revised accounting standards, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We intend to continue to improve our internal controls over financial reporting and ensure we are able to produce accurate and timely financial statements. However, no assurance can be given that our actions will be successful.
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ITEM 2. | FINANCIAL INFORMATION. |
Selected Financial Data
On September 16, 2013, AGS Holdings, LLC, AGS Capital and AP Gaming Acquisition, an indirect wholly owned subsidiary of AP Gaming and an affiliate of Apollo, entered into the Acquisition Agreement. The Acquisition Agreement provided for the Acquisition of AGS Capital by AP Gaming Acquisition for an aggregate purchase price of approximately $221.9 million. Since the formation of AP Gaming in August 2013, it has had no operations. AP Gaming, along with its subsidiaries shown in Item 1. BusinessCorporate Structure, were formed for the purpose of acquiring 100% of the equity interests of AGS Capital, LLC. Accordingly, the audited and unaudited interim financial statements that follow are for AGS Capital, LLC.
In the tables below, we provide selected historical consolidated financial data of AGS Capital, LLC as of and for the periods indicated. We prepared this information using audited financial statements for the fiscal years ended December 31, 2012, 2011 and 2010 and unaudited financial statements for the nine months ended September 30, 2013 and 2012. The unaudited Consolidated Balance Sheet Data as of September 30, 2012 has been extracted without material adjustment from our accounting records. When reading this selected historical financial data, it is important to read it in conjunction with the information and financial statements, including the notes related thereto, contained in Item 2. Financial InformationManagements Discussion and Analysis of Financial Condition and Results of Operations and Item 15. Financial Statements and Exhibits included in this Registration Statement.
Year Ended December 31, |
Nine Months ended
September 30, |
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(in thousands) | 2010 | 2011 | 2012 | 2012 | 2013 | |||||||||||||||
Consolidated Statements of Operations: |
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Gaming revenue |
$ | 55,021 | $ | 52,660 | $ | 54,029 | $ | 41,176 | $ | 41,957 | ||||||||||
Gaming revenueother |
3,804 | 4,270 | 3,763 | 2,927 | 800 | |||||||||||||||
Equipment sales |
2,979 | 2,716 | 763 | 697 | 1,226 | |||||||||||||||
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Total revenues |
61,804 | 59,646 | 58,555 | 44,800 | 43,983 | |||||||||||||||
Gaming operating expenses |
18,583 | 16,091 | 11,515 | 9,634 | 6,519 | |||||||||||||||
Cost of equipment sales |
1,505 | 1,061 | 395 | 281 | 777 | |||||||||||||||
Loss (gain) on disposition of assets |
(29 | ) | 176 | 451 | 464 | 775 | ||||||||||||||
General and administrative |
22,378 | 13,344 | 14,350 | 10,769 | 12,497 | |||||||||||||||
Selling and marketing |
4,136 | 3,346 | 3,443 | 2,544 | 2,538 | |||||||||||||||
Phantom unit compensation |
| 929 | 654 | 654 | 463 | |||||||||||||||
Impairment of long-lived assets |
| 804 | 2,711 | | 3,364 | |||||||||||||||
Impairment of intangibles |
| | 3,686 | | 1,391 | |||||||||||||||
Impairment of goodwill |
| | 18,679 | 18,679 | | |||||||||||||||
Depreciation and amortization |
22,844 | 23,644 | 29,454 | 21,332 | 21,716 | |||||||||||||||
Write downs and other charges |
| 2,249 | 3,664 | 3,586 | 202 | |||||||||||||||
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Total operating expenses |
69,417 | 61,644 | 89,002 | 67,943 | 50,242 | |||||||||||||||
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Loss from operations |
(7,613 | ) | (1,998 | ) | (30,447 | ) | (23,143 | ) | (6,259 | ) | ||||||||||
Interest expense |
5,861 | 5,833 | 10,270 | 5,989 | 13,168 | |||||||||||||||
Interest income |
(648 | ) | (512 | ) | (439 | ) | (307 | ) | (1,268 | ) | ||||||||||
Other expenses (income), net |
(168 | ) | 293 | (67 | ) | (174 | ) | (254 | ) | |||||||||||
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Net loss |
(12,658 | ) | (7,612 | ) | (40,211 | ) | (28,651 | ) | (17,905 | ) | ||||||||||
Foreign currency translation adjustment |
18 | (49 | ) | 56 | 55 | (23 | ) | |||||||||||||
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Total comprehensive loss |
$ | (12,640 | ) | $ | (7,661 | ) | $ | (40,155 | ) | $ | (28,596 | ) | $ | (17,928 | ) | |||||
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Year Ended December 31, |
Nine Months ended
September 30, |
|||||||||||||||||||
(in thousands) | 2010 | 2011 | 2012 | 2012 | 2013 | |||||||||||||||
Consolidated Statements of Cash Flows: |
||||||||||||||||||||
Net cash provided by operating activities |
$ | 21,765 | $ | 21,947 | $ | 18,850 | $ | 14,157 | $ | 14,833 | ||||||||||
Net cash used in investing activities |
(32,554 | ) | (26,205 | ) | (51,776 | ) | (39,181 | ) | (19,697 | ) | ||||||||||
Net cash provided by financing activities |
12,489 | 7,239 | 28,806 | 21,549 | 6,788 | |||||||||||||||
Capital expenditures of gaming equipment, vehicles and other equipment |
(12,411 | ) | (14,334 | ) | (21,086 | ) | (12,887 | ) | (11,954 | ) | ||||||||||
Consolidated Balance Sheets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 8,128 | $ | 10,787 | $ | 6,545 | $ | 7,136 | $ | 8,621 | ||||||||||
Gaming equipment, vehicles and other equipment |
33,863 | 36,887 | 40,267 | 36,508 | 37,255 | |||||||||||||||
Total assets |
124,700 | 128,603 | 125,567 | 128,548 | 115,623 | |||||||||||||||
Total liabilities |
153,301 | 151,077 | 127,508 | 118,916 | 135,492 | |||||||||||||||
Total members deficit |
(28,601 | ) | (22,474 | ) | (1,941 | ) | (127,579 | ) | (19,869 | ) |
Unaudited Pro Forma Consolidated Financial Data
The following Unaudited Pro Forma Consolidated Financial Data reflect adjustments to the historical consolidated financial statements of AGS Capital to give effect to the Acquisition and our anticipated post acquisition capital structure described in the notes to the Unaudited Pro Forma Consolidated Financial Data as of September 30, 2013 for the Unaudited Pro Forma Consolidated Balance Sheet and as of January 1, 2012, the first day of fiscal 2012, for the Unaudited Pro Forma Consolidated Statements of Operations presented for both the nine months ended September 30, 2013 and the year ended December 31, 2012.
The following Unaudited Pro Forma Consolidated Financial Data as of September 30, 2013, and for the year ended December 31, 2012 and the nine month period ended September 30, 2013, is presented to illustrate the effects of the Acquisition and the use of net proceeds.
The Unaudited Pro Forma Consolidated Financial Data shows the impact of the Acquisition on the consolidated balance sheets and the consolidated statements of operation under the acquisition method of accounting. Under this method of accounting, the assets and liabilities of AGS Capital are recorded at their estimated fair values as of the date the Acquisition is completed. In addition, as explained in more detail in the accompanying notes to the Unaudited Pro Forma Consolidated Financial Data, the amounts reflected in the Unaudited Pro Forma Consolidated Financial Data are subject to adjustment. The Unaudited Pro Forma business combination adjustments for the acquisition of AGS Capital include the expected business combination adjustments that will be recorded when AP Gaming Acquisition, LLC finalizes its accounting for the Acquisition based upon the fair value of the assets acquired and liabilities assumed. The business combination adjustments may be refined as additional information becomes available.
On November 19, 2013, AGS Capital created a wholly owned subsidiary, AP Gaming NV, LLC ( AP Gaming NV ). In order to address Nevada gaming regulatory requirements on a temporary basis, AGS Capital has created AP Gaming NV. Certain assets and interests of AGS Capital in Nevada have been transferred, assigned or otherwise contributed to AP Gaming NV. At the closing of the Acquisition, AGS Capital sold all of the equity interest in AP Gaming NV to an officer of AGS Capital, pursuant to a purchase and option agreement (the P&O Agreement ). In addition, AGS Capital management holds management positions with AP Gaming NV and directs the operations of AP Gaming NV. As a result we determined that AP Gaming NV is a Variable Interest Entity and AGS Capital is the primary beneficiary and will therefore continue to consolidate AP Gaming NV after the Acquisition. AGS Capital has a call option to repurchase the equity of AP Gaming NV. AGS Capital intends to exercise its call option and repurchase the equity of AP Gaming NV upon receipt of all regulatory approvals necessary in respect of AP Gaming Holdco, Inc.
31
The Unaudited Pro Forma Consolidated Statement of Operations was prepared as if (i) the Acquisition had occurred on January 1, 2012, (ii) the estimated net proceeds of the Acquisition were received on January 1, 2012 and (iii) a portion of the existing bank borrowings was repaid on January 1, 2012.
The Unaudited Pro Forma Consolidated Balance Sheet was prepared as if (i) the Acquisition had occurred on September 30, 2013, (ii) the estimated net proceeds of the Acquisition were received on September 30, 2013 and (iii) a portion of the existing bank borrowings was repaid as of September 30, 2013.
The Unaudited Pro Forma Consolidated Financial Data are for informational purposes only and is not necessarily indicative of what our financial performance would have been had the transactions reflected therein been completed on the dates assumed. It may not reflect the financial performance that would have resulted had we been operating as an acquired company during those periods. In addition, it is not indicative of our future financial performance.
The Unaudited Pro Forma Consolidated Financial Data should be read in conjunction with Selected Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations, Item 1. Business and the unaudited and audited consolidated financial statements and the related notes thereto, included elsewhere in this Registration Statement.
The Unaudited Pro Forma Consolidated Financial Data are compiled in a manner consistent with the accounting policies that will be used by us in preparing our consolidated financial statements. All Pro Forma adjustments are directly attributable to the transactions, factually supportable and based on available information and assumptions that we believe are reasonable.
32
Unaudited Pro Forma Consolidated Statements of Operations
AGS Capital, LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED September 30, 2013
Historical AGS
Capital, LLC |
Total
Adjustments |
Pro Forma | ||||||||||||||||
Net revenues |
43,982,524 | | 43,982,524 | |||||||||||||||
Operating expenses: |
||||||||||||||||||
Gaming operating expenses |
6,518,510 | | 6,518,510 | |||||||||||||||
Cost of equipment sales |
777,145 | | 777,145 | |||||||||||||||
Loss on disposition of assets |
775,427 | | 775,427 | |||||||||||||||
General and administrative |
12,496,688 | | 12,496,688 | |||||||||||||||
Selling and marketing |
2,537,615 | | 2,537,615 | |||||||||||||||
Phantom unit plan compensation |
463,018 | | 463,018 | |||||||||||||||
Impairment of long lived assets |
3,364,090 | | 3,364,090 | |||||||||||||||
Impairment of intangibles |
1,390,500 | | 1,390,500 | |||||||||||||||
Depreciation and amortization |
21,715,919 | 1,011,537 | (H) | 22,727,456 | ||||||||||||||
Writedowns and other charges |
202,500 | | 202,500 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
50,241,412 | 1,011,537 | 51,252,949 | |||||||||||||||
|
|
|
|
|
|
|||||||||||||
Loss from operations |
(6,258,888 | ) | (1,011,537 | ) | (7,270,425 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Interest expense |
13,167,623 | (872,013 | ) |
(B) |
12,295,610 | |||||||||||||
Interest income |
(1,268,241 | ) | 1,222,515 | (A) | (45,726 | ) | ||||||||||||
Other income |
(253,530 | ) | | (253,530 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||
Net loss before income tax benefit |
(17,904,740 | ) | (1,362,039 | ) | (19,266,779 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||||
Income tax benefit |
| |
(C) |
| ||||||||||||||
|
|
|
|
|
|
|||||||||||||
Net loss |
$ | (17,904,740 | ) | $ | (1,362,039 | ) | $ | (19,266,779 | ) | |||||||||
|
|
|
|
|
|
|||||||||||||
Loss per common share |
||||||||||||||||||
Basic |
$ | (.14 | ) | (D) | $ | (1.93 | ) | (D | ) | |||||||||
Diluted |
$ | (.14 | ) | (E) | $ | (1.93 | ) | (E | ) | |||||||||
Weighted average common shares outstanding (in thousands) |
||||||||||||||||||
Basic |
10,000 | (D) | 10,000 | (D | ) | |||||||||||||
Diluted |
10,000 | (E) | 10,000 | (E | ) |
33
Unaudited Pro Forma Consolidated Statements of Operations
AGS Capital, LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED December 31, 2012
Historical AGS
Capital, LLC |
Total
Adjustments |
Pro Forma | ||||||||||
Net revenues |
$ | 58,555,107 | $ | | $ | 58,555,107 | ||||||
Operating expenses: |
||||||||||||
Gaming operating expenses |
11,515,204 | | 11,515,204 | |||||||||
Cost of equipment sales |
395,181 | | 395,181 | |||||||||
Loss on disposition of assets |
450,858 | | 450,858 | |||||||||
General and administrative |
14,349,749 | | 14,349,749 | |||||||||
Selling and marketing |
3,442,549 | | 3,442,549 | |||||||||
Phantom unit plan compensation |
653,596 | | 653,596 | |||||||||
Impairment of long lived assets |
2,711,412 | | 2,711,412 | |||||||||
Impairment of intangibles |
22,365,384 | | 22,365,384 | |||||||||
Depreciation and amortization |
29,454,038 | 444,585 | (H) | 29,898,623 | ||||||||
Writedowns and other charges |
3,663,886 | | 3,663,886 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
89,001,857 | 444,585 | 89,446,442 | |||||||||
|
|
|
|
|
|
|||||||
Loss from operations |
(30,446,750 | ) | (444,585 | ) | (30,891,335 | ) | ||||||
|
|
|
|
|
|
|||||||
Interest expense |
10,269,667 | 6,124,480 | (B) | 16,394,147 | ||||||||
Interest income |
(439,140 | ) | 181,052 | (A) | (258,088 | ) | ||||||
Other income |
(66,292 | ) | | (66,292 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss before income taxes |
(40,210,985 | ) | (6,750,117 | ) | (46,961,102 | ) | ||||||
|
|
|
|
|
|
|||||||
Tax benefit |
| | (C) | | ||||||||
|
|
|
|
|
|
|||||||
Net loss |
$ | (40,210,985 | ) | $ | (6,750,117 | ) | $ | (46,961,102 | ) | |||
|
|
|
|
|
|
|||||||
Loss per common share |
||||||||||||
Basic |
$ | (0.68 | )(D) | $ | (4.70 | )(D) | ||||||
Diluted |
$ | (0.68 | )(E) | $ | (4.70 | )(E) | ||||||
Weighted average common shares outstanding (in thousands) |
||||||||||||
Basic |
10,000 | (D) | 10,000 | (D) | ||||||||
Diluted |
10,000 | (E) | 10,000 | (E) |
34
Unaudited Pro Forma Consolidated Balance Sheet
AGS Capital, LLC
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of September 30, 2013
35
Notes to the Unaudited Pro Forma Consolidated Financial Statements
(A) | Represents the elimination of interest income on note receivable balances which will remain with the seller of $1.2 million for the nine month period ended September 30, 2013 and $0.2 million for the year ended December 31, 2012. |
(B) | Represents adjustments to reflect: |
a. | removal of interest expense and amortization of debt discount, fees and expenses attributable to the Initial Term Loan with UBS Securities LLC; |
b. | recognition of interest expense attributable to borrowings of $160.5 million under our new credit facilities; |
c. | amortization of fees and expenses attributable to our new credit facilities; and |
d. | recognition of commitment fees on unused amounts attributable to our new revolving credit facility. |
The following table sets forth the assumed principal outstanding, interest rate and maturity for each component of our new credit facilities:
Principal |
Weighted
Average Interest Rate |
Weighted
Average Term of Debt |
||||||||||
Term Loan Facility |
$ | 155,000,000 | 9.25 | % | 7 Years | |||||||
Seller Note |
5,531,000 | 8.50 | % | 7.5 Years | ||||||||
Revolver Facility* |
| 9.25 | % | 5 Years | ||||||||
|
|
|||||||||||
Total |
$ | 160,531,000 | ||||||||||
|
|
* | Revolver Facility is $25,000,000 in total which will be undrawn at the date of Acquisition. |
The interest rate applicable for the Term Loan and Revolver Facility is a floating rate of LIBOR plus an applicable margin with a floor of 100 bps. For the purposes of the Unaudited Pro Forma Consolidated Statements of Operations, we have assumed that our outstanding borrowings bear interest at the floor of 100 bps plus an applicable margin of 8.25%.
For the purposes of the Unaudited Pro Forma Consolidated Statements of Operations, we have assumed that the commitment fee on our revolving credit facility, which is payable quarterly in arrears, is at a rate of 0.5% (based upon our expected debt rating at the time of acquisition) of the unused amounts.
The following table summarizes the adjustments in the Unaudited Pro Forma Consolidated Statements of Operations to reflect the adjustments to interest expense on third party debt:
Year Ended December 31, 2012 | ||||||||||||
Interest
Expense |
Deferred Loan
Costs Amortization |
Total | ||||||||||
New Term Loan Facility |
$ | 14,265,813 | $ | 1,217,683 | $ | 15,483,496 | ||||||
New Seller Note |
470,135 | 40,555 | 510,690 | |||||||||
Revolver facility unused commitment fee |
125,000 | 274,961 | 399,961 | |||||||||
Less: Initial Term Loan |
(8,649,105 | ) | (1,620,562 | ) | (10,269,667 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | 6,211,843 | $ | (87,363 | ) | $ | 6,124,480 | |||||
|
|
|
|
|
|
36
Period Ended September 30, 2013 | ||||||||||||
Interest
Expense |
Deferred Loan
Costs Amortization |
Total | ||||||||||
New Term Loan Facility |
$ | 10,699,359 | $ | 913,263 | $ | 11,612,622 | ||||||
New Seller Note |
352,601 | 30,416 | 383,017 | |||||||||
Revolver facility unused commitment fee |
93,750 | 206,221 | 299,971 | |||||||||
Less: Initial Term Loan |
(11,303,162 | ) | (1,864,461 | ) | (13,167,623 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | (157,452 | ) | $ | (714,561 | ) | $ | (872,013 | ) | |||
|
|
|
|
|
|
Pro forma interest charges on the term facility and revolver facilities were calculated at a rate of 9.25% reflecting the interest rate floor plus a margin of 8.25%. Fees and expenses attributable to the new credit facilities are amortized on an effective yield basis over the life of the related loan.
A change of one-eighth of 1.00% (12.5 basis points) in the interest rate associated with the floating rate borrowings would result in an additional annual interest expense of approximately $0.2 million (in the case of an increase to the rate) or an annual reduction of interest expense of approximately $0.2 million (in the case of a decrease in the rate).
(C) | For purposes of this Unaudited Pro Forma Consolidated Financial Data, the United States federal statutory tax rate of 35% has been used for all periods presented and then the income tax benefit has been fully reserved given the historical operating losses of the Company. This rate does not reflect AGS Capitals effective tax rate, which includes other tax items, such as state and foreign taxes, as well as other tax charges or benefits, and does not take into account any historical or possible future tax events that may impact the company. |
(D) | The number of shares used to compute pro forma earnings per share basic is 10,000,100, which is the number of shares of our common stock assumed to be outstanding on the acquisition date. |
(E) | The number of shares used to compute pro forma earnings per share diluted will be the number of basic shares referenced in note (D) above plus any potential dilution from stock-based awards granted under our stock-based compensation plans. There will be no potentially dilutive securities outstanding on acquisition date. In the ordinary course of business post acquisition, we expect to issue stock-based awards under our stock-based compensation plans which, when issued, will be dilutive in future periods. |
37
(F) | The Unaudited Pro Forma Consolidated Financial Data reflects the acquisition of AGS Capital and the payment of approximately $83.5 million in cash consideration and reclassification of the members equity to the stockholders equity. |
The computation of the estimated purchase price, excess of purchase price over the net tangible book value of net assets acquired and the resulting net adjustment to goodwill as of September 30, 2013 are as follows:
As of
September 30, 2013 |
||||
Book value of net assets |
$ | (19,868,741 | ) | |
Less: Assets remaining at seller |
(17,737,540 | ) | ||
|
|
|||
Net book value of net assets acquired |
(37,606,281 | ) | ||
Less: Goodwill acquired |
| |||
Less: Intangible assets acquired |
(31,331,542 | ) | ||
|
|
|||
Net Tangible book value of net assets acquired |
(68,937,823 | ) | ||
Estimate of consideration expected to be transferred: (1) |
260,531,000 | |||
Less: Breakage Fees |
(267,638 | ) | ||
Less: Early repayment fees |
(6,175,000 | ) | ||
Less: Cash to the balance sheet |
(19,381,111 | ) | ||
Less: Debt issuance costs |
(4,650,000 | ) | ||
Less: Transaction costs of the acquirer |
(14,511,654 | ) | ||
Less: Repayment Initial Term Loan |
(132,002,118 | ) | ||
|
|
|||
Adjusted estimate of consideration expected to be transferred: (2) |
83,543,479 | |||
|
|
|||
Excess purchase price over net assets acquired |
152,481,302 | |||
Fair value adjustments: |
||||
Less: estimated value of identifiable intangible assets |
$ | (68,701,367 | ) | |
Total adjustments |
(68,701,367 | ) | ||
|
|
|||
Gross adjustment to goodwill |
83,779,935 | |||
Less: Goodwill acquired |
| |||
|
|
|||
Net adjustment to goodwill |
$ | 83,779,935 | ||
|
|
(1) | The estimate of consideration expected to be transferred of $260.5 million is the total of $100 million of equity contribution from AP Gaming Acquisition, LLC, $155 million of new debt issued as part of the acquisition and $5.5 million of notes payable issued to the previous shareholders of AGS Capital, LLC. Total consideration consists of a contracted purchase price of $221.9 million, $14.5 million of transaction costs, $4.7 million of debt issuance costs and the remainder is cash to the balance sheet. |
(2) | It should be noted that at December 20, 2013 there was $3.2 million of debt that did not exist as of September 30, 2013 which resulted in a reduction of adjusted consideration expected to be transferred of $3.2 million with a corresponding reduction to goodwill. |
38
(G) | In connection with the acquisition, the following historical members equity balances as of September 30, 2013 are eliminated in the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2013, as follows: |
Members capital |
$ | 136,672,633 | ||
Accumulated deficit |
$ | (157,043,126 | ) | |
Accumulated other comprehensive income |
$ | 501,752 |
(H) | Represent adjustments in the September 30, 2013 Unaudited Pro Forma Consolidated Balance Sheet and the September 30, 2013 and December 31, 2012 Unaudited Pro Forma Consolidated Statements of Operations to intangible assets and amortization expense, respectively, as follows: |
AGS Capital LLC | ||||||||||||||||
Estimated
Fair Value |
Weighted-
Average Estimated Useful Life |
Amortization
Expense 9 months |
Amortization
Expense 12 months |
|||||||||||||
Customer relationships |
$ | 30,000,000 | 7 | $ | 3,214,286 | $ | 4,285,714 | |||||||||
Third party licenses |
30,807,194 | 3 | 7,808,188 | 10,049,806 | ||||||||||||
Internally developed gaming software |
5,222,751 | 3 | 2,746,185 | 3,583,070 | ||||||||||||
Purchased software |
2,671,422 | 5 | 406,538 | 2,030,300 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total intangible assets acquired |
68,701,367 | 4.8 | 14,175,197 | 19,948,890 | ||||||||||||
Less: AGSs historical intangible assets and amortization |
(31,331,542 | ) | (13,163,660 | ) | (19,504,305 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Pro forma adjustments |
$ | 37,369,825 | $ | 1,011,537 | $ | 444,585 | ||||||||||
|
|
|
|
|
|
Adjustment to recognize intangibles of $68.7 million and to eliminate AGS Capitals other identified intangibles of $31.3 million, and the related Unaudited Pro Forma Consolidated Statements of Operations impact resulting from the Acquisition. The Unaudited Pro Forma Consolidated Statements of Operations impact for the adjustment resulted in a net increase to the amortization expense of $0.4 million and $1.0 million, respectively, for the intangibles amortization for the year ended December 31, 2012 and the nine month period ended September 30, 2013.
The estimate is preliminary, subject to change and could vary materially from the actual adjustment at the time of consummation of the acquisition. For each 10% increase in fair value adjustment to intangibles, the Company would expect an annual increase in amortization expense approximating $1.4 million, assuming a weighted-average life of approximately 4.8 years.
(I) | Represents adjustments in the Unaudited Pro Forma Consolidated Balance Sheet to cash and cash equivalents as of September 30, 2013, as follows: |
Proceeds from incurrence of new debt, net of discount of $4.65 million |
$ | 150,350,000 | ||
Proceeds from capital contribution |
100,000,000 | |||
Repayments of initial term loan and related fees |
(138,177,118 | ) | ||
Transaction expenses and deferred loan costs |
(14,511,654 | ) | ||
Breakage fees |
(267,638 | ) | ||
Cash purchase price for equity acquired |
(78,012,479 | ) | ||
|
|
|||
Total |
$ | 19,381,111 | ||
|
|
(J) | Represents adjustments to eliminate assets in the Unaudited Pro Forma Consolidated Balance Sheet not acquired by AP Gaming Acquisition, LLC and retained by AGS Holdings, LLC. |
39
(K) | The following table summarizes the adjustment in the Unaudited Pro Forma Consolidated Balance Sheet to long term debt as of September 30, 2013 as follows: |
New Term Loan Facility |
$ | 153,450,000 | ||
New Seller Note |
5,531,000 | |||
Less: Repayment of Initial Term Loan (non-current portion) |
(124,133,163 | ) | ||
Less: Debt discount |
(4,650,000 | ) | ||
|
|
|||
Long-term debt |
30,197,837 | |||
|
|
|||
New Term Loan Facility (current portion) |
1,550,000 | |||
Less: Repayment of Initial Term Loan (current portion) |
(1,625,000 | ) | ||
|
|
|||
Total |
$ | 30,122,837 | ||
|
|
In addition accrued interest on the Initial Term Loan of $2 million has been repaid.
(L) | Represents the elimination in the Unaudited Pro Forma Consolidated Balance Sheet of deferred loan costs due to the repayment of the Initial Term Loan for an amount of $4.5 million and the recognition of deferred loan costs associated with the new loan facilities for $5.6 million. |
(M) | The following table summarizes the adjustment in the Unaudited Pro Forma Consolidated Balance Sheet to the accumulated deficit as of September 30, 2013, as follows: |
Elimination of historical accumulated deficit |
$ | 157,043,126 | ||
Write off deferred loan costs due to the repayment of the initial term loan |
(4,500,564 | ) | ||
Write off the debt discount associated with the initial term loan |
(4,241,837 | ) | ||
Early repayment penalty on initial term loan |
(6,175,000 | ) | ||
Breakage fees |
(267,638 | ) | ||
Transaction expenses |
(8,958,901 | ) | ||
|
|
|||
Total |
$ | 132,899,186 | ||
|
|
(N) | Represents the cash capital contribution made by the acquirer. |
Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included in Item 15. Financial Statements and Exhibits. This discussion and analysis also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in Cautionary Statement Regarding Forward-Looking Statements and Item 1A. Risk Factors in this Registration Statement. The following discussion and analysis is intended to enhance the readers understanding of our business environment.
Overview
We are a leading designer and manufacturer of Class II gaming machines for the Native American market, with an emerging presence in a broad range of commercial markets in the United States. As of September 30, 2013, we had 8,135 gaming machines in 18 U.S. states, with 145 gaming facilities under revenue sharing agreements and 24 facilities under fee per day agreements. The majority of our systems are used by Native American gaming operators in both Class II and Class III environments, with a recent expansion into the Illinois VGT Market. Our products include electronic gaming machines, server-based systems and back-office systems that are used by casinos and other gaming locations. We currently derive substantially all of our gaming revenues from lease agreements whereby we place gaming machines and systems at a customers facility in return for either a share of the revenues that these machines and systems generate or a daily fee, which we collectively refer to as participation agreements and as our participation model.
40
Business Outlook
During 2008 and 2009, and into 2010, the poor macro-economic environment had a negative impact on consumer discretionary spending. As a result, the U.S. gaming industry experienced its first ever year-over-year declines in gross gaming revenue in 2008 and 2009. While the recessionary pressures were felt in most markets, the core destination markets of the Las Vegas Strip and Atlantic City were among the hardest hit due to the negative effects of both the recession and increased regional competition, while other commercial markets and the Native American markets were not as adversely impacted. During 2010, we began to see improvements in regional commercial gaming jurisdictions, which have continued through the third quarter of 2013.
We believe the current economic environment presents multiple opportunities for our business. We believe the improving economy should lead to increases in consumer discretionary spending, which should in turn drive higher revenues in existing gaming locations. In addition, state budget deficits have ballooned and many states with fiscal difficulties are turning to gaming as a source of revenue enhancement, which we believe presents us with continued long-term growth opportunities.
We believe our participation model offers an attractive value proposition to casino and other facility operators; especially in the current economic environment. By leasing our gaming machines to customers, we enable our customers to introduce new games in their facilities with minimal cost and financial risk. In addition, our selective use of development agreements to secure incremental game placements under long-term contracts provides customers with additional capital to help expand their operations.
Key Drivers of Our Business
Our total revenues are impacted by the following key factors:
| the amount of money spent by consumers on our domestic revenue share installed base; |
| the amount of the daily fee on our participation gaming machines; |
| the selling price of our machines; |
| our revenue share percentage with customers; |
| the capital budgets of our customers; |
| the level of replacement of existing electronic gaming machines in existing casinos; |
| expansion of existing casinos; |
| development of new casinos; |
| opening of new gaming jurisdictions both in the United States and internationally; |
| our ability to obtain and maintain gaming licenses in various jurisdictions; |
| the relative competitiveness and popularity of our electronic gaming machines compared to competitive products offered in the same facilities; and |
| general macro-economic factors, including levels of and changes to consumer disposable income and personal consumption spending. |
Our expenses are impacted by the following key factors:
| fluctuations in the cost of labor relating to productivity; |
| overtime and training; |
| fluctuations in the price of components for gaming equipment; |
| fluctuations in energy prices; |
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| changes in the cost of obtaining and maintaining gaming licenses; and |
| fluctuations in the level of maintenance expense required on gaming equipment. |
Variations in our selling, general and administrative expenses, or SG&A, are primarily due to changes in employment and salaries and related fringe benefits.
Basis of Presentation
Although formed on September 8, 2005, AGS Capital had no activity until September 20, 2005, the date AGS Capitals wholly owned subsidiary, AGS, LLC, acquired certain assets of Clapper Enterprises, Inc. and Worldwide Game Technology Corp., collectively referred to as CEI.
Our financial presentation also includes a number of other operating subsidiaries we own or have owned in the past. AGS Partners LLC, or Partners, was formed on June 22, 2006, and on June 29, 2006, Partners acquired certain assets of Aurora Gaming, Inc., Integrity Gaming, Inc. and Integrity Gaming Nevada, LLC, collectively referred to as Integrity. BOL Finance, LLC, or BOL, was formed by AGS Capital on August 8, 2008, to finance distributors operating in Louisiana. It was capitalized through a note payable to AGS Capital. American Gaming Systems Toronto, Ltd., or AGST, was formed on July 11, 2008, and capitalized through debt and equity contributions from AGS Capital. AGST acquired certain assets of Gametronics, Inc. and Phone-Sweeps, Inc., collectively referred to as Gametronics on November 10, 2008. AGS Illinois, LLLP, or AGSIL, was formed in April 2010 to be our operating subsidiary for operation in Illinois. AGS Financing Corp., or AGS Finance, was formed on March 17, 2011 for the purpose of acting as a co-obligor in certain financing transactions. Promotional Marketing LLC, or Promotional, was formed on August 22, 2008. As of January 19, 2011, BOL and Promotional were merged into AGS, LLC. Additional information on our acquisitions and divestitures is included below in Acquisitions and Divestitures.
Acquisitions and Divestitures
AGS Acquisition
On September 20, 2005, AGS acquired certain assets of CEI for a purchase price of $67.8 million, which included approximately $2.4 million of acquisition costs. AGS accounted for the transaction as a purchase of a business in accordance with ASC Topic 805, Business Combinations, and, accordingly, the operating results have been included in the AGS consolidated financial statements since the date of acquisition.
The aggregate purchase price of the transaction was allocated to the identifiable intangible assets and tangible assets acquired, based on their estimated fair values at the date of acquisition, with any residual amount allocated to goodwill as follows:
Acquired assets: | Amount | |||
Gaming equipment |
$ | 8,462,000 | ||
Other fixed assets |
157,000 | |||
Inventories |
822,000 | |||
Note receivable |
2,843,000 | |||
Intangibles |
36,691,000 | |||
Goodwill |
18,678,970 | |||
Other |
146,030 | |||
|
|
|||
Total acquired assets |
$ | 67,800,000 | ||
|
|
Integrity Acquisition
On June 29, 2006, we acquired certain assets of Integrity for a purchase price of approximately $11.4 million, which includes approximately $53,000 of acquisition costs. The transaction was accounted for as a purchase of a business in accordance with ASC Topic 805, Business Combinations, and, accordingly, the operating results have been included in our consolidated financial statements since the date of acquisition.
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The aggregate purchase price of the transaction has been allocated to the identifiable intangible assets and tangible assets acquired, based on their estimated fair values at the date of acquisition, as follows:
Acquired assets: | Amount | |||
Gaming equipment |
$ | 2,302,150 | ||
Intangibles |
9,132,850 | |||
|
|
|||
Total acquired assets |
$ | 11,435,000 | ||
|
|
Gametronics Acquisition
On November 10, 2008, we acquired certain assets, including certain intellectual property rights, of Gametronics for a purchase price of approximately $3.9 million, which includes approximately $427,000 of acquisition costs. The transaction was accounted for as a purchase of a business in accordance with ASC Topic 805, Business Combinations, and, accordingly, the operating results have been included in our consolidated financial statements since the date of acquisition.
The aggregate purchase price of the transaction has been allocated to the identifiable intangible assets and tangible assets acquired, based on their estimated fair values at the date of acquisition, as follows:
Acquired assets: | Amount | |||
Gaming equipment |
$ | 979,000 | ||
Intangibles |
2,953,000 | |||
|
|
|||
Total acquired assets |
$ | 3,932,000 | ||
|
|
We had previously capitalized software development costs totaling approximately $2.0 million and $600,000 paid to Gametronics during the years ended December 31, 2008 and 2007, respectively.
During 2009, we sold certain equipment acquired in connection with this transaction to the previous owner of Gametronics in exchange for a licensing agreement, under which we will earn licensing fees for providing our software. The licensing agreement has a specified duration of 10 years unless terminated earlier under certain provisions of the agreement. Licensing fee revenue earned is included in gaming revenueother.
Bluberi Transaction
On January 9, 2012, we entered into a definitive agreement (the Definitive Agreement ) with Bluberi Gaming Technologies, Inc., or Bluberi, pursuant to which the we agreed to terminate our existing distribution agreement with Bluberi (the Existing Distribution Agreement ) and to purchase all of Bluberis right, title and interest in certain game titles covered by the Existing Distribution Agreement (the Bluberi Transaction ). In connection therewith, we agreed to pay $22.8 million to Bluberi and to enter into a five-year service agreement with Bluberi for which we will pay Bluberi a $2.0 million servicing fee paid ratably over the term of the service agreement and a one-time $1.0 million performance-based bonus. According to the Definitive Agreement, $3.5 million was due to Bluberi upon execution of the Definitive Agreement and $19.3 million was due no later than February 28, 2012 subject to certain restrictions as defined. At our option, payment of the $19.3 million could be extended one month by paying $2.5 million no later than February 28, 2012 and could be extended an additional month by paying $2.5 million no later than March 31, 2012, with both payments applying to the $19.3 million balance. On March 27, 2012, an addendum to the Definitive Agreement was executed which eliminated the payment due on March 31, 2012 and replaced it with payments of $500,000 due March 30, 2012, April 6, 2012, April 13, 2012, April 20, 2012, and April 27, 2012. On May 11, 2012, we made our final payment in accordance with the Definitive Agreement and its addendum.
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Acquisition by AP Gaming Acquisition, LLC
On September 16, 2013, we entered into an Equity Purchase Agreement (as subsequently amended and restated on December 3, 2013, the Acquisition Agreement ) with AP Gaming Acquisition, LLC ( AP Gaming Acquisition ), an affiliate of Apollo for approximately $221.9 million. The Acquisition Agreement provided for the acquisition of 100% of the equity of AGS Capital, LLC from AGS Holdings, LLC by funds affiliated with Apollo. The Acquisition was consummated on December 20, 2013. See Item 1. BusinessThe Acquisition.
Long-Term Debt
On August 15, 2012, we entered into a $130 million senior secured credit agreement with UBS Securities, LLC (the Term Loans ). Under this credit agreement, we borrowed $115 million as an Initial Term Loan and utilized the proceeds to repay all amounts outstanding under the May 14, 2007 credit agreement and fund operations. The agreement also includes a $15 million Delayed Draw Term Loan commitment, of which $7.5 million is freely available to us and was drawn on October 25, 2012, with the remaining $7.5 million draw subject to certain criteria. The Term Loans accrue interest at LIBOR or base rate, at our election, subject to an interest rate floor plus an applicable margin rate. Aggregate principal amounts of the Term Loans shall be payable in quarterly installments equal to 1.25% of the outstanding balance beginning September 30, 2014, with the final installment payable at August 15, 2016. The Term Loans are subject to certain financial covenants and other covenants including a total leverage ratio and an interest coverage ratio, as well as limits on capital expenditures. We were in compliance with all covenants as of September 30, 2013.
On April 16, 2013, we entered into the first amendment to the Term Loans which, among other items, revised the financial covenant requirements, beginning with the first quarter of 2013 extending through the term of the agreement.
In October 2013, we entered into financing agreements to purchase 450 gaming machines from various third party suppliers for lease to a company that operates and service slot routes in Illinois. The agreements require monthly payments of interest and principle and have terms ranging from 24 to 36 months and carry an interest rate from 8.0% to 8.5%.
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Results of Operations
The following tables set forth certain selected audited and unaudited condensed consolidated financial data for the periods indicated:
Year Ended December 31, |
Nine Months ended
September 30, |
|||||||||||||||||||
(in thousands) | 2010 | 2011 | 2012 | 2012 | 2013 | |||||||||||||||
Consolidated Statements of Operations: |
||||||||||||||||||||
Gaming revenue |
$ | 55,021 | $ | 52,660 | $ | 54,029 | $ | 41,176 | $ | 41,957 | ||||||||||
Gaming revenueother |
3,804 | 4,270 | 3,763 | 2,927 | 800 | |||||||||||||||
Equipment sales |
2,979 | 2,716 | 763 | 697 | 1,226 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total revenues |
61,804 | 59,646 | 58,555 | 44,800 | 43,983 | |||||||||||||||
Gaming operating expenses |
18,583 | 16,091 | 11,515 | 9,634 | 6,519 | |||||||||||||||
Cost of equipment sales |
1,505 | 1,061 | 395 | 281 | 777 | |||||||||||||||
(Gain) loss on disposition of assets |
(29 | ) | 176 | 451 | 464 | 775 | ||||||||||||||
General and administrative |
22,378 | 13,344 | 14,350 | 10,769 | 12,497 | |||||||||||||||
Selling and marketing |
4,136 | 3,346 | 3,443 | 2,544 | 2,538 | |||||||||||||||
Phantom unit compensation |
| 929 | 654 | 654 | 463 | |||||||||||||||
Impairment of long lived assets |
| 804 | 2,711 | | 3,364 | |||||||||||||||
Impairment of intangibles |
| | 3,686 | | 1,391 | |||||||||||||||
Impairment of goodwill |
| | 18,679 | 18,679 | | |||||||||||||||
Depreciation and amortization |
22,844 | 23,644 | 29,454 | 21,332 | 21,716 | |||||||||||||||
Write downs and other charges |
| 2,249 | 3,664 | 3,586 | 202 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
69,417 | 61,644 | 89,002 | 67,943 | 50,242 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss from operations |
(7,613 | ) | (1,998 | ) | (30,447 | ) | (23,143 | ) | (6,259 | ) | ||||||||||
Interest expense |
5,861 | 5,833 | 10,270 | 5,989 | 13,168 | |||||||||||||||
Interest income |
(648 | ) | (512 | ) | (439 | ) | (307 | ) | (1,268 | ) | ||||||||||
Other (income) expenses, net |
(168 | ) | 293 | (67 | ) | (174 | ) | (254 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
$ | (12,658 | ) | $ | (7,612 | ) | $ | (40,211 | ) | $ | (28,651 | ) | $ | (17,905 | ) | |||||
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|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012
Revenues
Total revenues were $44.0 million for the nine months ended September 30, 2013 compared to $44.8 million for the nine months ended September 30, 2012, which represents a decrease of $0.8 million, or 1.8%. Gaming revenues were $42.0 million for the nine months ended September 30, 2013 compared to $41.2 million for the nine months ended September 30, 2012, which represents an increase of $0.8 million, or 1.9%. The decrease in total revenue was primarily a result of the termination of a software license agreement on March 29, 2013, offset by the increase in gaming revenues and equipment sales. The increase in gaming revenue was primarily a result of transitioning from predominantly participation based revenue to more lease based revenue, including the addition of an entirely new lease market when we expanded our operations into Illinois. During this transition, participation revenue decreased $3.1 million while lease revenue increased $3.7 million.
Operating Expenses
Gaming operating expenses . Total gaming operating expenses were $6.5 million for the nine months ended September 30, 2013 compared to $9.6 million for the nine months ended September 30, 2012, which represents a decrease of $3.1 million, or 35.0%. The decrease in gaming operating expenses was primarily a result of the consummation of the Bluberi transaction in May 2012, which reduced Bluberi commissions by approximately $3.1 million, capitalization of certain production costs during 2013 that did not occur in 2012 and $0.2 million in non-recurring charges in 2012; partially offset by an increase facility specific fees and third party servicing fees.
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Cost of equipment sales . Cost of equipment sales was $0.8 million for the nine months ended September 30, 2013 compared to $0.3 million for the nine months ended September 30, 2012, which represents an increase of $0.5 million, or 166.7%. The increase is due to an increase in games sales.
Loss (gain) on disposition of assets . Loss on disposition of assets was $0.8 million for the nine months ended September 30, 2013 compared to $0.5 million for the nine months ended September 30, 2012, which represents an increase of $0.3 million, or 60%. The increase in the loss on disposition of assets was primarily a result of a loss event regarding old gaming devices from our Oklahoma warehouse.
General and administrative . General and administrative costs were $12.5 million for the nine months ended September 30, 2013 compared to $10.8 million for the nine months ended September 30, 2012, which represents an increase of $1.7 million, or 15.7%. The increase is due to legal fees of $1.2 million related to an arbitration proceeding with a customer, legal fees of $0.5 million related to the Acquisition, as well an increase in general and research and development payroll costs; partially offset by a decrease in bonus expense, and a decrease in licensing fees related to initial licensing of new jurisdictions expensed in 2012.
Selling and marketing . Selling and marketing costs were relatively consistent at $2.5 million for both the nine months ended September 30, 2013 and 2012.
Phantom unit compensation . Phantom unit compensation expense was $0.5 million for the nine months ended September 30, 2013 compared to $0.7 million for nine months ended September 30, 2012, which represents a decrease of $0.2 million, or 29.2%. The expense represents the recognition of the change in the fair value of the phantom units that vested during the two periods.
Impairment of long lived assets . Impairment of long-lived assets represents an impairment loss for obsolete gaming machines. The impairment charge was $3.4 million for the nine months ended September 30, 2013. We did not record an impairment charge in the nine months ended September 30, 2012.
Impairment of intangibles . Impairment of intangibles was $1.4 million for the nine months ended September 30, 2013. The amount relates to a lease incentive associated with a long-term lease with a gaming operator in Illinois entered into in 2010 for which the lease was amended in September 2013. We did not record an impairment charge in the nine months ended September 30, 2012.
Impairment of goodwill . Impairment of goodwill was $0 and $18.7 million for the nine months ended September 30, 2013 and 2012 respectively. The 2012 impairment, which accounted for the entire balance, was a result of the combination of an increase in our weighted average cost of capital primarily related to the increased interest rate related to the 2012 UBS debt and reduced revenue with in our long-term operating plan.
Depreciation and amortization . Depreciation and amortization was $21.7 million for the nine months ended September 30, 2013 compared to a $21.3 million for the nine months ended September 30, 2012, which represents an increase of $0.4 million, or 1.9%.
Other Expense (Income)
Interest expense . Interest expense was $13.2 million for the nine months ended September 30, 2013 and $6.0 million for the nine months ended September 30, 2012, which represents an increase of $7.2 million, or 120.0%. The increase in interest expense was primarily due to the increased interest rate for the new credit agreement entered into in August 2012.
Interest income . Interest income was $1.3 million for the nine months ended September 30, 2013 compared to $0.3 million for the nine months ended September 30, 2012. The increase in interest income was primarily the result of additional interest recognized on the loans to the gaming operators in the Illinois VGT market partially
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offset by a decrease in the outstanding principal amount of our other development agreement notes receivable generating interest income. Of the $13.0 million of notes receivable as of September 30, 2013, $11.8 million is related to loans to gaming operators in the Illinois VGT market. Of the $11.8 million for Illinois we are recognizing interest income on $7.8 million which is a percentage basis of live units to expected total deployments.
Other . We recorded other income of $0.3 million for the nine months ended September 30, 2013 and $0.2 million of income for the nine months ended September 30, 2012. The nine months ended September 30, 2013 includes $0.4 million of income related to the de-recognition of a customer liability. The remainder for 2013 and 2012 relates to the change in foreign currency exchange.
Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011
Revenues
Total revenues were $58.6 million for 2012 compared to $59.6 million for 2011, which represents a decrease of $1.0 million, or 1.7%. Gaming revenues were $54.0 million for 2012 compared to $52.7 million for 2011, which represents an increase of $1.3 million, or 2.5%. The increase in gaming revenue was primarily a result of an increase in the install base of leased games, which yielded a higher fee per day compared to participation games. Equipment sales were $0.8 million for 2012 compared to $2.7 million for 2011, which represents a decrease of $1.9 million, or 71.9%. The decrease in equipment sales was primarily due to our decision to focus on the recurring revenue portion of our business rather than game sales, which resulted in fewer units being sold in 2012 compared to 2011. We prefer the recurring revenue model due to the predictability of revenues and associated cash flows that game sales do not offer since many of the underlying contracts in our recurring revenue business are multi-year in nature.
Operating Expenses
Gaming operating expenses . Total gaming operating expenses were $11.5 million for 2012 compared to $16.1 million for 2011, which represents a decrease of $4.6 million, or 28.6%. The decrease in gaming operating expenses was primarily a result of the consummation of the Bluberi transaction in May 2012. Bluberi commissions were $3.2 million in 2012 compared to $7.8 million in 2011.
Cost of equipment sales . Cost of equipment sales were $0.4 million for 2012 compared to $1.1 million for 2011, which represents a decrease of $0.7 million, or 62.7%. The decrease in cost of equipment sales was primarily a result of fewer equipment sales as described above.
Loss (gain) on disposition of assets . Loss on disposition of assets was $0.5 million for 2012 compared to $0.2 million for 2011, which represents an increase of $0.3 million, or 156.7%. The loss for 2012 represents two material dispositions, while the 2011 loss was primarily a result of a loss on the sale of gaming equipment in the fourth quarter of 2011 and the loss on written off gaming equipment in Mexico partially offset by the return of gaming equipment by the state of Alabama which was previously written off.
General and administrative . General and administrative costs were $14.4 million for 2012 compared to $13.3 million for 2011, which represents a increase of $1.1 million, or 7.5%. The increase in general and administrative costs for 2012 was due primarily to an increase in research and development and payroll costs.
Selling and marketing . Selling and marketing costs were $3.4 million for 2012 compared to $3.3 million for 2011, which represents an increase of $0.1 million, or 2.9%. The increase in selling and marketing costs was primarily a result of higher commission expense partially offset by lower general selling costs.
Phantom unit compensation . Phantom unit compensation expense was $0.7 million for 2012 compared to $0.9 million for 2011, which represents a decrease of $0.2 million or 29.7%. The 2012 costs represent the recognition of the change in the fair value of the phantom units that vested during 2012.
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Impairment of long lived assets . Impairment of long-lived assets represents an impairment loss for obsolete gaming machines. The impairment was $2.7 million for 2012 compared to $0.8 million for 2011, which represents an increase of $1.9 million, or 237.4%. The increase is primarily due to a greater number of gaming machine we do not expect to use for future deployments resulting from our decision to focus on newer cabinet models.
Impairment of intangibles . Impairment of intangibles was $3.7 million for 2012, $2.9 million of which related to adjusting our net carrying value of the cashless gaming system licenses required to operate certain gaming machines. The remaining amount related to customer agreements and internally developed software associated with a licensing agreement held by AGS Toronto, which we terminated in March 2013. There was no impairment for intangibles in 2011.
Impairment of goodwill . Impairment of goodwill was $18.7 million for 2012. The impairment is a result of the combination of an increase in our weighted average cost of capital primarily related to the increased interest rate related to our Term Loans and reduced revenue with in our long-term operating plan. There was no impairment for goodwill in 2011.
Write downs and other charges . Write downs and other charges were $3.7 million for 2012 compared to $2.2 million for 2011, which represents an increase of $1.5 million, or 68.2%. The amounts for 2012 consist of $3.5 million of debt-related costs related to our prior credit facility, which was paid off with the proceeds of the Term Loans, and other costs incurred for unsuccessful financing transactions, and $0.2 million for consulting fees paid to a related party. The 2011 costs solely relate to unsuccessful financial transactions.
Depreciation and amortization . Depreciation and amortization expense was $29.5 million for 2012 compared to $23.6 million for 2011, which represents an increase of $5.9 million, or 25.0%. The increase in depreciation was primary related to additional costs for new gaming machines including the new deployments for Illinois VGT market. The increased amortization expense was primarily a result of the amortization of the intangible associated with the Bluberi transaction that was completed in May 2012 as well as an increase in internally developed software, partially offset by certain intangibles that were fully amortized in 2012.
Other (Income) Expenses
Interest expense . Interest expense was $10.3 million for 2012 compared to $5.8 for 2011, which represents an increase of $4.5 million, or 76.1%. The increase in interest expense was primarily related to the increased interest rate for the Term Loans, which we entered into in August 2012.
Interest income . Interest income was $0.4 million for 2012 compared to $0.5 million for 2011, which represents a decrease of $0.1 million. The decrease in interest income was primarily the result of a decrease in the outstanding principal amount of our development agreement notes receivable generating interest income. Of the $12.4 million of notes receivable as of December 31, 2012, $10.1 million is related to loans to gaming operators in the Illinois VGT market. Of the $10.1 million for Illinois we are recognizing interest income on $0.8 million which is a percentage basis of live units to expected total deployments.
Other . We recorded other income of $0.1 million for 2012 compared to other expenses of $0.3 million for 2011, primarily as a result of a change in foreign currency exchange.
Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010
Revenues
Total revenues were $59.6 million for 2011 compared to $61.8 million for 2010, which represents a decrease of $2.2 million, or 3.6%. Gaming revenues were $52.7 million for 2011 compared to $55.0 million for 2010, which represents a decrease of $2.3 million, or 4.2%. The decrease in gaming revenue was primarily a
48
result of a decrease in average game count along with adverse weather in Oklahoma in the first quarter of 2011, which caused several casino closures where our games are located. Equipment sales were $2.7 million for 2011 compared to $3.0 million for 2010, which represents a decrease of $0.3 million, or 10.0%. The decrease in equipment sales was primarily a result of a relatively flat number of units sold during 2011 compared to 2010 at a lower average selling price. In addition, there was a decrease in parts sales in 2011 compared to 2010.
Operating Expenses
Gaming operating expenses . Total gaming operating expenses were $16.1 million for 2011 compared to $18.6 million for 2010, which represents a decrease of $2.5 million, or 13.4%. The decrease in gaming operating expenses was primarily a result of the amended agreement signed in May 2010 with Bluberi, which lowered their commission rate from 30% to 20% of revenue.
Cost of equipment sales . Cost of equipment sales was $1.1 million for 2011 compared to $1.5 million for 2010, which represents a decrease of $0.4 million, or 29.5%. The decrease in cost of equipment sales was primarily a result of equipment sales at a lower average selling price as described above.
Loss (gain) on disposition of assets . Loss on disposition of assets was $0.2 million for 2011 compared to an immaterial gain for 2010. The loss on disposition of assets was primarily a result of a loss on the sale of gaming equipment in the fourth quarter of 2011 and the loss on written off gaming equipment in Mexico offset by the return of gaming equipment by the state of Alabama which was previously written off.
General and administrative . General and administrative costs were $13.3 million for 2011 compared to $22.4 million for 2010, which represents a decrease of $9.1 million, or 40.6%. The decrease in general and administrative costs for 2011 was due primarily to a reduction in bad debt expense compared to 2010. General and administrative costs in 2010 included $8.1 million in bad debt expense relating to sales from 2008 and 2009.
Selling and marketing . Selling and marketing costs were $3.3 million for 2011 compared to $4.1 million for 2010, which represents a decrease of $0.8 million, or 19.1%. The decrease in selling and marketing costs was primarily a result of a reduction in sales payroll expense.
Phantom unit compensation . Phantom unit compensation for 2011 represents the recognition of the change in the fair value of the phantom units that vested during 2011. There was no phantom unit compensation in 2010.
Impairment of long-lived assets . Impairment of long-lived assets for 2011 represents the recognition of an impairment loss for obsolete gaming machines. There was no impairment loss in 2010.
Depreciation and amortization . Depreciation and amortization expense was $23.6 million for 2011 compared to $22.8 million for 2010, which represents an increase of $0.8 million, or 3.5%. The increase in depreciation and amortization expense was primarily a result of a full year of amortization of licenses with Bluberi in 2011 as well as an increase in internally developed capitalized software in 2011.
Write downs and other charges . Write downs and other charges included $2.2 million of costs related to a cancelled bond offering in 2011.
Other Expenses (Income)
Interest expense . Interest expense was relatively flat at $5.8 million for 2011 compared to $5.9 million for 2010.
Interest income . Interest income was $0.5 million for 2011 compared to $0.6 million for 2010, which represents a decrease of $0.1 million. The decrease in interest income was primarily the result of a decrease in
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the outstanding principal amount of our development agreement notes receivable generating interest income. Of the $9.6 million of notes receivable as of December 31, 2011, we have deferred recognizing interest income on $3.3 million of that balance, which relate to loans to potential gaming operators in the Illinois VGT market, until collectability of the interest income is reasonably assured.
Other . We recorded other expenses of $0.3 million for 2011 compared to other income of $0.2 million for 2010, primarily as a result of increased foreign currency exchange expense.
Liquidity and Capital Resources
We expect that primary ongoing liquidity requirements will be for capital expenditures, working capital, other debt service, game development and other customer acquisition activities. We expect to finance these liquidity requirements through a combination of cash on hand and cash flows from operating activities. In October 2013, we entered into financing agreements to purchase 450 gaming machines from various third party suppliers for lease to a company that operates and service slot routes in Illinois. The agreements require monthly payments of interest and principle and have terms ranging from 24 to 36 months and carry an interest rate from 8.0% to 8.5%.
As of September 30, 2013, we had $8.6 million in cash and cash equivalents and $130.1 million of outstanding indebtedness (not including the discount), under our existing credit facility. As of December 31, 2012, we had $6.5 million in cash and cash equivalents and $122.9 million of outstanding indebtedness (not including the discount), which consisted of $122.5 million of outstanding indebtedness under our existing credit facility, and a $0.4 million note payable to Aristocrat.
Concurrent with the consummation of the Acquisition, on December 20, 2013 (the Closing Date ) we entered into our senior secured credit facilities, which consist of a $155 million term loan facility (the Term Facility ) and a $25 million revolving credit facility (the Revolving Facility and, together with the Term Loan Facility, the Senior Secured Credit Facilities ). AP Gaming I, LLC (the Borrower ), a wholly owned indirect subsidiary of AP Gaming, is the borrower under the Senior Secured Credit Facilities and Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Nomura Securities Internationa, Inc. acted as joint lead arrangers and joint bookrunners for the Senior Secured Credit Facilities.
The proceeds of the Term Facility were used by the Borrower, together with the proceeds of the equity contribution and other sources of funds, to pay the consideration for the Acquisition, to refinance the Companys existing credit facilities and to pay the costs and expenses of the Acquisition and other related transactions. The proceeds of the Revolving Facility will be used by the Borrower from time to time for general corporate purposes and other purposes agreed to with the lenders.
The Term Facility will mature on the seventh anniversary of the Closing Date, and the Revolving Facility will mature on the fifth anniversary of the Closing Date. The Term Facility requires scheduled quarterly payments in amounts equal to 0.25% of the original aggregate principal amount of the term loans, with the balance due at maturity. Borrowings under the Senior Secured Credit Facilities are expected to bear interest at a rate equal to, at the Borrowers option, either LIBOR or the base rate, subject to an interest rate floor plus an applicable margin rate. In addition, on a quarterly basis, the Borrower is required to pay each lender under the Revolving Facility a commitment fee in respect of any unused commitments thereunder at a rate of 0.50% per annum.
The Senior Secured Credit Facilities will be guaranteed by AP Gaming Holdings, the Borrowers material, wholly owned domestic subsidiaries (subject to certain exceptions) and AP Gaming NV, LLC, and will be secured by a pledge by AP Gaming Holdings of the Borrowers equity interest directly held by AP Gaming Holdings and a pledge of substantially all of the existing and future property and assets of the Borrower and the subsidiary guarantors and AP Gaming NV, LLC, subject to certain exceptions. The Senior Secured Credit Facilities require that the Borrower maintain a maximum net first lien leverage ratio set at a maximum of 5.5 to 1 beginning with the first quarter ending June 30, 2014. The Senior Secured Credit Facilities contain limitations on
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additional indebtedness, guarantees, incurrence of liens, investments and distributions, as defined. The Senior Secured Credit Facilities also contain customary events of default included in similar financing transactions, including, among others, failure to make payments when due, default under other material indebtedness, breach of covenants, breach of representations and warranties, involuntary or voluntary bankruptcy, and material judgments.
Based on our current business plan, we believe that our existing cash balances, cash generated from operations and availability under the Revolving Facility will be sufficient to meet our anticipated cash needs for at least the next twelve months and that we will be in compliance with the Senior Secured Credit Facilities, including the maximum net first lien leverage ratio for the quarters ended June 30, 2014, September 30, 2014 and December 31, 2014. However, our future cash requirements could be higher than we currently expect as a result of various factors. Our ability to meet our liquidity needs could be adversely affected if we suffer adverse results of operations, or if we violate the covenants and restrictions to which we are subject under the credit facility. Additionally, our ability to generate sufficient cash from our operating activities is subject to general economic, political, regulatory, financial, competitive and other factors beyond our control. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us under our existing credit facility in an amount sufficient to enable us to pay our service or repay our indebtedness or to fund our other liquidity needs, and we may be required to seek additional financing through credit facilities with other lenders or institutions or seek additional capital through private placements or public offerings of equity or debt securities.
Net cash provided by operating activities
The Company has historically produced a loss from operations due mainly to the capital nature of the business and the resulting depreciation and amortization expense. During the nine months ended September 30, 2013 and for 2012 and 2011, the net operating losses were further impacted by the impairments that were recorded. Net cash provided by operating activities was $14.8 million for the nine months ended September 30, 2013 compared to $14.2 million for the nine months ended September 30, 2012, representing an increase of $0.6 million. The increase is primarily due to an increase in income from operating activities excluding non-cash expenses of approximately $2.8 million, a $7.5 million increase due to changes in working capital during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012, offset by an increase in cash paid for interest of approximately $8.0 million.
Net cash provided by operating activities was $18.8 million for 2012 compared to $21.9 million for 2011, representing a decrease of $3.1 million primarily due to a decrease in working capital and an increase in cash paid for interest in 2012 compared to 2011.
Net cash provided by operating activities was $21.9 million for 2011 compared to $21.8 million for 2010, representing an increase of $0.1 million primarily due to an increase in working capital in 2011 compared to 2010.
Net cash used in investing activities
Net cash used in investing activities was $19.7 million during the nine months ended September 30, 2013 compared to $39.2 million during the nine months ended September 30, 2012, representing a decrease of $19.5 million. The decrease is primarily due to a decrease in purchases of intangible assets of $19.6 million as $19.9 million was spend last year on the Bluberi transaction, a reduction in advances to customers of $2.7 million, a decrease in collections under note receivables of $1.7 million, a decrease in capital expenditure of $0.9 million and no collections related to the Canadian payroll credit, partially offset by a $0.3 million increase in software development during the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012.
Net cash used in investing activities was $51.8 million in 2012, compared to $26.2 million in 2011, representing an increase of $25.6 million. $16.1 million of the increase is due to an increase in intangible assets where we spent $22.9 million in 2012 compared to $6.9 million in 2011. Of the 2012 amount, $19.9 million was
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related to the Bluberi transaction. The remaining increase is from a $1.4 million increase in software development, $3.2 million increase in notes receivables, a $6.8 million increase in capital expenditures primary related to the Illinois VGT market and a $1.5 million decrease in our Canadian payroll tax receivable and a decrease of $0.8 million of collections on notes receivables as well as $1.2 million collected towards the Canadian payroll tax receivable.
Net cash used in investing activities was $26.2 million in 2011, compared to $32.6 million in 2010, representing a decrease of $6.4 million. The decrease in net cash used in investing activities was primarily related to our acquisition of Bluberi license rights for an aggregate of $7.5 million during 2010 offset by a $1.9 million increase in capital expenditures in 2011, $2.8 million increase in notes receivable in 2011, and a $1.8 million increase in collections on notes receivable in 2011.
Net cash provided by financing activities
Net cash provided by financing activities was $6.8 million during the nine months ended September 30, 2013 compared to $21.5 million provided by financing activities during the nine months ended September 30, 2012, representing a decrease of $14.7 million. The decrease in net cash provided by financing activities was primarily due to a single borrowing of $7.5 million in 2013 compared to a $109.8 million borrowing for the 2012 UBS debt and a $130.6 million repayment of the 2007 UBS debt in 2012 and a $7.6 million decrease in deferred financing fees, partially offset by a decrease in member contributions of $50.7 million related to our refinancing activities during the nine months ended September 30, 2012.
Net cash provided by financing activities was $28.8 million for 2012 compared to $7.2 million for 2011, representing an increase of $21.6 million. The increase in net cash provided by financing activities was primarily due to a $36.9 million increase in member contributions, partially offset by $9.6 million net change in debt related to the repayment of our previous credit facility with the proceeds from the Term Loans and a $5.4 million increase in deferred financing fees related to our refinancing activities.
Net cash provided by financing activities was $7.2 million for 2011 compared to $12.5 million for 2010, representing a decrease of $5.3 million. The decrease in net cash provided by financing activities was primarily due to a net $2.6 million increase in repayments under our then-existing credit facility, an increase of $0.3 million in deferred financing costs, an increase of $0.2 million in payments on the Aristocrat note payable, offset by a $1.1 million increase in net contributions from members.
Significant Accounting Policies and Critical Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make decisions based upon estimates, assumptions and factors we consider relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ materially from those anticipated.
We believe that the following critical accounting policies and underlying estimates and judgments involve a higher degree of complexity than others do:
Management considers an accounting estimate to be critical if:
| It requires assumptions to be made that were uncertain at the time the estimate was made , and |
| Changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operation or financial condition . |
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Revenue Recognition
The majority of our gaming revenue is recurring and generated under participation agreements whereby we provide electronic gaming machines and systems in return for a percentage these gaming machines generate or a daily licensing fee. Under these arrangements, we generally retain ownership of the gaming equipment installed at customer facilities and are responsible for providing ongoing maintenance and support of the equipment. Certain arrangements require a portion of the revenue generated by our equipment to be set aside to be used to fund facility-specific marketing, advertising, promotions and service. These amounts are offset against revenue. We record revenue from our participation agreements based on the revenue generated by our machines during the reporting period factoring in the specified revenue share percentage for each customer. We record revenue from daily fee agreements based on the number of operating machine days during the reporting period multiplied by the specified daily fee per gaming unit or other denominator specified in the contracts.
Revenues from the stand-alone product sales or separate accounting units are recorded when:
| persuasive evidence of an arrangement exists; |
| the sales price is fixed and determinable; |
| delivery has occurred and services have been rendered; and |
| collectability is probable. |
The Company believes that the sale of its machines, and installation, training, service and removal thereof do not meet all the criteria in ASC 605-25-25-5. The Company believes the criteria in paragraph 5(a) is met because its customers buy gaming machines of similar functionality and configuration from other suppliers in the Companys industry, while the Company believes the criteria in paragraph 5(c) is not met because it does not offer a general right of return and installation and training is performed typically or within a day of the delivery of the machine to the customer. The majority of the Companys lease agreements includes a requirement for the Company to service games should failures occur. The cost related to the servicing of these machines is expensed as incurred and is not significant compared to the total revenue generated from the lease contract. Further, the Company does not offer the servicing of machines (i.e., extended warranties) as a separate deliverable to customers as a matter of practice.
Notes Receivable and Development Agreements
We enter into development agreements to provide financing for the construction of new gaming facilities or the expansion of existing facilities. The agreements generally come in two forms. The first is in the form of a loan or note receivable. Interest income is recognized on the repayment of the notes based on the stated rate or, if not stated explicitly in the development agreement, on an imputed interest rate. If the interest rate is to be imputed, a discount to the note receivable and a corresponding intangible is recorded. The intangible is recognized in the financial statements as a contract right under development agreement and amortized on a straight-line basis as a reduction in revenue over the term of the agreement. The second is in the form of an advance that is not expected to be repaid. These advances are accounted for as customer rights and amortized over the term of the agreement on a straight-line basis as a reduction in revenue. In both scenarios, the customer generally allocates to us a certain percentage of the floor or specified number of electronic gaming machines to be placed by us in the facility under a long-term equipment lease agreement whereby we receive a share of the revenues generated by our games or a fixed daily fee per game. Certain agreements contain performance standards for our gaming terminals that could allow the facility to reduce a portion of our guaranteed floor space. In the event a portion of the guaranteed floor space is reduced, the Company would recognize an impairment of the associated intangible. For our note receivables, terms regarding repayment of our loans or advances vary by agreement. In some agreements, we are repaid out of the incremental facility revenue or profit generated by the expansion in proportion to the amount of the overall funding we provided. It is also typical to have agreements where our loans or advances are repaid based on fixed monthly payments or other amortization schedule. Interest income related to notes receivable is recorded as interest income over the life of the note receivable and any
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related fees or costs to establish the notes are charged to general and administrative as incurred in the Consolidated Statement of Operations and Comprehensive Loss. We have not sold our notes receivable to third parties, so we do not have any off-balance sheet liabilities for factored receivables.
The Company assesses the impairment of notes whenever events or changes in circumstances indicate the carry value may not be realized. Impairment is measured based on the present value of the expected future cash flows and is recorded as bad debt expense in the period of assessment. For the years ended December 31, 2012, 2011 and 2010, the Company recorded an impairment of $0.4 million, $ 0, and $7.7 million, respectively.
The Company monitors the credit quality of its notes receivable by reviewing an aging of customer invoices. Invoices are considered past due if a scheduled payment is not received within agreed upon terms. The Company also reviews a variety of other relevant qualitative information such as collection experience, economic conditions and specific customer financial conditions to evaluate credit risk in recording the allowance for doubtful accounts or as an indicator of an impaired loan.
The Company accrues interest, if applicable, on its notes receivables per the terms of the agreement. Interest is not accrued on notes considered past due, or individual amounts that the Company has determined and specifically identified as not collectible. Interest recognition will resume once the notes are not considered past due.
Notes and the related allowance are charged off when we have exhausted all efforts of collection and the it is deemed uncollectible.
Assumptions/Approach used for Assumption #1 : Intangibles that result from our notes receivable and development agreements are generally amortized over the life of the contract, using the straight-line method of amortization, which is recorded as a reduction of revenue generated from the gaming facility. We use a straight-line amortization method, as a pattern of future benefits cannot be readily determined.
Effect if Different Assumptions used for Assumption #1 : While we believe that the use of the straight-line method of amortization is the best way to account for the intangible that results from our notes receivable and development agreement activity, the use of an alternative method could have a material effect on the amount recorded as a reduction to revenue in the current reporting period.
Assumptions/Approach used for Assumption #2 : We estimate cash flows directly associated with the use of the intangible assets to test recoverability and remaining useful lives based upon forecasted product revenues and cash flows. In developing estimated cash flows, we incorporate assumptions regarding future performance, including estimations of win per day and estimated units. When the carrying amount exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset, we then compare the carrying amount to its current fair value. We recognize an impairment loss if the carrying amount is not recoverable and exceeds its fair value.
Effect if Different Assumptions used for Assumption #2 : Impairment testing requires judgment, including estimations of cash flows, and determinations of fair value. While we believe our estimates of future revenues and cash flows are reasonable, different assumptions could materially affect the measurement of useful lives, recoverability and fair value. If actual cash flows fall below initial forecasts, we may need to record additional amortization and/or impairment charges.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts related to our accounts receivable and notes receivable that have been deemed to have a high risk of collectability. We review our accounts receivable and notes receivable on a monthly basis to determine if any receivables will potentially be uncollectible. We analyze historical
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collection trends and changes in our customers payment patterns, customer concentration and credit worthiness when evaluating the adequacy of our allowance for doubtful accounts. A large percentage of receivables are with Native American tribes that have their casinos and gaming operations in the state of Oklahoma, and we have concentrations of credit risk with several tribes. Despite the industry, geographic and customer concentrations related to our receivables, due to our historical experience with receivable collections, management considers credit risk to be minimal with respect to accounts receivable. We include any receivable balances that are determined to be uncollectible in our overall allowance for doubtful accounts. Changes in our assumptions or estimates reflecting the collectability of certain accounts could materially affect our allowance for both trade and notes receivable.
Assumptions/Approach used for Assumption #1 : We estimate our allowance for doubtful accounts based on historical collection trends, changes in our customers payment patterns, customer concentration and credit worthiness.
Effect if Different Assumptions used for Assumption #1: Recording an allowance for doubtful accounts requires judgment. While we believe our estimates are reasonable, if actual cash collections fall below our expectations, we may need to record additional bad debt expense.
Inventories
Inventories consist primarily of parts and supplies that are used to repair and maintain machinery and equipment, as well as gaming equipment under construction or held for sale. Inventories are stated at the lower of cost or market. Cost of inventories is determined using the first-in, first-out (FIFO) method for all components of inventory. We regularly review inventory quantities and update estimates for the net realizable value of inventories to identify excess or obsolete inventory. This process includes examining the carrying values of parts and ancillary equipment in comparison to the current fair market values for such equipment (less costs to sell or dispose). Some of the factors involved in this analysis include the overall levels of our inventories, the current and projected demand including forecasted lease and sales levels for such products (Assumption #1), the projected markets for such products (Assumption #1) and the costs required to lease or sell the products, including refurbishment costs. Inventory is also subject to technical obsolence.
Assumptions/Approach used for Assumption #1 : Our estimates of net realizable value of inventory take into account projected usage including lease and sales levels that will utilize the existing inventory to assist in determining the net realizable value of the inventory at a balance sheet date. If inventory has no projected usage, it is written down to current market values (less costs to sell and dispose).
Effect if Different Assumptions used for Assumption #1 : Although we believe our estimate of inventory usage are reasonable, different assumptions could materially affect the inventories net realizable value. If actual inventory usage is lower than our projections, additional inventory write-downs may be required.
Gaming Equipment, Vehicles and Other Equipment
The cost of gaming equipment consisting of gaming machines, servers and other support equipment as well as vehicles and other equipment, are depreciated over their estimated useful lives, generally using the straight-line method for financial reporting. We annually evaluate the estimated lives used to depreciate assets. We measure recoverability of assets to be held and used by comparing the carrying amount of an asset to future cash flows expected to be generated by the asset. Our policy is to record an impairment , when necessary, for excess or obsolete gaming machines on hand that we do not expect to be used. Impairments are based upon several factors, including estimated forecast of gaming terminal demand for placement into casinos (Assumption #1).
Assumptions/Approach used for Critical Assumption #1 : The carrying value of the asset is determined based upon managements assumptions as to the useful life of the asset, where the assets are depreciated over the estimated life on a straight line basis over five years.
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Effect if different assumptions used for Critical Assumption #1 : While we believe the useful lives that we use are reasonable, different assumptions could materially affect the carrying value of the assets, as well as the depreciation expense recorded.
Assumptions/Approach used for Assumption #2 : We estimate cash flows directly associated with the use of the gaming equipment to test recoverability and remaining useful lives based upon forecasted product revenues and cash flows. In developing estimated cash flows, we incorporate assumptions regarding future performance, including estimations of win per day and estimated units. When the carrying amount exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset, we then compare the carrying amount to its current fair value. We recognize an impairment loss if the carrying amount is not recoverable and exceeds its fair value.
Effect if Different Assumptions used for Assumption #2 : Impairment testing requires judgment, including estimations of cash flows, and determinations of fair value. While we believe our estimates of future revenues and cash flows are reasonable, different assumptions could materially affect the measurement of useful lives, recoverability and fair value. If actual cash flows fall below initial forecasts, we may need to record additional amortization and/or impairment charges.
Intangible Assets
The Company reviews its identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized for identifiable intangibles, other than goodwill, when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets carrying amount.
We group our definite-lived intangible assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company groups our identifiable intangible assets and reviews them for impairment according to the groupings below:
| Contract rights under development agreements these intangibles relate to the discounts on development note receivables loans that have been extended to customers at no interest rate in exchange for a fixed number of gaming terminal placements in the customers facility. The Company receives a fixed percentage of those gaming terminals win per day over the term of the agreement or a daily fee per gaming terminal. Contract rights under development agreements are amortized over the term of the agreement as a reduction in revenue. Our impairment analysis incorporates reviewing the future expected revenues and cash flows under the respective contracts in comparison to the underlying net book value of the associated intangible; |
| Customer agreements these intangibles represent the cash advances to customers that are not expected to be repaid in exchange for a fixed number of gaming terminal placements in the customers facility. The Company receives a fixed percentage of those gaming terminals win per day over the term of the agreement or a daily fee per gaming terminal. Customer agreements are amortized over the term of the agreement as a reduction in revenue. Our impairment analysis incorporates the reviewing future expected revenues and cash flows with these related customer under the respective contracts in comparison to the underlying net book value of the associated intangible; |
| Third-party licenses these intangibles represent the rights to license third party gaming titles that the Company has purchased for use in its gaming terminals. Third-party licenses are amortized to operating expense over the shorter of the term of the license or the expected life of the titles, whichever is shorter. Our impairment analysis incorporates the future expected revenues and cash flows of the title or gaming titles in comparison to their underlying net book value of the associated intangible; |
|
Purchased software these intangibles represent the license to operate the ticket-in-ticket-out (TITO) technology associated with many of the Companys gaming terminals. These costs are amortized over |
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the expected life of the underlying gaming terminal. These TITO intangible assets are included with a gaming terminal and are not transferrable to other gaming terminals once placed into service; therefore, our impairment analysis is incorporated with our review for impairment of the underlying gaming terminal. We evaluate the future revenues and cash flows associated with the underlying gaming terminal in comparison to the underlying net book value of the gaming terminal and associated TITO intangible asset. |
The Company reviews its definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Examples of such events or changes in circumstances include the following:
| Contract rights under development agreements and customer agreements (1) other than temporary decrease in revenue and cash flows associated with a particular customer (2) reduction in amount of gaming terminal placements in the customers facility; |
| Third-party licenses other than temporary decreases in revenue and cash flows associated with a gaming title or group of gaming titles; |
| Purchase software other than temporary decreases in revenue and associated cash flow associated with a specific gaming terminal. |
Impairment is reviewed at a minimum once a year. When the estimated undiscounted cash flows are not sufficient to recover the intangible assets carrying amount, an impairment loss is measured to the extent the fair value of the asset is less than its carrying amount. The Company recognized an impairment charge of $3,686,414 for the year end December 31, 2012. Of this total, $2,859,330 related to adjusting the net carrying value of the purchase software.
Assumptions/Approach used for Assumption #1 : We estimate cash flows directly associated with the use of the intangible assets to test recoverability and remaining useful lives based upon forecasted product revenues and cash flows. In developing estimated cash flows, we incorporate assumptions regarding future performance, including estimations of win per day and estimated units. When the carrying amount exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the asset, we then compare the carrying amount to its current fair value. We recognize an impairment loss if the carrying amount is not recoverable and exceeds its fair value.
Effect if Different Assumptions used for Assumption #1 : Impairment testing requires judgment, including estimations of cash flows, and determinations of fair value. While we believe our estimates of future revenues and cash flows are reasonable, different assumptions could materially affect the measurement of useful lives, recoverability and fair value. If actual cash flows fall below initial forecasts, we may need to record additional amortization and/or impairment charges.
Goodwill
We are required to perform an annual goodwill impairment review, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when its carrying amount exceeds its estimated fair value. Goodwill is reviewed for possible impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, or a loss of key personnel.
Accounting for Income Taxes
We are a limited liability company treated as a disregarded entity for federal and state income tax purposes. As a result, any federal (and most state) items of income or loss, and any income tax credits, are passed through
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to our ultimate owner for inclusion in its individual income tax returns. There are also no material entity level state taxes. We have a foreign subsidiary that is a corporation which has experienced cumulative losses and does not incur current foreign income taxes. In accordance with ASC Topic 740, Income Taxes, we have recorded deferred tax assets and liabilities to account for the expected future tax benefits and consequences of events that have been recognized in our financial statements and our tax returns. There are several items that result in deferred tax asset and liability impact to the balance sheet. If we conclude that it is more likely than not that all or some portion of the deferred tax assets will not be realized under accounting standards, they are reduced by a valuation allowance to remove the benefit of recovering those deferred tax assets from our financial statements.
ASC Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In order to record any financial statement benefit, we are required to determine, based on the technical merits of the position, whether it is more likely than not (a likelihood of more than 50 percent) that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. If that step is satisfied, then we must measure the tax position to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
We previously were a partnership for federal and state income tax purposes. Accordingly, no provision for income taxes is included in our consolidated financial statements.
Our tax returns are subject to examination by Canadian and U.S. federal and state authorities. If such examinations occur and result in changes with respect to any partnership qualifications or changes to distributable income or loss, the tax liability of the members may be changed accordingly.
Assumptions/Approach Used : Numerous judgments and assumptions are inherent in the determination of future taxable income and tax return filing positions that we take, including factors such as future operating conditions. Management regularly considers the likelihood of realizing the future benefits associated with our existing deductible temporary differences and carryforwards. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. In Canada, we continue to experience tax losses and do not foresee profitable activities in the future; therefore management determined that it is not more likely than not that the future benefit associated with all of our existing deductible temporary differences and carryforwards in Canada will be realized. As a result, we have maintained a full valuation allowance against all of our remaining Canadian deferred tax assets.
Effect if Different Assumptions Used : Management, together with consultation from an independent public accounting firm used in tax consultation, continually evaluate tax law requirements and their effect on our current and future tax liability and our tax filing positions. The ultimate utilization of our gross deferred tax assets, primarily associated with our cumulative losses in Canada is largely dependent upon our ability to generate taxable income in the future. We maintain a valuation allowance when management believes it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in a valuation allowance from period to period are included in the tax provision in the period of change. Management evaluates the recoverability of our deferred income tax assets by assessing the need for a valuation allowance on a quarterly basis. If we determine that it is more likely than not that our deferred tax assets will be recovered, the valuation allowance will be reduced.
Costs of Computer Software
Internally developed gaming software is accounted for under FASB ASC Topic 985-20, Costs of Software to Be Sold, Leased or Marketed , and is stated at cost, which is amortized over the estimated useful lives of the software, generally using the straight-line method. Software development costs are capitalized once technological feasibility has been established and are amortized when the software is placed into service. Any subsequent
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software maintenance costs, such as bug fixes and subsequent testing, are expensed as incurred. Discontinued software development costs are expensed when the determination to discontinue is made. Software developments costs are amortized over the expected life of the title or group of titles, if applicable, to amortization expense.
At each balance sheet date, we compare the net book value of our internally developed computer software to the net realizable value on a product by product basis. The net realizable value is determined based upon certain assumptions, including the expected future revenues and net cash flows of the gaming titles or group of gaming titles utilizing that software, if applicable. For the year ended December 31, 2012, we recognized an impairment charge of $827,084, for internally-developed costs that related to a licensing agreement held by AGS Toronto which the Company terminated in March 2013. These assets have no future value and were written off accordingly.
Assumptions/Approach used for Assumption #1 : Internally developed gaming software intangibles are generally amortized over the expected life of the product, using the straight-line method of amortization, to amortization expense. We use a straight-line amortization method, as the associated revenue from our revenue share or daily fee arrangements is relatively consistent over the life of the product.
Effect if Different Assumptions used for Assumption #1 : While we believe that the use of the straight-line method of amortization is the best way to account for the internally developed gaming software intangible, if the timing of actual revenues varies from forecasted revenues, our estimate and timing of the amortization may have to be altered.
Assumptions/Approach used for Assumption #2 : We estimate the revenues and net cash flows from our internally developed software intangible on a product by product basis to compare net book value to net realizable value. In developing estimated revenues and cash flows, we incorporate assumptions regarding future performance, including estimations of win per day and estimated units. When the carrying amount exceeds the net realizable value, the excess is written off.
Effect if Different Assumptions used for Assumption #2 : Determining net realizable value requires judgment, including estimations of forecasted revenue and cash flows. While we believe our estimates of future revenues and cash flows are reasonable, different assumptions could materially affect the measurement of net realizable value.
Research and Development
We conduct research and development activities primarily to develop new gaming platforms and gaming content. These research and development costs consist primarily of salaries and benefits and are expensed as incurred. Once the technological feasibility of a project has been established, capitalization of development costs begins until the product is available for general release.
Contingencies
We assess our exposures to loss contingencies, including claims and legal proceedings, and accrue a liability if a potential loss is considered probable and the amount can be estimated. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, if the actual loss from a contingency differs from our estimate, there could be a material impact on our results of operations or financial position. Operating expenses associated with contingencies, including legal fees, are expensed when incurred.
Seasonality
Historically, our operating results have been highest during the first quarter and lowest in our third and fourth quarters, primarily due to the seasonality of player demand. Our quarterly operating results may vary
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based on the timing of the opening of new gaming jurisdictions, the opening or closing of casinos, the expansion or contraction of existing casinos, approval or denial of our products and corporate licenses under gaming regulations, the introduction of new products, the seasonality of customer capital budgets, the mix of domestic versus international sales and the mix of lease and royalty revenue versus sales and service revenue.
Inflation
Our operations have not been, nor are they expected to be in the future, materially affected by inflation. However, our operational expansion is affected by the cost of hardware components, which are not considered to be inflation sensitive, but rather, sensitive to changes in technology and competition in the hardware markets. In addition, we expect to continue to incur increased legal and other similar costs associated with regulatory compliance requirements and the uncertainties present in the operating environment in which we conduct our business.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations
The following table contains information on our contractual obligations and commitments as of December 31, 2012.
Payments Due by Period | ||||||||||||||||||||
(in thousands) | Total |
Less
than 1 year |
2-3 years | 4-5 years |
More than
5 years |
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Long term debt |
$ | 130,000 | $ | | $ | 9,750 | $ | 120,250 | $ | | ||||||||||
Estimated interest payment |
54,277 | 14,950 | 29,900 | 9,427 | | |||||||||||||||
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Total |
$ | 184,277 | $ | 14,950 | $ | 39,650 | $ | 129,677 | $ | | ||||||||||
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The following table contains information on our contractual obligations and commitments as of December 31, 2012, giving pro forma effect to the Acquisition and the Senior Secured Credit Facilities.
Payments Due by Period | ||||||||||||||||||||
(in thousands) | Total |
Less
than 1 year |
2-3 years | 4-5 years |
More than
5 years |
|||||||||||||||
Long term debt |
$ | 160,609 | $ | 1,628 | $ | 3,100 | $ | 3,100 | $ | 152,781 | ||||||||||
Estimated interest payments |
$ | 102,510 | 14,391 | 28,352 | 27,778 | 31,989 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 263,119 | $ | 16,019 | $ | 31,452 | $ | 30,878 | $ | 184,770 | ||||||||||
|
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|
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|
|
|
|
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Recently Issued Accounting Standards
In July 2012, the Financial Accounting Standards Board (the FASB ) issued Accounting Standards Update 2012-02, IntangiblesGoodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, ( ASU 2012-02 ). ASU 2012-02 amends the guidance in Accounting Standards Codification 350-302 on testing indefinite-lived intangible assets, other than goodwill, for impairment by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. If the entity
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determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50 percent) impaired, the entity would not need to calculate the fair value of the asset. In addition, ASU 2012-02 does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption being permitted. The adoption of this standard will not have a material effect on our financial position or results of operations.
In June 2011, FASB issued an ASU on presentation of comprehensive income to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. This update changes the requirements for the presentation of other comprehensive income, eliminating the option to present components of other comprehensive income as part of the statement of stockholders equity, among other items. The guidance requires that all non-owner changes in stockholders equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments are effective for fiscal years ending after December 15, 2012 for the Company. This pronouncement did not have a material effect on our financial statements.
In September 2011, the FASB amended ASC 350, IntangiblesGoodwill and Others, to simplify the assessment of goodwill impairment and will become effective for the Company for fiscal years beginning after December 15, 2011, however early adoption is allowed. The amended guidance allows us to do an initial qualitative assessment of relative events and circumstances to determine if fair value of a reporting unit is more likely than not less than its carrying value, prior to performing the two-step quantitative goodwill impairment test. We adopted the amended guidance for its September 30, 2011 measurement date and it did not have a material effect on its financial statements.
Industry and Market Data
This Registration Statement includes market and industry data that we obtained from our research, studies conducted by third party sources that we believe to be reliable and industry and general publications published by third parties and, in some cases, management estimates based on industry and other knowledge. We have not independently verified any of the data from third party sources, and we make no representation as to the accuracy of such information. While we believe internal company estimates are reliable and market definitions are appropriate, they have not been verified by any independent sources, and we make no representations as to the accuracy of such estimates.
Quantitative and Qualitative Disclosures About Market Risk
Interest Rates. Our primary exposure to market risk is interest rate risk associated with our long-term debt, which accrues interest at variable rates. The Term Loans accrue and the Senior Secured Credit Facilities will accrue interest at LIBOR or the base rate, at our election, subject to an interest rate floor plus an applicable margin rate.
In connection with the development agreements we enter into with some of our customers, we provide financing for the construction of new gaming facilities or the expansion of existing facilities, which are generally required to be repaid. As a result of these notes receivable, we are subject to market risk with respect to interest rate fluctuations.
Any material increase in prevailing interest rates could cause us to incur significantly higher interest expense. These factors have not increased significantly, therefore no significant changes have been made in our strategies to manage any of these exposures. We evaluate our exposure to market risk by monitoring interest rates in the market place.
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ITEM 3. | PROPERTIES. |
We currently lease the following properties:
Location |
Size | |||
727 Overhead Drive, Oklahoma City, Oklahoma |
60,000 sq. ft. | |||
6680 Amelia Earhart Court, Las Vegas, Nevada |
23,153 sq. ft. | |||
905 Irving Park Road, Itasca, Illinois |
20,680 sq. ft. | |||
8820 Jane Street, Building B, Concord, Ontario, Canada |
8,500 sq. ft. | |||
1200 NW 63rd Street, Suite 300, Oklahoma City, Oklahoma |
3,750 sq. ft. | |||
2555 Marshall Road, Suite E, Biloxi, Mississippi |
350 sq. ft. |
Our leases for our facilities in Itasca, Illinois and at 727 Overhead Drive in Oklahoma City, Oklahoma are set to expire by the end of 2015. Our office in Concord, Ontario is currently operating under a month-to-month lease. A new lease is being negotiated, and the Company expects the new lease to be executed in the near future. In addition, our facilities in Biloxi, Mississippi and at 1200 NW 63rd Street in Oklahoma City, Oklahoma are currently operating under month-to-month leases. We currently do not own any real property.
ITEM 4. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. |
As of February 10, 2014, we had 100 shares of Common Stock and 10,000,000 shares of non-voting common stock issued and outstanding. All of our shares of Common Stock, which have no economic rights, are owned by AP Gaming VoteCo, LLC. All of our shares of non-voting common stock are owned by Apollo Gaming Holdings, L.P. The address of Apollo Gaming Holdings, L.P. is c/o Apollo Management, L.P., 9 West 57th Street, 43rd Floor, New York, NY, 10019, and the address of AP Gaming VoteCo, LLC is 6680 Amelia Earhart Court, Las Vegas, NV 89119. The members of AP Gaming VoteCo are Marc Rowan, who is an affiliate of Apollo, and David Sambur. Apollo Gaming Holdings, L.P. is an affiliate of Apollo Management, L.P.
ITEM 5. | DIRECTORS AND EXECUTIVE OFFICERS. |
Set forth below are the names, ages, positions, and biographical information of the executive officers of AGS Capital and the officers and director of AP Gaming.
AGS Capital
Name |
Age |
Position |
||||
David Lopez |
39 | Chief Executive Officer | ||||
Curt Mayer |
45 | Chief Financial Officer | ||||
Ken Bossingham |
49 | Chief Operating Officer | ||||
Paul Lofgren |
52 | Vice President of Business Development | ||||
Victor Gallo |
47 | General Counsel, Compliance Officer and Vice President, Regulatory Affairs | ||||
Olaf Vancura |
46 | Vice President of Game Development |
AP Gaming
Name |
Age |
Position |
||||
David Lopez |
39 | Chief Executive Officer, President and Secretary | ||||
Curt Mayer |
45 | Treasurer | ||||
David Sambur |
33 | Director |
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The following are brief biographies describing the backgrounds of the executive officers of AGS Capital and our officers and director.
David Lopez. Mr. Lopez has served as the Chief Executive Officer of AGS Capital since February 3, 2014. Mr. Lopez most recently served as President and Chief Executive Officer of Global Cash Access ( GCA ), and, prior to his role at GCA, as Chief Operating Officer of Shuffle Master Inc. During his 14-year tenure with Shuffle Master, Mr. Lopez held various positions within the organization, including Interim CEO, Executive Vice President, President of the Americas, Vice President of Product Management, as well as serving as a member of its Board of Directors from November 2010 until May 2012. Mr. Lopez is a graduate of the University of Nevada, Las Vegas with a B.S. in Business Administration.
Curt Mayer. Mr. Mayer has served as our Chief Financial Officer since July 2011. From February 2011 to July 2011, he served as Chief Financial Officer of Skywire Media, Inc., a startup in the mobile technology sector. From May 2007 to November 2010, Mr. Mayer served as Corporate Vice-President of Finance for Station Casinos, Inc. Prior to his tenure at Station Casinos, Mr. Mayer served as Chief Financial Officer for Black Gaming, LLC from May 2002 to May 2007. From July 1992 to May 2002, Mr. Mayer was employed by the accounting firm of Arthur Andersen, LLP, most recently as a Senior Audit Manager. From 1995 to 2002, Mr. Mayer worked in the firms Las Vegas office providing audit services to the hospitality and gaming industry. Mr. Mayer obtained his CPA license in the state of Pennsylvania.
Ken Bossingham. Mr. Bossingham has served as our Chief Operating Officer since January 2013. He previously spent 12 years with Atronic Americas, LLC as Senior Vice President of Sales and Chief Operating Officer, leading them through the GTECH acquisition in 2008. After the acquisition, Mr. Bossingham served as Vice President and General Manager North American Casino for GTECH/Spielo until his departure in 2013. Mr. Bossingham has also held senior management positions in the gaming space with JCM Global and Aristocrat Technologies. He holds a Bachelor of Science degree from Moorhead State University and an MBA from Idaho State University.
Paul Lofgren. Mr. Lofgren has served as our Vice President of Business Development since October 2010. He is the founder and President of Redhorse Advisory Group, which provides expertise and resources to gaming clients seeking to introduce new products, enter new markets or improve performance. Previously, he was Executive Vice President of Bally Technologies, Inc. where he led the Gaming Division and Worldwide Business Development of the company. In this position, Mr. Lofgren managed over 800 employees with operations in over 250 jurisdictions. Mr. Lofgren received his Bachelor of Business Administration degree in Accounting from the University of San Diego.
Victor Gallo. Mr. Gallo joined us in February 2010 as Vice President, Licensing and Compliance and Compliance Officer and currently serves as our General Counsel, Compliance Officer and Vice President, Regulatory Affairs. Previously, Mr. Gallo was General Counsel and Vice President of Business Development for Youbet.com, and Vice President of Legal and Compliance and Corporate Counsel for Konami Gaming. Mr. Gallo has also worked as an attorney in private practice, and as an active duty captain in the Air Force Judge Advocate General Corps. Mr. Gallo received his Bachelor of Science degree in Aerospace Engineering from the University of Southern California and a Juris Doctor from the University of the Pacific.
Olaf Vancura. Dr. Vancura has served as our Vice President for Game Development since October 2010. Previously, Dr. Vancura was Vice President of Game Development and Chief Creative Officer of Mikohn Gaming. Dr. Vancura is the chief architect of the popular strategy-based Yahtzee and Battleship lines of casino games, as well as the trivia-based Ripleys Believe It or Not! casino games. He has also acquired and created unique casino game content for national brands such as Garfield, Monopoly, Clue, Trivial Pursuit and Wink Martindale . On multiple occasions, Dr. Vancuras games have received game-design Most Innovative awards and been featured on the covers of major gaming publications and two of Dr. Vancuras gaming machine titles were voted #1 and #3 Most Innovative Games of the Year by readers of Strictly Slots magazine. He was the
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named inventor on over 60 national (and additional international) patents related to gaming. Dr. Vancura holds a Ph.D in physics from Johns Hopkins University, served a post-doctoral fellowship at Harvard University and was a member of the Harvard-Smithsonian Center for Astrophysics.
David Sambur. Mr. Sambur has served as a member of the Board of AP Gaming since November 2013. He also serves as Chief Executive Officer, President, Secretary and Treasurer of AP Gaming. Mr. Sambur is a Partner of Apollo, having joined in 2004. Mr. Sambur has experience in financing, analyzing, investing in and/or advising public and private companies and their board of directors. Prior to joining Apollo, Mr. Sambur was a member of the Leveraged Finance Group of Salomon Smith Barney Inc. from 2002 to 2004. Mr. Sambur serves on the board of directors of Caesars Entertainment, Verso Paper Corp., Verso Paper, Inc., Verso Paper Holdings LLC, Momentive Performance Materials Holdings LLC, Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc. Mr. Sambur graduated summa cum laude and Phi Beta Kappa from Emory University with a BA in Economics. Mr. Samburs executive leadership experience, including his service on the board of several companies, and financial expertise is a valuable asset to the Board.
ITEM 6. | EXECUTIVE COMPENSATION. |
Summary Compensation Table
The following table discloses compensation for our fiscal year ending December 31, 2013 ( Fiscal 2013 ) received by Messrs. Miodunski, Mayer and Lofgren, each of whom was a named executive officer during Fiscal 2013.
Name and Principal Position |
Year | Salary ($) | Bonus ($) |
Stock
Awards ($) |
Option
Awards ($) |
Non-Equity
Incentive Plan Compensation ($) |
All Other
Compensation ($)(1) |
Total ($) | ||||||||||||||||||||||||
Robert Miodunski, Former President and Chief Executive Officer |
2013 | 340,385 | | | | 834,000 | | 1,174,385 | ||||||||||||||||||||||||
Curt Mayer, Chief Financial Officer |
2013 | 275,000 | | | | 315,000 | 11,331 | 601,331 | ||||||||||||||||||||||||
Paul Lofgren Vice President, Business Development and Sales |
2013 | 275,000 | | | | 265,000 | 9,215 | 549,215 |
(1) | Amounts represent the Companys matching contribution under our 401(k) Plan. |
Grants of Plan-Based Awards for Fiscal 2013
The following Grants of Plan-Based Awards table provides information concerning awards granted in Fiscal 2013 to our named executive officers. No equity awards were granted to our named executive officers during Fiscal 2013.
Name |
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards (1) |
|||||||||||
Threshold
($) |
Target
($) |
Maximum
($) |
||||||||||
Robert Miodunski |
| 170,192 | 340,385 | |||||||||
Curt Mayer |
| 137,500 | 275,000 | |||||||||
Paul Lofgren |
| 137,500 | 275,000 |
(1) | This reflects the target and maximum payouts to our named executive officers pursuant to the 2013 Managerial Incentive Plan with respect to services performed for the Company during Fiscal 2013. |
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Employment Agreements with Named Executive Officers
Robert Miodunski
On June 2, 2010, we entered into an employment agreement with Mr. Robert Miodunski, pursuant to which he was appointed Chairman of the Advisory Board and Interim President / Chief Executive Officer of AGS. Mr. Miodunskis employment agreement was amended November 28, 2011 and again on March 21, 2013 to change his position to President/Chief Executive Officer of AGS and Chairman of the Advisory Board until the earlier of his four-year anniversary with AGS, the hiring of a new President/CEO (at which time he would remain as Chairman) or a change in control of ownership of AGS. Mr. Miodunskis annual base salary is $450,000 and he is eligible for an annual bonus to be paid in cash based on our attainment of financial results and earnings targets. Mr. Miodunski also received a one-time signing bonus of $100,000, to be credited against his bonuses earned, if any, in either 2010 or 2011. In accordance with his employment agreement, Mr. Miodunski was granted phantom equity units. Effective April 1, 2013, Mr. Miodunski adopted a three-day work schedule, and his base salary was pro-rated accordingly to $300,000 per year. His annual performance bonus potential was also reduced pro rata by 60%.
Curt Mayer
On June 23, 2011, we entered into an employment agreement with Mr. Curt Mayer, pursuant to which he was appointed Chief Financial Officer. Mr. Mayers employment agreement was amended on March 18, 2013 to, among other things, increase his severance to nine months base salary. Mr. Mayers annual base salary is $275,000 and he is eligible for an annual bonus to be paid in cash based on our attainment of financial results and earnings targets. In accordance with his employment agreement, Mr. Mayer was granted profits interests that represent a percentage of the gains in equity value of the Company in the event of a sale.
Paul Lofgren
On September 28, 2010, we entered into an employment agreement with Mr. Paul Lofgren, pursuant to which he was appointed Vice President of Business Development. Mr. Lofgrens base salary is $275,000 and he is eligible for an annual commission bonus to be paid in cash based on sales and game placements signed after Mr. Lofgrens employment commences. Mr. Lofgren also received a one-time signing bonus of $50,000. In accordance with his employment agreement, Mr. Lofgren was granted profits interests that represent a percentage of the gains in equity value of the Company in the event of a sale.
Outstanding Equity Awards as of Fiscal Year End 2013
In connection with the Acquisition, all outstanding equity awards, which represent phantom units granted under the AGS Holdings, LLC Phantom Unit Plan, immediately vested. None of our named executive officers had any outstanding equity awards as of the Fiscal Year End 2013.
Option Exercises and Stock Vested
Option Awards | Stock Awards | |||||||||||||||
Name |
Number of
Shares Acquired on Exercise |
Value
Realized on Exercise |
Number of
Shares Acquired on Vesting |
Value
Realized on Vesting |
||||||||||||
Robert Miodunski (1) |
400 | $ | 750,000 | | | |||||||||||
Curt Mayer (1) |
100 | $ | 225,000 | | | |||||||||||
Paul Lofgren (1) |
100 | $ | 225,000 | | |
(1) | The phantom units represented a contractual right to receive a percentage of the equity value of the Company in excess of the strike price, in the event of a change of control. A change of control was deemed to have occurred upon the consummation of the Acquisition, and as a result, all outstanding unvested phantom units immediately vested and all outstanding phantom units were settled for the cash payment shown above. |
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Pension Benefits
We do not maintain any defined benefit pension plan for the benefit of our named executive officers.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plan for the benefit of our named executive officers.
Payments Upon Termination and Change of Control
Pursuant to each named executive officers employment agreement, upon the termination of his employment by the Company without Cause, the Company would provide cash severance equal to six months base salary to Mr. Miodunski, nine months base salary to Mr. Mayer and 12 months base salary to Mr. Lofgren. Cause in the employment agreements with each of Messrs. Miodunski, Mayer and Lofgren includes (i) failure to correct underperformance after written notification from, in the case of Mr. Miodunski, the Chairman of the Board or his designee, or, in the case of Messrs. Mayer and Lofgren, the CEO or the Board, (ii) illegal fraudulent conduct, (iii) conviction of a felony, (iv) a determination that Messrs. Miodunski, Mayer or Lofgrens involvement with the Company would have a negative impact on our ability to receive or retain any licenses, (v) willful or material misrepresentation to the Company, CEO or Board relating to the business, assets, prospects or operation of the Company, or (vi) refusal to take any action as reasonably directed by the Board or any individual acting on behalf or at the direction of the Board. In addition, Cause in Mr. Miodunskis employment agreement also includes EBITDA of the Company falling below $25 million during any twelve month period. Each of Messrs. Miodunski, Mayer and Lofgren must sign a standard release of claims before we will make any severance payment.
If the employment of each of our named executive officers had been terminated by us without Cause as of December 31, 2013, Messrs. Miodunski, Mayer and Lofgren would have been entitled to receive cash severance payments in the amount of $170,193, $206,250 and $275,000, respectively. Each of our named executive officers has agreed in his employment agreement to post-termination noncompetition and nonsolicitation covenants for 12 months following termination of employment; provided that in the case of Mr. Miodunski (a) the nonsolicitation covenant applies for 24 months and (b) the noncompetition covenant only applies for six months following termination of employment by us without Cause unless the Company pays him an additional six months of severance.
In addition, upon a change in control of the Company, all unvested phantom units will become fully vested subject to the named executive officers continued employment through the date of the change in control.
Hiring of New CEO
We hired David Lopez as our new CEO, effective February 3, 2014, upon the retirement of our former CEO and President, Robert Miodunski. Mr. Lopezs initial term is for three years and automatically renews thereafter for successive one-year terms.
Director Compensation
David Sambur is the sole member of our Board of Directors and does not receive any compensation from the Company for his services on the Board.
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ITEM 7. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
Related Transactions
Transactions Related to the Acquisition
On November 19, 2013, AGS Capital created a wholly owned subsidiary, AP Gaming NV, LLC ( AP Gaming NV ). Prior to the closing of the Acquisition, certain of AGS Capitals assets and interests in the State of Nevada were transferred to AP Gaming NV. At the closing of the Acquisition, AGS Capital sold all of the equity interest in AP Gaming NV to Curt Mayer, who was recently licensed by the Nevada Gaming Commission as the chief financial officer of AGS, LLC, pursuant to a purchase and option agreement (the P&O Agreement ). Also at the closing of the Acquisition, AGS Capital and AGS Gaming NV entered into a services and license agreement (the Services and License Agreement ), pursuant to which AP Gaming NV receives operational and administrative services from AGS Capital and AGS Capitals employees which, together with assets transferred to AP Gaming NV by AGS Capital, permit AP Gaming NV to continue the business Nevada operations on a
seamless basis. In addition, at the closing of the Acquisition, AGS Capital entered into a revolving credit facility (the Revolving Facility ) with AP Gaming NV to provide AP Gaming NV with sufficient liquidity to fund its operations.
Pursuant to the P&O Agreement, AGS Capital, the sole member of AP Gaming NV, retained an option to reacquire all of the equity interests in AP Gaming NV from Curt Mayer (the Option), which is exercisable on or prior to the tenth anniversary of the closing of the Acquisition. As required by the P&O Agreement, at the closing of the Acquisition, (a) AP Gaming NV executed and delivered a guarantee agreement in respect of the Senior Secured Credit Facilities and (b) AP Gaming NV entered into a collateral agreement in connection with the Senior Secured Credit Facilities in its capacity as a Pledgor.
Pursuant to the Services and License Agreement, AP Gaming NV receives operational and administrative services from AGS Capital and AGS Capitals employees that, together with assets transferred to AP Gaming NV by AGS Capital, permit AP Gaming NV to continue the business Nevada operations on a seamless basis from and after the closing of the Acquisition. The agreement also provides AP Gaming NV a non-exclusive, non-transferable, worldwide, fully paid-up, royalty-free, non-assignable license to all intellectual property of AGS Capital and AGS, LLC. In addition, AP Gaming NV is entitled during the term of the agreement to use and access space at certain of the Companys facilities, and is entitled to use the equipment located at such facilities pursuant to a limited license. The Services and License Agreement has a ten-year term.
The Revolving Facility provides for $1.0 million of maximum commitments. Loans under the Revolving Facility bear fixed interest at a rate equal to 5.0% per annum, payable quarterly in arrears. AP Gaming NV, in its discretion, may opt to pay the quarterly interest in kind by adding any accrued and unpaid interest to the outstanding principal of the loans. The Revolving Facility matures on the tenth anniversary of the facility. Among other customary terms, the Revolving Facility contains the following Events of Default: failure of Curt Mayer to own 100% of AP Gaming NVs equity interests other than as a result of transfer to AGS Capital (or its designee), default or breach by AP Gaming NV of its obligations under the P&O Agreement or its operating agreement, or the expiry of AGS Capitals Option under the P&O Agreement. Upon receipt of regulatory approval from the Nevada Gaming Commission and the Nevada Gaming Control Board, it is expected that AGS Capital will exercise the option and reacquire all of the equity interests in AP Gaming NV.
Exclusive License and Distribution Agreements with Dr. Olaf Vancura
We have an exclusive license and distribution arrangement with Dr. Olaf Vancura, our Vice President of Game Development, Game Ingenuity, LLC ( Game Ingenuity ), an entity in which Dr. Vancura is the managing member and Advanced Gaming Solutions, Inc. ( Advanced ), an unaffiliated entity .
Pursuant to the exclusive license agreement, Dr. Vancura and Game Ingenuity have agreed to exclusively license certain intellectual property rights to us during the period of Dr. Vancuras employment and any non-
67
compete period that follows his employment. Upon termination of Dr. Vancuras employment and following the end of any non-compete period thereafter, our exclusive license automatically converts to a non-exclusive, perpetual right and license to use the intellectual property rights, as specified in the exclusive license agreement. We pay Dr. Vancura and Game Ingenuity royalties on the revenues we earn from or placement of select products that utilize the licensed intellectual property rights. For the year ended December 31, 2012, we have incurred no expense pursuant to this license arrangement.
Pursuant to the exclusive distribution agreement, Game Ingenuity, Advanced and Dr. Vancura have granted us the exclusive rights to promote, place and/or sell certain game titles in Arizona, California, Florida, Illinois, Maryland, Minnesota, New Mexico and Oklahoma for a period of one year, which may be extended subject to agreement among the parties, until the termination of Dr. Vancuras employment with AGS. In addition, the exclusive distribution agreement grants us the right to promote, place and/or sell the games Boogie Ball and Power Boogie non-exclusively in Nevada and exclusively in North America outside of Nevada. In exchange for this distribution right, we pay Game Ingenuity and Advanced royalties on the collections we receive from end-users using the gaming titles. For the year ended December 31, 2012, we have incurred $35,239 in expense pursuant to this distribution arrangement.
Additionally, we co-own certain patents with Dr. Vancura which, by agreement, results in payments to Dr. Vancura during his employment with us for use of those patents.
Other Related Transactions
During 2012, AGS Holdings, LLC, as the member of AGS Capital, contributed capital totaling $60.7 million to AGS Capital. Approximately $50.7 million of the contributed capital was utilized to cure debt covenant violations, repay current debt obligations, finance the final payment of the Definitive Agreement with Bluberi and provide working capital to AGS Capital. The remaining $10.0 million was a forgiveness of long-term debt to a related party that occurred in August 2012 associated with the Term Loans.
On October 25, 2012, AGS Illinois, LLLP, a subsidiary of AGS Capital, assumed all rights and obligations of Alpine AGS, LLC ( Alpine AGS ), AGS Capitals indirect parent prior to the Acquisition, to a loan agreement held by Alpine AGS for $1,864,500. Interest on the loan is payable at a rate of 15% per year on the outstanding balance of the loan, which matures on March 9, 2016. Repayment of the principal and any accrued and outstanding interest is in monthly installments, beginning April 9, 2013.
Policies and Procedures for Related Person Transactions
Although we do not yet have any policies or procedures for the review, approval or ratification of transactions with related persons, we intend to implement such policies and procedures following the effectiveness of this Registration Statement.
Director Independence
We intend to form committees of our Board of Directors and satisfy the independence requirements as and to the extent applicable to us following the effectiveness of this Registration Statement.
ITEM 8. | LEGAL PROCEEDINGS. |
We are party to various claims and legal actions that arise in the ordinary course of business. We do not believe the outcome of such disputes or legal actions will have a material adverse effect on our financial condition, results of operations, liquidity or capital resources.
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ITEM 9. | MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND RELATED EQUITY HOLDER MATTERS. |
Market Information
We have issued 100 shares of Common Stock to AP Gaming VoteCo, LLC. We have also issued 10,000,000 shares of non-voting common stock to Apollo Gaming Holdings, L.P. There is currently no established public trading market for our Common Stock or our non-voting common stock, and there are no plans, proposals, arrangements or understandings with any person with regard to the development of a trading market in our Common Stock or our non-voting common stock.
Holders
Please see Item 4. Security Ownership of Certain Beneficial Owners and Management for disclosure regarding the holders of our Common Stock and our non-voting common stock.
Distributions
We do not make, and do not anticipate making in the foreseeable future, any distributions on our Common Stock or our non-voting common stock. The agreements that govern our outstanding indebtedness, including the Senior Secured Credit Facilities, restrict our ability to declare or make distributions on our Common Stock or our non-voting common stock, and our third amended and restated certificate of incorporation specifically prohibits holders of our Common Stock from receiving dividends or any other distributions.
ITEM 10. | RECENT SALES OF UNREGISTERED SECURITIES. |
On August 30, 2013, in anticipation of our acquisition of AGS Capital, we issued 100 shares of our initial common stock to Apollo Gaming Holdings, L.P. See Item 1. BusinessThe Acquisition. Our third amended and restated certificate of incorporation authorizes up to 100 shares of Common Stock and up to 30,000,000 shares of non-voting common stock par value $0.01 per share. All shares of the Common Stock were issued to AP Gaming VoteCo, LLC, and 10,000,000 shares of the non-voting common stock were issued to Apollo Gaming Holdings L.P. in exchange for the initial shares of common stock. These transactions were exempt from registration pursuant to Section 4(2) of the Securities Act, as they were transactions by an issuer that did not involve a public offering of securities.
ITEM 11. | DESCRIPTION OF REGISTRANTS SECURITIES TO BE REGISTERED. |
The securities to be registered are shares of voting common stock of the Company, referred to in this Registration Statement as Common Stock. The rights of the Common Stock are set forth in the third amended and restated certificate of incorporation and by-laws of the Company. The following description of the rights of holders of Common Stock is a summary and is qualified in its entirety by reference to the Companys third amended and restated certificate of incorporation and by-laws. The Company has also issued shares of non-voting common stock, which are not being registered with this Registration Statement.
The Common Stock has no economic rights or privileges, including rights in liquidation.
Voting
Each share of Common Stock shall have one vote, and the Common Stock shall vote together as a single class. The Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, except as otherwise provided by law or by Board resolutions. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided in the third amended and restated certificate of incorporation or the laws of the State of Delaware.
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Amendments to the By-laws
The by-laws of the Company may be amended at any annual or special meeting of the stockholders by the affirmative vote of the holders of shares constituting a majority of Common Stock. The Board may also, by majority vote of those directors present at any meeting at which a quorum is present or by written consent, amend the by-laws of the Company or enact such other by-laws as in their judgment may be advisable for the regulation and conduct of the affairs of the Company.
Preferred Stock
The third amended and restated certificate of incorporation of the Company authorizes the Board to issue up to 100,000 shares of preferred stock. The Board is authorized to fix the voting rights, if any, designations, powers, preferences and the relative, participation, optional or other rights, if any, and the qualification, limitations or restrictions thereof, of any unissued series of preferred stock, and to fix the number of shares constituting such series, and to increase or decrease the number of shares of any such series. We currently do not have any shares of preferred stock issued and outstanding.
ITEM 12. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
The third amended and restated certificate of incorporation provides that the Company shall indemnify and hold harmless present and former directors or officers of the Company and persons serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, from and against all expense, liability and loss reasonably incurred or suffered by such person in connection with any action, suit or proceeding such person was or is made a party to or is threatened to be made a party to or is involved in, whether civil, criminal, administrative or investigative, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Company shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of the Company.
This right to indemnification includes the right of the expenses incurred by an indemnified party in defending any such proceeding in advance of its final disposition to be paid by the Company. If a claim is not pain in full by the Company within 30 days after the Company receives a written claim, the indemnified party may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the indemnified party shall be entitled to be paid also the expense of prosecuting such claim.
The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company, corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss.
ITEM 13. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
See Item 15. Financial Statements and Exhibits.
ITEM 14. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
None.
70
ITEM 15. | FINANCIAL STATEMENTS AND EXHIBITS. |
(a) | Financial Statements: |
A. AGS Capital, LLC Audited Consolidated Financial Statements |
||||
F-1 | ||||
Consolidated Balance Sheets as of December 31, 2012 and 2011 |
F-3 | |||
F-4 | ||||
Consolidated Statements of Members Deficit for the years ended December 31, 2012, 2011 and 2010 |
F-5 | |||
Consolidated Statements of Cash Flows for years ended December 31, 2012, 2011 and 2010 |
F-6 | |||
F-7 | ||||
B. AGS Capital, LLC Unaudited Interim Consolidated Financial Statements |
||||
Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 |
F-29 | |||
F-30 | ||||
Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 |
F-31 | |||
F-32 |
71
(b) | Exhibits: |
Exhibit Number |
Exhibit Description |
|
2.1* | Amended and Restated Equity Purchase Agreement by and among AGS Capital, LLC, AGS Holdings, LLC and AP Gaming Acquisition, LLC, dated December 3, 2013. | |
3.1 | Third Amended and Restated Certificate of Incorporation of AP Gaming Holdco, Inc. | |
3.2* | Bylaws of AP Gaming Holdco, Inc. | |
10.1* | 2011 Managerial Bonus Plan. | |
10.2* | 2012 Managerial Incentive Plan. | |
10.3* | 2013 Managerial Incentive Plan. | |
10.4* | AGS Holdings, LLC Phantom Units Plan. | |
10.5* | Employment Agreement between American Gaming Systems, LLC and Robert Miodunski, dated June 2, 2010. | |
10.6* | First Amendment to June 2, 2010 Employment Agreement between American Gaming Systems, LLC and Robert Miodunski, dated November 28, 2011. | |
10.7* | Second Amendment to June 2, 2010 Employment Agreement between American Gaming Systems, LLC and Robert Miodunski, dated March 21, 2013. | |
10.8* | Non-Disclosure, Non-Solicitation and Covenant Not to Compete Agreement between AGS LLC and Robert Miodunski, dated June 24, 2010. | |
10.9* | Phantom Units Certificate between AGS Holdings, LLC and Robert Miodunski, dated August 16, 2012. | |
10.10* | First Amendment to Phantom Units Grant between AGS Holdings, LLC and Robert Miodunski, dated April 1, 2013. | |
10.11* | Employment Agreement between American Gaming Systems, LLC and Curt Mayer, dated June 23, 2011. | |
10.12* | First Amendment to June 23, 2011 Employment Agreement between American Gaming Systems, LLC and Curt Mayer, dated March 18, 2013. | |
10.13* | Non-Disclosure, Non-Solicitation and Covenant Not to Compete Agreement between AGS LLC and Curt Mayer, dated June 23, 2011. | |
10.14* | Phantom Units Certificate between AGS Holding, LLC and Curt Mayer, dated August 16, 2012. | |
10.15* | Employment Agreement between AGS LLC and Paul Lofgren, dated September 28, 2010. | |
10.16* | Phantom Units Certificate between AGS Holdings, LLC and Paul Lofgren, dated August 16, 2012. | |
10.17* | First Amendment to Phantom Units Grant between AGS Holdings, LLC and Paul Lofgren, dated April 1, 2013. | |
10.18 |
First Lien Credit Agreement dated as of December 20, 2013, among AP Gaming Holdings, LLC, as Holdings, AP Gaming I, LLC, as Borrower, the lenders party thereto, Citicorp North America, Inc., as Administrative Agent, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Nomura Securities International, Inc., as Joint Lead Arrangers and Joint Bookrunners, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Nomura Securities International, Inc., as Co-Syndication Agents, and Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Nomura Securities International, Inc., as Co-Documentation Agents. |
72
Exhibit Number |
Exhibit Description |
|
10.19 |
Collateral Agreement dated and effective as of December 20, 2013, among AP Gaming I, LLC, each Subsidiary Party party thereto and Citicorp North America, Inc., as Collateral Agent. |
|
10.20 | Subsidiary Guarantee dated and effective as of December 20, 2013, by and among each Subsidiary party thereto and Citicorp North America, Inc., as Collateral Agent. | |
10.21 | Holdings Guarantee and Pledge Agreement dated and effective as of December 20, 2013, between AP Gaming Holdings, LLC, as Holdings and Citicorp North America, Inc., as Agent. | |
21.1* | Subsidiaries of AP Gaming Holdco, Inc. |
* | Previously filed |
73
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 10, 2014
AP GAMING HOLDCO, INC. | ||
By: | /s/ David Sambur | |
Name: David Sambur | ||
Title: Chief Executive Officer |
74
Report of Independent Registered Public Accounting Firm
The Board of Managers of
AGS Capital, LLC
We have audited the accompanying consolidated balance sheet of AGS Capital, LLC (Company) as of December 31, 2012, and the related consolidated statements of operations and comprehensive loss, members deficit and cash flows for the year then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 Companys internal control over financial reporting. Our audit 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 Companys internal control over financial reporting. Accordingly, we express no such opinion. 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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AGS Capital, LLC at December 31, 2012, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Las Vegas, Nevada
December 17, 2013
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Managers of AGS Capital, LLC:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive loss, of members deficit and of cash flows present fairly, in all material respects, the financial position of AGS Capital, LLC and its subsidiaries at December 31, 2011, and the results of their operations and their cash flows for the years ended December 31, 2011 and 2010 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP |
Las Vegas, Nevada |
May 25, 2012 |
F-2
AGS Capital, LLC
(A limited liability company)
As of | ||||||||
December 31,
2012 |
December 31,
2011 |
|||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 6,545,282 | $ | 10,786,609 | ||||
Restricted cash |
200,000 | 200,000 | ||||||
Trade accounts receivable, net of allowance of $.5 million and $1.7 million, respectively |
7,949,287 | 6,769,592 | ||||||
Notes receivablecurrent portion |
2,394,149 | 2,760,694 | ||||||
Inventories, net |
5,376,581 | 2,650,802 | ||||||
Prepaid expenses |
874,575 | 903,608 | ||||||
Deposits and other |
1,837,437 | 882,139 | ||||||
|
|
|
|
|||||
Total current assets |
25,177,311 | 24,953,444 | ||||||
|
|
|
|
|||||
Gaming equipment, vehicles and other equipment, net |
40,267,363 | 36,887,386 | ||||||
Notes receivable, net of current portion, less allowance for doubtful accounts of $.4 million and $8.9 million, respectively |
10,047,966 | 6,825,744 | ||||||
Deferred loan costs, net |
5,391,841 | 1,435,496 | ||||||
Goodwill |
| 18,678,970 | ||||||
Intangible assets |
39,644,021 | 35,359,043 | ||||||
Canadian tax receivable |
3,369,905 | 3,511,212 | ||||||
Other assets |
1,668,279 | 951,890 | ||||||
|
|
|
|
|||||
Total other assets |
60,122,012 | 66,762,355 | ||||||
|
|
|
|
|||||
Total assets |
$ | 125,566,686 | $ | 128,603,185 | ||||
|
|
|
|
|||||
Liabilities and Members Deficit |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 5,269,033 | $ | 8,051,928 | ||||
Due to related party |
66,436 | | ||||||
Accrued interest |
2,016,597 | | ||||||
Customer deposits on gaming machine leases |
421,565 | 421,565 | ||||||
Current maturities of long-term debt |
382,972 | 35,391,339 | ||||||
|
|
|
|
|||||
Total current liabilities |
8,156,603 | 43,864,832 | ||||||
|
|
|
|
|||||
Phantom unit-plan liability |
1,582,736 | 929,140 | ||||||
Long-term debt payable to a related party |
| 10,000,000 | ||||||
Long-term debt |
117,768,326 | 96,283,203 | ||||||
|
|
|
|
|||||
Total liabilities |
127,507,665 | 151,077,175 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Members deficit |
||||||||
Members capital |
136,672,633 | 75,985,115 | ||||||
Accumulated deficit |
(139,138,386 | ) | (98,927,401 | ) | ||||
Accumulated other comprehensive income |
524,774 | 468,296 | ||||||
|
|
|
|
|||||
Total members deficit |
(1,940,979 | ) | (22,473,990 | ) | ||||
|
|
|
|
|||||
Total liabilities and members deficit |
$ | 125,566,686 | $ | 128,603,185 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-3
AGS Capital, LLC
Consolidated Statements of Operations and Comprehensive Loss
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Revenues |
||||||||||||
Gaming revenue |
$ | 54,029,397 | $ | 52,659,644 | $ | 55,021,164 | ||||||
Gaming revenueother |
3,762,752 | 4,270,598 | 3,803,705 | |||||||||
Equipment sales |
762,958 | 2,715,580 | 2,978,754 | |||||||||
|
|
|
|
|
|
|||||||
Total revenues |
58,555,107 | 59,645,822 | 61,803,623 | |||||||||
|
|
|
|
|
|
|||||||
Operating expenses |
||||||||||||
Gaming operating expenses |
11,515,204 | 16,091,095 | 18,583,022 | |||||||||
Cost of equipment sales |
395,181 | 1,060,693 | 1,504,550 | |||||||||
Loss (gain) on disposition of assets |
450,858 | 175,626 | (29,237 | ) | ||||||||
General and administrative |
14,349,749 | 13,345,198 | 22,378,391 | |||||||||
Phantom unit compensation |
653,596 | 929,140 | | |||||||||
Selling and marketing |
3,442,549 | 3,345,540 | 4,135,531 | |||||||||
Impairment of long lived assets |
2,711,412 | 803,506 | | |||||||||
Impairment of intangibles |
3,686,414 | | | |||||||||
Impairment of goodwill |
18,678,970 | | | |||||||||
Write downs and other charges |
3,663,886 | 2,249,436 | | |||||||||
Depreciation and amortization |
29,454,038 | 23,643,662 | 22,844,087 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
89,001,857 | 61,643,896 | 69,416,344 | |||||||||
|
|
|
|
|
|
|||||||
Loss from operations |
(30,446,750 | ) | (1,998,074 | ) | (7,612,721 | ) | ||||||
Other expense (income) |
||||||||||||
Interest expense |
10,269,667 | 5,832,937 | 5,860,549 | |||||||||
Interest income |
(439,140 | ) | (512,299 | ) | (648,129 | ) | ||||||
Other (income) expense |
(66,292 | ) | 293,730 | (167,000 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss |
(40,210,985 | ) | (7,612,442 | ) | (12,658,141 | ) | ||||||
Foreign currency translation adjustment |
56,478 | (48,496 | ) | 18,220 | ||||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss |
$ | (40,154,507 | ) | $ | (7,660,938 | ) | $ | (12,639,921 | ) | |||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
AGS Capital, LLC
(A limited liability company)
Consolidated Statements of Members Deficit
For the years ended December 31, 2012 and 2011
Members
Capital |
Receivable
from Member |
Accumulated
Deficit |
Accumulated
Other Comprehensive Income |
Total
Members Deficit |
||||||||||||||||
Balance at January 1, 2010 |
$ | 50,301,913 | $ | | $ | (78,656,818 | ) | $ | 498,572 | $ | (27,856,333 | ) | ||||||||
Capital contributions |
16,699,266 | | | | 16,699,266 | |||||||||||||||
Receivable from member |
| (1,988,759 | ) | | | (1,988,759 | ) | |||||||||||||
Repurchase of member interest |
(2,815,000 | ) | | | | (2,815,000 | ) | |||||||||||||
Comprehensive loss |
||||||||||||||||||||
Net loss |
| | (12,658,141 | ) | | (12,658,141 | ) | |||||||||||||
Foreign currency translation adjustment |
| | | 18,220 | 18,220 | |||||||||||||||
|
|
|||||||||||||||||||
Total comprehensive loss |
| | | | (12,639,921 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2010 |
64,186,179 | (1,988,759 | ) | (91,314,959 | ) | 516,792 | (28,600,747 | ) | ||||||||||||
Cancellation of receivable from member |
(1,988,759 | ) | 1,988,759 | | | | ||||||||||||||
Capital contributions |
13,787,695 | | | | 13,787,695 | |||||||||||||||
Comprehensive loss |
||||||||||||||||||||
Net loss |
| | (7,612,442 | ) | | (7,612,442 | ) | |||||||||||||
Foreign currency translation adjustment |
| | | (48,496 | ) | (48,496 | ) | |||||||||||||
|
|
|||||||||||||||||||
Total comprehensive loss |
| | | | (7,660,938 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
75,985,115 | | (98,927,401 | ) | 468,296 | (22,473,990 | ) | |||||||||||||
Capital contributions |
60,687,518 | | | | 60,687,518 | |||||||||||||||
Comprehensive loss |
||||||||||||||||||||
Net loss |
| | (40,210,985 | ) | | (40,210,985 | ) | |||||||||||||
Foreign currency translation adjustment |
| | | 56,478 | 56,478 | |||||||||||||||
|
|
|||||||||||||||||||
Total comprehensive loss |
| | | | (40,154,507 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2012 |
$ | 136,672,633 | $ | | $ | (139,138,386 | ) | $ | 524,774 | $ | (1,940,979 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
AGS Capital, LLC
(A limited liability company)
Consolidated Statements of Cash Flows
Year Ended December 31, | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Cash flows from operating activities |
||||||||||||
Net loss |
$ | (40,210,985 | ) | $ | (7,612,442 | ) | $ | (12,658,141 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities |
||||||||||||
Depreciation and amortization |
29,454,038 | 23,643,662 | 22,844,087 | |||||||||
Accretion of contract rights under development agreements and customer agreements |
3,932,851 | 4,296,329 | 2,987,910 | |||||||||
Amortization of deferred loan costs and discount |
1,620,562 | 796,962 | 796,962 | |||||||||
Provision for bad debts |
265,273 | 320,656 | 9,458,134 | |||||||||
Interest income from imputed interest |
(331,006 | ) | (367,160 | ) | (377,563 | ) | ||||||
Loss (gain) on sale of capital assets |
450,858 | 175,626 | (29,237 | ) | ||||||||
Impairment of long lived assets |
2,711,412 | 803,506 | | |||||||||
Impairment of intangible assets |
3,686,414 | | | |||||||||
Impairment of goodwill |
18,678,970 | | | |||||||||
Phantom unit plan compensation |
653,596 | 929,140 | | |||||||||
Write off of deferred loan costs |
3,013,886 | 2,249,436 | | |||||||||
Non-cash contract rights under development agreements |
(108,243 | ) | (1,168,293 | ) | | |||||||
Changes in assets and liabilities that relate to operations |
||||||||||||
(Increase) decrease in trade accounts receivable and notes receivable |
338,699 | 1,709,788 | (2,108,638 | ) | ||||||||
Decrease in accounts and notes receivablerelated parties |
| | 2,428,592 | |||||||||
Increase in note receivablerelated party |
| | (141,317 | ) | ||||||||
(Increase) decrease in inventories, net |
(2,725,779 | ) | 862,961 | 1,838,726 | ||||||||
(Increase) decrease in prepaid expenses |
(203,594 | ) | 131,684 | (376,294 | ) | |||||||
(Increase) decrease in deposits and other |
(955,298 | ) | (764,763 | ) | 12,566 | |||||||
Increase in other assets, non-current |
(718,133 | ) | (951,890 | ) | | |||||||
Decrease in accounts payable and accrued liabilities |
(2,787,046 | ) | (2,937,772 | ) | (2,794,622 | ) | ||||||
Decrease in accounts payablerelated parties |
| | (116,574 | ) | ||||||||
Increase in due to related party |
66,436 | | | |||||||||
Increase in accrued interest |
2,016,597 | | | |||||||||
Decrease in customer deposits on gaming machine leases |
| (170,000 | ) | | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
18,849,508 | 21,947,430 | 21,764,591 | |||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities |
||||||||||||
Advances under notes receivable |
(7,488,468 | ) | (4,245,867 | ) | (1,455,250 | ) | ||||||
Collections under notes receivable |
3,196,142 | 4,037,949 | 2,189,815 | |||||||||
Increase in Canadian tax receivable |
(958,832 | ) | (2,427,184 | ) | (1,180,147 | ) | ||||||
Payments received for Canadian tax refund |
1,180,856 | | | |||||||||
Purchases of intangible assets |
(22,927,268 | ) | (6,870,097 | ) | (13,199,318 | ) | ||||||
Software development and other |
(3,834,392 | ) | (2,483,132 | ) | (6,536,584 | ) | ||||||
Proceeds from sale of assets |
141,427 | 116,636 | 39,237 | |||||||||
Purchases of gaming equipment, vehicles and other equipment |
(21,085,605 | ) | (14,333,803 | ) | (12,411,275 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(51,776,140 | ) | (26,205,498 | ) | (32,553,522 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities |
||||||||||||
Member contributions |
50,687,518 | 13,787,695 | 16,699,265 | |||||||||
Repurchase of members interest |
| | (2,815,000 | ) | ||||||||
Increase in receivable from member |
| | (1,242,824 | ) | ||||||||
Payments under notes payable |
(600,680 | ) | (230,738 | ) | | |||||||
Borrowings under bank credit facility |
117,300,000 | 3,800,000 | 6,000,000 | |||||||||
Repayments on bank credit facility |
(130,625,738 | ) | (7,529,169 | ) | (6,152,529 | ) | ||||||
Payment of deferred loan costs |
(7,954,726 | ) | (2,589,110 | ) | | |||||||
|
|
|
|
|
|
|||||||
Net cash provided by financing activities |
28,806,374 | 7,238,678 | 12,488,912 | |||||||||
Effect of exchange rates on cash and cash equivalents |
(121,069 | ) | (322,146 | ) | 3,368 | |||||||
|
|
|
|
|
|
|||||||
(Decrease) increase in cash and cash equivalents |
(4,241,327 | ) | 2,658,464 | 1,703,349 | ||||||||
Cash and cash equivalents, beginning of period |
10,786,609 | 8,128,145 | 6,424,796 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents, end of period |
$ | 6,545,282 | $ | 10,786,609 | $ | 8,128,145 | ||||||
|
|
|
|
|
|
|||||||
Supplemental cash flow informationCash paid during the period for interest |
$ | 6,632,508 | $ | 5,020,088 | $ | 5,043,319 | ||||||
|
|
|
|
|
|
|||||||
Non-cash investing and financing activities: |
||||||||||||
Extinguishment of related party debt |
$ | (10,000,000 | ) | $ | | $ | | |||||
Financed purchase of equipment |
$ | | $ | 1,279,540 | $ | | ||||||
Acquisition of purchased software in accrued liabilities |
$ | | $ | 1,750,000 | $ | | ||||||
Capital expenditures in accrued liabilities |
$ | | $ | 832,806 | $ | | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
1. Organization and Business
AGS Capital, LLC (the Company) was formed in Delaware on September 8, 2005. The Company is a limited liability company with the following owned subsidiaries, AGS LLC (AGS), AGS Partners, LLC (Partners), AGS Illinois LLLP (AGS IL) and American Gaming Systems Toronto, Ltd., f/k/a GTNA Solutions Corp. (collectively, AGS Toronto). The Company is a subsidiary of AGS Holdings, LLC which is a subsidiary of Alpine AGS, LLC. Although formed on September 8, 2005, the Company had no activity until September 20, 2005, the date Companys wholly owned subsidiary, AGS LLC, acquired assets of Clapper Enterprises, Inc. and Worldwide Game Technology Corp. The Company operates in a single business segment and is a designer, manufacturer, distributor and operator of Class II and Class III gaming machines located in Native American and other gaming facilities. Capitals gaming systems are typically provided to customers under revenue-sharing arrangements, but are also sold outright directly to customers. The Company offers content for its gaming systems that has been designed and developed by the Company, as well as game themes it has licensed from others. Partners was formed on June 22, 2006, and on June 29, 2006, Partners acquired certain assets of Aurora Gaming, Inc., Integrity Gaming, Inc. and Integrity Gaming Nevada, LLC (Integrity). BOL Finance, LLC (BOL) was formed by the Company on August 8, 2008, to finance distributors operating in Louisiana. It was capitalized through a note payable to the Company. AGS Toronto was formed on July 11, 2008, and capitalized through debt and equity contributions from the Company. AGS Toronto acquired certain assets of Gametronics, Inc. and Phone-Sweeps, Inc. on November 10, 2008. BOL was dissolved during 2011.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of AGS Capital, LLC and its wholly owned subsidiaries, AGS, Partners, BOL and GTNA. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make decisions based upon estimates, assumptions, and factors considered relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of the estimates and assumptions. Accordingly, actual results could differ materially from those anticipated.
Revenue Recognition
The majority of the Companys gaming revenue is of a recurring nature and is generated by providing customers with gaming terminals, gaming terminal content licenses and back-office equipment, which are collectively referred to as gaming equipment, under participation arrangements. Under these arrangements, the Company retains ownership of the gaming equipment installed at customer facilities, and receives revenue based on a percentage of the win per day generated by the gaming equipment. Certain arrangements require a portion of the facilities win per day to be set aside to be used to fund facility-specific marketing, advertising, promotions and service. These amounts are offset against revenue. Licensing revenue generated from the use of the Companys software is recognized when earned and reported.
F-7
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Revenues from the stand-alone product sales or separate accounting units are recorded when:
| Persuasive evidence of an arrangement exists; |
| The sales price is fixed and determinable; |
| Delivery has occurred and services have been rendered; and |
| Collectability is probable. |
The Company believes that the sale of its machines, and installation, training, service and removal thereof do not meet all the criteria in ASC 605-25-25-5. The Company believes the criteria in paragraph 5(a) is met because its customers buy gaming machines of similar functionality and configuration from other suppliers in the Companys industry, while the Company believes the criteria in paragraph 5(c) is not met because it does not offer a general right of return and installation and training is performed typically or within a day of the delivery of the machine to the customer. The majority of the Companys lease agreements includes a requirement for the Company to service games should failures occur. The cost related to the servicing of these machines is expensed as incurred and is not significant compared to the total revenue generated from the lease contract. Further, the Company does not offer the servicing of machines (i.e., extended warranties) as a separate deliverable to customers as a matter of practice.
Cash and Cash Equivalents
Cash and equivalents consist primarily of deposits held at major banks and other marketable securities with original maturities of 90 days or less.
Restricted Cash
Restricted cash amounts represent funds held in escrow as collateral for the Companys surety bonds for various gaming authorities.
Notes Receivable and Development Agreements
The Company enters into development agreements to provide financing for new tribal gaming facilities, or for the expansion of existing facilities. The agreements generally come in two forms. The first is in the form of a loan. Interest income is recognized on the repayment of the notes based on the stated rate or, if not stated explicitly in the development agreement, on an imputed interest rate. If the interest rate is to be imputed, a discount to the note receivable and a corresponding intangible is recorded. The intangible is recognized in the financial statements as a contract right under development agreement and amortized as a reduction in revenue over the term of the agreement. The second is in the form of an advance that is not expected to be repaid. These advances are accounted for as customer rights and amortized over the term of the agreement as a reduction in revenue. In both scenarios, the customer commits to a fixed number of gaming terminal placements in the facility, and the Company receives a fixed percentage of those gaming terminals win per day over the term of the agreement or a daily fee per gaming terminal. Certain agreements contain performance standards for the gaming terminals that could allow the facility to reduce a portion of the guaranteed floor space. In the event a portion of the guaranteed floor space is reduced, the Company would recognize an impairment of the associated intangible. Interest income related to notes receivable is recorded as interest income in the Consolidated Statement of Operations and Comprehensive Loss.
F-8
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Generally, the Company utilizes the term of a contract to amortize the intangible assets associated with development agreements. The Company reviews the carrying value of these contract rights at least annually, or whenever changes in circumstances indicate the carrying value of these assets may not be recoverable. While management believes that the estimates and assumptions used in evaluating the carrying value of these assets are reasonable, different assumptions could materially affect either the carrying value or the estimated useful lives of the contract rights.
The Company assesses the impairment of notes whenever events or changes in circumstances indicate the carry value may not be realized. Impairment is measured based on the present value of the expected future cashflows and is recorded as bad debt expense in the period of assessment. For the years ended December 31, 2012, 2011 and 2010, the Company recorded an impairment of $0.4 million, $ 0, and $7.7 million, respectively.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts related to the accounts receivable and notes receivable that have been deemed to have a high risk of collectability. The Company reviews the accounts receivable and notes receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The Company analyzes historical collection trends and changes in the customers payment patterns, customer concentration, and credit worthiness when evaluating the adequacy of the allowance for doubtful accounts. A large percentage of receivables are with Native American tribes that have their reservations and gaming operations in the state of Oklahoma, and the Company has concentrations of credit risk with several tribes. The Company includes any receivable balances that are determined to be uncollectible in the overall allowance for doubtful accounts. Changes in the assumptions or estimates reflecting the collectability of certain accounts could materially affect the allowance for both trade and notes receivable.
Inventories
Inventories consist primarily of parts and supplies that are used to repair and maintain machinery and equipment. Inventories are stated at the lower of cost or market. Cost of inventories is determined using the first-in, first-out (FIFO) method for all components of inventory. The Company regularly reviews inventory quantities and update estimates for the net realizable value of inventories. This process includes examining the carrying values of parts and ancillary equipment in comparison to the current fair market values for such equipment (less costs to sell or dispose). Some of the factors involved in this analysis include the overall levels of the inventories, the current and projected sales levels for such products, the projected markets for such products and the costs required to sell the products, including refurbishment costs. Changes in the assumptions or estimates could materially affect the inventory carrying value.
Gaming Equipment, Vehicles and Other Equipment
The cost of gaming equipment, consisting of fixed-base player terminals, file servers and other support equipment as well as vehicles and other equipment, is depreciated over their estimated useful lives, generally using the straight-line method for financial reporting. Repairs and maintenance costs are expensed as incurred. The Company annually evaluates the estimated lives used to depreciate assets. The estimated useful lives are as follows:
Gaming equipment deployed |
4 to 5 years | |||
Vehicles and other equipment |
3 to 7 years |
F-9
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future cash flows expected to be generated by the asset. The Companys policy is to provide reserves, when necessary, for excess or obsolete gaming terminals on hand that it does not expect to be used. Reserves are based upon several factors, including estimated forecast of gaming terminal demand for placement into casinos. While the Company believes that the estimates and assumptions used in evaluating the carrying amount of these assets are reasonable, different assumptions could affect either the carrying amount or the estimated useful lives of the assets, which could have a significant impact on the results of operations and financial condition. The Company recognized an impairment charge for obsolete gaming terminals since the carrying amount was greater than fair value of $2,711,412, $803,506, and $0 for the years ending December 31, 2012, 2011, and 2010, respectively.
Intangible Assets
The Company reviews its identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized for identifiable intangibles, other than goodwill, when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets carrying amount.
The Company groups its definite-lived intangible assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company groups its identifiable intangible assets and reviews them for impairment according to the groupings below:
| Contract rights under development agreements these intangibles relate to the discounts on development note receivables loans that have been extended to customers at no interest rate in exchange for a fixed number of gaming terminal placements in the customers facility. The Company receives a fixed percentage of those gaming terminals win per day over the term of the agreement or a daily fee per gaming terminal. Contract rights under development agreements are amortized over the term of the agreement as a reduction in revenue. The Companys impairment analysis incorporates reviewing the future expected revenues and cash flows under the respective contracts in comparison to the underlying net book value of the associated intangible; |
| Customer agreements these intangibles represent the cash advances to customers that are not expected to be repaid in exchange for a fixed number of gaming terminal placements in the customers facility. The Company receives a fixed percentage of those gaming terminals win per day over the term of the agreement or a daily fee per gaming terminal. Customer agreements are amortized over the term of the agreement as a reduction in revenue. The Companys impairment analysis incorporates the reviewing future expected revenues and cash flows with these related customer under the respective contracts in comparison to the underlying net book value of the associated intangible; |
| Third-party licenses these intangibles represent the rights to license third party gaming titles that the Company has purchased for use in its gaming terminals. Third-party licenses are amortized to operating expense over the shorter of the term of the license or the expected life of the titles, whichever is shorter. The Companys impairment analysis incorporates the future expected revenues and cash flows of the title or gaming titles in comparison to their underlying net book value of the associated intangible; |
|
Purchased software these intangibles represent the license to operate the ticket-in-ticket-out (TITO) technology associated with many of the Companys gaming terminals. These costs are amortized over the expected life of the underlying gaming terminal. These TITO intangible assets are included with a |
F-10
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
gaming terminal and are not transferrable to other gaming terminals once placed into service; therefore, the Companys impairment analysis is incorporated with the Companys review for impairment of the underlying gaming terminal. The Company evaluates the future revenues and cash flows associated with the underlying gaming terminal in comparison to the underlying net book value of the gaming terminal and associated TITO intangible asset. |
The Company reviews its definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Examples of such events or changes in circumstances include the following:
| Contract rights under development agreements and customer agreements (1) other than temporary decrease in revenue and cash flows associated with a particular customer (2) reduction in amount of gaming terminal placements in the customers facility; |
| Third-party licenses other than temporary decreases in revenue and cash flows associated with a gaming title or group of gaming titles; |
| Purchase software other than temporary decreases in revenue and associated cash flow associated with a specific gaming terminal. |
Impairment is reviewed at a minimum once a year. When the estimated undiscounted cash flows are not sufficient to recover the intangible assets carrying amount, an impairment loss is measured to the extent the fair value of the asset is less than its carrying amount. The Company recognized an impairment charge of $3,686,414 for the year end December 31, 2012. Of this total, $2,859,330 related to adjusting the net carrying value of the purchase software.
Goodwill
The Company is required to perform an annual goodwill impairment review, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when its carrying amount exceeds its estimated fair value. Goodwill is reviewed for possible impairment annually on September 30 of each year or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, or a loss of key personnel. During the Companys impairment testing for the year ended December 31, 2012, the Company recorded an impairment charge of $18,678,970 which amounted to the entire balance of goodwill. The impairment is a result of the combination of an increase in our weighted average cost of capital primarily related to the increased interest rate related to the 2012 UBS debt and reduced projected revenue within our long-term operating plan.
Deferred Loan Costs
Deferred loan costs consist of various debt issuance costs and are being amortized on the effective-interest method over the life of the related loans. Loan cost amortization expense of $1,620,562, $796,962, and $796,962 is included in interest expense in the Companys statement of operations and comprehensive loss for the years ended December 31, 2012, 2011, and 2010, respectively.
Customer Deposits on Gaming Machine Leases
The Company held deposits totaling $421,565 at December 31, 2012 and 2011 from third- party distributors as deposits on gaming machines leases.
F-11
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Accounting for Income Taxes
The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes. As a result, any federal (and most state) items of income or loss, and any income tax credits, are passed through to our ultimate owner for inclusion in its individual income tax returns. Prior to March 2010, the Company was a partnership for federal and state income tax purposes. Accordingly, no provision for federal or state income taxes is included in the consolidated financial statements. However, the Company is subject to certain foreign income taxes incurred by its Canadian subsidiary.
The Companys tax returns are subject to examination by federal and state authorities. If such examinations occur and result in changes with respect to any partnership qualifications or changes to distributable income or loss, the tax liability of the members may be changed accordingly.
Costs of Computer Software
Internally developed gaming software represents the Companys internal costs to develop gaming titles to utilize on the Companys gaming terminals. Internally developed gaming software is accounted for under FASB ASC Topic 985-20, Costs of Software to Be Sold, Leased or Marketed , and is stated at cost, which is amortized over the estimated useful lives of the software, generally using the straight-line method. Software development costs are capitalized once technological feasibility has been established and are amortized when the software is placed into service. Any subsequent software maintenance costs, such as bug fixes and subsequent testing, are expensed as incurred. Discontinued software development costs are expensed when the determination to discontinue is made. Software developments costs are amortized over the expected life of the title or group of titles, if applicable, to amortization expense.
At each balance sheet date, the Company compares the net book value of its internally developed computer software to the net realizable value on a title by title basis. The net realizable value is determined based upon certain assumptions, including the expected future revenues and net cash flows of the gaming titles or group of gaming titles utilizing that software, if applicable. For the year ended December 31, 2012, the Company recognized an impairment charge of $827,084 for internally developed costs that related to a licensing agreement held by AGS Toronto, which the Company terminated in March 2013. These assets have no future value and were written off accordingly.
Research and Development
The Company conducts research and development activities primarily to develop new gaming platforms and gaming content. These research and development costs consist primarily of salaries and benefits and are expensed as incurred. Once the technological feasibility of a project has been established, capitalization of development costs begins until the product is available for general release. Research and development expenses were $1,199,248, $681,434, and $353,252 for the years ended December 31, 2012, 2011, and 2010, respectively and is included as a component of general and administrative expense.
Contingencies
The Company assesses its exposures to loss contingencies including claims and legal proceedings and accrues a liability if a potential loss is considered probable and the amount can be estimated. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, if the actual loss from a contingency
F-12
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
differs from managements estimate, there could be a material impact on the results of operations or financial position. Operating expenses, including legal fees, associated with contingencies are expensed when incurred.
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, trade receivables and note receivable. Cash equivalents are investment-grade, short-term debt instruments consisting of treasury bills which are maintained with high credit quality financial institutions under repurchase agreements. Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits.
The Companys gaming revenue customers are concentrated in the Class II gaming and casino industry and are located primarily in Oklahoma. Certain Native American tribes or their gaming enterprise and certain commercial locations comprise a significant component of the Companys total gaming revenue or trade receivables. However, the Company also conducts business through distributor relationships, some of which act as a collection agent. The following gaming revenue and trade receivable concentrations existed at December 31, 2012 and 2011:
2012 | 2011 | |||||||
Gaming revenue |
||||||||
Customer A |
35 | % | 34 | % | ||||
Customer B |
9 | % | 9 | % | ||||
Trade receivable |
||||||||
Customer A |
10 | % | 16 | % | ||||
Customer B |
7 | % | 8 | % | ||||
Customer C |
1 | % | 1 | % | ||||
Customer D |
1 | % | 1 | % | ||||
Customer E |
2 | % | 4 | % | ||||
Customer F |
8 | % | 0 | % | ||||
Customer G |
7 | % | 4 | % |
Supplier Dependence
The Companys gaming equipment operates primarily on software developed by Bluberi Gaming Technologies, Inc. (formerly Labtronix Group Inc.) (Bluberi). Bluberi provides PC boards for the Companys manufactured gaming machines featuring Bluberi software content, as well as server hardware for each customer location with gaming machines operating on Bluberi software. Up until May 2012, the Company paid Bluberi a licensing fee equal to 20% of revenue earned related to games placed in casinos which operate with Bluberi software content, which gives the Company the rights to operate select game titles and related PC boards and server hardware. On January 9, 2012, the Company entered into a definitive agreement with Bluberi to purchase all of Bluberis right, title and interest in certain game titles (see note 6). The Gametronics acquisition in 2008 enables the Company to develop software if Bluberi were unable to fulfill its duties under this arrangement. Although the Company believes that it could locate a substitute software developer, any such replacement would involve some delay and the Company may not be able to maintain operation of its terminals without significant interruption. Any failure of the Company to maintain operation of its gaming terminals could have a material adverse effect on its business, results of operations and financial condition.
F-13
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Foreign Currency Translation
The financial statements of the Companys Canadian subsidiary are translated into U.S. dollars at the year-end rate of exchange for asset and liability accounts and the average rate of exchange for income statement accounts. The effects of these translations are recorded as a component of other accumulated comprehensive loss in members deficit.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs for 2012, 2011, and 2010 were $252,632, $350,862, and $199,000, respectively.
Recently Issued Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update 2012-02, IntangiblesGoodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, (ASU 2012-02). ASU 2012-02 amends the guidance in Accounting Standards Codification 350-302 on testing indefinite-lived intangible assets, other than goodwill, for impairment by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50 percent) impaired, the entity would not need to calculate the fair value of the asset. In addition, ASU 2012-02 does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption being permitted. The adoption of this standard will not have a material effect on the Companys financial position or results of operations.
In June 2011, FASB issued an ASU on presentation of comprehensive income to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. This update changes the requirements for the presentation of other comprehensive income, eliminating the option to present components of other comprehensive income as part of the statement of stockholders equity, among other items. The guidance requires that all non-owner changes in stockholders equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments are effective for fiscal years ending after December 15, 2012 for the Company. This pronouncement did not have a material effect on the Companys financial statements.
In September 2011, the FASB amended ASC 350, IntangiblesGoodwill and Others, to simplify the assessment of goodwill impairment and became effective for the Company for fiscal years beginning after December 15, 2011. The amended guidance allows the Company to do an initial qualitative assessment of relative events and circumstances to determine if fair value of a reporting unit is more likely than not less than its carrying value, prior to performing the two-step quantitative goodwill impairment test. The Company adopted the amended guidance for its September 30, 2011 measurement date and it did not have a material effect on its financial statements.
F-14
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
3. Notes Receivable
At December 31, 2012 and 2011, notes receivable consisted of the following:
2012 | 2011 | |||||||
Note A |
$ | 671,032 | $ | 2,483,511 | ||||
Note B |
1,059,907 | 1,332,072 | ||||||
Note C |
8,932,000 | 2,250,000 | ||||||
Note D |
1,049,869 | 1,043,400 | ||||||
Other, net |
729,307 | 2,477,455 | ||||||
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Total notes receivable, net |
12,442,115 | 9,586,438 | ||||||
Less: Current portion |
(2,394,149 | ) | (2,760,694 | ) | ||||
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Notes receivablelong term |
$ | 10,047,966 | $ | 6,825,744 | ||||
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Note A
On June 14, 2007, the Company committed to a significant, existing tribal customer to provide $18,750,000 for part of the funding for a facility expansion. In return, the Company received the right to approximately 10% of the additional 4,000 gaming units expected to be placed in the expanded facility. The agreement allows the customer to buy out the Companys right to floor space after the note has been repaid. The Company advanced its total commitment of $18,750,000 in 2007. On September 4, 2008, the agreement was amended to reduce the development funding from $18,750,000 to $9,375,000 in return for a reduction in the number of gaming units to be placed in the facility, from 10% of total expected units to 5%. The Company paid $150,000 to modify the agreement and was repaid $9,375,000 in 2008. In addition, the Company recorded a $532,980 loss in 2008 on restructuring of the note receivable that was due primarily from the difference in value between the unamortized intangible asset and the unearned discount for the receivable at the time that the agreement was restructured. The amended development agreement specifies that the note receivable will be repaid out of net profits, as defined in the agreement, in excess of $9,000,000 per month. As the collections on the note are received and the expected timing of the payments is re-evaluated, the imputed interest rate earned is evaluated and may change. Based upon the trend of collections to date and expected future collection, the imputed interest rate approximates 20.6% at December 31, 2012. The Company recorded $238,577, $283,000, and $359,000 of imputed interest during the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012 and 2011, the balance of the note receivable has been reduced by an unamortized discount of $45,726 and $284,303, respectively.
Note B
On September 20, 2010, the Company entered into a development agreement and committed $1,455,250 to an existing tribal customer to provide part of the funding for the development and construction of a gaming facility in Oklahoma. In return, the Company received the right to approximately 20% of the new square footage of all Available Gaming Floor Space in the Project, as defined, provided that in no event the Company will have no more or less than 50 gaming units for a period of six years and eleven months subject to certain performance criteria, as defined. The agreement allows the customer to buy out the Companys right to floor space after the note has been repaid. The amended development agreement specifies that the note receivable will be repaid out of the Net Profits, as defined in the agreement, in excess of $500,000 per month. As the collections on the note are received and the expected timing of the payments is re-evaluated, the imputed interest rate earned is evaluated and may change.
F-15
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Based upon the trend of collections to date and expected future collection, the imputed interest rate approximates 4.5%. The Company recorded $72,918, $17,292 and $0 of imputed interest during the years ended December 31, 2012, 2011 and 2010, respectively. As of December 31, 2012 and 2011, the balance of the note receivable has been reduced by an unamortized discount of $50,261 and $123,178, respectively.
Note C
On December 15, 2010 and further amended on November 17, 2011 and December 8, 2011, the Company entered into an agreement to loan funds not to exceed $2,250,000 with a company that intends to operate and service slot routes in Illinois. As of December 31, 2011, the Company has fully funded the loan under this agreement. Full funding of the loan was predicated on the route operator acquiring the rights to place VGTs at a minimum of 135 locations pursuant to Use Agreements, as defined. On March 6, 2012, the Company executed an Amended and Restated Loan Agreement (Restated Loan) with the holder of Note C. The Restated Loan provides for a Route Acquisition Tranche of $4,650,000 and an operational tranche of $750,000. The Restated Loan was amended July 25, 2012 to increase the operational tranche to $950,000. On October 25, 2012 the Company assumed a loan agreement of $1,864,500 from a related party. On December 20, 2012, the Company extended a second operational tranche for $1,417,500 and as well as the Vault Promissory Note for $467,500 for funds to acquire certain route equipment.
Interest is payable at a rate of 13% or 15% for various notes, on the outstanding balance until the note matures on dates ranging from March 9, 2016 to December 31, 2016. Repayment of the note principal and interest will be in monthly installments and will begin at various dates. The Company is recognizing interest income on percentage basis of live units to expected total deployments.
Note D
On January 12, 2011 and March 10, 2011, the Company loaned $864,000 and $197,400, respectively, in exchange for promissory notes to an entity. Interest on the notes accrues at a rate of 5% until the date that routine gaming operations commence at which point the interest rate will increase to 10% and the entity will be required to commence 60 monthly principal and interest installments. All accrued and unpaid interest prior to the first payment of principal must be paid on this day as well. The Company is recognizing interest income on percentage basis of live units to expected total deployments. The Company retains a claim on the general assets of the entity as collateral.
On March 30, 2012, the holder of Note C entered into a management agreement with the holder of Note D to manage the routes acquired by the holder of Note D. As part of that agreement, the holder of Note C assumed the holder of Note Ds obligation to the Company through the execution of a Loan Assumption and Release Agreement dated March 30, 2012.
Other Notes Receivable
Other notes receivable represent arrangements with other customers related to the Companys advances for the construction and development of casino expansions or the Companys financing of the sale of gaming machines to customers. Interest rates and maturities of the notes vary as do principal and interest payments.
F-16
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
The Companys notes receivable are reviewed monthly, at a minimum, for impairment. The Company also reviews a variety of other relevant qualitative information such as collection experience, economic conditions and specific customer financial conditions to evaluate credit risk in recording the allowance for notes receivable or as an indicator of an impaired loan. The Company accrues interest, if applicable, on its notes receivables per the terms of the agreement. Interest is not accrued on past due notes receivable, or individual amounts that the Company has determined and specifically identified as not collectible.
The following tables detail our evaluation of notes receivable for impairment:
Notes Receivable
as of December 31, 2012 |
Notes Receivable
as of December 31, 2011 |
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Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
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Notes receivable, current |
$ | 2,394,149 | $ | 1,488,050 | $ | 906,099 | $ | 2,760,694 | $ | 2,760,694 | $ | | ||||||||||||||||||
Notes receivable, non-current |
10,494,740 | 1,418,970 | 9,075,770 | 15,701,946 | 12,408,546 | 3,293,400 | ||||||||||||||||||||||||
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Total |
$ | 12,888,889 | $ | 2,907,020 | $ | 9,981,869 | $ | 18,462,640 | $ | 15,169,240 | $ | 3,293,400 | ||||||||||||||||||
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The activity related to the allowance for notes receivable for the year ended December 31, 2012 is as follows:
Allowance for Notes Receivables
Year Ended December 31, 2012 |
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Beginning
Balance |
Charge-offs | Recoveries | Provision |
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
|||||||||||||||||||||||||||||
Notes receivable, current |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||||||
Notes receivable, non-current |
8,876,202 | (8,876,202 | ) | | 446,774 | 446,774 | 446,774 | | |||||||||||||||||||||||||||
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|
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|
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|
|
|
|
||||||||||||||||||||||
$ | 8,876,202 | $ | (8,876,202 | ) | $ | | $ | 446,774 | $ | 446,774 | $ | 446,774 | $ | | |||||||||||||||||||||
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|
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The activity related to the allowance for notes receivable for the year ended December 31, 2011 is as follows:
Allowance for Notes Receivables
Year Ended December 31, 2011 |
|||||||||||||||||||||||||||||||||||
Beginning
Balance |
Charge-
offs |
Recoveries | Provision |
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
|||||||||||||||||||||||||||||
Notes receivable, current |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||||||
Notes receivable, non-current |
8,876,202 | | | | 8,876,202 | 8,876,202 | | ||||||||||||||||||||||||||||
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$ | 8,876,202 | $ | | $ | | $ | | $ | 8,876,202 | $ | 8,876,202 | $ | | ||||||||||||||||||||||
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F-17
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
The following summarizes the aging of past due note receivables as of December 31, 2012:
1 to 90
Days Past Due |
91 to 180
Days Past Due |
181+ Days
Days Past Due |
Total Past
Due |
Current |
Total
Receivable |
Recorded
Investment in Receivables on Nonaccrual Status |
Recorded
Investment 90 Days and Accruing |
|||||||||||||||||||||||||||||||||
Notes receivable |
$ | 17,754 | $ | 14,423 | $ | 423,762 | $ | 455,939 | $ | 12,432,950 | $ | 12,888,889 | $ | 455,938 | $ | | ||||||||||||||||||||||||
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The following summarizes the aging of past due note receivables as of December 31, 2011:
1 to 90
Days Past Due |
91 to
180 Days Past Due |
181+ Days
Days Past Due |
Total Past
Due |
Current |
Total
Receivable |
Recorded
Investment in Receivables on Nonaccrual Status |
Recorded
Investment 90 Days and Accruing |
|||||||||||||||||||||||||||||||||
Notes receivable |
$ | 17,265 | $ | 3,492 | $ | 8,872,513 | $ | 8,893,270 | $ | 9,569,372 | $ | 18,462,642 | $ | 8,893,716 | $ | | ||||||||||||||||||||||||
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The aging of note receivable balances are based on their contractually agreed upon payment terms.
Impairment is recognized when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of a note arrangement. During the year ended December 31, 2012, recognized an impairment charge on notes receivable and a related allowance of $0.4 million. There were no impairments recorded during the year ended December 31, 2011.
The impaired loan balance as of December 31, 2012 was as follows:
Recorded
Investment |
Unpaid
Principal Balance |
Related
Allowance |
Average
Recorded Investment |
Interest
Income Recognized |
|||||||||||||||||||||
With allowance recorded: |
|||||||||||||||||||||||||
Notes receivables |
$ | 443,085 | $ | 443,085 | $ | (443,085 | ) | $ | 439,150 | $ | 29,235 | ||||||||||||||
Without allowance recorded: |
|||||||||||||||||||||||||
Notes receivable |
| | | | | ||||||||||||||||||||
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$ | 443,085 | $ | 443,085 | $ | (443,085 | ) | $ | 439,150 | $ | 29,235 | |||||||||||||||
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The impaired loan balance as of December 31, 2011 was as follows:
Recorded
Investment |
Unpaid
Principal Balance |
Related
Allowance |
Average
Recorded Investment |
Interest
Income Recognized |
||||||||||||||||
With allowance recorded: |
||||||||||||||||||||
Notes receivables |
$ | 8,876,202 | $ | 8,876,202 | $ | (8,876,202 | ) | $ | 8,876,202 | $ | | |||||||||
Without allowance recorded: |
||||||||||||||||||||
Notes receivable |
| | | | | |||||||||||||||
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$ | 8,876,202 | $ | 8,876,202 | $ | (8,876,202 | ) | $ | 8,876,202 | $ | | ||||||||||
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F-18
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
4. Contract rights under development agreements and customer agreements
The Company enters into development agreements and placement fee agreements with certain customers to secure floor space under lease agreements for its gaming machines. Amounts paid in connection with the development agreements are repaid to the Company in accordance with the terms of the agreement, whereas placements fees are not reimbursed. Placement fees can be in the form of cash paid upfront or free lease periods and are accreted over the life of the contract and the expense is recorded as a reduction of revenue. For the years ended December 31, 2012, 2011 and 2010, $3,932,851, $4,296,329 and $2,987,910, respectively were recorded as a reduction of revenue as accretion of contract rights under development agreements and customer agreements.
5. Gaming Equipment, Vehicles and Other Equipment
Gaming equipment, vehicles and other equipment consist of the following at December 31, 2012 and 2011:
As of
December 31, 2012 |
As of
December 31, 2011 |
|||||||
Gaming equipment |
$ | 77,559,874 | $ | 71,638,235 | ||||
Vehicles and other equipment |
12,988,667 | 12,036,706 | ||||||
Less: Accumulated depreciation |
(50,281,178 | ) | (46,787,555 | ) | ||||
|
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|
|
|||||
$ | 40,267,363 | $ | 36,887,386 | |||||
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|
|
Gaming equipment, vehicles and other equipment are depreciated over the respective useful lives of the assets ranging from three to seven years. Depreciation expense was $14,420,255, $12,366,061, and $11,006,700 for the years ended December 31, 2012, 2011, and 2010, respectively.
6. Goodwill and Intangibles
As of December 31, 2012 and 2011, the Companys intangible assets consisted of the following:
As of
December 31, 2012 |
As of
December 31, 2011 |
|||||||||||||||||||||||
Gross
Value |
Accumulated
Amortization |
Net
Carrying Value |
Gross
Value |
Accumulated
Amortization |
Net
Carrying Value |
|||||||||||||||||||
Contract rights under development agreements |
$ | 20,188,400 | $ | (14,462,485 | ) | $ | 5,725,915 | $ | 20,031,328 | $ | (11,813,466 | ) | $ | 8,217,862 | ||||||||||
Customer relationships |
32,222,850 | (31,634,026 | ) | 588,824 | 32,222,850 | (27,840,060 | ) | 4,382,790 | ||||||||||||||||
Customer agreement |
9,837,300 | (3,589,917 | ) | 6,247,383 | 9,292,770 | (2,434,918 | ) | 6,857,852 | ||||||||||||||||
Covenants not to compete |
525,745 | (524,692 | ) | 1,053 | 525,613 | (523,462 | ) | 2,151 | ||||||||||||||||
Third party licenses |
28,818,500 | (7,818,902 | ) | 20,999,598 | 8,500,000 | (2,375,000 | ) | 6,125,000 | ||||||||||||||||
Internally developed gaming software |
18,547,767 | (14,640,132 | ) | 3,907,635 | 15,027,870 | (11,459,441 | ) | 3,568,429 | ||||||||||||||||
Purchased software |
9,658,842 | (7,485,229 | ) | 2,173,613 | 11,024,588 | (4,819,629 | ) | 6,204,959 | ||||||||||||||||
Goodwill |
| | | 18,678,970 | | 18,678,970 | ||||||||||||||||||
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|
|||||||||||||
$ | 119,799,404 | $ | (80,155,383 | ) | $ | 39,644,021 | $ | 115,303,989 | $ | (61,265,976 | ) | $ | 54,038,013 | |||||||||||
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F-19
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
On January 9, 2012, the Company entered into a definitive agreement (the Definitive Agreement) with Bluberi Gaming Technologies, Inc. (Bluberi) pursuant to which the Company agreed to terminate its existing distribution agreement with Bluberi (the Existing Distribution Agreement) and to purchase all of Bluberis right, title and interest in certain game titles covered by the Existing Distribution Agreement (the Bluberi Transaction). In connection therewith, the Company agreed to pay $22.8 million to Bluberi and to enter into a five-year service agreement with Bluberi for which the Company would pay Bluberi a $2.0 million servicing fee paid ratably over the term of the service agreement and a one-time $1.0 million performance-based bonus. According to the Definitive Agreement, $3.5 million was due to Bluberi upon execution of the Definitive Agreement and $19.3 million (the Balance) was due no later than February 28, 2012 subject to certain restrictions as defined. At the Companys option, payment of the $19.3 million could be extended one month by paying $2.5 million (the First Option Payment) no later than February 28, 2012 and could be extended an additional month by paying $2.5 million (the Second Option Payment) no later than March 31, 2012 with both payments applying to the Balance. On March 27, 2012, an addendum to the Definitive Agreement was executed which eliminated the Second Option Payment and replaced it with payments of $500,000 due March 30, 2012, April 6, 2012, April 13, 2012, April 20, 2012 and April 27, 2012. On May 11, 2012, the Company made its final payment in accordance with the Definitive Agreement and its addendum using proceeds from the capital contribution (see Note 10).
On April 2, 2012, the Company entered into a Letter of Intent to purchase the assets of a video lottery terminal business for a total cash consideration of $5.0 million dollars. $1.8 million of the purchase price would be paid upon the execution of an asset purchase agreement and $3,000,000 would be paid at closing. On April 5, 2012, the Company paid a $200,000 (the Lock-up Fee) to secure a 60-day exclusivity period, to perform due diligence related to the acquisition. The Company also received a license for a game title as consideration for the Lock-up Fee. The payment of the Lock-up Fee is included as part of purchased software on the Companys consolidated financial statements. On May 31, 2012, the Company terminated its Letter of Intent for the acquisition and received a license for an additional game title.
On July 13, 2012, the Company entered into a contract rights under development agreement with a new tribal customer for the right to place 64 Class II games in exchange for a single up-front payment of $640,000. The amount will be amortized over the life of the agreement.
On October 31, 2011 AGS entered into a license agreement with GameTech International, Inc., a supplier of video gaming products. Under the terms of the agreement, AGS will have the exclusive right to market, sell, lease or sublicense five GameTech game titles in licensed establishments across the Illinois territory as defined in the Illinois Video Gaming Act. As consideration for these titles, AGS paid GameTech a non-refundable royalty fee of $1 million on November 9, 2011. In addition to the five titles, AGS will have the option to purchase more titles for a one-time royalty fee of $200,000 per title. This agreement will continue in perpetuity unless properly terminated by one or more of the parties involved pursuant to the terms of the agreement.
On January 24, 2011, the Company extended its revenue sharing agreement with a key customer. Under the agreement the Company paid $2,800,000 for and in consideration of extending the term of the agreement through May 1, 2016. In addition to the amount paid to the key customer, the Company also paid an outside consultant $600,000 toward obtaining the extension on the existing revenue sharing agreement.
On January 1, 2011, the Company modified three separate revenue sharing arrangements with a customer and consolidated them into a Joint Amendment to Agreements (Joint Amendment). Under the Joint Amendment, the Company will pay the customer up to $1,250,000 and extend the term under the Joint
F-20
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Amendment to December 31, 2014. As of December 31, 2011, the Company had paid approximately $1.2 million to the customer under the Joint Amendment.
Intangibles are amortized over the respective useful lives of the assets ranging from two to ten years. Amortization expense related to intangibles, inclusive of accretion of contract rights under development agreements and customer agreements, was $18,966,634, $15,573,930 and $14,825,297 for the years ended December 31, 2012, 2011 and 2010, respectively.
Amortization expense related to contract rights under development agreements and customer agreements, or accretion of contract rights under development agreements and customer agreements, is netted against gaming revenue in the accompanying statements of operation and other comprehensive loss.
The estimated amortization expense on software development, purchased software and intangible assets for each of the next five years and thereafter is as follows:
Years ended December 31, |
||||
2013 |
$ | 17,261,284 | ||
2014 |
13,337,055 | |||
2015 |
6,552,883 | |||
2016 |
1,243,361 | |||
2017 |
269,472 | |||
Thereafter |
979,966 |
7. Canadian Payroll Tax Receivable
Certain Company expenditures incurred through its subsidiary AGS Toronto are eligible for the Ontario Interactive Digital Media Tax Credit (OIDMTC). The OIDMTC is a refundable payroll tax credit paid to corporations that develop interactive digital media products within Ontario. The OIDMTC is based upon the Ontario labor expenditures and eligible marketing and distribution expenditures claimed by a qualifying corporation with respect to eligible products. For a certified game developer, eligible expenses include Ontario salaries and wages. The developer must incur at least $1 million of Ontario labor expenses per year developing eligible interactive digital media games to qualify. The Company has recognized a Canadian Payroll Tax Receivable related to the OIDMTC of $3,369,905 and $3,511,212 as of December 31, 2012 and 2011, respectively. In September 2012, the Company collected $1,180,856 for the 2009 application and continues to pursue the receivable for later years.
8. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at December 31, 2012 and 2011 are as follows:
2012 | 2011 | |||||||
Trade accounts payable |
$ | 512,100 | $ | 2,431,797 | ||||
Salary and payroll tax accrual |
1,277,822 | 1,194,848 | ||||||
Accrued commission |
212,803 | 1,236,613 | ||||||
Accrued other |
3,266,308 | 3,188,670 | ||||||
|
|
|
|
|||||
$ | 5,269,033 | $ | 8,051,928 | |||||
|
|
|
|
F-21
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
9. Long-term Debt
Long-term debt consisted of the following at December 31, 2012 and 2011:
2012 | 2011 | |||||||
$115 million Initial Term Loan, interest above LIBOR or base rate (11.50% at December 31, 2012), net of unamortized discount of $4.7 million |
$ | 110,203,176 | $ | | ||||
$15 million Delayed Draw Term Loan, interest above LIBOR or base rate (11.50% at December 31, 2012). |
7,500,000 | | ||||||
$125 million Initial Term Loan, interest based upon, at the election of the borrower, (a) LIBOR plus 3.0% or (b) the higher of (1) federal funds plus 0.50% or (2) the Administrators Base Rate. The interest rate was 3.24% at June 30, 2012. |
| 96,682,717 | ||||||
$30 million Delayed Draw Term Loan, interest based upon, at the election of the borrower, (a) LIBOR plus 3.0% or (b) the higher of (1) federal funds plus 0.50% or (2) the Administrators Base Rate. The interest rate was 3.24% at June 30, 2012. |
| 14,532,023 | ||||||
$20 million Revolving Loan, interest based upon, at the election of the borrower, (a) LIBOR plus 3.0% or (b) the higher of (1) federal funds plus 0.50% or (2) the Administrators Base Rate |
| 19,411,000 | ||||||
Aristocrat long-term note payable |
448,122 | 1,048,802 | ||||||
|
|
|
|
|||||
Total debt |
118,151,298 | 131,674,542 | ||||||
LessAmounts due within one year |
(382,972 | ) | (35,391,339 | ) | ||||
|
|
|
|
|||||
Long-term debt |
$ | 117,768,326 | $ | 96,283,203 | ||||
|
|
|
|
On August 15, 2012, the Company entered into a $130 million senior secured credit agreement with UBS Securities, LLC (UBS). Under this credit agreement the Company borrowed $115 million as an Initial Term Loan and utilized the proceeds to repay all amounts outstanding under the May 14, 2007 UBS credit agreement and fund operations. The agreement includes a $15 million Delayed Draw Term Loan commitment, of which $7.5 million was freely available to the Company and drawn on October 25, 2012 with the remaining $7.5 million draw subject to certain criteria. The Initial Term Loan and the Delayed Draw Term Loans, collectively the Term Loans, accrue interest at LIBOR or base rate, at the borrowers election, subject to an interest rate floor plus an applicable margin rate. Aggregate principal amounts of the Term Loans are payable in quarterly installments equal to 1.25% of the outstanding balance beginning September 30, 2014 with the final installment payable at August 15, 2016. The Term Loans are subject to certain financial covenants and other covenants including a total leverage ratio and an interest coverage ratio, as well as limits on capital expenditures. The Company was in compliance with all covenants as of December 31, 2012.
On May 14, 2007, the Company entered into a $175 million senior secured credit agreement with UBS Securities, LLC (UBS). Under this credit agreement, the Company borrowed $125 million under an Initial Term Loan. The Company used the proceeds from this loan to repay the notes payable under a senior secured credit agreement with Morgan Stanley. Aggregate principal amounts of the Initial Term Loan was payable in quarterly installments of $312,500 with the final installment payable at May 14, 2013, in an amount sufficient to repay the aggregate outstanding principal of the Initial Term Loan. In May 2012, the Company repaid $11.7 million of the Initial Term Loan in accordance with the Credit Agreement as it relates to the $13.4 million equity cure utilized in May 2011. In addition, approximately $445,000 of the annual Excess Cash Flow paid in May was applied to the loan. All amounts under this facility were repaid as a result of entering into the Initial Term Loan.
F-22
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
The Delayed Draw Term Loan commitment of up to $30 million provides the ability to finance development agreements. This commitment expired on May 14, 2008. The aggregate outstanding principal amount of the Delayed Draw Term Loan was payable in quarterly installments equal to 1.0% of the aggregate original principal balance thereof, with the final installment payable at May 14, 2013. In May 2012, the Company repaid $1.7 million of the Delayed Draw Term Loan in accordance with the Credit Agreement as it relates to the $13.4 million equity cure utilized in May 2011. In addition, approximately $67,000 of the annual Excess Cash Flow paid in May was applied to the loan. All amounts under this facility were repaid as a result of entering into the Initial Term Loan.
The Revolving Loan facility provided up to $20 million for working capital and other needs. The Revolving Loan was repaid in full in May 2012.
As of March 31, 2011, the Companys debt to EBITDA leverage ratio exceeded the maximum permissible ratio covenant. However, on May 24, 2011, the member of the Company exercised the equity cure right under the senior secured credit agreement by making an equity contribution to the Company of $13.4 million, which enabled the Company to maintain compliance with the debt to EBITDA leverage ratio covenant for the measurement dates in 2011. The Company utilized $3.4 million of the equity contribution to pay down a portion of the outstanding indebtedness under the senior secured credit facility. The debt associated with these payments was classified as current in the accompanying consolidated financial statements as of December 31, 2011. As of March 31, 2012, the Companys debt to EBITDA leverage ratio exceeded the maximum permissible ratio covenant. However, on May 11, 2012 and May 23, 2012, the member of the Company contributed a total of $50.6 million to the Company, of which $9.9 million was designated as an equity cure under the senior secured credit agreement which enabled the Company to maintain compliance with the debt to EBITDA leverage ratio covenant. On May 14, 2012, the Company utilized $19.4 million to pay the maturing amount on the Revolving Loan and on May 24, 2012 utilized $13.4 million of the member contribution to pay a portion of the outstanding indebtedness under the senior secured credit facility.
Aggregate contractual future principal payments (excluding the effects of repayments for excess cash flow) of long-term debt for the years following December 31, 2012, are as follows:
December 31, 2013 |
$ | 382,972 | ||
December 31, 2014 |
3,127,650 | |||
December 31, 2015 |
6,125,000 | |||
December 31, 2016 |
113,312,500 | |||
|
|
|||
Total |
$ | 122,948,122 | ||
|
|
10. Related Party Transactions
On June 1, 2009, the Company sold 150 gaming machines and related gaming equipment to the former Chief Executive Officer of the Company, through a $655,060 promissory note, which bears interest at a rate of 8.5% per year, with all interest and principal payable upon maturity at June 1, 2011. Effective November 1, 2011, amounts outstanding under this obligation will be paid through the assigned proceeds from certain game positions currently placed in a Native American casino. Amounts due under this note receivable were $562,146 and $776,377 as of December 31, 2012 and 2011, respectively.
F-23
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
The Company had other receivables from related parties totaling $1,988,759 at December 31, 2010 which was presented as a contra-equity item within the accompanying consolidated statement of members deficit. The receivable was cancelled in 2011.
During 2010, the Company entered into a separate exclusive distributor agreement with Game Ingenuity (in which a related party is a principal) to place or sell games developed utilizing Game Ingenuity intellectual property into all markets where the Company is licensed or will be licensed within one year from the placement of the first game, or as otherwise mutually agreed between the parties. During 2012 and 2011 the Company has not incurred any expense as part of this agreement.
During 2012 and 2011, the Companys member contributed capital totaling $60.7 million and $13.8 million respectively, to the Company. Approximately $50.7 million of the 2012 contributed capital was utilized to cure debt covenant violations, repay the current obligations of debt (See Note 9), finance the final payment of the Definitive Agreement (See Note 6) and to provide working capital for the Company. $10.0 million of the 2012 contributed capital was a forgiveness of long-term debt to a related party that occurred in August 2012 associated with the Company entering the Initial Term Loan. The entire 2011 contributed capital was utilized to cure debt covenant violations and provide working capital for the Company (See Note 9)
For the years ended December 31, 2012 and 2011, we paid Alpine Management Services, III LLC $150,000 and $0, respectively, for consulting services.
On October 25, 2012 the Company assumed a note receivable which was held by Alpine AGS, LLC in the amount of $1,864,500, as further described in Note 3 for note receivable C.
11. Write Downs and Other Charges
The consolidated statements of operation and comprehensive loss include various non-routine transactions or related party consulting fees. For the year end December 31, 2012, the Company had $3,663,886 in write downs and other charges that consisted of $3,513,886 of costs related to the write off of debt issue costs related to the 2007 UBS debt agreement and other costs incurred in conjunction with an unsuccessful financing transaction as well as $150,000 for consulting fees paid to a related party. For the year ended December 31, 2011, the Company had $2,249,436 of costs related to a failed debt offering.
12. Benefit Plans
The Company has implemented the AGS Holdings Inc. Phantom Units Plan (the Plan) which is intended to reinforce and encourage the continued attention and dedication of certain Covered Executives (as defined) to their assigned duties to the Company until a Change in Control (as defined) has occurred. Units of the Plan have been issued as a percentage and in terms of number of units within the Plan at a strike price of $56,000,000 and vest over a period of up to four years. The value of the units is determined as the product of the percentage held in the Plan and the summation of the enterprise value of the Company less the net debt of the Company less the strike price. The liability associated with the Plan will ultimately be settled for cash; therefore the Company will adjust the liability to its estimated fair value each reporting period through phantom unit compensation in the accompanying consolidated statement of operations. As of December 31, 2012, 905 phantom units were granted which represents 9.05% of the equity value of the Company that exceeds $56,000,000 plus membership contributions as define by the Plan. For the year ended December 31, 2012, the Company recognized an increase in the value of the plan of $653,596.
F-24
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
The Company has established a 401(k) defined contribution plan (the Plan) for its employees. The Plan allows employees to contribute up to 15% of their pretax earnings, and the Company may match a percentage of the contributions on a discretionary basis. The expense associated with the Plan for 2012, 2011, and 2010 was $182,464, $116,094, and $117,893, respectively.
13. Income Taxes
The Company did not record a current provision for state or foreign tax purposes for the years ended December 31, 2012, 2011 and 2010. The Company has experienced cumulative losses from its foreign subsidiary and does not incur current foreign income taxes. There are also no material entity level state taxes. As a pass-through entity for domestic federal income tax purposes, income or loss flows through to the limited liability company members who are taxed in their individual capacities on their distributive shares of partnership taxable income.
The reconciliation of income tax at the federal statutory rate to the actual effective income tax rate is as follows:
Year Ended
December 31, 2012 |
Year Ended
December 31, 2011 |
Year Ended
December 31, 2010 |
||||||||||
Federal statutory rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Non-taxable entities |
(34.5 | ) | (44.5 | ) | (28.9 | ) | ||||||
Foreign rate differential |
(0.1 | ) | 2.3 | (1.5 | ) | |||||||
Valuation Allowance |
(0.4 | ) | 7.2 | (4.6 | ) | |||||||
|
|
|
|
|
|
|||||||
| | | ||||||||||
|
|
|
|
|
|
The components of the deferred tax assets and liabilities consist of the following:
December 31,
2012 |
December 31,
2011 |
|||||||
Foreign deferred income tax assets: |
||||||||
Net operating loss carryforwards |
$ | 197,555 | $ | 287,294 | ||||
Property and equipment |
31,369 | 6,841 | ||||||
Intangible assets |
356,972 | 125,765 | ||||||
|
|
|
|
|||||
Total foreign deferred income tax assets |
585,896 | 419,900 | ||||||
|
|
|
|
|||||
Valuation allowance |
(585,896 | ) | (419,900 | ) | ||||
|
|
|
|
|||||
Net foreign deferred income tax assets |
$ | | $ | | ||||
|
|
|
|
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. We assess the realizability of deferred tax assets on a quarterly basis and have concluded that it is not more likely than not to recognize certain deferred tax assets. As a result, a valuation allowance was recorded against our deferred tax assets.
F-25
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Accounting standards for accounting for uncertain tax positions require that tax positions be assessed using a two-step process. A tax position is recognized if it meets a more likely than not threshold, as is measured at the largest amount of benefit that is greater than 50% likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. It is the policy of the Company to recognize penalties and interest related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2012 and 2011, we have not recorded a reserve for uncertain tax positions or penalties and interest nor do we anticipate a significant change to the reserve for uncertain tax positions in the next 12 months.
The Company is not under audit by any federal, state or foreign jurisdiction for income taxes. The Companys federal and state income tax filings since inception are open to examination. The Companys international subsidiary is located in Canada, and the earliest tax year open to examination is 2008. The Company does not have U.S federal or state net operating loss carryforwards. The Company does have foreign net operating losses of $745,491 at December 31, 2012 which will begin to expire in tax years beginning after 2028.
14. Commitments and Contingencies
Leases
The Company leases administrative and warehouse facilities and certain equipment under non-cancelable operating leases. Rent expense was $686,002 and $600,452, $707,000 during the years ended December 31, 2012, 2011 and 2010, respectively.
Future minimum lease payments under these leases as of December 31, 2012, are as follows:
For the year ended December 31, |
Amount | |||
2013 |
$ | 555,452 | ||
2014 |
440,815 | |||
2015 |
310,311 | |||
2016 |
179,740 | |||
2017 |
| |||
|
|
|||
$ | 1,486,318 | |||
|
|
The Company is subject to federal, state and Native American laws and regulations that affect both its general commercial relationships with its Native American tribal customers, as well as the products and services provided to them. Periodically, the Company reviews the status of each significant matter and assesses the potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. If a potential loss from any claim or legal proceeding is considered reasonably possible, the Company discloses an estimate of the possible loss or range of possible loss, or a statement that such an estimate cannot be made. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to their pending claims and litigation and may revise their estimates. Such revisions in the estimates of the potential liabilities could have a material impact on the results of operations and financial condition.
On October 11, 2011, the Company entered into a licensing agreement with Ripleys Entertainment to develop casino games based in the Ripleys Believe it or Not brand. The licensing agreement which,
F-26
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
guarantees Ripleys Entertainment $600,000 in royalties, commenced upon the execution of the agreement and will expire on September 30, 2014 subject to one year renewals at the option of the Company. The Company paid a prepaid royalty of $200,000 upon execution of the agreement and in October 2012 an additional $200,000 was advanced under the terms of the agreement.
On May 14, 2012, the Company entered into a licensing agreement with One Three Television, LLC (One Three) to develop casino games based in the Are You Smarter than a 5 th Grader brand. The licensing agreement which, guarantees One Three $400,000 in royalties, will commence May 8, 2012 and expires on December 1, 2017 subject to a two year renewal at the option of the Company. The Company paid a prepaid royalty of $200,000 upon execution of the agreement and in December 2012 an additional $100,000 was advanced under the terms of the agreement.
On October 5, 2012, the Company entered into a licensing agreement with Freemantle Media North America, Inc. (Freemantle) to develop casino games based in the Family Feud brand. The licensing agreement which, guarantees Freemantle $650,000 in royalties, will commence October 5, 2012 and expires on December 31, 2017 subject to a three year renewal at the option of the Company. The Company paid a prepaid royalty of $200,000 upon execution of the agreement.
15. Subsequent Events
In connection with the preparation of its consolidated financial statements as of and for the year ended December 31, 2012, the Company has evaluated events that occurred between January 1, 2013 and December 17, 2013, to determine whether any of these events required recognition or disclosure in the 2012 financial statements, as required by FASB ASC Topic 855, Subsequent Events .
In January 2013, the Company advanced $0.4 million in regards to Note C mentioned above.
On February 15, 2013, the Company drew the Second Delayed Draw Term Loan of $7.5 million to fund operations.
On February 22, 2013, the Company paid a contract renewal fee of $550,000 to extend the lease agreement with its second largest customer. These costs will be capitalized as an intangible and amortized over the life of the agreement.
On February 28, 2013, the Company paid a placement fee of $400,000 to renew the agreement with an existing customer. These costs will be capitalized as an intangible and amortized over the life of the agreement.
On March 29, 2013, the Company terminated its software license and option agreement with Pong Marketing and Promotions Inc. due to use of the software outside the scope of the uses permitted for in the agreement. All intangibles related to the license and agreement, were fully impaired for the year ended December 31, 2012 as discussed in the intangibles section of note 2.
On April 16, 2013, the Company entered into the first amendment to the 2012 UBS credit agreement which, among other items, changed the financial covenant requirements beginning with the first quarter of 2013 extending through the term of the agreement.
F-27
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
In October 2013, the Company entered into financing agreements to purchase 450 gaming machines from various third party suppliers for lease to a company that operates and service slot routes in Illinois. The agreements require monthly payments of interest and principle and have terms ranging from 24 to 36 months and carry an interest rate from 8.0% to 8.5%.
On November 22, 2013, the route operator referenced in Note C, completed a permanent financing agreement with a third party. As a condition of the financing, the Company received a principal payment of approximately $3 million as payment in full for specific loans. The Company waived all outstanding interest due on these loans through the date of the financing and will record the amount as a lease incentive and amortize the amount over the remaining length of the lease. The remaining notes have been consolidated into a single loan and will accrue interest at 13%. Interest payments will be in kind until such time as the third party debt is paid in full; however monthly amortization payments paid in cash will begin May 2015 and continue through the maturity of the loan.
F-28
AGS Capital, LLC
(A limited liability company)
As of | ||||||||
September 30,
2013 |
December 31,
2012 |
|||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 8,620,709 | $ | 6,545,282 | ||||
Restricted cash |
100,000 | 200,000 | ||||||
Trade accounts receivable, net of allowance of $0.3 million and $0.5 million, respectively |
6,532,917 | 7,949,287 | ||||||
Notes receivablecurrent portion |
1,158,685 | 2,394,149 | ||||||
Inventories, net |
4,708,324 | 5,376,581 | ||||||
Prepaid expenses |
624,902 | 874,575 | ||||||
Deposits and other |
2,582,904 | 1,837,437 | ||||||
|
|
|
|
|||||
Total current assets |
24,328,441 | 25,177,311 | ||||||
|
|
|
|
|||||
Gaming equipment, vehicles and other equipment, net |
37,255,438 | 40,267,363 | ||||||
Notes receivable, net of current portion, less allowance for doubtful accounts of $0 and $0.4 million, respectively |
11,817,723 | 10,047,966 | ||||||
Interest receivable |
786,734 | | ||||||
Deferred loan costs, net |
4,500,564 | 5,391,841 | ||||||
Intangible assets |
31,331,542 | 39,644,021 | ||||||
Canadian tax receivable |
3,974,398 | 3,369,905 | ||||||
Other assets |
1,627,962 | 1,668,279 | ||||||
|
|
|
|
|||||
Total other assets |
54,038,923 | 60,122,012 | ||||||
|
|
|
|
|||||
Total assets |
$ | 115,622,802 | $ | 125,566,686 | ||||
|
|
|
|
|||||
Liabilities and Members Deficit |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 5,607,328 | $ | 5,269,033 | ||||
Due to related party |
| 66,436 | ||||||
Accrued interest |
2,002,118 | 2,016,597 | ||||||
Customer deposits on gaming machine leases |
| 421,565 | ||||||
Current maturities of long-term debt |
1,703,180 | 382,972 | ||||||
|
|
|
|
|||||
Total current liabilities |
9,312,626 | 8,156,603 | ||||||
|
|
|
|
|||||
Phantom unit-plan liability |
2,045,754 | 1,582,736 | ||||||
Long-term debt |
124,133,163 | 117,768,326 | ||||||
|
|
|
|
|||||
Total liabilities |
135,491,543 | 127,507,665 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Members deficit |
||||||||
Members capital |
136,672,633 | 136,672,633 | ||||||
Accumulated deficit |
(157,043,126 | ) | (139,138,386 | ) | ||||
Accumulated other comprehensive income |
501,752 | 524,774 | ||||||
|
|
|
|
|||||
Total members deficit |
(19,868,741 | ) | (1,940,979 | ) | ||||
|
|
|
|
|||||
Total liabilities and members deficit |
$ | 115,622,802 | $ | 125,566,686 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-29
AGS Capital, LLC
(A limited liability company)
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
Revenues |
||||||||
Gaming revenue |
$ | 41,956,943 | $ | 41,175,810 | ||||
Gaming revenueother |
799,384 | 2,927,393 | ||||||
Equipment sales |
1,226,197 | 696,713 | ||||||
|
|
|
|
|||||
Total revenues |
43,982,524 | 44,799,916 | ||||||
|
|
|
|
|||||
Operating expenses |
||||||||
Gaming operating expenses |
6,518,510 | 9,634,630 | ||||||
Cost of equipment sales |
777,145 | 281,465 | ||||||
Loss on disposition of assets |
775,427 | 463,984 | ||||||
General and administrative |
12,496,688 | 10,768,040 | ||||||
Selling and marketing |
2,537,615 | 2,544,003 | ||||||
Phantom unit compensation |
463,018 | 653,596 | ||||||
Impairment of long lived assets |
3,364,090 | | ||||||
Impairment of intangibles |
1,390,500 | | ||||||
Impairment of goodwill |
| 18,678,970 | ||||||
Write downs and other charges |
202,500 | 3,585,939 | ||||||
Depreciation and amortization |
21,715,919 | 21,332,495 | ||||||
|
|
|
|
|||||
Total operating expenses |
50,241,412 | 67,943,122 | ||||||
|
|
|
|
|||||
Loss from operations |
(6,258,888 | ) | (23,143,206 | ) | ||||
Other expense (income) |
||||||||
Interest expense |
13,167,623 | 5,988,973 | ||||||
Interest income |
(1,268,241 | ) | (307,448 | ) | ||||
Other income |
(253,530 | ) | (173,534 | ) | ||||
|
|
|
|
|||||
Net loss |
(17,904,740 | ) | (28,651,197 | ) | ||||
Foreign currency translation adjustment |
(23,022 | ) | 55,117 | |||||
|
|
|
|
|||||
Total comprehensive loss |
$ | (17,927,762 | ) | $ | (28,596,080 | ) | ||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-30
AGS Capital, LLC
(A limited liability company)
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended
September 30, |
||||||||
2013 | 2012 | |||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | (17,904,740 | ) | $ | (28,651,197 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities |
||||||||
Depreciation and amortization |
21,715,919 | 21,332,495 | ||||||
Accretion of contract rights under development agreements and customer agreements |
2,968,198 | 3,034,971 | ||||||
Amortization of deferred loan costs and discount |
1,864,461 | 1,005,423 | ||||||
Provision for bad debts |
(173,605 | ) | (95,572 | ) | ||||
Payment in kind for interest on development loan |
(426,003 | ) | | |||||
Interest income from imputed interest |
(78,290 | ) | (266,057 | ) | ||||
Loss on disposition of assets |
775,427 | 463,984 | ||||||
Impairment of long lived assets |
3,364,090 | | ||||||
Impairment of intangibles |
1,390,500 | | ||||||
Impairment of goodwill |
| 18,678,970 | ||||||
Non-cash contract rights under development agreements |
(152,631 | ) | (81,707 | ) | ||||
Write off of deferred loan costs |
| 3,010,939 | ||||||
Phantom unit plan compensation |
463,018 | 653,596 | ||||||
Changes in assets and liabilities that relate to operations |
||||||||
Decrease in restricted cash |
100,000 | | ||||||
Decrease in trade accounts receivable and notes receivable |
951,311 | 1,086,559 | ||||||
Decrease (increase) in inventories, net |
668,257 | (2,569,539 | ) | |||||
Decrease (increase) in prepaid expenses |
172,949 | (626,717 | ) | |||||
Increase in deposits and other |
(745,467 | ) | (1,147,010 | ) | ||||
Decrease in other assets, non-current |
35,085 | | ||||||
Increase (decrease) increase in accounts payable and accrued liabilities |
346,576 | (3,402,646 | ) | |||||
Decrease in due to related party |
(66,436 | ) | | |||||
(Decrease) increase in accrued interest |
(14,479 | ) | 1,730,764 | |||||
Decrease in customer deposits on gaming machine leases |
(421,565 | ) | | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
14,832,575 | 14,157,256 | ||||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Advances under notes receivable |
(1,460,165 | ) | (4,150,000 | ) | ||||
Collections under notes receivable |
1,061,515 | 2,796,803 | ||||||
Increase in interest receivable |
(786,734 | ) | | |||||
Increase in Canadian tax receivable |
(717,984 | ) | (825,998 | ) | ||||
Payments received for Canadian tax receivable |
| 1,180,384 | ||||||
Purchases of intangible assets |
(2,451,218 | ) | (22,032,382 | ) | ||||
Software development and other |
(3,559,722 | ) | (3,342,310 | ) | ||||
Proceeds from disposition of assets |
171,404 | 78,899 | ||||||
Purchases of gaming equipment, vehicles and other equipment |
(11,954,225 | ) | (12,886,598 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(19,697,129 | ) | (39,181,202 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Member contributions |
| 50,687,518 | ||||||
Payments under notes payable |
(369,943 | ) | (443,995 | ) | ||||
Borrowings under bank credit facility |
7,500,000 | 109,800,000 | ||||||
Repayments on bank credit facility |
| (130,625,738 | ) | |||||
Payment of deferred loan costs |
(341,965 | ) | (7,868,393 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
6,788,092 | 21,549,392 | ||||||
Effect of exchange rates on cash and cash equivalents |
151,889 | (176,402 | ) | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
2,075,427 | (3,650,956 | ) | |||||
Cash and cash equivalents, beginning of period |
6,545,282 | 10,786,609 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 8,620,709 | $ | 7,135,653 | ||||
|
|
|
|
|||||
Supplemental cash flow informationCash paid during the period for interest |
$ | 11,290,625 | $ | 3,252,786 | ||||
|
|
|
|
|||||
Supplemental schedule of noncash investing and financing activities |
||||||||
Capital expenditures funded by settlement of customer receivable |
$ | 844,035 | | |||||
Lease incentive intangible related to discounted notes receivable |
$ | 155,965 | |
The accompanying notes are an integral part of these consolidated financial statements.
F-31
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
1. Organization and Business
AGS Capital, LLC (the Company) was formed in Delaware on September 8, 2005. The Company is a limited liability company with the following owned subsidiaries, AGS LLC (AGS), AGS Partners, LLC (Partners), AGS Illinois LLLP (AGS IL) and American Gaming Systems Toronto, Ltd., f/k/a GTNA Solutions Corp. (collectively, AGS Toronto). The Company is a subsidiary of AGS Holdings, LLC which is a subsidiary of Alpine AGS, LLC. Although formed on September 8, 2005, the Company had no activity until September 20, 2005, the date Companys wholly owned subsidiary, AGS LLC, acquired assets of Clapper Enterprises, Inc. and Worldwide Game Technology Corp. The Company operates in a single business segment and is a designer, manufacturer, distributor and operator of Class II and Class III gaming machines located in Native American and other gaming facilities. Capitals gaming systems are typically provided to customers under revenue-sharing arrangements, but are also sold outright directly to customers. The Company offers content for its gaming systems that has been designed and developed by the Company, as well as game themes it has licensed from others. Partners was formed on June 22, 2006, and on June 29, 2006, Partners acquired certain assets of Aurora Gaming, Inc., Integrity Gaming, Inc. and Integrity Gaming Nevada, LLC (Integrity). BOL Finance, LLC (BOL) was formed by the Company on August 8, 2008, to finance distributors operating in Louisiana. It was capitalized through a note payable to the Company. AGS Toronto was formed on July 11, 2008, and capitalized through debt and equity contributions from the Company. AGS Toronto acquired certain assets of Gametronics, Inc. and Phone-Sweeps, Inc. on November 10, 2008. BOL was dissolved during 2011.
Proposed Acquisition by AP Gaming Acquisition, LLC
On September 16, 2013, the Company entered into an Equity Purchase Agreement (the Acquisition Agreement) by and among the Company and AP Gaming Acquisition, LLC, an affiliate of Apollo Management VIII, L.P. (Apollo) for an aggregate purchase price of approximately $221.9 million. The Acquisition Agreement provides that Apollo will purchase 100% of the equity of AGS Capital, LLC from AGS Holdings, LLC.
The Agreement contains certain termination rights for both parties and under specific circumstances each party might be required to pay the counterparty a termination fee. The Agreement contains certain limitations on the operations of the Company during the period prior to the close of the transaction.
Consummation of the Acquisition Agreement is subject to customary conditions, including without limitation (i) the expiration or early termination of the waiting period applicable to the consummation of the proposed Acquisition Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended (the HSR Act) (which waiting period expired as of 11:59 p.m. EDT on October 23, 2013 with no action by the Federal Trade Commission or the Department of Justice), (ii) the receipt of specified licenses, permits, and other approvals relating to AP Gaming Acquisition, LLC issued by certain governmental authorities, (iii) the successful financing by AP Gaming Acquisition, LLC and its affiliates to consummate the Acquisition Agreement, (iv) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits the proposed Acquisition Agreement, (v) the accuracy of the representations and warranties of the parties and compliance by the parties with their respective obligations under the Acquisition Agreement (subject to customary materiality qualifiers) and (vi) the absence of any change, effect, development or circumstance that, individually or in the aggregate, constitutes or is reasonably likely to constitute a Company Material Adverse Effect (as defined in the Acquisition Agreement).
F-32
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
During the nine months ended September 30, 2013, the Company incurred approximately $0.5 million of expenses related to the Acquisition Agreement. These expenses consisted primarily of payments to financial advisors and consultation with legal counsel, and were recorded in general and administrative expense.
No assurance can be given that the Agreement will be completed; however the transaction is anticipated to close in late 2013 or early 2014 depending on timing of various regulatory approvals required throughout the United States necessary to close the transactions and satisfaction of other closing conditions. The expectation is that the current $130 million senior secured credit agreement entered into on August 15, 2012 and further amended on April 16, 2013 will be repaid in full upon the close of the transaction.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of AGS Capital, LLC and its wholly owned subsidiaries, AGS, Partners, BOL and GTNA. All significant intercompany transactions and balances have been eliminated in the consolidation. In managements opinion, all adjustments (which include normal recurring adjustments) necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented have been made.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make decisions based upon estimates, assumptions, and factors considered relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of the estimates and assumptions. Accordingly, actual results could differ materially from those anticipated.
Revenue Recognition
The majority of the Companys gaming revenue is of a recurring nature and is generated by providing customers with gaming terminals, gaming terminal content licenses and back-office equipment, which are collectively referred to as gaming equipment, under participation arrangements. Under these arrangements, the Company retains ownership of the gaming equipment installed at customer facilities, and receives revenue based on a percentage of the win per day generated by the gaming equipment. Certain arrangements require a portion of the facilities win per day to be set aside to be used to fund facility-specific marketing, advertising, promotions and service. These amounts are offset against revenue. Licensing revenue generated from the use of the Companys software is recognized when earned and reported.
Revenues from the stand-alone product sales or separate accounting units are recorded when:
| Persuasive evidence of an arrangement exists; |
| The sales price is fixed and determinable; |
| Delivery has occurred and services have been rendered; and |
| Collectability is probable. |
F-33
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
The Company believes that the sale of its machines, and installation, training, service and removal thereof do not meet all the criteria in ASC 605-25-25-5. The Company believes the criteria in paragraph 5(a) is met because its customers buy gaming machines of similar functionality and configuration from other suppliers in the Companys industry, while the Company believes the criteria in paragraph 5(c) is not met because it does not offer a general right of return and installation and training is performed typically or within a day of the delivery of the machine to the customer. The majority of the Companys lease agreements includes a requirement for the Company to service games should failures occur. The cost related to the servicing of these machines is expensed as incurred and is not significant compared to the total revenue generated from the lease contract. Further, the Company does not offer the servicing of machines (i.e., extended warranties) as a separate deliverable to customers as a matter of practice.
Cash and Cash Equivalents
Cash and equivalents consist primarily of deposits held at major banks and other marketable securities with original maturities of 90 days or less.
Restricted Cash
Restricted cash amounts represent funds held in escrow as collateral for the Companys surety bonds for various gaming authorities.
Notes Receivable and Development Agreements
The Company enters into development agreements to provide financing for new tribal gaming facilities, or for the expansion of existing facilities. In return, the customer commits to a fixed number of gaming terminal placements in the facility, and the Company receives a fixed percentage of those gaming terminals win per day over the term of the agreement or a daily fee per gaming terminal. Certain agreements contain performance standards for the gaming terminals that could allow the facility to reduce a portion of the guaranteed floor space. The agreements typically provide for a portion of the amounts retained by the gaming facility for their share of the win to be used for repayment of some or all of the advances. Amounts advanced in excess of those reimbursed by the customer for real property and land improvements are allocated to intangible assets and amortized over the life of the contract. Interest income related to notes receivables is recorded as interest income in the statement of operations and comprehensive loss.
Generally, the Company utilizes the term of a contract to amortize the intangible assets associated with development agreements. The Company reviews the carrying value of these contract rights at least annually, or whenever changes in circumstances indicate the carrying value of these assets may not be recoverable. While management believes that the estimates and assumptions used in evaluating the carrying value of these assets are reasonable, different assumptions could materially affect either the carrying value or the estimated useful lives of the contract rights.
The Company assesses the impairment of notes and development agreements receivables whenever events or changes in circumstances indicate the carry value may not be realized. Impairment is measured based on the present value of the expected future cashflows and is recorded as bad debt expense in the period of assessment.
F-34
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts related to the accounts receivable and notes receivable that have been deemed to have a high risk of collectability. The Company reviews the accounts receivable and notes receivable on a monthly basis to determine if any receivables will potentially be uncollectible. The Company analyzes historical collection trends and changes in the customers payment patterns, customer concentration, and credit worthiness when evaluating the adequacy of the allowance for doubtful accounts. A large percentage of receivables are with Native American tribes that have their reservations and gaming operations in the state of Oklahoma, and the Company has concentrations of credit risk with several tribes. The Company includes any receivable balances that are determined to be uncollectible in the overall allowance for doubtful accounts. Changes in the assumptions or estimates reflecting the collectability of certain accounts could materially affect the allowance for both trade and notes receivable.
Inventories
Inventories consist primarily of parts and supplies that are used to repair and maintain machinery and equipment. Inventories are stated at the lower of cost or market. Cost of inventories is determined using the first-in, first-out (FIFO) method for all components of inventory. The Company regularly reviews inventory quantities and update estimates for the net realizable value of inventories. This process includes examining the carrying values of parts and ancillary equipment in comparison to the current fair market values for such equipment (less costs to sell or dispose). Some of the factors involved in this analysis include the overall levels of the inventories, the current and projected sales levels for such products, the projected markets for such products and the costs required to sell the products, including refurbishment costs. Changes in the assumptions or estimates could materially affect the inventory carrying value.
Gaming Equipment, Vehicles and Other Equipment
The cost of gaming equipment, consisting of fixed-base player terminals, file servers and other support equipment as well as vehicles and other equipment, is depreciated over their estimated useful lives, generally using the straight-line method for financial reporting. Repairs and maintenance costs are expensed as incurred. The Company annually evaluates the estimated lives used to depreciate assets. The estimated useful lives are as follows:
Gaming equipment deployed | 4 to 5 years | |
Vehicles and other equipment | 3 to 7 years |
The Company measures recoverability of assets to be held and used by comparing the carrying amount of an asset to future cash flows expected to be generated by the asset whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Companys policy is to provide reserves, when necessary, for excess or obsolete gaming terminals on hand that it does not expect to be used. Reserves are based upon several factors, including estimated forecast of gaming terminal demand for placement into casinos. While the Company believes that the estimates and assumptions used in evaluating the carrying amount of these assets are reasonable, different assumptions could affect either the carrying amount or the estimated useful lives of the assets, which could have a significant impact on the results of operations and financial condition. The Company recognized an impairment charge for obsolete gaming terminals of $3,364,090 and $0 for the nine months ending September 30, 2013 and 2012, respectively.
F-35
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
Intangible Assets
The Company reviews its identifiable definite-lived intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized for long-lived assets and identifiable intangibles, other than goodwill, when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount.
The Company recognized an impairment charge of $1,390,500 for the nine months ended September 30, 2013. The amount relates to a lease incentive associated with a long-term lease with a gaming operator in Illinois entered into in 2010 for which the lease was amended in September 2013. We did not record an impairment charge in the nine months ended September 30, 2012.
Goodwill
The Company is required to perform an annual goodwill impairment review, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when its carrying amount exceeds its estimated fair value. Goodwill is reviewed for possible impairment annually on September 30 of each year or more frequently whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, or a loss of key personnel. During the Companys impairment testing for the nine months ended September 30, 2012, the Company recorded an impairment charge of $18,678,970 which amounted to the entire balance of goodwill. The impairment is a result of the combination of an increase in our weighted average cost of capital primarily related to the increased interest rate related to the 2012 UBS debt and reduced projected revenue within our long-term operating plan. No impairment was recorded for the nine months ending September 30, 2013.
Customer Deposits on Gaming Machine Leases
The Company held deposits totaling $0 and $421,565 at September 30, 2013 and December 31, 2012, respectively from third- party distributors as deposits on gaming machines leases. In September 2013, the Company recognized the remainder of the deposit as other income.
Accounting for Income Taxes
The Company is a limited liability company treated as a disregarded entity for federal and state income tax purposes. As a result, any federal (and most state) items of income or loss, and any income tax credits, are passed through to our ultimate owner for inclusion in its individual income tax returns. Prior to March 2010, the Company was a partnership for federal and state income tax purposes. Accordingly, no provision for federal or state income taxes is included in the consolidated financial statements. However, the Company is subject to certain foreign income taxes incurred by its Canadian subsidiary.
The Companys tax returns are subject to examination by federal and state authorities. If such examinations occur and result in changes with respect to any partnership qualifications or changes to distributable income or loss, the tax liability of the members may be changed accordingly.
F-36
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
Costs of Computer Software
Internally developed gaming software is accounted for under FASB ASC Topic 985-20, Costs of Software to Be Sold, Leased or Marketed, and is stated at cost, which is amortized over the estimated useful lives of the software, generally using the straight-line method. Software development costs are capitalized once technological feasibility has been established and are amortized when the software is placed into service. Any subsequent software maintenance costs, such as bug fixes and subsequent testing, are expensed as incurred. Discontinued software development costs are expensed when the determination to discontinue is made.
Research and Development
The Company conducts research and development activities primarily to develop new gaming platforms and gaming content. These research and development costs consist primarily of salaries and benefits and are expensed as incurred. Once the technological feasibility of a project has been established, capitalization of development costs begins until the product is available for general release.
Contingencies
The Company assesses its exposures to loss contingencies including claims and legal proceedings and accrues a liability if a potential loss is considered probable and the amount can be estimated. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, if the actual loss from a contingency differs from managements estimate, there could be a material impact on the results of operations or financial position. Operating expenses, including legal fees, associated with contingencies are expensed when incurred.
Foreign Currency Translation
The financial statements of the Companys Canadian subsidiary are translated into U.S. dollars at the year-end rate of exchange for asset and liability accounts and the average rate of exchange for income statement accounts. The effects of these translations are recorded as a component of other accumulated comprehensive loss in members deficit.
New Accounting Standards
On January 1, 2013, we adopted Accounting Standards Update (ASU) 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income . This ASU requires the disclosure of changes to accumulated other comprehensive income to be presented by component on the face of the financial statements or in a separate note to the financial statements. This ASU also requires the disclosure of significant items reclassified out of accumulated other comprehensive income to net income during the period either on the face of the financial statements or in a separate note to the financial statements. See Note 13.
F-37
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
2. Notes Receivable
At September 30, 2013 and December 31, 2012, notes receivable consisted of the following:
2013 | 2012 | |||||||
Note A |
$ | | $ | 671,032 | ||||
Note B |
760,839 | 1,059,907 | ||||||
Note C |
9,818,168 | 8,932,000 | ||||||
Note D |
1,049,869 | 1,049,869 | ||||||
Note E |
844,035 | | ||||||
Other, net |
503,497 | 729,307 | ||||||
|
|
|
|
|||||
Total notes receivable, net |
12,976,408 | 12,442,115 | ||||||
Less: Current portion |
(1,158,685 | ) | (2,394,149 | ) | ||||
|
|
|
|
|||||
Notes receivablelong term |
$ | 11,817,723 | $ | 10,047,966 | ||||
|
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|
|
Note A
On June 14, 2007, the Company committed to a significant, existing tribal customer to provide $18,750,000 for part of the funding for a facility expansion. In return, the Company received the right to approximately 10% of the additional 4,000 gaming units expected to be placed in the expanded facility. The agreement allows the customer to buy out the Companys right to floor space after the note has been repaid. The Company advanced its total commitment of $18,750,000 in 2007. On September 4, 2008, the agreement was amended to reduce the development funding from $18,750,000 to $9,375,000 in return for a reduction in the number of gaming units to be placed in the facility, from 10% of total expected units to 5%. The Company paid $150,000 to modify the agreement and was repaid $9,375,000 in 2008. In addition, the Company recorded a $532,980 loss in 2008 on restructuring of the note receivable that was due primarily from the difference in value between the unamortized intangible asset and the unearned discount for the receivable at the time that the agreement was restructured. The amended development agreement specifies that the note receivable will be repaid out of net profits, as defined in the agreement, in excess of $9,000,000 per month. As the collections on the note are received and the expected timing of the payments is re-evaluated, the imputed interest rate earned is evaluated and may change. As of May 2013 the note has been repaid in full. The Company recorded $45,726 and $185,485 of imputed interest during the nine months ended September 30, 2013 and September 30, 2012, respectively. As of September 30, 2013 and December 31 2012, the balance of the note receivable has been reduced by an unamortized discount of $0 and $45,726, respectively.
Note B
On September 20, 2010, the Company entered into a development agreement and committed $1,455,250 to an existing tribal customer to provide part of the funding for the development and construction of a gaming facility in Oklahoma. In return, the Company received the right to approximately 20% of the new square footage of all Available Gaming Floor Space in the Project, as defined, provided that in no event the Company will have no more or less than 50 gaming units for a period of six years and eleven months subject to certain performance criteria, as defined. The agreement allows the customer to buy out the Companys right to floor space after the note has been repaid. The amended development agreement specifies that the note receivable will be repaid out of the Net Profits, as defined in the agreement, in excess of $500,000 per month. As the collections on the note
F-38
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
are received and the expected timing of the payments is re-evaluated, the imputed interest rate earned is evaluated and may change. Based upon the trend of collections to date and expected future collection, the imputed interest rate approximates 4.65%. The Company recorded $32,564 and $58,601 of imputed interest during the nine month ended September 30, 2013 and September 30, 2012, respectively. As of September 30, 2013 and December 31, 2012, the balance of the note receivable has been reduced by an unamortized discount of $17,696 and $50,261, respectively.
Note C
On December 15, 2010 and further amended on November 17, 2011 and December 8, 2011, the Company entered into an agreement to loan funds not to exceed $2,250,000 with a company that operates and services slot routes in Illinois. As of December 31, 2011, the Company has fully funded the loan under this agreement. Full funding of the loan was predicated on the route operator acquiring the rights to place VGTs at a minimum of 135 locations pursuant to Use Agreements, as defined. On March 6, 2012, the Company executed an Amended and Restated Loan Agreement (Restated Loan) with the holder of Note C. The Restated Loan provides for a Route Acquisition Tranche of $4,650,000 and an operational tranche of $750,000. The Restated Loan was amended July 25, 2012 to increase the operational tranche to $950,000. On October 25, 2012 the Company assumed a loan agreement of $1,864,500 from a related party. On December 20, 2012, the Company extended a second operational tranche for $1,417,500 and as well as the Vault Promissory Note for $467,500, which was amended on March 6, 2013 and increased to $510,165, for funds to acquire certain route equipment.
Interest is payable at a rate of 13% or 15% for various notes, on the outstanding balance until the note matures on dates ranging from March 9, 2016 to December 31, 2016. Repayment of the note principal and interest will be in monthly installments and will begin at various dates. The Company is recognizing interest income on percentage basis of live units to expected total deployments.
On February 1, 2013 the Company entered into an intercreditor agreement that subordinates all principal amounts owed under each note to a third party as well as requires all interest payments are made in-kind until the first lien obligation is paid in full, which currently can be a maximum amount of $6,000,000.
As of September 30, 2013 the Company determined that the loan assumed from a third party for $1,864,500 was impaired due to a decrease in the original interest rate from 15% to 13% and recorded a $130,303 allowance against the loan balance. See Note 14 for more information on the change to the notes.
Note D
On January 12, 2011 and March 10, 2011, the Company loaned $864,000 and $185,869, respectively, in exchange for promissory notes to an entity. Interest is payable at a rate of 13%. Repayment of principal and interest is based on excess operational cash flow of the borrower and begins the month after the first game was available for public use. All accrued and unpaid interest prior to the first payment of principal must be paid on this day as well. The Company is recognizing interest income on percentage basis of live units to expected total deployments. The Company retains a claim on the general assets of the entity as collateral.
On March 30, 2012, the holder of Note C entered into a management agreement with the holder of Note D to manage the routes acquired by the holder of Note D. As part of that agreement, the holder of Note C assumed
F-39
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
September 30, 2013 and 2012
the holder of Note Ds obligation to the Company through the execution of a Loan Assumption and Release Agreement dated March 30, 2012.
On February 1, 2013 the Company entered into an intercreditor agreement that subordinates all principal amounts owed under each note to a third party as well as requires all interest payments are made in-kind until the first lien obligation is paid in full, which currently can be a maximum amount of $6,000,000.
Note E
On September 27, 2013 the Company loaned $1,000,000 to a company that operates and service slot routes in Illinois in part to pay off 100 gaming machines that were financed with third parties, with the remainder utilized to fund a cash payment to settle current receivables to the Company. The gaming machines were in turn transferred to the Company as partial settlement of outstanding receivables in conjunction with amended lease and equipment agreements. The note carries a 2% per annum simple interest rate and has monthly payments of principal and interest in equal amounts amortized over the 36 month life of the loan. The note is collateralized by a $1,000,000 letter of credit issued by a bank. As of September 30, 2013, the balance of the note receivable has been reduced by an unamortized discount of $155,965.
Other Notes Receivable
Other notes receivable represent arrangements with other customers related to the Companys advances for the construction and development of casino expansions or the Companys financing of the sale of gaming machines to customers. Interest rates and maturities of the notes vary as do principal and interest payments. The Company assesses collectability under these agreements and reserves for estimated uncollectible amounts.
The Companys notes receivable are reviewed monthly, at a minimum, for impairment. The Company also reviews a variety of other relevant qualitative information such as collection experience, economic conditions and specific customer financial conditions to evaluate credit risk in recording the allowance for notes receivable or as an indicator of an impaired loan. The Company accrues interest, if applicable, on its notes receivables per the terms of the agreement. Interest is not accrued on past due notes receivable, or individual amounts that the Company has determined and specifically identified as not collectible.
The following tables detail our evaluation of notes receivable for impairment:
Notes Receivable
as of September 30, 2013 |
Notes Receivable
as of December 31, 2012 |
|||||||||||||||||||||||||||||
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
|||||||||||||||||||||||||
Notes receivable, current |
$ | 1,158,685 | $ | 1,158,685 | $ | | $ | 2,394,149 | $ | 1,488,050 | $ | 906,099 | ||||||||||||||||||
Notes receivable, non-current |
11,817,723 | 949,686 | 10,868,037 | 10,494,740 | 1,418,970 | 9,075,770 | ||||||||||||||||||||||||
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|
|
|
|
|||||||||||||||||||
Total |
$ | 12,976,408 | $ | 2,108,371 | $ | 10,868,037 | $ | 12,888,889 | $ | 2,907,020 | $ | 9,981,869 | ||||||||||||||||||
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F-40
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements
September 30, 2013 and 2012
The activity related to the allowance for notes receivable for the nine-months ended September 30, 2013 is as follows:
Allowance for Notes Receivables
Nine-months Ended September 30, 2013 |
|||||||||||||||||||||||||||||||||||
Beginning
Balance |
Charge-offs | Recoveries | Provision |
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
|||||||||||||||||||||||||||||
Notes receivable, current |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||||||
Notes receivable, non-current |
446,774 | (422,745 | ) | | | 24,029 | 24,029 | | |||||||||||||||||||||||||||
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|
|
||||||||||||||||||||||
$ | 446,774 | $ | (422,745 | ) | $ | | $ | | $ | 24,029 | $ | 24,029 | $ | | |||||||||||||||||||||
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|
The activity related to the allowance for notes receivable for the nine months ended September 30, 2012 is as follows:
Allowance for Notes Receivables
Nine-Months Ended September 30, 2012 |
|||||||||||||||||||||||||||||||||||
Beginning
Balance |
Charge-offs | Recoveries | Provision |
Ending
Balance |
Ending
Balance Individually Evaluated For Impairment |
Ending
Balance Collectively Evaluated For Impairment |
|||||||||||||||||||||||||||||
Notes receivable, current |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||||||
Notes receivable, non-current |
8,876,202 | (8,872,513 | ) | | | 3,689 | 3,689 | | |||||||||||||||||||||||||||
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$ | 8,876,202 | $ | (8,872,513 | ) | $ | | $ | | $ | 3,689 | $ | 3,689 | $ | | |||||||||||||||||||||
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The following summarizes the aging of past due note receivables as of September 30, 2013:
1 to 90
Days Past Due |
91 to 180
Days Past Due |
181+ Days
Days Past Due |
Total Past
Due |
Current |
Total
Receivable |
Recorded
Investment in Receivables on Nonaccrual Status |
Recorded
Investment 90 Days and Accruing |
|||||||||||||||||||||||||||||||||
Notes receivable |
$ | 4,375 | $ | | $ | 24,039 | $ | 28,414 | $ | 12,972,034 | $ | 13,000,448 | $ | 24,039 | $ | | ||||||||||||||||||||||||
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The following summarizes the aging of past due note receivables as of December 31, 2012:
1 to 90
Days Past Due |
91 to
180 Days Past Due |
181+ Days
Days Past Due |
Total Past
Due |
Current |
Total
Receivable |
Recorded
Investment in Receivables on Nonaccrual Status |
Recorded
Investment 90 Days and Accruing |
|||||||||||||||||||||||||||||||||
Notes receivable |
$ | 17,754 | $ | 14,423 | $ | 423,762 | $ | 455,939 | $ | 12,432,950 | $ | 12,888,889 | $ | 455,938 | $ | | ||||||||||||||||||||||||
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The aging of note receivable balances are based on their contractually agreed upon payment terms.
F-41
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
The impaired loan balance as of September 30, 2013 is as follows:
Recorded
Investment |
Unpaid
Principal Balance |
Related
Allowance |
Average
Recorded Investment |
Interest
Income Recognized |
|||||||||||||||||||||
With allowance recorded: |
|||||||||||||||||||||||||
Notes receivables |
$ | 24,039 | $ | 24,039 | $ | (24,039 | ) | $ | 24,039 | $ | | ||||||||||||||
Without allowance recorded: |
|||||||||||||||||||||||||
Notes receivable |
| | | | | ||||||||||||||||||||
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$ | 24,039 | $ | 24,039 | $ | (24,039 | ) | $ | 24,039 | $ | | |||||||||||||||
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The impaired loan balance as of December 31, 2012 is as follows:
Recorded
Investment |
Unpaid
Principal Balance |
Related
Allowance |
Average
Recorded Investment |
Interest
Income Recognized |
|||||||||||||||||||||
With allowance recorded: |
|||||||||||||||||||||||||
Notes receivables |
$ | 443,085 | $ | 443,085 | $ | (443,085 | ) | $ | 439,150 | $ | 29,235 | ||||||||||||||
Without allowance recorded: |
|||||||||||||||||||||||||
Notes receivable |
| | | | | ||||||||||||||||||||
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$ | 443,085 | $ | 443,085 | $ | (443,085 | ) | $ | 439,150 | $ | 29,235 | |||||||||||||||
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3. Contract rights under development agreements and customer agreements
The Company enters into development agreements and placement fee agreements with certain customers to secure floor space under lease agreements for its gaming machines. Amounts paid in connection with the development agreements are repaid to the Company in accordance with the terms of the agreement, whereas placements fees are not reimbursed. Placement fees can be in the form of cash paid upfront or free lease periods and are accreted over the life of the contract and the expense is recorded as a reduction of revenue. For the nine months ended September 30, 2013 and 2012, $2,968,198 and $3,034,971, respectively, were recorded as a reduction of revenue as accretion of contract rights under development agreements and customer agreements.
4. Gaming Equipment, Vehicles and Other Equipment
Gaming equipment, vehicles and other equipment consist of the following at September 30, 2013 and December 31, 2012:
2013 | 2012 | |||||||
Gaming equipment |
$ | 82,878,511 | $ | 77,559,874 | ||||
Vehicles and other equipment |
14,057,381 | 12,988,667 | ||||||
Less: Accumulated depreciation |
(59,680,454 | ) | (50,281,178 | ) | ||||
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$ | 37,255,438 | $ | 40,267,363 | |||||
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F-42
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
In September 2013, the Company reached an agreement with a company that operates and service slot routes in Illinois to settle outstanding lease fees owed. As a condition of the agreement, 100 gaming machines were transferred to the Company as a partial settlement of the receivable. The Company has estimated the value of the machines at $844,035, pending a third party appraisal, which is reflected in the amounts presented above.
In September 2013, the Company recognized an impairment charge for obsolete gaming terminals of $3,364,090.
Gaming equipment, vehicles and other equipment are depreciated over the respective useful lives of the assets ranging from three to seven years. Depreciation expense was $11,505,379 and $9,827,534 for the nine months ended September 30, 2013 and September 30, 2012, respectively.
5. Goodwill and Intangibles
As of September 30, 2013 and December 31, 2012, the Companys intangible assets consisted of the following:
2013 | 2012 | |||||||||||||||||||||||
Gross
Value |
Accumulated
Amortization |
Net
Carrying Value |
Gross
Value |
Accumulated
Amortization |
Net
Carrying Value |
|||||||||||||||||||
Contract rights under development agreements |
$ | 20,498,476 | $ | (16,054,782 | ) | $ | 4,443,694 | $ | 20,188,400 | $ | (14,462,485 | ) | $ | 5,725,915 | ||||||||||
Customer relationships |
32,222,850 | (32,222,850 | ) | | 32,222,850 | (31,634,026 | ) | 588,824 | ||||||||||||||||
Customer agreement |
9,813,933 | (4,989,830 | ) | 4,824,103 | 9,837,300 | (3,589,917 | ) | 6,247,383 | ||||||||||||||||
Covenants not to compete |
525,559 | (525,374 | ) | 185 | 525,745 | (524,692 | ) | 1,053 | ||||||||||||||||
Third party licenses |
28,818,500 | (14,274,984 | ) | 14,543,516 | 28,818,500 | (7,818,902 | ) | 20,999,598 | ||||||||||||||||
Internally developed gaming software |
21,746,366 | (16,897,744 | ) | 4,848,622 | 18,547,767 | (14,640,132 | ) | 3,907,635 | ||||||||||||||||
Purchased software |
10,480,066 | (7,808,644 | ) | 2,671,422 | 9,658,842 | (7,485,229 | ) | 2,173,613 | ||||||||||||||||
Goodwill |
| | | | | | ||||||||||||||||||
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$ | 124,105,750 | $ | (92,774,208 | ) | $ | 31,331,542 | $ | 119,799,404 | $ | (80,155,383 | ) | $ | 39,644,021 | |||||||||||
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On January 9, 2012, the Company entered into a definitive agreement (the Definitive Agreement) with Bluberi Gaming Technologies, Inc. (Bluberi) pursuant to which the Company agreed to terminate its existing distribution agreement with Bluberi (the Existing Distribution Agreement) and to purchase all of Bluberis right, title and interest in certain game titles covered by the Existing Distribution Agreement (the Bluberi Transaction). In connection therewith, the Company agreed to pay $22.8 million to Bluberi and to enter into a five-year service agreement with Bluberi for which the Company would pay Bluberi a $2.0 million servicing fee paid ratably over the term of the service agreement and a one-time $1.0 million performance-based bonus. According to the Definitive Agreement, $3.5 million was due to Bluberi upon execution of the Definitive Agreement and $19.3 million (the Balance) was due no later than February 28, 2012 subject to certain restrictions as defined. At the Companys option, payment of the $19.3 million could be extended one month by
F-43
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
paying $2.5 million (the First Option Payment) no later than February 28, 2012 and could be extended an additional month by paying $2.5 million (the Second Option Payment) no later than March 31, 2012 with both payments applying to the Balance. On March 27, 2012, an addendum to the Definitive Agreement was executed which eliminated the Second Option Payment and replaced it with payments of $500,000 due March 30, 2012, April 6, 2012, April 13, 2012, April 20, 2012 and April 27, 2012. On May 11, 2012, the Company made its final payment in accordance with the Definitive Agreement and its addendum using proceeds from the capital contribution (see Note 9).
On April 2, 2012, the Company entered into a Letter of Intent to purchase the assets of a video lottery terminal business for a total cash consideration of $5.0 million dollars. $1.8 million of the purchase price would be paid upon the execution of an asset purchase agreement and $3,000,000 would be paid at closing. On April 5, 2012, the Company paid a $200,000 (the Lock-up Fee) to secure a 60-day exclusivity period, to perform due diligence related to the acquisition. The Company also received a license for a game title as consideration for the Lock-up Fee. The payment of the Lock-up Fee is included as part of purchased software on the Companys consolidated financial statements. On May 31, 2012, the Company terminated its Letter of Intent for the acquisition and received a license for an additional game title.
On July 13, 2012, the Company entered into a contract rights under development agreement with a new tribal customer for the right to place Class II games in exchange for a single up-front payment of $640,000. The amount will be amortized over the life of the agreement.
On February 22, 2013, the Company paid a contract renewal fee of $550,000 to extend the lease agreement with its second largest customer. These costs were capitalized as an intangible and amortized over the life of the agreement.
On February 28, 2013, the Company paid a placement fee of $400,000 to renew the agreement with an existing customer. These costs were capitalized as an intangible and amortized over the life of the agreement.
During 2013, the Company has entered into multiple development agreements with various third parties to provide new content or update current content for new markets. Payments are due when certain targets are reached in the development process.
In September 2013, the Company recognized an impairment charge for an intangible related to a lease incentive paid to a company that operates and services slot routes in Illinois of $1,390,500.
Intangibles are amortized over the respective useful lives of the assets ranging from two to ten years. Amortization expense related to intangibles, inclusive of accretion of contract rights under development agreements and customer agreements, was $13,173,505 and $14,539,932 for the nine months ended September 30, 2013 and 2012, respectively.
Amortization expense related to contract rights under development agreements and customer agreements, or accretion of contract rights under development agreements and customer agreements, is netted against gaming revenue in the accompanying statements of operation and other comprehensive loss.
F-44
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
6. Canadian Tax Receivable
Certain Company expenditures incurred through its subsidiary AGS Toronto are eligible for the Ontario Interactive Digital Media Tax Credit (OIDMTC). The OIDMTC is a refundable payroll tax credit paid to corporations that develop interactive digital media products within Ontario. The OIDMTC is based upon the Ontario labor expenditures and eligible marketing and distribution expenditures claimed by a qualifying corporation with respect to eligible products. For a certified game developer, eligible expenses include Ontario salaries and wages. The developer must incur at least $1 million of Ontario labor expenses per year developing eligible interactive digital media games to qualify. The Company has recognized a Canadian Tax Receivable related to the OIDMTC of $3,974,398 and $3,369,905 as of September 30, 2013 and December 31, 2012, respectively. In September 2012, the Company collected $1,180,856 for the 2009 application and filed applications for 2010 and 2011 in May 2013. The application for 2012 was filed in October 2013.
7. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at September 30, 2013 and December 31, 2012 are as follows:
2013 | 2012 | |||||||
Trade accounts payable |
$ | 1,436,900 | $ | 512,100 | ||||
Salary and payroll tax accrual |
1,436,814 | 1,277,822 | ||||||
Accrued commission |
269,810 | 212,803 | ||||||
Accrued other |
2,463,804 | 3,266,308 | ||||||
|
|
|
|
|||||
$ | 5,607,328 | $ | 5,269,033 | |||||
|
|
|
|
8. Long-term Debt
Long-term debt consisted of the following at September 2013 and December 31, 2012:
2013 | 2012 | |||||||
$115 million Initial Term Loan, interest above LIBOR or base rate (11.50% at September 30, 2013), net of unamortized discount of $4.2 million |
$ | 110,758,163 | $ | 110,203,176 | ||||
$15 million Delayed Draw Term Loan, interest above LIBOR or base rate (11.50% at September 30, 2013). |
15,000,000 | 7,500,000 | ||||||
Aristocrat long-term note payable |
78,180 | 448,122 | ||||||
|
|
|
|
|||||
Total debt |
125,836,343 | 118,151,298 | ||||||
LessAmounts due within one year |
(1,703,180 | ) | (382,972 | ) | ||||
|
|
|
|
|||||
Long-term debt |
$ | 124,133,163 | $ | 117,768,326 | ||||
|
|
|
|
On August 15, 2012, the Company entered into a $130 million senior secured credit agreement with UBS Securities, LLC (UBS). Under this credit agreement the Company borrowed $115 million as an Initial Term Loan and utilized the proceeds to repay all amounts outstanding under the May 14, 2007 UBS credit agreement and fund operations. The agreement includes a $15 million Delayed Draw Term Loan commitment, which was fully drawn as of February 15, 2013. The Initial Term Loan and the Delayed Draw Term Loans, collectively the
F-45
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
Term Loans, accrue interest at LIBOR or base rate, at the borrowers election, subject to an interest rate floor plus an applicable margin rate. Aggregate principal amounts of the Term Loans are payable in quarterly installments equal to 1.25% of the outstanding balance beginning September 30, 2014 with the final installment payable at August 15, 2016. The Term Loans are subject to certain financial covenants and other covenants including a total leverage ratio and an interest coverage ratio, as well as limits on capital expenditures. The Company was in compliance with all covenants as of September 30, 2013.
On April 16, 2013, the Company entered into the first amendment to the 2012 UBS credit agreement which, among other items, revised the financial covenant requirements beginning with the first quarter of 2013 extending through the term of the agreement.
9. Related Party Transactions
On June 1, 2009, the Company sold 150 gaming machines and related gaming equipment to the former Chief Executive Officer of the Company, through a $655,060 promissory note, which bears interest at a rate of 8.5% per year, with all interest and principal payable upon maturity at June 1, 2011. Effective November 1, 2011, amounts outstanding under this obligation will be paid through the assigned proceeds from certain game positions currently placed in a Native American casino. Amounts due under this note receivable were $446,623 and $562,146 as of September 30, 2013 and December 31, 2012, respectively.
The Company had other receivables from related parties totaling $1,988,759 at December 31, 2010 which was presented as a contra-equity item within the accompanying consolidated statement of members deficit. The receivable was cancelled in 2011.
During 2010, the Company entered into a separate exclusive distributor agreement with Game Ingenuity (in which a related party is a principal) to place or sell games developed utilizing Game Ingenuity intellectual property into all markets where the Company is licensed or will be licensed within one year from the placement of the first game, or as otherwise mutually agreed between the parties. During 2012 and 2011 the Company has not incurred any expense as part of this agreement.
During 2012 and 2011, the Companys member contributed capital totaling $60.7 million and $13.8 million respectively, to the Company. Approximately $50.7 million of the 2012 contributed capital was utilized to cure debt covenant violations, repay the current obligations of debt (See Note 8), finance the final payment of the Definitive Agreement (See Note 5) and to provide working capital for the Company. $10.0 million of the 2012 contributed capital was a forgiveness of long-term debt to a related party that occurred in August 2012 associated with the Company entering the Initial Term Loan. The entire 2011 contributed capital was utilized to cure debt covenant violations and provide working capital for the Company (See Note 8)
On October 25, 2012 the Company assumed a note receivable which was held by Alpine AGS, LLC in the amount of $1,864,500, as further described in Note 3 for note receivable C.
10. Write Downs and Other Charges
The consolidated statements of operation and comprehensive loss include various non-routine transactions and related party consulting fees. For nine months ended September 30, 2013 write downs and other charges consisted of $202,500, for consulting fees paid to a related party for 2013 offset by a $22,500 refund of debt costs
F-46
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
related to the 2007 UBS debt paid in 2012. For the nine months ended September 30, 2012 write downs and other charges consisted of $3,585,939 of costs related to the write off of debt issues costs related to the 2007 UBS debt agreement and other costs in conjunction with an unsuccessful financing transaction as well as $75,000 for consulting fees paid to a related party.
11. Benefit Plans
The Company has implemented the AGS Holdings Inc. Phantom Units Plan (the Plan) which is intended to reinforce and encourage the continued attention and dedication of certain Covered Executives (as defined) to their assigned duties to the Company until a Change in Control (as defined) has occurred. Units of the Plan have been issued as a percentage and in terms of number of units within the Plan at a strike price of $56,000,000 and vest over a period of up to four years. The value of the units is determined as the product of the percentage held in the Plan and the summation of the enterprise value of the Company less the net debt of the Company less the strike price. The liability associated with the Plan will ultimately be settled for cash; therefore the Company will adjust the liability to its estimated fair value each reporting period through phantom unit compensation in the accompanying consolidated statement of operations. As of September 30, 2013 and 2012, 1055 and 905, respectively, of phantom units were granted which represents 10.55% and 9.05% of the equity value of the Company that exceeds $56,000,000 plus membership contributions as define by the Plan. For the nine months ended September 30, 2013, the Company has assessed the liability of the plan based on estimated purchase price as indicated in the Acquisition Agreement and recorded an expense of $463,018 and $653,596, respectively, which was included in general administrative expense.
On April 1, 2013 the Plan was amended to increase the strike price to $90,000,000 until January 1, 2014 at which time it shall increase to $115,000,000.
12. Commitments and Contingencies
On October 11, 2011, the Company entered into a licensing agreement with Ripleys Entertainment to develop casino games based in the Ripleys Believe it or Not brand. The licensing agreement which, guarantees Ripleys Entertainment $600,000 in royalties, commenced upon the execution of the agreement and will expire on September 30, 2014 subject to one year renewals at the option of the Company. The Company paid a prepaid royalty of $200,000 upon execution of the agreement and in October 2012 an additional $200,000 was advanced under the terms of the agreement.
On May 14, 2012, the Company entered into a licensing agreement with One Three Television, LLC (One Three) to develop casino games based in the Are You Smarter than a 5 th Grader brand. The licensing agreement which, guarantees One Three $400,000 in royalties, will commence May 8, 2012 and expires on December 1, 2017 subject to a two year renewal at the option of the Company. The Company paid a prepaid royalty of $200,000 upon execution of the agreement and in December 2012 an additional $100,000 was advanced under the terms of the agreement.
On October 5, 2012, the Company entered into a licensing agreement with Freemantle Media North America, Inc. (Freemantle) to develop casino games based in the Family Feud brand. The licensing agreement which, guarantees Freemantle $650,000 in royalties, will commence October 5, 2012 and expires on December 31, 2017 subject to a three year renewal at the option of the Company. The Company paid a prepaid royalty of $200,000 upon execution of the agreement.
F-47
AGS Capital, LLC
(A limited liability company)
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2013 and 2012
On February 28, 2013, the Company entered into a licensing and security interest agreement with Pay it Again Poker, LLC to purchase all rights, title and interest in and to Pay it Again Pokers SuperChance Poker trademark and patents. The Company prepaid a $100,000, nonrefundable royalty payment due 15 days after execution of the agreement, with a final non-refundable, minimum royalty payment of $400,000 due on or before December 1, 2013. The trademark and patents are subject to an exclusive license back for all internet rights and other non-slot machine applications.
During 2013, the Company has entered into multiple development agreements with various third parties to provide new content or update current content for new markets. Payments are due when certain targets are reached in the development process.
13. Supplemental Accumulated Other Comprehensive Income Information
Changes in the balance of accumulated other comprehensive income, by component, are presented below:
Currency
Translation Adjustments |
Total | |||||||
At December 31, 2012 |
$ | 524,774 | $ | 524,774 | ||||
Other comprehensive loss |
(23,022 | ) | (23,022 | ) | ||||
|
|
|
|
|||||
At September 30, 2013 |
$ | 501,752 | $ | 501,752 | ||||
|
|
|
|
14. Subsequent Events
In connection with the preparation of its Consolidated Financial Statements as of September 30, 2013, the Company has evaluated subsequent events through December 17, 2013, the date the Consolidated Financial Statements were available to be issued, to determine whether any of these events required recognition or disclosure.
In October 2013, the Company entered into financing agreements to purchase 450 gaming machines from various third party suppliers for lease to a company that operates and service slot routes in Illinois. The agreements require monthly payments of interest and principle and have terms ranging from 24 to 36 months and carry an interest rate from 8.0% to 8.5%.
On November 22, 2013, the route operator referenced in Note C, completed a permanent financing agreement with a third party. As a condition of the financing, the Company received a principal payment of approximately $3 million as payment in full for specific loans. The Company waived all outstanding interest due on these loans through the date of the financing and will record the amount as a lease incentive and amortize the amount over the remaining length of the lease. The remaining notes have been consolidated into a single loan and will accrue interest at 13%. Interest payments will be in kind until such time as the third party debt is paid in full; however monthly amortization payments paid in cash will begin May 2015 and continue through the maturity of the loan.
F-48
Exhibit 3.1
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AP GAMING HOLDCO, INC.
Pursuant to Section 242 of the General Corporation Law of the State of Delaware, AP GAMING HOLDCO, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the GCL ) (the Corporation ), does hereby certify as follows:
FIRST : The present name of the Corporation is AP Gaming Holdco, Inc., which is the name under which the Corporation was originally incorporated; and the date of filing the original Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware is August 30, 2013.
SECOND : Article IV, Section 1 of the Certificate of Incorporation shall be restated in its entirety as follows:
Section 1. Capital Stock . The total number of shares of stock which the Corporation shall be authorized to issue is 30,100,100 shares which shall consist of (a) 100 shares of voting Common Stock, par value $0.01 per share (the Class A Shares ), (b) 30,000,000 shares of non-voting Common Stock, par value $0.01 per share (the Class B Shares and together with the Class A Shares, the Common Stock ) and (c) 100,000 shares of Preferred Stock, par value $0.01 per share ( Preferred Stock ).
THIRD: The provisions of the Certificate of Incorporation of the Corporation as heretofore amended and/or supplemented, and as herein amended, are hereby restated and integrated into the single instrument which is hereinafter set forth, and which is entitled Third Amended and Restated Certificate of Incorporation of AP Gaming Holdco, Inc. without any further amendments other than the amendments herein certified and without any discrepancy between the provisions of the Certificate of Incorporation as heretofore amended and supplemented and the provisions of the said single instrument hereinafter set forth.
FOURTH: The foregoing amendment to the Certificate of Incorporation and the restatement of the Certificate of Incorporation were duly adopted by the sole director of the Corporation through the written consent of the sole director of the Corporation pursuant to Sections 141(f), 242 and 245 of the GCL.
FIFTH: The foregoing amendment to the Certificate of Incorporation and the restatement of the Certificate of Incorporation have been adopted by the sole stockholder of the Corporation through a written action pursuant to Sections 228, 242 and 245 of the GCL.
SIXTH: The foregoing amendment to the Certificate of Incorporation and the restatement of the Certificate of Incorporation were thus duly adopted in accordance with the applicable provisions of Sections 141(f), 228, 242 and 245 of the GCL.
SEVENTH: The Third Amended and Restated Certificate of Incorporation of the Corporation shall be effective upon the filing of this amended and restated certificate of incorporation with the Secretary of State of the State of Delaware.
EIGHTH: The Third Amended and Restated Certificate of Incorporation of the Corporation, as amended and restated herein, shall at the effective time of this amended and restated certificate of incorporation, read as follows:
[Remainder of Page Left Intentionally Blank]
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AP GAMING HOLDCO, INC.
ARTICLE I
The name of the corporation (which is hereinafter referred to as the Corporation ) is: AP Gaming Holdco, Inc.
ARTICLE II
The address of the Corporations registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, County of New Castle. The name of the Corporations registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized and incorporated under the General Corporation Law of the State of Delaware.
ARTICLE IV
Section 1. Capital Stock . The total number of shares of stock which the Corporation shall be authorized to issue is 30,100,100 shares which shall consist of (a) 100 shares of voting Common Stock, par value $0.01 per share (the Class A Shares ), (b) 30,000,000 shares of non-voting Common Stock, par value $0.01 per share (the Class B Shares and together with the Class A Shares, the Common Stock ) and (c) 100,000 shares of Preferred Stock, par value $0.01 per share ( Preferred Stock ).
Section 2. Preferred Stock . The Board of Directors of the Corporation (the Board ) is expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more classes or series, to fix the number of shares constituting such series, and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding) and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations, powers, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by a majority of the entire Board providing for the issuance of such class or series including, without limitation, the authority to provide that any such class or series may be (a) subject to redemption at such time or times and at such price or prices, (b) entitled to receive dividends (which may be cumulative or noncumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series, (c) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation, or (d) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments, all as may be stated in such resolution or resolutions. Notwithstanding the foregoing, the rights of each holder of the Preferred Stock shall be subject at all times to compliance with all gaming and other statutes, laws, rules and regulations applicable to the Corporation and such holder at that time.
Section 3. Common Stock .
(a) Economic Interest . Except as provided in this Article IV , Section 3 , the Class A Shares shall have no economic rights or privileges, including rights in liquidation.
(b) Dividends . The holders of the Class A Shares shall have no right to receive dividends or any other distributions. Subject to the rights of holders of any Preferred Stock, when, as and if, dividends are declared on the Common Stock, whether payable in cash, in property or in securities of the Corporation, the holders of Class B Shares shall be entitled to share equally, share for share, in such dividends.
(c) Liquidation or Dissolution . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of Class B Shares shall receive a pro rata distribution of any remaining assets after payment of or provision for liabilities and the liquidation preference on Preferred Stock, if any.
(d) Voting Rights . The holders of the Class A Shares shall be entitled to one vote per Class A Share on all matters to be voted on by the stockholders of the Corporation, and to the maximum extent permitted by the Delaware General Corporation Law, the holders of the Class B Shares shall have no right to vote on any matter to be voted on by the stockholders of the Corporation (including, without limitation, any election or removal of the directors of the Corporation and any matters for which a separate vote of the Class B Shares might otherwise be required by the Delaware General Corporation Law) and the Class B Shares shall not be included in determining the number of shares voting or entitled to vote on such matters.
(e) Consideration for Shares . The Common Stock and Preferred Stock authorized by this Article IV shall be issued for such consideration as shall be fixed, from time to time, by the Board.
(f) Assessment of Stock . The capital stock of the Corporation, after the amount of the subscription price has been fully paid in, shall not be assessable for any purpose, and no stock issued as fully paid shall ever be assessable or assessed. No stockholder of the Corporation is individually liable for the debts or liabilities of the Corporation.
(g) Cumulative Voting for Directors . No stockholder of the Corporation shall be entitled to cumulative voting of his shares for the election of directors.
(h) Preemptive Rights . No stockholder of the Corporation shall have any preemptive rights.
ARTICLE V
Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized and empowered to make, alter and repeal the By-Laws of the Corporation by a majority vote at any regular or special meeting of the Board or by written consent, subject to the power of the stockholders of the Corporation to alter or repeal any By-Laws made by the Board.
ARTICLE VII
The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation (this Certificate ), and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article.
ARTICLE VIII
Section 1. Elimination of Certain Liability of Directors . A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification.
Section 2. Indemnification and Insurance .
(a) Right to Indemnification . Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a proceeding), by reason of the fact that
he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, to the fullest extent permitted by law, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys fees, judgments, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided , however , that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided , however , that, if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of the Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit . If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by
the Corporation (including its Board, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights . The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of this Certificate, By-Law, agreement, vote of stockholders or disinterested directors or otherwise.
(d) Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.
ARTICLE IX
The name and mailing address of the incorporator is Stephanie H. Lee, c/o Wachtell, Lipton, Rosen & Katz, 51 W. 52 nd Street, New York, NY 10019.
ARTICLE X
Notwithstanding anything to the contrary contained in this Certificate , this Certificate shall be deemed to include all provisions required by the Casino Control Act, N.J.S.A. 5:12-1 et seq., as amended and as may hereafter be amended from time to time (the Casino Control Act ) and to the extent that anything contained herein or in the operating
agreement of the Corporation is inconsistent with the Casino Control Act, the provisions of such Act shall govern. All provisions of the Casino Control Act, to the extent required by law to be stated in this Certificate, are herewith incorporated by reference.
This Certificate shall be generally subject to the provisions of the Casino Control Act and the rules and regulations of the New Jersey Casino Control Commission (the Commission ) promulgated thereunder. Specifically, and in accordance with the provisions of Section 82(d)(7) of the Casino Control Act, N.J.S.A. 5:12-82(d)(7), the Commission shall have the right of prior approval with regard to transfers of membership interests and other interests in the Corporation and any membership interests in the Corporation are held subject to the condition that if a holder thereof is found to be disqualified by the Commission pursuant to the provisions of the Casino Control Act, such holder will dispose of his interest in the Corporation; provided , however , that, notwithstanding any other provision of law to the contrary, nothing herein contained shall be deemed to require a certificate evidencing that any interest in the Corporation bear any legend to this effect. Specifically, and in accordance with the provisions of Section 82(d)(8) of the Casino Control Act, N.J.S.A. 5:12-82(d)(8), the Corporation shall have the absolute right to repurchase, at the market price or the purchase price, whichever is less, any membership interest or other interest in the Corporation, in the event that the Commission disapproves a transfer of such interest in accordance with the provisions of the Casino Control Act. Disqualified holders shall not be entitled (i) to receive any distributions or interest upon any membership interests and other interests in the Corporation; (ii) to exercise, directly or through any trustee or nominee, any right conferred by membership interests and other interests in the Corporation; or (iii) to receive any remuneration in any form from the Corporation for services rendered or otherwise.
IN WITNESS WHEREOF, AP Gaming Holdco, Inc. has caused this Third Amended and Restated Certificate of Incorporation to be duly executed as of February 6, 2014.
AP GAMING HOLDCO, INC. | ||
By: |
/s/ David B. Sambur |
|
Name: | David B. Sambur | |
Title: | Chief Executive Officer |
Exhibit 10.18
FIRST LIEN CREDIT AGREEMENT
Dated as of December 20, 2013,
Among
AP GAMING HOLDINGS, LLC,
as Holdings,
AP GAMING I, LLC,
as Borrower,
THE LENDERS PARTY HERETO,
CITICORP NORTH AMERICA, INC.,
as Administrative Agent,
CITIGROUP GLOBAL MARKETS INC.,
CREDIT SUISSE SECURITIES (USA) LLC,
DEUTSCHE BANK SECURITIES INC.
and
NOMURA SECURITIES INTERNATIONAL, INC.,
as Joint Lead Arrangers and Joint Bookrunners,
CREDIT SUISSE SECURITIES (USA) LLC,
DEUTSCHE BANK SECURITIES INC.
and
NOMURA SECURITIES INTERNATIONAL, INC.,
as Co-Syndication Agents,
and
CREDIT SUISSE SECURITIES (USA) LLC,
DEUTSCHE BANK SECURITIES INC.
and
NOMURA SECURITIES INTERNATIONAL, INC.,
as Co-Documentation Agents
TABLE OF CONTENTS
Page | ||||||
ARTICLE I Definitions |
1 | |||||
Section 1.01 |
Defined Terms | 1 | ||||
Section 1.02 |
Terms Generally | 66 | ||||
Section 1.03 |
Effectuation of Transactions | 66 | ||||
Section 1.04 |
Exchange Rates; Currency Equivalents | 66 | ||||
Section 1.05 |
Timing of Payment or Performance | 67 | ||||
Section 1.06 |
Times of Day | 67 | ||||
ARTICLE II The Credits |
67 | |||||
Section 2.01 |
Commitments | 67 | ||||
Section 2.02 |
Loans and Borrowings | 68 | ||||
Section 2.03 |
Requests for Borrowings | 69 | ||||
Section 2.04 |
Swingline Loans | 69 | ||||
Section 2.05 |
Letters of Credit | 71 | ||||
Section 2.06 |
Funding of Borrowings | 77 | ||||
Section 2.07 |
Interest Elections | 78 | ||||
Section 2.08 |
Termination and Reduction of Commitments | 79 | ||||
Section 2.09 |
Repayment of Loans; Evidence of Debt | 80 | ||||
Section 2.10 |
Repayment of Term Loans and Revolving Facility Loans | 81 | ||||
Section 2.11 |
Prepayment of Loans | 82 | ||||
Section 2.12 |
Fees | 85 | ||||
Section 2.13 |
Interest | 86 | ||||
Section 2.14 |
Alternate Rate of Interest | 87 | ||||
Section 2.15 |
Increased Costs | 87 | ||||
Section 2.16 |
Break Funding Payments | 88 |
i
Section 2.17 |
Taxes | 89 | ||||
Section 2.18 |
Payments Generally; Pro Rata Treatment; Sharing of Set-offs | 93 | ||||
Section 2.19 |
Mitigation Obligations; Replacement of Lenders | 95 | ||||
Section 2.20 |
Illegality | 96 | ||||
Section 2.21 |
Incremental Commitments | 96 | ||||
Section 2.22 |
Defaulting Lender | 106 | ||||
ARTICLE III Representations and Warranties |
108 | |||||
Section 3.01 |
Organization; Powers | 108 | ||||
Section 3.02 |
Authorization | 109 | ||||
Section 3.03 |
Enforceability | 109 | ||||
Section 3.04 |
Governmental Approvals | 110 | ||||
Section 3.05 |
Financial Statements | 110 | ||||
Section 3.06 |
No Material Adverse Effect | 110 | ||||
Section 3.07 |
Title to Properties; Possession Under Leases | 110 | ||||
Section 3.08 |
Subsidiaries | 111 | ||||
Section 3.09 |
Litigation; Compliance with Laws | 111 | ||||
Section 3.10 |
Federal Reserve Regulations | 112 | ||||
Section 3.11 |
Investment Company Act | 112 | ||||
Section 3.12 |
Use of Proceeds | 112 | ||||
Section 3.13 |
Tax Returns | 112 | ||||
Section 3.14 |
No Material Misstatements | 113 | ||||
Section 3.15 |
Employee Benefit Plans | 113 | ||||
Section 3.16 |
Environmental Matters | 114 | ||||
Section 3.17 |
Security Documents | 114 | ||||
Section 3.18 |
Location of Real Property and Leased Premises | 115 |
ii
Section 3.19 |
Solvency | 116 | ||||
Section 3.20 |
Labor Matters | 116 | ||||
Section 3.21 |
Insurance | 117 | ||||
Section 3.22 |
No Default | 117 | ||||
Section 3.23 |
Intellectual Property; Licenses, Etc. | 117 | ||||
Section 3.24 |
Senior Debt | 117 | ||||
Section 3.25 |
USA PATRIOT Act; OFAC | 117 | ||||
Section 3.26 |
Foreign Corrupt Practices Act | 118 | ||||
ARTICLE IV Conditions of Lending |
118 | |||||
Section 4.01 |
All Credit Events | 118 | ||||
Section 4.02 |
First Credit Event | 119 | ||||
ARTICLE V Affirmative Covenants |
122 | |||||
Section 5.01 |
Existence; Business and Properties | 122 | ||||
Section 5.02 |
Insurance | 123 | ||||
Section 5.03 |
Taxes | 124 | ||||
Section 5.04 |
Financial Statements, Reports, etc. | 124 | ||||
Section 5.05 |
Litigation and Other Notices | 126 | ||||
Section 5.06 |
Compliance with Laws | 127 | ||||
Section 5.07 |
Maintaining Records; Access to Properties and Inspections | 127 | ||||
Section 5.08 |
Use of Proceeds | 127 | ||||
Section 5.09 |
Compliance with Environmental Laws | 127 | ||||
Section 5.10 |
Further Assurances; Additional Security | 128 | ||||
Section 5.11 |
Rating | 131 | ||||
ARTICLE VI Negative Covenants |
131 | |||||
Section 6.01 |
Indebtedness | 131 | ||||
Section 6.02 |
Liens | 137 |
iii
Section 6.03 |
Sale and Lease-Back Transactions | 143 | ||||
Section 6.04 |
Investments, Loans and Advances | 143 | ||||
Section 6.05 |
Mergers, Consolidations, Sales of Assets and Acquisitions | 148 | ||||
Section 6.06 |
Dividends and Distributions | 150 | ||||
Section 6.07 |
Transactions with Affiliates | 153 | ||||
Section 6.08 |
Business of the Borrower and the Subsidiaries | 156 | ||||
Section 6.09 |
Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. | 156 | ||||
Section 6.10 |
Fiscal Year | 160 | ||||
Section 6.11 |
Net First Lien Leverage Ratio | 160 | ||||
ARTICLE VIA Holdings Negative Covenants |
160 | |||||
ARTICLE VII Events of Default |
160 | |||||
Section 7.01 |
Events of Default | 160 | ||||
Section 7.02 |
Treatment of Certain Payments | 163 | ||||
Section 7.03 |
Right to Cure | 164 | ||||
ARTICLE VIII The Agents |
165 | |||||
Section 8.01 |
Appointment | 165 | ||||
Section 8.02 |
Delegation of Duties | 165 | ||||
Section 8.03 |
Exculpatory Provisions | 166 | ||||
Section 8.04 |
Reliance by Agents | 167 | ||||
Section 8.05 |
Notice of Default | 167 | ||||
Section 8.06 |
Non-Reliance on Agents and Other Lenders | 168 | ||||
Section 8.07 |
Indemnification | 168 | ||||
Section 8.08 |
Agent in Its Individual Capacity | 169 | ||||
Section 8.09 |
Successor Administrative Agent | 169 |
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Section 8.10 |
Arrangers, Syndication Agent and Documentation Agent | 170 | ||||
Section 8.11 |
Security Documents, Collateral Agent and Collateral Agent | 170 | ||||
Section 8.12 |
Right to Realize on Collateral and Enforce Guarantees | 171 | ||||
Section 8.13 |
Withholding Tax | 171 | ||||
ARTICLE IX Miscellaneous |
172 | |||||
Section 9.01 |
Notices; Communications | 172 | ||||
Section 9.02 |
Survival of Agreement | 173 | ||||
Section 9.03 |
Binding Effect | 173 | ||||
Section 9.04 |
Successors and Assigns | 174 | ||||
Section 9.05 |
Expenses; Indemnity | 180 | ||||
Section 9.06 |
Right of Set-off | 182 | ||||
Section 9.07 |
Applicable Law | 182 | ||||
Section 9.08 |
Waivers; Amendment | 183 | ||||
Section 9.09 |
Interest Rate Limitation | 186 | ||||
Section 9.10 |
Entire Agreement | 186 | ||||
Section 9.11 |
WAIVER OF JURY TRIAL | 187 | ||||
Section 9.12 |
Severability | 187 | ||||
Section 9.13 |
Counterparts | 187 | ||||
Section 9.14 |
Headings | 187 | ||||
Section 9.15 |
Jurisdiction; Consent to Service of Process | 187 | ||||
Section 9.16 |
Confidentiality | 188 | ||||
Section 9.17 |
Platform; Borrower Materials | 189 | ||||
Section 9.18 |
Release of Liens and Guarantees | 189 | ||||
Section 9.19 |
Judgment Currency | 191 | ||||
Section 9.20 |
USA PATRIOT Act Notice | 192 |
v
Section 9.21 |
Affiliate Lenders | 192 | ||||
Section 9.22 |
Agency of the Borrower for the Loan Parties | 193 | ||||
Section 9.23 |
No Liability of the Issuing Banks | 193 | ||||
Section 9.24 |
Application of Gaming Laws | 193 |
vi
Exhibits, Schedules and Annex
Exhibit A | Form of Assignment and Acceptance | |
Exhibit B | Form of Administrative Questionnaire | |
Exhibit C | Form of Solvency Certificate | |
Exhibit D-1 | Form of Borrowing Request | |
Exhibit D-2 | Form of Swingline Borrowing Request | |
Exhibit E | Form of Interest Election Request | |
Exhibit F | [Reserved] | |
Exhibit G | Form of Permitted Loan Purchase Assignment and Acceptance | |
Exhibit H | [Reserved] | |
Exhibit I | Form of Non-Bank Tax Certificate | |
Exhibit J | Form of Global Intercompany Note | |
Schedule 1.01(A) | Certain Excluded Equity Interests | |
Schedule 1.01(B) | Mortgaged Properties | |
Schedule 1.01(C) | Immaterial Subsidiaries | |
Schedule 1.01(D) | Existing Letters of Credit | |
Schedule 1.01(E) | Closing Date Unrestricted Subsidiaries | |
Schedule 1.01(F) | Designated Subsidiaries | |
Schedule 2.01 | Commitments | |
Schedule 3.01 | Organization and Good Standing | |
Schedule 3.04 | Governmental Approvals | |
Schedule 3.05 | Financial Statements | |
Schedule 3.08(a) | Subsidiaries | |
Schedule 3.08(b) | Subscriptions | |
Schedule 3.13 | Taxes | |
Schedule 3.16 | Environmental Matters | |
Schedule 3.21 | Insurance | |
Schedule 3.23 | Intellectual Property | |
Schedule 3.26 | Certain Regulatory Matters | |
Schedule 5.10 | Post-Closing Items | |
Schedule 6.01 | Indebtedness | |
Schedule 6.02(a) | Liens | |
Schedule 6.04 | Investments | |
Schedule 6.07 | Transactions with Affiliates | |
Schedule 9.01 | Notice Information |
vii
FIRST LIEN CREDIT AGREEMENT dated as of December 20, 2013 (this Agreement ), among AP GAMING HOLDINGS, LLC, a Delaware limited liability company ( Holdings ), AP GAMING I, LLC, a Delaware limited liability company (the Borrower ), the LENDERS party hereto from time to time, and CITICORP NORTH AMERICA, INC., as Administrative Agent (in such capacity, the Administrative Agent ) for the Lenders.
WHEREAS, AP Gaming Acquisition, LLC, a Delaware limited liability company and a Subsidiary of the Borrower ( AcquisitionCo ), has entered into the Purchase Agreement with AGS Holdings, LLC, a Delaware limited liability company (the Seller ) and AGS Capital, LLC, a Delaware limited liability company ( AGS Capital ), pursuant to which AcquisitionCo will directly or indirectly acquire all of the issued and outstanding equity interests of AGS Capital (such acquisition, the AGS Acquisition );
WHEREAS, in connection with the consummation of the AGS Acquisition, the Borrower has requested the Lenders to extend credit in the form of (a) Term B Loans on the Closing Date in an aggregate principal amount of $155,000,000 and (b) Revolving Facility Loans and Letters of Credit at any time and from time to time prior to the Revolving Facility Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $25,000,000;
NOW, THEREFORE, the Lenders and the Issuing Banks are willing to extend such credit to the Borrower on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01 Defined Terms . As used in this Agreement, the following terms shall have the meanings specified below:
ABR shall mean, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate in effect for such day plus 0.50%, (b) the Prime Rate in effect on such day and (c) the Adjusted LIBO Rate for a one-month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.00%; provided , that for the avoidance of doubt, the LIBO Rate for any day shall be based on the rate determined on such day at approximately 11:00 a.m. (London time) by reference to the British Bankers Association Interest Settlement Rates (or the successor thereto if the British Bankers Association is no longer making a LIBO Rate available) for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers Association (or the successor thereto if the British Bankers Association is no longer making a LIBO Rate available) as an authorized vendor for the purpose of displaying such rates). Any change in such rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, as the case may be.
ABR Borrowing shall mean a Borrowing comprised of ABR Loans.
ABR Loan shall mean any ABR Term Loan, ABR Revolving Loan or Swingline Loan.
ABR Revolving Facility Borrowing shall mean a Borrowing comprised of ABR Revolving Loans.
ABR Revolving Loan shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the ABR in accordance with the provisions of Article II.
ABR Term Loan shall mean any Term Loan bearing interest at a rate determined by reference to the ABR in accordance with the provisions of Article II.
AcquisitionCo shall have the meaning assigned to such term in the first recital hereto.
Additional Mortgage shall have the meaning assigned to such term in Section 5.10(c).
Adjusted LIBO Rate shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum equal to the greater of (x) (a) the LIBO Rate in effect for such Interest Period divided by (b) one minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any, and (y) in the case of Eurocurrency Borrowings composed of Eurocurrency Term Loans, 1.00%.
Administrative Agent shall have the meaning assigned to such term in the introductory paragraph of this Agreement, together with its successors and assigns.
Administrative Agent Fees shall have the meaning assigned to such term in Section 2.12(c).
Administrative Questionnaire shall mean an Administrative Questionnaire in the form of Exhibit B or such other form supplied by the Administrative Agent.
Affiliate shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.
Affiliate Lender shall have the meaning assigned to such term in Section 9.21(a).
Agents shall mean the Administrative Agent and the Collateral Agent.
Agreement shall have the meaning assigned to such term in the introductory paragraph of this Agreement, as amended, restated, supplemented or otherwise modified from time to time.
2
AGS Acquired Business shall mean AGS Capital and its subsidiaries.
AGS Acquisition shall have the meaning assigned to such term in the first recital hereto.
AGS Capital shall have the meaning assigned to such term in the first recital hereto.
Agreement Currency shall have the meaning assigned to such term in Section 9.19.
All-in Yield shall mean, as to any Loans (or Pari Term Loans, if applicable), the yield thereon payable to all Lenders (or other lenders, as applicable) providing such Loans (or Pari Term Loans, if applicable) in the primary syndication thereof, as reasonably determined by the Administrative Agent, whether in the form of interest rate, margin, original issue discount, up-front fees, rate floors or otherwise; provided , that original issue discount and up-front fees shall be equated to interest rate assuming a 4-year life to maturity (or, if less, the life of such Loans (or Pari Term Loans, if applicable)); and provided , further , that All-in Yield shall not include arrangement, commitment, underwriting, structuring or similar fees and customary consent fees for an amendment paid generally to consenting lenders.
Alternate Currency shall mean, with respect to any Letter of Credit, Canadian dollars and any other currency other than Dollars as may be acceptable to the Administrative Agent and the Issuing Bank with respect thereto in their sole discretion.
Alternate Currency Letter of Credit shall mean any Letter of Credit denominated in an Alternate Currency.
Applicable Commitment Fee shall mean for any day (i) 0.50% per annum or (ii) with respect to any Other Revolving Facility Commitments, the Applicable Commitment Fee set forth in the applicable Incremental Assumption Agreement.
Applicable Date shall have the meaning assigned to such term in Section 9.08(f).
Applicable Margin shall mean for any day (i) with respect to any Term B Loan, 8.25% per annum in the case of any Eurocurrency Loan and 7.25% per annum in the case of any ABR Loan, (ii) with respect to any Initial Revolving Loan, 8.25% per annum in the case of any Eurocurrency Loan and 7.25% per annum in the case of any ABR Loan, and (iii) with respect to any Other Term Loan or Other Revolving Loan, the Applicable Margin set forth in the Incremental Assumption Agreement relating thereto.
Applicable Period shall mean an Excess Cash Flow Period or an Excess Cash Flow Interim Period, as the case may be.
3
Applicable Premium shall mean the excess of (A) the present value of all remaining required interest payments through the first anniversary of the Closing Date (using the Adjusted LIBO Rate that is determined for a three-month Interest Period commencing on the date of such prepayment and assuming such Adjusted LIBO Rate remains the same for the entire period from the date of such prepayment to the first anniversary of the Closing Date), plus the present value of the principal amount of the Term B Loans being prepaid, assuming a prepayment date of the first anniversary of the Closing Date, plus the present value of the prepayment premium provided in clause (ii) of the proviso to Section 2.11(a) on such principal amount being prepaid, assuming a prepayment date of the first anniversary of the Closing Date, in each case computed using a discount rate equal to the Treasury Rate plus 50 basis points over (B) the principal amount of the Term B Loans being prepaid. For purposes of this definition, Treasury Rate means the rate per annum equal to the yield to maturity at the time of computation of the United States Treasury securities with a constant maturity as compiled and published in the most recent Federal Reserve Statistical Release H 15 (519) that has become publicly available at least two Business Days prior to such time (or, if such Statistical Release is no longer published, any publicly available source of similar market data) most nearly equal to the period from such date of prepayment to the first anniversary of the Closing Date; provided , however , that if the period from such date of prepayment to the first anniversary of the Closing Date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the weekly average yield on actively traded United States Treasury securities adjusted to a constant maturity of one year shall be used.
Approved Fund shall have the meaning assigned to such term in Section 9.04(b)(ii).
Arrangers shall mean Citigroup Global Markets, Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities, Inc. and Nomura Securities International, Inc.
Asset Sale shall mean any loss, damage, destruction or condemnation of, or any Disposition (including any sale and leaseback of assets and any mortgage or lease of Real Property) to any person of, any asset or assets of the Borrower or any Subsidiary.
Assignee shall have the meaning assigned to such term in Section 9.04(b)(i).
Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender and an Assignee, and accepted by the Administrative Agent and the Borrower (if required by Section 9.04), in the form of Exhibit A or such other form as shall be approved by the Administrative Agent and reasonably satisfactory to the Borrower.
Availability Period shall mean, with respect to any Class of Revolving Facility Commitments, the period from and including the Closing Date (or, if later, the effective date for such Class of Revolving Facility Commitments) to but excluding the earlier of the Revolving Facility Maturity Date for such Class and, in the case of each of the Revolving Facility Loans, Revolving Facility Borrowings, Swingline Loans, Swingline Borrowings and Letters of Credit, the date of termination of the Revolving Facility Commitments of such Class.
Available Unused Commitment shall mean, with respect to a Revolving Facility Lender under any Class of Revolving Facility Commitments at any time, an amount equal to the amount by which (a) the applicable Revolving Facility Commitment of such Revolving Facility Lender at such time exceeds (b) the applicable Revolving Facility Credit Exposure of such Revolving Facility Lender at such time.
4
Below Threshold Asset Sale Proceeds shall have the meaning assigned to such term in the definition of the term Cumulative Credit.
Board shall mean the Board of Governors of the Federal Reserve System of the United States of America.
Board of Directors shall mean, as to any person, the board of directors or other governing body of such person, or if such person is owned or managed by a single entity, the board of directors or other governing body of such entity.
Borrower shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Borrower Materials shall have the meaning assigned to such term in Section 9.17.
Borrowing shall mean a group of Loans of a single Type under a single Facility, and made on a single date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect.
Borrowing Minimum shall mean (a) in the case of Eurocurrency Loans, $1,000,000, (b) in the case of ABR Loans, $1,000,000 and (c) in the case of Swingline Loans, $500,000.
Borrowing Multiple shall mean (a) in the case of Eurocurrency Loans, $500,000, (b) in the case of ABR Loans, $250,000 and (c) in the case of Swingline Loans, $250,000.
Borrowing Request shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit D-1 .
Budget shall have the meaning assigned to such term in Section 5.04(e).
Business Day shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided , that when used in connection with a Eurocurrency Loan, the term Business Day shall also exclude any day on which banks are not open for dealings in deposits in Dollars in the London interbank market.
Capital Expenditures shall mean, for any person in respect of any period, the aggregate of all expenditures incurred by such person during such period that, in accordance with GAAP, are or should be included in additions to property, plant or equipment or similar items reflected in the statement of cash flows of such person.
5
Capitalized Lease Obligations shall mean, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
Capitalized Software Expenditures shall mean, for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a person during such period in respect of licensed or purchased software or internally developed software and software enhancements that, in accordance with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of such person and its subsidiaries.
Cash Collateralize shall mean to pledge and deposit with or deliver to the Collateral Agent, for the benefit of one or more of the Issuing Banks or Lenders, as collateral for Revolving L/C Exposure or obligations of the Lenders to fund participations in respect of Revolving L/C Exposure, cash or deposit account balances under the sole dominion and control of the Collateral Agent or, if the Collateral Agent and each Issuing Bank shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Collateral Agent and each applicable Issuing Bank. Cash Collateral and Cash Collateralization shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
Cash Interest Expense shall mean, with respect to the Borrower and the Subsidiaries on a consolidated basis for any period, Interest Expense for such period, less the sum of, without duplication, (a) pay-in-kind Interest Expense or other non-cash Interest Expense (including as a result of the effects of purchase accounting), (b) to the extent included in Interest Expense, the amortization of any financing fees paid by, or on behalf of, the Borrower or any Subsidiary, including such fees paid in connection with the Transactions or upon entering into a Permitted Receivables Financing, and (c) the amortization of debt discounts, if any, or fees in respect of Hedging Agreements; provided , that Cash Interest Expense shall exclude any one time financing fees, including those paid in connection with the Transactions, or upon entering into a Permitted Receivables Financing or any amendment of this Agreement.
Cash Management Agreement shall mean any agreement to provide to Holdings, the Borrower or any Subsidiary cash management services for collections, treasury management services (including controlled disbursement, overdraft, automated clearing house fund transfer services, return items and interstate depository network services), any demand deposit, payroll, trust or operating account relationships, commercial credit cards, merchant card, purchase or debit cards, non-card e-payables services, and other cash management services, including electronic funds transfer services, lockbox services, stop payment services and wire transfer services.
Cash Management Bank shall mean any person that, at the time it enters into a Cash Management Agreement (or on the Closing Date), is an Agent, an Arranger, a Lender or an Affiliate of any such person, in each case, in its capacity as a party to such Cash Management Agreement.
6
CFC shall mean a controlled foreign corporation within the meaning of section 957(a) of the Code.
A Change in Control shall be deemed to occur if:
(a) (i) at any time prior to a Qualified IPO, (x) the Permitted Holders shall at any time cease to have, directly or indirectly, the power to vote or direct the voting of at least 35% of the Voting Stock of the Borrower or (y) any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding any employee benefit plan of such person, entity or group and its subsidiaries and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted Holders, shall at any time have acquired direct or indirect beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of a percentage of the voting power of the outstanding Voting Stock of the Borrower that is greater than the percentage of such voting power of such Voting Stock in the aggregate, directly or indirectly, beneficially owned by the Permitted Holders or (ii) at any time on and after a Qualified IPO, any person, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding any employee benefit plan of such person, entity or group and its subsidiaries and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted Holders (or any holding company parent of the Borrower owned directly or indirectly by the Permitted Holders), shall at any time have acquired direct or indirect beneficial ownership (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of voting power of the outstanding Voting Stock of the Borrower having more than the greater of (A) 35% of the ordinary voting power for the election of directors of the Borrower and (B) the percentage of the ordinary voting power for the election of directors of the Borrower owned in the aggregate, directly or indirectly, beneficially, by the Permitted Holders, unless in the case of either clause (i) or (ii) of this clause (a), the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the members of the Board of Directors of the Borrower;
(b) at any time on or after a Qualified IPO, during any period of twelve (12) consecutive months, a majority of the seats (other than vacant seats) on the Board of Directors of the Borrower shall be occupied by individuals who were neither (1) nominated by the Board of Directors of the Borrower or a Permitted Holder, (2) appointed by directors so nominated nor (3) appointed by a Permitted Holder; or
(c) Holdings shall fail to beneficially own, directly or indirectly, 100% of the issued and outstanding Equity Interests of the Borrower (other than in connection with a Qualified IPO of the Borrower).
Change in Law shall mean (a) the adoption of any law, rule or regulation after the Closing Date, (b) any change in law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any Lending Office of such Lender or by such Lenders holding company, if any) with any written request, guideline or directive (whether or not having
7
the force of law) of any Governmental Authority made or issued after the Closing Date; provided , however , that notwithstanding anything herein to the contrary, (x) all requests, rules, guidelines or directives under or issued in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act, all interpretations and applications thereof and any compliance by a Lender with any request or directive relating thereto and (y) all requests, rules, guidelines or directives promulgated under or in connection with, all interpretations and applications of, or any compliance by a Lender with any request or directive relating to International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case under this clauses (x) and (y) be deemed to be a Change in Law but only to the extent a Lender is imposing applicable increased costs or costs in connection with capital adequacy requirements similar to those described in clauses (a) and (b) of Section 2.15 generally on other borrowers of loans under U.S. cash flow senior secured credit facilities.
Charges shall have the meaning assigned to such term in Section 9.09.
Class shall mean, (a) when used in respect of any Loan or Borrowing, whether such Loan or the Loans comprising such Borrowing are Term B Loans, Other Term Loans, Initial Revolving Loans or Other Revolving Loans; and (b) when used in respect of any Commitment, whether such Commitment is in respect of a commitment to make Term B Loans, Other Term Loans, Initial Revolving Loans or Other Revolving Loans. Other Term Loans or Other Revolving Loans that have different terms and conditions (together with the Commitments in respect thereof) from the Term B Loans or the Initial Revolving Loans, respectively, or from other Other Term Loans or other Other Revolving Loans, as applicable, shall be construed to be in separate and distinct Classes.
Class Loans shall have the meaning assigned to such term in Section 9.08(f).
Closing Date shall mean December 20, 2013.
Code shall mean the Internal Revenue Code of 1986, as amended.
Co-Investors shall mean each of (a) the Fund and the Fund Affiliates (excluding any of their portfolio companies) and (b) the Management Group.
Collateral shall mean all the Collateral (or equivalent term) as defined in any Security Document and shall also include the Mortgaged Properties and all other property that is subject to any Lien in favor of the Administrative Agent, the Collateral Agent or any Subagent for the benefit of the Secured Parties pursuant to any Security Document.
Collateral Agent shall mean Citicorp North America, Inc. acting as collateral agent for the Secured Parties, together with its successors and assigns in such capacity.
Collateral Agreement shall mean the Collateral Agreement dated as of the date hereof as amended, restated, supplemented or otherwise modified from time to time, among the Borrower, each Subsidiary Loan Party and the Collateral Agent.
8
Collateral and Guarantee Requirement shall mean the requirement that (in each case subject to Sections 5.10(d), (e) and (g) and Schedule 5.10):
(a) on the Closing Date, the Collateral Agent shall have received (i) from the Borrower and each Subsidiary Loan Party, a counterpart of the Collateral Agreement, (ii) from each Subsidiary Loan Party, a counterpart of the Subsidiary Guarantee Agreement and (iii) from Holdings, a counterpart of the Holdings Guarantee and Pledge Agreement, in each case duly executed and delivered on behalf of such person;
(b) on the Closing Date, (i)(x) all outstanding Equity Interests of the Borrower and all other outstanding Equity Interests, in each case, directly owned by the Loan Parties, other than Excluded Securities, and (y) all Indebtedness owing to any Loan Party (other than Holdings), other than Excluded Securities, shall have been pledged pursuant to the Collateral Agreement or the Holdings Guarantee and Pledge Agreement, as applicable, and (ii) the Collateral Agent shall have received certificates or other instruments (if any) representing such Equity Interests (other than certificates or instruments included on Schedule 5.10, which shall be delivered to the Collateral Agent after the Closing Date pursuant to Section 5.10) and any notes or other instruments required to be delivered pursuant to the applicable Security Documents, together with stock powers, note powers or other instruments of transfer with respect thereto endorsed in blank;
(c) in the case of any person that becomes a Subsidiary Loan Party after the Closing Date, the Collateral Agent shall have received (i) a supplement to the Collateral Agreement and the Subsidiary Guarantee Agreement, (ii) supplements to the other Security Documents, if applicable, in the form specified therefor or otherwise reasonably acceptable to the Administrative Agent, in each case, duly executed and delivered on behalf of such Subsidiary Loan Party, and (iii) certificates or other instruments (if any) representing all Equity Interests (other than Excluded Securities) directly owned by such Subsidiary Loan Party and any notes or other instruments required to be delivered pursuant to the applicable Security Documents, together with stock powers, note powers or other instruments of transfer with respect thereto endorsed in blank;
(d) after the Closing Date, (x) all outstanding Equity Interests of any person that becomes a Subsidiary Loan Party after the Closing Date and (y) subject to Section 5.10(g) and, without duplication of clause (c)(iii) above, all Equity Interests, all notes and other instruments directly acquired by a Loan Party (other than Holdings) after the Closing Date (including the Equity Interests of any Special Purpose Receivables Subsidiary established after the Closing Date), other than Excluded Securities, shall have been pledged and, to the extent certificated, delivered to the Collateral Agent pursuant to the Collateral Agreement, together with stock powers or other instruments of transfer with respect thereto endorsed in blank;
(e) on the Closing Date and at all times thereafter, except as otherwise contemplated by this Agreement or any Security Document, all documents and instruments, including Uniform Commercial Code financing statements, and filings with the United States Copyright Office and the United States Patent and Trademark Office,
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and all other actions required by the applicable Requirement of Law or reasonably requested by the Collateral Agent to be delivered, filed, registered or recorded to create the Liens intended to be created by the Security Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been delivered, filed, registered or recorded or delivered to the Collateral Agent for filing, registration or the recording concurrently with, or promptly following, the execution and delivery of each such Security Document;
(f) within (x) 90 days after the Closing Date with respect to the Mortgaged Property set forth on Schedule 1.01(B) (or such later date as the Collateral Agent may agree) and (y) within the time periods set forth in Section 5.10 with respect to Mortgaged Properties encumbered pursuant to said Section 5.10, the Collateral Agent shall have received (i) counterparts of each Mortgage to be entered into with respect to each such Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property and suitable for recording or filing in all filing or recording offices that the Collateral Agent may reasonably deem necessary or desirable in order to create a valid and enforceable Lien subject to no other Liens except Permitted Liens at the time of recordation thereof, (ii) with respect to the Mortgage encumbering each such Mortgaged Property, opinions of counsel regarding the enforceability, due authorization, execution and delivery of the Mortgages and such other matters customarily covered in real estate counsel opinions as the Collateral Agent may reasonably request, in form and substance reasonably acceptable to the Collateral Agent, (iii) with respect to each such Mortgaged Property, the Flood Documentation and (iv) such other documents as the Collateral Agent may reasonably request with respect to any such Mortgage or Mortgaged Property;
(g) within (x) 90 days after the Closing Date with respect to the Mortgaged Property set forth on Schedule 1.01(B) (or such later date as the Collateral Agent may agree) and (y) within the time periods set forth in Section 5.10 with respect to Mortgaged Properties encumbered pursuant to said Section 5.10, the Collateral Agent shall have received (i) a policy or policies or marked up unconditional binder of title insurance with respect to properties located in the United States of America, or a date-down and modification endorsement, if available, paid for by the Borrower, issued by a nationally recognized title insurance company insuring the Lien of each Mortgage as a valid Lien on the Mortgaged Property described therein, free of any other Liens except Permitted Liens, together with such customary endorsements (including zoning endorsements where reasonably appropriate and available), coinsurance and reinsurance as the Collateral Agent may reasonably request and which are available at commercially reasonable rates in the jurisdiction where the applicable Mortgaged Property is located, and, with respect to any such property located in a state in which a zoning endorsement is not available at commercially reasonable rates, a zoning report from a recognized vendor or zoning compliance letter from the applicable municipality in a form reasonably acceptable to the Collateral Agent, as the Collateral Agent may reasonably request with respect to properties located in the United States
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of America and (ii) a survey of each Mortgaged Property (including all improvements, easements and other customary matters thereon reasonably required by the Collateral Agent), as applicable, for which all necessary fees (where applicable) have been paid with respect to properties located in the United States of America, which is (A) complying in all material respects with the minimum detail requirements of the American Land Title Association and American Congress of Surveying and Mapping as such requirements are in effect on the date of preparation of such survey and (B) sufficient for such title insurance company to remove all standard survey exceptions from the title insurance policy relating to such Mortgaged Property or otherwise reasonably acceptable to the Collateral Agent;
(h) the Collateral Agent shall have received on the Closing Date, evidence of the insurance and related endorsements required by the terms of Section 5.02 hereof; and
(i) after the Closing Date, the Collateral Agent shall have received (i) such other Security Documents as may be required to be delivered pursuant to Section 5.10 or the Collateral Agreement, and (ii) upon reasonable request by the Collateral Agent, evidence of compliance with any other requirements of Section 5.10.
Commitment Fee shall have the meaning assigned to such term in Section 2.12(a).
Commitments shall mean (a) with respect to any Lender, such Lenders Revolving Facility Commitment and Term Facility Commitment and (b) with respect to any Swingline Lender, its Swingline Commitment (it being understood that a Swingline Commitment does not increase the applicable Swingline Lenders Revolving Facility Commitment).
Commodity Exchange Act shall mean the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
Conduit Lender shall mean any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided , that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender; provided , further , that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Sections 2.15, 2.16, 2.17 or 9.05 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender unless the designation of such Conduit Lender is made with the prior written consent of the Borrower (not to be unreasonably withheld or delayed), which consent shall specify that it is being made pursuant to the proviso in the definition of Conduit Lender and provided, that the designating Lender provides such information as the Borrower reasonably requests in order for the Borrower to determine whether to provide its consent or (b) be deemed to have any Commitment.
Consolidated Debt at any date shall mean the sum of (without duplication) all Indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of Capitalized Lease Obligations, Indebtedness for borrowed money and Disqualified Stock of the Borrower and the Subsidiaries determined on a consolidated basis on such date in accordance with GAAP.
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Consolidated Net Income shall mean, with respect to any person for any period, the aggregate of the Net Income of such person and its subsidiaries for such period, on a consolidated basis; provided , however , that, without duplication,
(i) any net after-tax extraordinary, nonrecurring or unusual gains or losses or income or expense or charge (less all fees and expenses relating thereto), including any severance, relocation or other restructuring expenses, any expenses related to any New Project or any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, fees, expenses or charges relating to facilities closing costs, curtailments or modifications to pension and post-retirement employee benefit plans, excess pension charges, acquisition integration costs, facilities opening costs, signing, retention or completion bonuses, and expenses or charges related to any offering of Equity Interests or debt securities of the Borrower, Holdings or any Parent Entity, any Investment, acquisition, Disposition, recapitalization or issuance, repayment, refinancing, amendment or modification of Indebtedness (in each case, whether or not successful), and any fees, expenses, charges or change in control payments related to the Transactions (including any costs relating to auditing prior periods, any transition-related expenses, and Transaction Expenses incurred before, on or after the Closing Date), in each case, shall be excluded,
(ii) any net after-tax income or loss from Disposed of, abandoned, closed or discontinued operations or fixed assets and any net after-tax gain or loss on the Dispositions of Disposed of, abandoned, closed or discontinued operations or fixed assets shall be excluded,
(iii) any net after-tax gain or loss (less all fees and expenses or charges relating thereto) attributable to business Dispositions or asset Dispositions other than in the ordinary course of business (as determined in good faith by the management of the Borrower) shall be excluded,
(iv) any net after-tax income or loss (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness, Hedging Agreements or other derivative instruments shall be excluded,
(v) (A) the Net Income for such period of any person that is not a subsidiary of such person, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of the amount of dividends or distributions or other payments paid in cash (or to the extent converted into cash) to the referent person or a subsidiary thereof (other than an Unrestricted Subsidiary of such referent person) in respect of such period and (B) the Net Income for such period shall include any dividend, distribution or other payment in cash (or to the extent converted into cash) received by the referent person or a subsidiary thereof (other than an Unrestricted Subsidiary of such referent person) from any person in excess of, but without duplication of, the amounts included in subclause (A),
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(vi) the cumulative effect of a change in accounting principles during such period shall be excluded,
(vii) effects of purchase accounting adjustments (including the effects of such adjustments pushed down to such person and its subsidiaries) in component amounts required or permitted by GAAP, resulting from the application of purchase accounting or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded,
(viii) any impairment charges or asset write-offs, in each case pursuant to GAAP, and the amortization of intangibles and other fair value adjustments arising pursuant to GAAP, shall be excluded,
(ix) any non-cash compensation charge or expenses realized or resulting from stock option plans, employee benefit plans or post-employment benefit plans, or grants or sales of stock, stock appreciation or similar rights, stock options, restricted stock, preferred stock or other rights shall be excluded,
(x) accruals and reserves that are established or adjusted within twelve months after the Closing Date and that are so required to be established or adjusted in accordance with GAAP or as a result of adoption or modification of accounting policies shall be excluded,
(xi) non-cash gains, losses, income and expenses resulting from fair value accounting required by the applicable standard under GAAP and related interpretation shall be excluded,
(xii) [Reserved],
(xiii) any non-cash charges for deferred tax asset valuation allowances shall be excluded,
(xiv) any currency translation gains and losses related to currency remeasurements of Indebtedness, and any net loss or gain resulting from Hedging Agreements for currency exchange risk, shall be excluded,
(xv) any deductions attributable to minority interests shall be excluded,
(xvi) (A) the non-cash portion of straight-line rent expense shall be excluded and (B) the cash portion of straight-line rent expense which exceeds the amount expensed in respect of such rent expense shall be included,
(xvii) (A) to the extent covered by insurance and actually reimbursed, or, so long as such person has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (x) not denied by the applicable carrier in writing within 180 days and (y) in fact reimbursed within 365 days following the date of such evidence (with a deduction for any amount so added back to the extent not so reimbursed within such 365 days), expenses with respect to liability or casualty events or
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business interruption shall be excluded; and (B) amounts estimated in good faith to be received from insurance in respect of lost revenues or earnings in respect of liability or casualty events or business interruption shall be included (with a deduction for amounts actually received up to such estimated amount to the extent included in Net Income in a future period), and
(xviii) without duplication, an amount equal to the amount of distributions actually made to any parent or equity holder of such person in respect of such period in accordance with Section 6.06(b)(v) shall be included as though such amounts had been paid as income taxes directly by such person for such period.
Consolidated Total Assets shall mean, as of any date of determination, the total assets of the Borrower and the consolidated Subsidiaries without giving effect to any amortization of the amount of intangible assets since December 31, 2013, determined on a consolidated basis in accordance with GAAP, as set forth on the consolidated balance sheet of the Borrower as of the last day of the fiscal quarter most recently ended for which financial statements have been (or were required to be) delivered pursuant to Section 5.04(a) or 5.04(b), as applicable, calculated on a Pro Forma Basis after giving effect to any acquisition or Disposition of a person or assets that may have occurred on or after the last day of such fiscal quarter. For purposes of testing whether any Lien, Investment, Immaterial Subsidiary, Disposition, Indebtedness or other item that is incurred (or made) based on a basket or threshold related to Consolidated Total Assets, such item shall be permitted if such basket or threshold was available on the date of such incurrence (or making) even if Consolidated Total Assets subsequently decreases.
Continuing Letter of Credit shall have the meaning assigned to such term in Section 2.05(k).
Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and Controlling and Controlled shall have meanings correlative thereto.
Credit Event shall have the meaning assigned to such term in Article IV.
Cumulative Credit shall mean, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis equal to, without duplication:
(a) $7,500,000, plus
(b) the Cumulative Retained Excess Cash Flow Amount at such time, plus
(c) the aggregate amount of proceeds received after the Closing Date and prior to such time that would have constituted Net Proceeds pursuant to clause (a) of the definition thereof, except for the operation of clause (x), (y) or (z) of the second proviso thereof (the Below Threshold Asset Sale Proceeds ), plus
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(d) (i) the cumulative amount of proceeds (including cash and the fair market value (as determined in good faith by the Borrower) of property other than cash) from the sale of Equity Interests of the Borrower, Holdings or any Parent Entity after the Closing Date and on or prior to such time (including upon exercise of warrants or options), which proceeds have been contributed as common equity to the capital of the Borrower, and (ii) common Equity Interests of the Borrower, Holdings or any Parent Entity issued upon conversion of Indebtedness (other than Indebtedness that is contractually subordinated to the Loan Obligations in right of payment) of the Borrower or any Subsidiary owed to a person other than the Borrower or a Subsidiary not previously applied for a purpose other than use in the Cumulative Credit; provided , that this clause (d) shall exclude Permitted Cure Securities, proceeds of Equity Interests referred to in Section 6.01(p), proceeds of Excluded Contributions, sales of Equity Interests financed as contemplated by Section 6.04(e) or used as described in clause (ix) of the definition of EBITDA and any amounts used to finance the payments or distributions in respect of any Junior Financing pursuant to Section 6.09(b), plus
(e) 100% of the aggregate amount of contributions as common equity to the capital of the Borrower received in cash (and the fair market value (as determined in good faith by the Borrower) of property other than cash) after the Closing Date (subject to the same exclusions as are applicable to clause (d) above); plus
(f) 100% of the aggregate principal amount of any Indebtedness (including the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock) of the Borrower or any Subsidiary thereof issued after the Closing Date (other than Indebtedness issued to a Subsidiary), which has been converted into or exchanged for Equity Interests (other than Disqualified Stock) in the Borrower, Holdings or any Parent Entity, plus
(g) 100% of the aggregate amount received by the Borrower or any Subsidiary in cash (and the fair market value (as determined in good faith by the Borrower) of property other than cash received by the Borrower or any Subsidiary) after the Closing Date from:
(A) the sale (other than to the Borrower or any Subsidiary) of the Equity Interests of an Unrestricted Subsidiary that was originally designated as such by use of the Cumulative Credit, or
(B) any dividend or other distribution by an Unrestricted Subsidiary that was originally designated as such by use of the Cumulative Credit, plus
(h) in the event any Unrestricted Subsidiary that was originally designated as such by use of the Cumulative Credit has been redesignated as a Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, Holdings, the Borrower or any Subsidiary, the fair market value (as determined in good faith by the Borrower) of the Investments of Holdings, the Borrower or any Subsidiary in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable), plus
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(i) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received by the Borrower or any Subsidiary in respect of any Investments made pursuant to Section 6.04(j)(Y), minus
(j) any amounts thereof used to make Investments pursuant to Section 6.04(j)(Y) after the Closing Date prior to such time, minus
(k) any amount thereof used to make Restricted Payments pursuant to Section 6.06(e) after the Closing Date prior to such time, minus
(l) any amount thereof used to make payments or distributions in respect of Junior Financings pursuant to Section 6.09(b)(i)(E) after the Closing Date prior to such time (other than payments made with proceeds from the issuance of Equity Interests that were excluded from the calculation of the Cumulative Credit pursuant to clause (d) above);
provided , however , (A) for purposes of Section 6.06(e), the calculation of the Cumulative Credit shall not include any Below Threshold Asset Sale Proceeds except to the extent they are used as contemplated in clause (k) above and (B) the Cumulative Credit shall only be increased pursuant to clause (b) above with respect to any Excess Cash Flow Period if Excess Cash Flow for such Excess Cash Flow Period exceeds the ECF Threshold Amount) (or, with respect to any Excess Cash Flow Interim Period, a pro rata portion of such amount).
Cumulative Retained Excess Cash Flow Amount shall mean, at any date, an amount (which shall not be less than zero in the aggregate) determined on a cumulative basis equal to:
(a) the aggregate cumulative sum of the Retained Percentage of Excess Cash Flow for all Excess Cash Flow Periods ending after the Closing Date and prior to such date, plus
(b) for each Excess Cash Flow Interim Period ended prior to such date but as to which the corresponding Excess Cash Flow Period has not ended, an amount equal to the Retained Percentage of Excess Cash Flow for such Excess Cash Flow Interim Period, minus
(c) the cumulative amount of all Retained Excess Cash Flow Overfundings as of such date.
Cure Amount shall have the meaning assigned to such term in Section 7.03.
Cure Right shall have the meaning assigned to such term in Section 7.03.
Current Assets shall mean, with respect to the Borrower and the Subsidiaries on a consolidated basis at any date of determination, the sum of (a) all assets (other than cash and Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be
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classified on a consolidated balance sheet of the Borrower and the Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits, and (b) in the event that a Permitted Receivables Financing is accounted for off balance sheet, (x) gross accounts receivable comprising part of the Receivables Assets subject to such Permitted Receivables Financing less (y) collections against the amounts sold pursuant to clause (x).
Current Liabilities shall mean, with respect to the Borrower and the Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and the Subsidiaries as current liabilities at such date of determination, other than (a) the current portion of any Indebtedness, (b) accruals of Interest Expense (excluding Interest Expense that is due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals, if any, of transaction costs resulting from the Transactions, (e) accruals of any costs or expenses related to (i) severance or termination of employees prior to the Closing Date or (ii) bonuses, pension and other post-retirement benefit obligations, and (f) accruals for add-backs to EBITDA included in clauses (a)(iv), (a)(v), and (a)(vii) of the definition of such term.
Customer Development Agreement shall mean any loan agreement or other financing instrument entered into in the ordinary course of business pursuant to which the Borrower or one of its Subsidiaries extends credit from time to time or makes payments to a customer party on one or more equipment and/or supplies lease or sale agreements with the Borrower or its Subsidiaries to finance such customers operation of the leased or purchased equipment and/or supplies (including rental or purchase payments owed to the Borrower or any of its Subsidiaries) and/or the development or acquisition of video gaming routes.
Customer Note shall mean any promissory note issued pursuant to a Customer Development Agreement by the customer borrower thereunder and made payable to the Borrower or a Subsidiary to evidence all obligations owed by such customer under such Customer Development Agreement.
Debt Fund Affiliate Lender shall mean entities managed by the Fund or funds advised by its affiliated management companies that are primarily engaged in, or advises funds or other investment vehicles that are engaged in, making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit or securities in the ordinary course and for which no personnel making investment decisions in respect of any equity fund which has a direct or indirect equity investment in Holdings, the Borrower or its restricted subsidiaries has the right to make any investment decisions.
Debt Service shall mean, with respect to the Borrower and the Subsidiaries on a consolidated basis for any period, Cash Interest Expense for such period plus scheduled principal amortization of Consolidated Debt for such period.
Debtor Relief Laws shall mean the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States of America or other applicable jurisdictions from time to time in effect.
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Default shall mean any event or condition that upon notice, lapse of time or both would constitute an Event of Default.
Defaulting Lender shall mean, subject to Section 2.22, any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder or (ii) pay to the Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Swingline Lender, Administrative Agent or any Issuing Bank in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder ( provided , that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower) or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided , that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.22) upon delivery of written notice of such determination to the Borrower, each Issuing Bank, the Swingline Lender and each Lender.
Designated Non-Cash Consideration shall mean the fair market value (as determined in good faith by the Borrower) of non-cash consideration received by the Borrower or one of its Subsidiaries in connection with an Asset Sale that is so designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer of the Borrower, setting forth such valuation, less the amount of cash or cash equivalents received in connection with a subsequent disposition of such Designated Non-Cash Consideration.
Designated Entity shall mean (i) each person specified by the Borrower on Schedule 1.01(F) and (ii) each person designated by the Borrower from time to time after the Closing Date to be included (or excluded) as a Designated Entity that is reasonably acceptable to the Administrative Agent.
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Disinterested Director shall mean, with respect to any person and transaction, a member of the Board of Directors of such person who does not have any material direct or indirect financial interest in or with respect to such transaction.
Dispose or Disposed of shall mean to convey, sell, lease, sell and leaseback, assign, farm-out, transfer or otherwise dispose of any property, business or asset. The term Disposition shall have a correlative meaning to the foregoing.
Disqualification shall mean, with respect to any Lender:
(a) the failure of that person timely to file pursuant to applicable Gaming Laws:
(i) any application requested of that person by any Gaming Authority in connection with any licensing required of that person as a lender to the Borrower; or
(ii) any required application or other papers in connection with determination of the suitability of that person as a lender to the Borrower;
(b) the withdrawal by that person (except where requested or permitted by the Gaming Authority) of any such application or other required papers;
(c) any finding by a Gaming Authority that there is reasonable cause to believe that such person may be found unqualified or unsuitable; or
(d) any final determination by a Gaming Authority pursuant to applicable Gaming Laws:
(i) that such person is unsuitable as a lender to the Borrower;
(ii) that such person shall be disqualified as a lender to the Borrower; or
(iii) denying the issuance to that person of any license or other approval required under applicable Gaming Laws to be held by all lenders to the Borrower; and
the word Disqualified as used herein shall have a meaning correlative thereto.
Disqualified Stock shall mean, with respect to any person, any Equity Interests of such person that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change
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of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Loan Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock, in each case, prior to the date that is ninety-one (91) days after the Latest Maturity Date in effect at the time of issuance thereof ( provided , that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock). Notwithstanding the foregoing: (i) any Equity Interests issued to any employee or to any plan for the benefit of employees of the Borrower or the Subsidiaries or by any such plan to such employees shall not constitute Disqualified Stock solely because they may be required to be repurchased by the Borrower in order to satisfy applicable statutory or regulatory obligations or as a result of such employees termination, death or disability and (ii) any class of Equity Interests of such person that by its terms authorizes such person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Stock shall not be deemed to be Disqualified Stock.
Documentation Agent shall have the meaning assigned to such term in the introductory paragraph to this Agreement.
Dollar Equivalent shall mean, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in any currency other than Dollars, the equivalent amount thereof in Dollars as determined by the Administrative Agent at such time on the basis of the Spot Rate (determined in respect of the most recent Revaluation Date or other applicable date of determination) for the purchase of Dollars with such currency.
Dollars or $ shall mean lawful money of the United States of America.
Domestic Subsidiary shall mean any Subsidiary that is not a Foreign Subsidiary.
EBITDA shall mean, with respect to the Borrower and the Subsidiaries on a consolidated basis for any period, the Consolidated Net Income of the Borrower and the Subsidiaries for such period plus (a) the sum of (in each case without duplication and to the extent the respective amounts described in subclauses (i) through (xiv) of this clause (a) reduced such Consolidated Net Income (and were not excluded therefrom) for the respective period for which EBITDA is being determined):
(i) provision for Taxes based on income, profits or capital of the Borrower and the Subsidiaries for such period, including, without limitation, state, franchise and similar taxes and foreign withholding taxes (including penalties and interest related to taxes or arising from tax examinations),
(ii) Interest Expense (and to the extent not included in Interest Expense, (x) all cash dividend payments (excluding items eliminated in consolidation) on any series of preferred stock or Disqualified Stock and (y) costs of surety bonds in connection with financing activities) of the Borrower and the Subsidiaries for such period,
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(iii) depreciation and amortization expenses of the Borrower and the Subsidiaries for such period including the amortization of intangible assets, deferred financing fees, customer placement fees and Capitalized Software Expenditures and amortization of unrecognized prior service costs and actuarial gains and losses related to pensions and other post-employment benefits,
(iv) business optimization expenses and other restructuring charges or reserves (which, for the avoidance of doubt, shall include the effect of inventory optimization programs, facility closure, facility consolidations, retention, severance, systems establishment costs, contract termination costs, future lease commitments and excess pension charges); provided , that with respect to each business optimization expense or other restructuring charge, a Responsible Officer of the Borrower shall have delivered to the Administrative Agent an officers certificate specifying and quantifying such expense or charge,
(v) any other non-cash charges; provided , that for purposes of this subclause (v) of this clause (a), any non-cash charges or losses shall be treated as cash charges or losses in any subsequent period during which cash disbursements attributable thereto are made (but excluding, for the avoidance of doubt, amortization of a prepaid cash item that was paid in a prior period),
(vi) the amount of management, consulting, monitoring, transaction and advisory fees and related expenses paid to the Fund or any Fund Affiliate (or any accruals related to such fees and related expenses) during such period not in contravention of this Agreement,
(vii) any expenses or charges (other than depreciation or amortization expense as described in the preceding clause (iii)) related to any issuance of Equity Interests, Investment, acquisition, New Project, Disposition, recapitalization or the incurrence, modification or repayment of Indebtedness permitted to be incurred by this Agreement (including a refinancing thereof) (whether or not successful), including (x) such fees, expenses or charges related to this Agreement, (y) any amendment or other modification of the Obligations or other Indebtedness and (z) commissions, discounts, yield and other fees and charges (including any interest expense) related to any Permitted Receivables Financing,
(viii) the amount of loss on sale of receivables and related assets to a Special Purpose Receivables Subsidiary in connection with a Permitted Receivables Financing,
(ix) any costs or expense incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of the Borrower or a Subsidiary Loan Party (other than contributions received from the Borrower or another Subsidiary Loan Party) or net cash proceeds of an issuance of Equity Interests of the Borrower (other than Disqualified Stock),
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(x) non-operating expenses,
(xi) the amount of any loss attributable to a New Project, until the date that is 12 months after the date of completing the construction, acquisition, assembling or creation of such New Project, as the case may be; provided , that (A) such losses are reasonably identifiable and factually supportable and certified by a Responsible Officer of the Borrower and (B) losses attributable to such New Project after 12 months from the date of completing such construction, acquisition, assembling or creation, as the case may be, shall not be included in this clause (xi),
(xii) with respect to any joint venture that is not a Subsidiary and solely to the extent relating to any net income referred to in clause (v) of the definition of Consolidated Net Income, an amount equal to the proportion of those items described in clauses (i) and (ii) above relating to such joint venture corresponding to the Borrowers and the Subsidiaries proportionate share of such joint ventures Consolidated Net Income (determined as if such joint venture were a Subsidiary), and
(xiii) one-time costs associated with commencing Public Company Compliance;
minus (b) the sum of (without duplication and to the extent the amounts described in this clause (b) increased such Consolidated Net Income for the respective period for which EBITDA is being determined) non-cash items increasing Consolidated Net Income of the Borrower and the Subsidiaries for such period (but excluding any such items (A) in respect of which cash was received in a prior period or will be received in a future period or (B) which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that reduced EBITDA in any prior period).
Notwithstanding anything to the contrary contained herein and subject to adjustments permitted hereunder with respect to acquisitions, Dispositions and other transactions occurring following the Closing Date and/or pursuant to the definition of Pro Forma Basis, for purposes of determining EBITDA under this Agreement, EBITDA for the fiscal quarter ended December 31, 2012 shall be deemed to be $8,800,000, EBITDA for the fiscal quarter ended March 31, 2013 shall be deemed to be $10,200,000, EBITDA for the fiscal quarter ended June 30, 2013 shall be deemed to be $10,300,000 and EBITDA for the fiscal quarter ended September 30, 2013 shall be deemed to be $10,900,000.
ECF Threshold Amount shall have the meaning assigned to such term in Section 2.11(c).
Environment shall mean ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna, the workplace or as otherwise defined in any Environmental Law.
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Environmental Laws shall mean all applicable laws (including common law), rules, regulations, codes, ordinances, orders, binding agreements, decrees or judgments, promulgated or entered into by or with any Governmental Authority, relating in any way to the Environment, preservation or reclamation of natural resources, the generation, management, Release or threatened Release of, or exposure to, any Hazardous Material or to occupational health and safety matters (to the extent relating to the Environment or Hazardous Materials).
Environmental Permits shall have the meaning assigned to such term in Section 3.16.
Equity Financing shall have the meaning assigned to such term in Section 4.02(f).
Equity Interests of any person shall mean any and all shares, interests, rights to purchase or otherwise acquire, warrants, options, participations or other equivalents of or interests in (however designated) equity or ownership of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, and any securities or other rights or interests convertible into or exchangeable for any of the foregoing.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time and any final regulations promulgated and the rulings issued thereunder.
ERISA Affiliate shall mean any trade or business (whether or not incorporated) that, together with Holdings, the Borrower or a Subsidiary, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
ERISA Event shall mean (a) any Reportable Event or the requirements of Section 4043(b) of ERISA apply with respect to a Plan; (b) with respect to any Plan, the failure to satisfy the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, whether or not waived; (c) a determination that any Plan is, or is expected to be, in at- risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (d) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (e) the incurrence by Holdings, the Borrower, a Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or Multiemployer Plan; (f) the receipt by Holdings, the Borrower, a Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA; (g) the incurrence by Holdings, the Borrower, a Subsidiary or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (h) the receipt by Holdings, the Borrower, a Subsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from Holdings, the Borrower, a Subsidiary or any ERISA Affiliate of any
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notice, concerning the impending imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA, or in endangered or critical status, within the meaning of Section 432 of the Code or Section 305 of ERISA; (i) the conditions for imposition of a lien under Section 303(k) of ERISA shall have been met with respect to any Plan; or (j) the withdrawal of any of Holdings, the Borrower, a Subsidiary or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which such entity was a substantial employer as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA.
Eurocurrency Borrowing shall mean a Borrowing comprised of Eurocurrency Loans.
Eurocurrency Loan shall mean any Eurocurrency Term Loan or Eurocurrency Revolving Loan.
Eurocurrency Revolving Facility Borrowing shall mean a Borrowing comprised of Eurocurrency Revolving Loans.
Eurocurrency Revolving Loan shall mean any Revolving Facility Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.
Eurocurrency Term Loan shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.
Event of Default shall have the meaning assigned to such term in Section 7.01.
Excess Cash Flow shall mean, with respect to the Borrower and its Subsidiaries on a consolidated basis for any Applicable Period, EBITDA of the Borrower and its Subsidiaries on a consolidated basis for such Applicable Period, minus , without duplication, (A):
(a) Debt Service for such Applicable Period,
(b) the amount of any voluntary prepayment permitted hereunder of term Indebtedness during such Applicable Period (other than any voluntary prepayment of the Term Loans, which shall be the subject of Section 2.11(c)) and the amount of any voluntary prepayments of revolving Indebtedness to the extent accompanied by permanent reductions of any revolving facility commitments (other than any voluntary prepayments of the Revolving Facility Commitment, which shall be the subject of Section 2.11(c)) during such Applicable Period to the extent an equal amount of loans thereunder was simultaneously repaid, so long as the amount of such prepayment is not already reflected in Debt Service,
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(c) (i) Capital Expenditures and Capitalized Software Expenditures by the Borrower and the Subsidiaries on a consolidated basis during such Applicable Period that are paid in cash and (ii) the aggregate consideration paid in cash during the Applicable Period in respect of Permitted Business Acquisitions, New Project expenditures and other Investments permitted hereunder (excluding Permitted Investments and intercompany Investments in Subsidiaries),
(d) Capital Expenditures, Capitalized Software Expenditures, Permitted Business Acquisitions, New Project expenditures or other Investments permitted hereunder (excluding Permitted Investments and intercompany Investments in Subsidiaries) that the Borrower or any Subsidiary shall, during such Applicable Period, become obligated to make or otherwise anticipated to make payments with respect thereto but that are not made during such Applicable Period; provided , that (i) the Borrower shall deliver a certificate to the Administrative Agent not later than 90 days after the end of such Applicable Period, signed by a Responsible Officer of the Borrower and certifying that payments in respect of such Capital Expenditures, Capitalized Software Expenditures, Permitted Business Acquisitions, New Project expenditures or other Investments permitted hereunder (excluding Permitted Investments and intercompany Investments in Subsidiaries) are expected to be made in the following Excess Cash Flow Period, and (ii) any amount so deducted shall not be deducted again in a subsequent Applicable Period,
(e) Taxes paid in cash by Holdings and its Subsidiaries on a consolidated basis during such Applicable Period or that will be paid within six months after the close of such Applicable Period; provided , that with respect to any such amounts to be paid after the close of such Applicable Period, (i) any amount so deducted shall not be deducted again in a subsequent Applicable Period, and (ii) appropriate reserves shall have been established in accordance with GAAP,
(f) (i) an amount equal to any increase in Working Capital of the Borrower and its Subsidiaries for such Applicable Period and any anticipated increase, estimated by the Borrower in good faith, for the following Excess Cash Flow Period and (ii) an amount equal to any increase in non-current Canadian tax receivables of the Borrower and its Subsidiaries for such Applicable Period and any anticipated increase, estimated by the Borrower in good faith, for the following Excess Cash Flow Period,
(g) cash expenditures made in respect of Hedging Agreements during such Applicable Period, to the extent not reflected in the computation of EBITDA or Interest Expense,
(h) permitted Restricted Payments paid in cash by the Borrower during such Applicable Period and permitted Restricted Payments paid by any Subsidiary to any person other than Holdings, the Borrower or any of the Subsidiaries during such Applicable Period, in each case in accordance with Section 6.06 (other than Section 6.06(e), except to the extent such Restricted Payments were financed with internally-generated cash flow of the Borrower or any Subsidiary),
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(i) amounts paid in cash during such Applicable Period on account of (A) items that were accounted for as non-cash reductions of Net Income in determining Consolidated Net Income or as non-cash reductions of Consolidated Net Income in determining EBITDA of the Borrower and its Subsidiaries in a prior Applicable Period and (B) reserves or accruals established in purchase accounting,
(j) to the extent not deducted in the computation of Net Proceeds in respect of any asset disposition or condemnation giving rise thereto, the amount of any mandatory prepayment of Indebtedness (other than Indebtedness created hereunder or under any other Loan Document), together with any interest, premium or penalties required to be paid (and actually paid) in connection therewith, and
(k) the amount related to items that were added to or not deducted from Net Income in calculating Consolidated Net Income or were added to or not deducted from Consolidated Net Income in calculating EBITDA to the extent such items represented a cash payment (which had not reduced Excess Cash Flow upon the accrual thereof in a prior Applicable Period), or an accrual for a cash payment, by the Borrower and its Subsidiaries or did not represent cash received by the Borrower and its Subsidiaries, in each case on a consolidated basis during such Applicable Period.
plus , without duplication, (B):
(a) (i) an amount equal to any decrease in Working Capital of the Borrower and its Subsidiaries for such Applicable Period and (ii) an amount equal to any decrease in non-current Canadian tax receivables of the Borrower and its Subsidiaries for such Applicable Period,
(b) all amounts referred to in clauses (A)(b), (A)(c) and (A)(d) above to the extent funded with the proceeds of the issuance or the incurrence of Indebtedness (including Capitalized Lease Obligations and purchase money Indebtedness, but excluding proceeds of extensions of credit under any revolving credit facility), the sale or issuance of any Equity Interests (including any capital contributions) and any loss, damage, destruction or condemnation of, or any sale, transfer or other disposition (including any sale and leaseback of assets and any mortgage or lease of Real Property) to any person of any asset or assets, in each case to the extent there is a corresponding deduction from Excess Cash Flow above,
(c) to the extent any permitted Capital Expenditures, Permitted Business Acquisitions, New Project Expenditures or permitted Investments referred to in clause (A)(d) above do not occur in the following Applicable Period of the Borrower specified in the certificate of the Borrower provided pursuant to clause (A)(d) above, the amount of such Capital Expenditures, Permitted Business Acquisitions New Project Expenditures or permitted Investments that were not so made in such following Applicable Period,
(d) cash payments received in respect of Hedging Agreements during such Applicable Period to the extent (i) not included in the computation of EBITDA or (ii) such payments do not reduce Cash Interest Expense,
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(e) any extraordinary or nonrecurring gain realized in cash during such Applicable Period (except to the extent such gain consists of Net Proceeds subject to Section 2.11(b)), and
(f) the amount related to items that were deducted from or not added to Net Income in connection with calculating Consolidated Net Income or were deducted from or not added to Consolidated Net Income in calculating EBITDA to the extent either (i) such items represented cash received by the Borrower or any Subsidiary or (ii) such items do not represent cash paid by the Borrower or any Subsidiary, in each case on a consolidated basis during such Applicable Period.
Excess Cash Flow Interim Period shall mean, (x) during any Excess Cash Flow Period, any one, two, or three-quarter period (a) commencing on the later of (i) the end of the immediately preceding Excess Cash Flow Period and (ii) if applicable, the end of any prior Excess Cash Flow Interim Period occurring during the same Excess Cash Flow Period and (b) ending on the last day of the most recently ended fiscal quarter (other than the last day of the fiscal year) during such Excess Cash Flow Period for which financial statements are available and (y) during the period from the Closing Date until the beginning of the first Excess Cash Flow Period, any period commencing on the Closing Date and ending on the last day of the most recently ended fiscal quarter for which financial statements are available.
Excess Cash Flow Period shall mean each fiscal year of the Borrower, commencing with the fiscal year of the Borrower ending on December 31, 2014.
Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Excluded Contributions shall mean the amount received in cash (and the fair market value (as determined by the Borrower in good faith) of property other than cash) by the Borrower after the Closing Date from:
(a) contributions to its common Equity Interests, and
(b) the sale (other than to a Subsidiary of the Borrower or to any Subsidiary management equity plan or stock option plan or any other management or employee benefit plan or agreement) of Equity Interests (other than Disqualified Stock) of the Borrower,
in each case designated as Excluded Contributions pursuant to an officers certificate from a Responsible Officer of the Borrower on or promptly after the date on which such capital contributions are made or the date on which such Equity Interests is sold, as the case may be.
Excluded Indebtedness shall mean all Indebtedness not incurred in violation of Section 6.01.
Excluded Property shall have the meaning assigned to such term in Section 5.10(g).
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Excluded Securities shall mean any of the following:
(a) any Equity Interests or Indebtedness with respect to which the Collateral Agent and the Borrower reasonably agree, in writing, that the cost or other consequences of pledging such Equity Interests or Indebtedness in favor of the Secured Parties under the Security Documents are likely to be excessive in relation to the value to be afforded thereby;
(b) in the case of any pledge of voting Equity Interests of any Foreign Subsidiary (in each case, that is owned directly by the Borrower or a Subsidiary Loan Party) to secure the Obligations, any voting Equity Interest of such Foreign Subsidiary in excess of 65% of the outstanding Equity Interests of such class;
(c) in the case of any pledge of voting Equity Interests of any FSHCO (in each case, that is owned directly by the Borrower or a Subsidiary Loan Party) to secure the Obligations, any voting Equity Interest of such FSHCO in excess of 65% of the outstanding Equity Interests of such class;
(d) any Equity Interests or Indebtedness to the extent and for so long as the pledge thereof would be prohibited by any Requirement of Law (including Gaming Laws);
(e) any Equity Interests of any person that is not a Wholly Owned Subsidiary to the extent (A) that a pledge thereof to secure the Obligations is prohibited by (i) any applicable organizational documents, joint venture agreement or shareholder agreement or (ii) any other enforceable contractual obligation with an unaffiliated third party not in violation of Section 6.09(c) binding on such Equity Interests that existed at the time of the acquisition thereof and was not created or made binding on such Equity Interests in contemplation of or in connection with the acquisition of such Equity Interests (except in the case of Equity Interests (A) owned on the Closing Date or (B) acquired after the Closing Date with Indebtedness of the type permitted under clause (i) or (j) of Section 6.01) (other than, in the case of subclause (A)(i) and this subclause (A)(ii), customary non-assignment provisions which are ineffective under Article 9 of the Uniform Commercial Code or other applicable Requirements of Law), (B) any organizational documents, joint venture agreement or shareholder agreement (or other contractual obligation referred to in subclause (A)(ii) above) prohibits such a pledge without the consent of any other party; provided , that this clause (B) shall not apply if (1) such other party is a Loan Party or a Wholly Owned Subsidiary or (2) consent has been obtained to consummate such pledge (it being understood that the foregoing shall not be deemed to obligate the Borrower or any Subsidiary to obtain any such consent) and for so long as such organizational documents, joint venture agreement or shareholder agreement or replacement or renewal thereof is in effect, or (C) a pledge thereof to secure the Obligations would give any other party (other than a Loan Party or a Wholly Owned Subsidiary) to any organizational documents, joint venture agreement or shareholder agreement governing such Equity Interests (or other contractual obligation referred to in subclause (A)(ii) above) the right to terminate its obligations thereunder (other than, in the case of other contractual obligations referred to in subclause (A)(ii), customary non-assignment provisions which are ineffective under Article 9 of the Uniform Commercial Code or other applicable Requirement of Law);
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(f) any Equity Interests of any Immaterial Subsidiary and any Unrestricted Subsidiary;
(g) any Equity Interests of any Subsidiary of, or other Equity Interests owned by, a Foreign Subsidiary;
(h) any Equity Interests of any Subsidiary to the extent that the pledge of such Equity Interests could reasonably be expected to result in material adverse tax consequences to the Borrower or any Subsidiary as reasonably determined in good faith by the Borrower;
(i) any Equity Interests set forth on Schedule 1.01(A) to this Agreement which have been identified on or prior to the Closing Date in writing to the Agent by a Responsible Officer of the Borrower and agreed to by the Administrative Agent;
(j) (x) any Equity Interests owned by Holdings, other than Equity Interests in the Borrower and (y) any Indebtedness owned by Holdings; and
(k) any Margin Stock.
Excluded Subsidiary shall mean any of the following (except as otherwise provided in clause (b) of the definition of Subsidiary Loan Party):
(a) each Immaterial Subsidiary,
(b) each Domestic Subsidiary that is not a Wholly Owned Subsidiary (for so long as such Subsidiary remains a non-Wholly Owned Subsidiary),
(c) each Domestic Subsidiary that is prohibited from guaranteeing or granting Liens to secure the Obligations by any Requirement of Law (including Gaming Laws) or that would require consent, approval, license or authorization of a Governmental Authority or Gaming Authority to guarantee or grant Liens to secure the Obligations (unless such consent, approval, license or authorization has been received),
(d) each Domestic Subsidiary that is prohibited by any applicable contractual requirement from guaranteeing or granting Liens to secure the Obligations on the Closing Date or at the time such Subsidiary becomes a Subsidiary not in violation of Section 6.09(c) (and for so long as such restriction or any replacement or renewal thereof is in effect),
(e) any Special Purpose Receivables Subsidiary,
(f) any Foreign Subsidiary,
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(g) any Domestic Subsidiary (i) that is an FSHCO or (ii) that is a Subsidiary of a Foreign Subsidiary,
(h) any other Domestic Subsidiary with respect to which, (x) the Administrative Agent and the Borrower reasonably agree that the cost or other consequences of providing a Guarantee of or granting Liens to secure the Obligations are likely to be excessive in relation to the value to be afforded thereby or (y) providing such a Guarantee or granting such Liens could reasonably be expected to result in material adverse tax consequences as determined in good faith by the Borrower, and
(i) each Unrestricted Subsidiary.
Excluded Swap Obligation shall mean, 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 a security interest 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 Guarantors failure for any reason 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 interest becomes effective with respect to such Swap Obligation, unless otherwise agreed between the Administrative Agent and the Borrower. 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 interest is or becomes illegal.
Excluded Taxes shall mean, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder or under any other Loan Document, (i) Taxes imposed on or measured by its overall net income or branch profits (however denominated, and including (for the avoidance of doubt) any backup withholding in respect thereof under Section 3406 of the Code or any similar provision of state, local or foreign law), and franchise (and similar) Taxes imposed on it (in lieu of net income Taxes), in each case by a jurisdiction (including any political subdivision thereof) as a result of such recipient being organized in, having its principal office in, or in the case of any Lender, having its applicable lending office in, such jurisdiction, or as a result of any other present or former connection with such jurisdiction (other than any such connection arising solely from this Agreement or any other Loan Documents or any transactions contemplated thereunder), (ii) U.S. federal withholding Tax imposed on any payment by or on account of any obligation of any Loan Party hereunder or under any other Loan Document that is required to be imposed on amounts payable to a Lender (other than to the extent such Lender is an assignee pursuant to a request by the Borrower under Section 2.19(b) or 2.19(c)) pursuant to laws in force at the time such Lender becomes a party hereto (or designates a new lending office), except to the extent that such Lender (or its assignor, if any) was entitled, immediately prior to the designation of a new lending office (or assignment), to receive additional amounts or indemnification payments from any Loan Party with respect to such withholding Tax pursuant to Section 2.17, (iii) any withholding Tax imposed on any payment by or on account of any obligation of any Loan Party hereunder or under any other Loan Document that is attributable to the Administrative Agents, any Lenders or any other recipients failure to comply with Section 2.17(d) or (e) or (iv) any Tax imposed under FATCA.
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Existing Class Loans shall have the meaning assigned to such term in Section 9.08(f).
Existing Credit Agreement shall mean the Credit Agreement, dated as of August 15, 2012, among AGS LLC, AGS Capital, the lenders party thereto from time to time, and UBS AG, Stamford Branch, as administrative agent and collateral agent, as amended, supplemented or otherwise modified from time to time to the date hereof.
Existing Letters of Credit shall mean those Letters of Credit or bank guarantees issued and outstanding as of the date hereof and set forth on Schedule 1.01(D).
Extended Revolving Facility Commitment shall have the meaning assigned to such term in Section 2.21(e).
Extended Revolving Loan shall have the meaning assigned to such term in Section 2.21(e).
Extended Term Loan shall have the meaning assigned to such term in Section 2.21(e).
Extending Lender shall have the meaning assigned to such term in Section 2.21(e).
Extension shall have the meaning assigned to such term in Section 2.21(e).
Facility shall mean the respective facility and commitments utilized in making Loans and credit extensions hereunder, it being understood that, as of the Closing Date there are two Facilities ( i.e. , the Term B Facility and the Revolving Facility Commitments established on the Closing Date and the extensions of credit thereunder) and thereafter, the term Facility may include any other Class of Commitments and the extensions of credit thereunder.
FATCA shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), or any Treasury regulations promulgated thereunder or official administrative interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
Federal Funds Effective Rate shall mean, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided
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that (a) if such day is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day shall be the average (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
Fee Letter shall mean that certain Fee Letter dated as of September 16, 2013 by and among Holdings, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Credit Suisse AG, Cayman Islands Branch, Credit Suisse Securities (USA) LLC, Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc. and Nomura Securities International, Inc., UBS Loan Finance LLC and UBS Securities LLC.
Fees shall mean the Commitment Fees, the L/C Participation Fees, the Issuing Bank Fees and the Administrative Agent Fees.
Financial Covenant shall mean the covenant of the Borrower set forth in Section 6.11.
Financial Officer of any person shall mean the Chief Financial Officer, principal accounting officer, Treasurer, Assistant Treasurer or Controller of such person, or a duly authorized employee of such person who is a Financial Officer of a subsidiary of such person.
First Lien/First Lien Intercreditor Agreement shall mean an intercreditor agreement in a customary form reasonably acceptable to the Administrative Agent and the Borrower, as such document may be amended, renewed, extended, supplemented, restated or otherwise modified from time to time.
First Lien/Second Lien Intercreditor Agreement shall mean an intercreditor agreement in a customary form reasonably acceptable to the Administrative Agent and the Borrower, as such document may be amended, renewed, extended, supplemented, restated or otherwise modified from time to time.
Flood Documentation shall mean, with respect to each Mortgaged Property located in the United States of America or any territory thereof, (i) a completed life-of-loan Federal Emergency Management Agency standard flood hazard determination (to the extent a Mortgaged Property is located in a Special Flood Hazard Area, together with a notice about Special Flood Hazard Area status and flood disaster assistance duly executed by the Borrower and the applicable Loan Party relating thereto) and (ii) a copy of, or a certificate as to coverage under, and a declaration page relating to, the insurance policies required by Section 5.02(c) hereof and the applicable provisions of the Security Documents, each of which shall (A) be endorsed or otherwise amended to include a standard or New York lenders loss payable or mortgagee endorsement (as applicable), (B) name the Collateral Agent, on behalf of the Secured Parties, as additional insured and loss payee/mortgagee, (C) identify the address of each property located in a Special Flood Hazard Area, the applicable flood zone designation and the flood insurance coverage and deductible relating thereto and (D) be otherwise in form and substance reasonably satisfactory to the Collateral Agent.
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Flood Insurance Laws shall mean, collectively, (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statute thereto, (iii) the National Flood Insurance Reform Act of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto.
Foreign Lender shall mean any Lender (a) that is not disregarded as separate from its owner for U.S. federal income tax purposes and that is not a United States person as defined by Section 7701(a)(30) of the Code or (b) that is disregarded as separate from its owner for U.S. federal income tax purposes and whose regarded owner is not a United States person as defined in Section 7701(a)(30) of the Code.
Foreign Subsidiary shall mean any Subsidiary that is incorporated or organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia.
Fronting Exposure shall mean, at any time there is a Defaulting Lender, (a) with respect to any Issuing Bank, such Defaulting Lenders Revolving Facility Percentage of Revolving L/C Exposure with respect to Letters of Credit issued by such Issuing Bank other than such Revolving L/C Exposure as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof and (b) with respect to the Swingline Lender, such Defaulting Lenders Swingline Exposure other than Swingline Loans as to which such Defaulting Lenders participation obligation has been reallocated to other Lenders.
FSHCO shall mean any Subsidiary that owns no material assets other than the Equity Interests of one or more Foreign Subsidiaries that are CFCs and/or of one or more FSHCOs.
Fund shall mean, collectively, investment funds managed by Affiliates of Apollo Global Management, LLC.
Fund Affiliate shall mean (i) each Affiliate of the Fund that is neither a portfolio company (which means a company actively engaged in providing goods or services to unaffiliated customers), whether or not controlled, nor a company controlled by a portfolio company and (ii) any individual who is a partner or employee of Apollo Management, L.P., Apollo Management VII, L.P. or Apollo Commodities Management, L.P.
GAAP shall mean generally accepted accounting principles in effect from time to time in the United States of America, applied on a consistent basis, subject to the provisions of Section 1.02; provided , that any reference to the application of GAAP in Sections 3.13(b), 3.20, 5.03, 5.07 and 6.02(e) to a Foreign Subsidiary (and not as a consolidated Subsidiary of the Borrower) shall mean generally accepted accounting principles in effect from time to time in the jurisdiction of organization of such Foreign Subsidiary.
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Gaming Authority shall mean any commission, panel, board or similar body or organization of any Governmental Authority or of any Indian Tribe, in each case, with authority to regulate gaming or other games of chance or the manufacture, sale, lease, distribution or operation of gaming devices or equipment, the design, operation or distribution of internet gaming services or products, online gaming products and services, the ownership or operation of current or contemplated casinos or any other gaming activities and operations in a jurisdiction.
Gaming Laws shall mean all laws, rules, regulations, judgments, injunctions, orders, decrees or other restrictions of any Gaming Authority, applicable to the business or activities of the Borrower or any of its Subsidiaries, including to the extent applicable, the gaming industry or Indian Tribes or the manufacture, sale, lease, distribution or operation of gaming devices or equipment, the design, operation or distribution of internet gaming services or products, online gaming products and services, the ownership or operation of current or contemplated casinos or any other gaming activities and operations.
Governmental Authority shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body.
Guarantee of or by any person (the guarantor ) shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another person (the primary obligor ) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (iv) entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of the guarantor securing any Indebtedness or other obligation (or any existing right, contingent or otherwise, of the holder of Indebtedness or other obligation to be secured by such a Lien) of any other person, whether or not such Indebtedness or other obligation is assumed by the guarantor; provided , however , that the term Guarantee shall not include endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or Disposition of assets permitted by this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such person in good faith.
guarantor shall have the meaning assigned to such term in the definition of the term Guarantee.
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Guarantors shall mean the Loan Parties other than the Borrower.
Hazardous Materials shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including, without limitation, explosive or radioactive substances or petroleum by products or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas or pesticides, fungicides, fertilizers or other agricultural chemicals, of any nature subject to regulation or which can give rise to liability under any Environmental Law.
Hedge Bank shall mean any person that is (or an Affiliate thereof is) an Agent, an Arranger or a Lender on the Closing Date (or any person that becomes an Agent, Arranger or Lender or Affiliate thereof after the Closing Date) and that enters into a Hedging Agreement, in each case, in its capacity as a party to such Hedging Agreement.
Hedging Agreement shall mean any agreement with respect to any swap, forward, future or derivative transaction, or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value, or credit spread transaction, repurchase transaction, reserve repurchase transaction, securities lending transaction, weather index transaction, spot contracts, fixed price physical delivery contracts, or any similar transaction or any combination of these transactions, in each case of the foregoing, whether or not exchange traded; provided , that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings, the Borrower or any of the Subsidiaries shall be a Hedging Agreement.
High Yield-Style Loans shall mean, at any time of determination, term loans governed by documentation containing a set of negative covenants substantially similar to those customary in the high-yield bond market at such time (as determined by the Borrower in good faith).
Holdings shall have the meaning assigned to such term in the introductory paragraph of this Agreement.
Holdings Guarantee and Pledge Agreement shall mean the Holdings Guarantee and Pledge Agreement dated as of the date hereof, as amended, restated, supplemented or otherwise modified from time to time, between Holdings and the Collateral Agent.
Immaterial Subsidiary shall mean any Subsidiary that (a) did not, as of the last day of the fiscal quarter of the Borrower most recently ended for which financial statements have been (or were required to be) delivered pursuant to Section 5.04(a) or 5.04(b), have assets with a value in excess of 5.0% of the Consolidated Total Assets or revenues representing in excess of 5.0% of total revenues of the Borrower and the Subsidiaries on a consolidated basis as of such date, and (b) taken together with all Immaterial Subsidiaries as of such date, did not have assets with a value in excess of 10% of Consolidated Total Assets or revenues representing in excess of 10% of total revenues of the Borrower and the Subsidiaries on a consolidated basis as of such date; provided , that the Borrower may elect in its sole discretion to exclude as an Immaterial Subsidiary any Subsidiary that would otherwise meet the definition thereof.
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Increased Amount of any Indebtedness shall mean any increase in the amount of such Indebtedness in connection with any accrual of interest, the accretion of accreted value, the amortization of original issue discount, the payment of interest in the form of additional Indebtedness or in the form of common stock of the Borrower, the accretion of original issue discount or liquidation preference and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies.
Incremental Amount shall mean, at any time, the sum of:
(i) the excess (if any) of (a) $25,000,000 over (b) the sum of (x) the aggregate principal amount of all outstanding Incremental Term Loans and Incremental Revolving Facility Commitments, in each case, established after the Closing Date and prior to such time pursuant to Section 2.21 utilizing this clause (i) (other than Incremental Term Loans and Incremental Revolving Facility Commitments in respect of Refinancing Term Loans, Extended Term Loans, Extended Revolving Facility Commitments or Replacement Revolving Facility Commitments, respectively) and (y) the aggregate principal amount of Indebtedness outstanding pursuant to Section 6.01(z) at such time; plus
(ii) any additional amounts so long as immediately after giving effect to the establishment of the commitments in respect thereof (and assuming such commitments are fully drawn) and the use of proceeds of the loans thereunder, the Net First Lien Leverage Ratio on a Pro Forma Basis is not greater than 3.75 to 1.00; provided that, for purposes of this clause (ii), the net cash proceeds of Incremental Loans incurred at such time shall not be netted against the applicable amount of Consolidated Debt for purposes of such calculation of the Net First Lien Leverage Ratio.
Incremental Assumption Agreement shall mean an Incremental Assumption Agreement in form and substance reasonably satisfactory to the Administrative Agent, among the Borrower, the Administrative Agent and, if applicable, one or more Incremental Term Lenders and/or Incremental Revolving Facility Lenders.
Incremental Commitment shall mean an Incremental Term Loan Commitment or an Incremental Revolving Facility Commitment.
Incremental Loan shall mean an Incremental Term Loan or an Incremental Revolving Loan.
Incremental Revolving Facility Commitment shall mean the commitment of any Lender, established pursuant to Section 2.21, to make Incremental Revolving Loans to the Borrower.
Incremental Revolving Facility Lender shall mean a Lender with an Incremental Revolving Facility Commitment or an outstanding Incremental Revolving Loan.
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Incremental Revolving Loan shall mean (i) Revolving Facility Loans made by one or more Revolving Facility Lenders to the Borrower pursuant to an Incremental Revolving Facility Commitment to make additional Initial Revolving Loans and (ii) to the extent permitted by Section 2.21 and provided for in the relevant Incremental Assumption Agreement, Other Revolving Loans (including in the form of Extended Revolving Loans or Replacement Revolving Loans, as applicable), or (iii) any of the foregoing.
Incremental Term Borrowing shall mean a Borrowing comprised of Incremental Term Loans.
Incremental Term Facility shall mean any Class of Incremental Term Loan Commitments and the Incremental Term Loans made thereunder.
Incremental Term Loan Installment Date shall have, with respect to any Class of Incremental Term Loans established pursuant to an Incremental Assumption Agreement, the meaning assigned to such term in Section 2.10(a)(ii).
Incremental Term Lender shall mean a Lender with an Incremental Term Loan Commitment or an outstanding Incremental Term Loan.
Incremental Term Loan Commitment shall mean the commitment of any Lender, established pursuant to Section 2.21, to make Incremental Term Loans to the Borrower.
Incremental Term Loans shall mean (i) Term Loans made by one or more Lenders to the Borrower pursuant to Section 2.01(c) consisting of additional Term B Loans and (ii) to the extent permitted by Section 2.21 and provided for in the relevant Incremental Assumption Agreement, Other Term Loans or (iii) any of the foregoing.
Indebtedness of any person shall mean, if and to the extent (other than with respect to clause (i)) the same would constitute indebtedness or a liability in accordance with GAAP, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person under conditional sale or other title retention agreements relating to property or assets purchased by such person, to the extent that the same would be required to be shown as a long term liability on a balance sheet prepared in accordance with GAAP, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services (other than such obligations accrued in the ordinary course), to the extent that the same would be required to be shown as a long term liability on a balance sheet prepared in accordance with GAAP, (e) all Capitalized Lease Obligations of such person, (f) all net payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined, in respect of outstanding Hedging Agreements, (g) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters of credit, (h) the principal component of all obligations of such person in respect of bankers acceptances, (i) all Guarantees by such person of Indebtedness described in clauses (a) to (h) above and (j) the amount of all obligations of such person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock);
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provided , that Indebtedness shall not include (A) trade and other ordinary-course payables, accrued expenses, and intercompany liabilities arising in the ordinary course of business, (B) prepaid or deferred revenue, (C) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the seller of such asset, (D) earn-out obligations until such obligations become a liability on the balance sheet of such person in accordance with GAAP and any Purchase Agreement Earn-outs, (E) obligations in respect of Third Party Funds or (F) in the case of the Borrower and its Subsidiaries, (I) all intercompany Indebtedness having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and made in the ordinary course of business and (II) intercompany liabilities in connection with the cash management, tax and accounting operations of the Borrower and the Subsidiaries. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness limits the liability of such person in respect thereof. To the extent not otherwise included, Indebtedness shall include the amount of any Receivables Net Investment.
Indemnified Taxes shall mean all Taxes imposed on or with respect to or measured by any payment by or on account of any obligation of any Loan Party hereunder or under any other Loan Document other than (a) Excluded Taxes and (b) Other Taxes.
Indemnitee shall have the meaning assigned to such term in Section 9.05(b).
Indian Tribe shall mean any United States Native American Indian tribe, band, nation or other organized group or community recognized by the Secretary of the Interior of the United States of America as being eligible for special status as Indians and recognized as possessing powers of self-government.
Ineligible Institution shall mean the persons identified in writing to the Administrative Agent by the Borrower on or prior to the Closing Date, and as may be identified in writing to the Administrative Agent by the Borrower from time to time thereafter in respect of bona fide business competitors of the Borrower (in the good faith determination of the Borrower) by delivery of a notice thereof to the Administrative Agent setting forth such person or persons (or the person or persons previously identified to the Administrative Agent that are to be no longer considered Ineligible Institutions).
Information shall have the meaning assigned to such term in Section 3.14(a).
Information Memorandum shall mean the Confidential Information Memorandum dated December 3, 2013, as modified or supplemented prior to the Closing Date.
Initial Revolving Loan shall mean a Revolving Facility Loan made (i) pursuant to the Revolving Facility Commitments in effect on the Closing Date (as the same may be amended from time to time in accordance with this Agreement) or (ii) pursuant to any Incremental Revolving Facility Commitment on the same terms as the Revolving Facility Loans referred to in clause (i) of this definition.
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Intellectual Property shall have the meaning assigned to such term in the Collateral Agreement.
Interest Election Request shall mean a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.07.
Interest Expense shall mean, with respect to any person for any period, the sum of (a) gross interest expense of such person for such period on a consolidated basis, including (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees with respect to Hedging Agreements) payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any payments or accruals with respect to Capitalized Lease Obligations allocable to interest expense, (b) capitalized interest of such person, and (c) commissions, discounts, yield and other fees and charges incurred in connection with any Permitted Receivables Financing which are payable to any person other than the Borrower or a Subsidiary Loan Party. For purposes of the foregoing, gross interest expense shall be determined after giving effect to any net payments made or received and costs incurred by the Borrower and the Subsidiaries with respect to Hedging Agreements, and interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Borrower to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.
Interest Payment Date shall mean, (a) with respect to any Eurocurrency Loan, (i) the last day of the Interest Period applicable to the Borrowing of which such Loan is a part, (ii) in the case of a Eurocurrency Borrowing with an Interest Period of more than three months duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months duration been applicable to such Borrowing and (iii) in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type or the date of repayment or prepayment in accordance with Section 2.10 or 2.11, (b) with respect to any ABR Loan, the last Business Day of each calendar quarter and (c) with respect to any Swingline Loan, the day that such Swingline Loan is required to be repaid pursuant to Section 2.09(a).
Interest Period shall mean, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter (or 12 months, if at the time of the relevant Borrowing, all relevant Lenders make interest periods of such length available or, if agreed to by the Administrative Agent, any shorter period), as the Borrower may elect; provided , however , that if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.
Investment shall have the meaning assigned to such term in Section 6.04.
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Issuing Bank shall mean (i) Citicorp North America, Inc. and (ii) each other Issuing Bank designated pursuant to Section 2.05(l), in each case in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term Issuing Bank shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
Issuing Bank Fees shall have the meaning assigned to such term in Section 2.12(b).
Joint Bookrunners shall mean Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities, Inc. and Nomura Securities International, Inc.
Judgment Currency shall have the meaning assigned to such term in Section 9.19.
L/C Disbursement shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit.
L/C Participation Fee shall have the meaning assigned to such term in Section 2.12(b).
Latest Maturity Date shall mean, at any date of determination, the latest of the latest Revolving Facility Maturity Date and the latest Term Facility Maturity Date, in each case then in effect on such date of determination.
Lender shall mean each financial institution listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance in accordance with Section 9.04), as well as any person that becomes a Lender hereunder pursuant to Section 9.04 or Section 2.21. Unless the context clearly indicates otherwise, the term Lenders shall include any Swingline Lender.
Lending Office shall mean, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Loans.
Letter of Credit shall mean any letter of credit or bank guarantee issued pursuant to Section 2.05, including any Alternate Currency Letter of Credit. Each Existing Letter of Credit shall be deemed to constitute a Letter of Credit issued hereunder on the Closing Date for all purposes of the Loan Documents.
Letter of Credit Commitment shall mean, with respect to each Issuing Bank, the commitment of such Issuing Bank to issue Letters of Credit pursuant to Section 2.05.
Letter of Credit Sublimit shall mean the aggregate Letter of Credit Commitments of the Issuing Banks, in an amount not to exceed $7,500,000 (or the equivalent thereof in an Alternate Currency) or such larger amount not to exceed the Revolving Facility Commitment as the Administrative Agent and the applicable Issuing Bank may agree.
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LIBO Rate shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers Association Interest Settlement Rates (or the successor thereto if the British Bankers Association is no longer making such rates available) for Dollar deposits (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers Association (or its successor) as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the LIBO Rate shall be the interest rate per annum determined by the Administrative Agent to be the average of the rates per annum at which Dollar deposits are offered for such relevant Interest Period to major banks in the London interbank market in London, England by the Administrative Agent at approximately 11:00 a.m. (London time) on the date that is two Business Days prior to the beginning of such Interest Period.
Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar monetary encumbrance in or on such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided , that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.
Loan Documents shall mean (i) this Agreement, (ii) the Subsidiary Guarantee Agreement, (iii) the Holdings Guarantee and Pledge Agreement, (iv) the Security Documents, (v) each Incremental Assumption Agreement, (vi) any Note issued under Section 2.09(e), (vii) the Letters of Credit and (viii) solely for the purposes of Sections 4.02 and 7.01 hereof, the Fee Letter; provided that, for purposes of the expense reimbursement and indemnity provisions in Section 8.07 and Section 9.05 only, the First Lien/First Lien Intercreditor Agreement (if entered into) and the First Lien/Second Lien Intercreditor Agreement (if entered into) shall be deemed to be Loan Documents.
Loan Obligations shall mean (a) the due and punctual payment by the Borrower of (i) the unpaid principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans made to the Borrower under this Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and obligations to provide Cash Collateral and (iii) all other monetary obligations of the Borrower owed under or pursuant to this Agreement and each other Loan Document, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), and (b) the due and punctual payment of all obligations of each other Loan Party under or pursuant to each of the Loan Documents.
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Loan Parties shall mean Holdings (prior to a Qualified IPO), the Borrower and the Subsidiary Loan Parties.
Loans shall mean the Term Loans, the Revolving Facility Loans and the Swingline Loans.
Local Time shall mean New York City time (daylight or standard, as applicable).
Majority Lenders of any Facility shall mean, at any time, Lenders under such Facility having Loans and unused Commitments representing more than 50% of the sum of all Loans outstanding under such Facility and unused Commitments under such Facility at such time. The Loans and unused Commitments of any Defaulting Lenders shall be disregarded in determining Majority Lenders at any time.
Management Group shall mean the group consisting of the directors, executive officers and other management personnel of the Borrower, Holdings or any Parent Entity, as the case may be, on the Closing Date together with (a) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of the Borrower, Holdings or any Parent Entity, as the case may be, was approved by a vote of a majority of the directors of the Borrower, Holdings or any Parent Entity, as the case may be, then still in office who were either directors on the Closing Date or whose election or nomination was previously so approved and (b) executive officers and other management personnel of the Borrower, Holdings or any Parent Entity, as the case may be, hired at a time when the directors on the Closing Date together with the directors so approved constituted a majority of the directors of the Borrower or Holdings, as the case may be.
Margin Stock shall have the meaning assigned to such term in Regulation U.
Material Adverse Effect shall mean a material adverse effect on the business, property, operations or financial condition of the Borrower and its Subsidiaries, taken as a whole, or the validity or enforceability of any of the Loan Documents or the rights and remedies of the Administrative Agent and the Lenders thereunder.
Material Indebtedness shall mean Indebtedness (other than Loans and Letters of Credit) of any one or more of the Borrower or any Subsidiary in an aggregate principal amount exceeding $15,000,000.
Material Real Property shall mean any parcel or parcels of Real Property located in the United States now or hereafter owned in fee by the Borrower or any Subsidiary Loan Party and having a fair market value (on a per-property basis) of at least $5,000,000 as of (x) the Closing Date, for Real Property now owned or (y) the date of acquisition, for Real Property acquired after the Closing Date, in each case as determined by the Borrower in good faith.
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Material Subsidiary shall mean any Subsidiary other than an Immaterial Subsidiary.
Maximum Rate shall have the meaning assigned to such term in Section 9.09.
Minimum L/C Collateral Amount shall mean, at any time, in connection with any Letter of Credit, (i) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 103% of the Revolving L/C Exposure with respect to such Letter of Credit at such time and (ii) otherwise, an amount sufficient to provide credit support with respect to such Revolving L/C Exposure as determined by the Administrative Agent and the Issuing Banks in their sole discretion.
Moodys shall mean Moodys Investors Service, Inc.
Mortgaged Properties shall mean the Material Real Properties owned in fee by the Borrower or any Subsidiary Loan Party that are set forth on Schedule 1.01(B) and each additional Material Real Property encumbered by a Mortgage pursuant to Section 5.10.
Mortgages shall mean, collectively, the mortgages, trust deeds, deeds of trust, deeds to secure debt, assignments of leases and rents, and other security documents (including amendments to any of the foregoing) delivered with respect to Mortgaged Properties, each in a form reasonably acceptable to the Administrative Agent as amended, supplemented or otherwise modified from time to time.
Multiemployer Plan shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower, Holdings or any Subsidiary or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions.
Net First Lien Leverage Ratio shall mean, on any date, the ratio of (A) (i) the sum of, without duplication, (a) the aggregate principal amount of any Term B Loans and Revolving Facility Loans outstanding as of the last day of the Test Period most recently ended as of such date and (b) the aggregate principal amount of any other Consolidated Debt (including Capitalized Lease Obligations) of the Borrower and its Subsidiaries as of the last day of such Test Period that is then secured by Liens that are senior to or pari passu with the Liens securing the Term B Loans less (ii) without duplication, up to $25,000,000 of Unrestricted Cash and unrestricted Permitted Investments of the Borrower and its Subsidiaries as of the last day of such Test Period, to (B) EBITDA for such Test Period, all determined on a consolidated basis in accordance with GAAP; provided , that the Net First Lien Leverage Ratio shall be determined for the relevant Test Period on a Pro Forma Basis.
Net Income shall mean, with respect to any person, the net income (loss) of such person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.
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Net Proceeds shall mean:
(a) 100% of the cash proceeds actually received by the Borrower or any Subsidiary Loan Party (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise and including casualty insurance settlements and condemnation awards, but only as and when received) from any Asset Sale (other than any Asset Sales pursuant to Section 6.05(a), (b), (c), (d), (e), (f), (h), (i), (j), (k) and (l)), net of (i) attorneys fees, accountants fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, required debt payments and required payments of other obligations relating to the applicable asset to the extent such debt or obligations are secured by a Lien permitted hereunder (other than pursuant to the Loan Documents) on such asset, other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith, (ii) Taxes paid or payable (in the good faith determination of the Borrower) as a result thereof, and (iii) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities (other than any taxes deducted pursuant to clause (i) or (ii) above) (x) related to any of the applicable assets and (y) retained by the Borrower or any of the Subsidiaries including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations (however, the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be cash proceeds of such Asset Sale occurring on the date of such reduction); provided , that, if Holdings or the Borrower shall deliver a certificate of a Responsible Officer of Holdings or the Borrower to the Administrative Agent promptly following receipt of any such proceeds setting forth Holdings or the Borrowers intention to use any portion of such proceeds, to acquire, maintain, develop, construct, improve, upgrade or repair assets useful in the business of the Borrower and the Subsidiaries or to make Permitted Business Acquisitions and other Investments permitted hereunder (excluding Permitted Investments and intercompany Investments in Subsidiaries) in each case within 12 months of such receipt, such portion of such proceeds shall not constitute Net Proceeds except to the extent not, within 12 months of such receipt, so used or contractually committed to be so used (it being understood that if any portion of such proceeds are not so used within such 12 month period but within such 12 month period are contractually committed to be used, then such remaining portion if not so used within six months following the end of such 12 month period shall constitute Net Proceeds as of such date without giving effect to this proviso); provided , further , that (x) no net cash proceeds calculated in accordance with the foregoing realized in a single transaction or series of related transactions shall constitute Net Proceeds unless such net cash proceeds shall exceed $3,000,000 (and thereafter only net cash proceeds in excess of such amount shall constitute Net Proceeds), (y) no net cash proceeds calculated in accordance with the foregoing shall constitute Net Proceeds in any fiscal year until the aggregate amount of all such net cash proceeds in such fiscal year shall exceed $6,000,000 (and thereafter only net cash proceeds in excess of such amount shall constitute Net Proceeds) and (z) if at the time of receipt of such net cash proceeds or at any time during the 12-month (or 18-
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month, as applicable) reinvestment period contemplated by the immediately preceding proviso, if Holdings or the Borrower shall deliver a certificate of a Responsible Officer of Holdings or the Borrower to the Administrative Agent certifying that on a Pro Forma Basis after giving effect to the Asset Sale and the application of the proceeds thereof, the Total Net Leverage Ratio is less than or equal to 2.50 to 1.00, up to $10,000,000 of such proceeds shall not constitute Net Proceeds; and
(b) 100% of the cash proceeds from the incurrence, issuance or sale by the Borrower or any Subsidiary Loan Party of any Indebtedness (other than Excluded Indebtedness), net of all taxes and fees (including investment banking fees), commissions, costs and other expenses, in each case incurred in connection with such issuance or sale.
New Class Loans shall have the meaning assigned to such term in Section 9.08(f).
New Project shall mean (x) each plant, facility or branch which is either a new plant, facility or branch or an expansion of an existing plant, facility or branch owned by the Borrower or the Subsidiaries which in fact commences operations and (y) each creation (in one or a series of related transactions) of a business unit to the extent such business unit commences operations or each expansion (in one or a series of related transactions, and including the process of obtaining regulatory approvals for entering into any new geographical jurisdiction) of business into a new market.
Non-Consenting Lender shall have the meaning assigned to such term in Section 2.19(c).
Non-Defaulting Lender shall mean, at any time, each Lender that is not a Defaulting Lender at such time.
Note shall have the meaning assigned to such term in Section 2.09(e).
Obligations shall mean, collectively, (a) the Loan Obligations, (b) obligations in respect of any Secured Cash Management Agreement and (c) obligations in respect of any Secured Hedge Agreement.
OFAC shall have the meaning provided in Section 3.25(b).
Other Revolving Facility Commitments shall mean Incremental Revolving Facility Commitments to make Other Revolving Loans.
Other Revolving Loans shall have the meaning assigned to such term in Section 2.21.
Other Taxes shall mean any and all present or future stamp or documentary Taxes or any other excise, transfer, sales, property, intangible, mortgage recording or similar Taxes arising from any payment made hereunder or under any other Loan Document or from the execution, registration, delivery or enforcement of, consummation or administration of, from the receipt or perfection of security interest under, or otherwise with respect to, the Loan Documents (but excluding any Excluded Taxes).
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Other Term Loans shall have the meaning assigned to such term in Section 2.21 (including in the form of Extended Term Loans or Refinancing Term Loans, as applicable).
Parent Entity shall mean any direct or indirect parent of the Borrower other than Holdings.
Pari Term Loans shall have the meaning assigned to such term in Section 6.02.
Pari Yield Differential shall have the meaning assigned to such term in Section 6.02.
Participant shall have the meaning assigned to such term in Section 9.04(d)(i).
Participant Register shall have the meaning assigned to such term in Section 9.04(d)(ii).
PBGC shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.
Perfection Certificate shall mean the Perfection Certificate with respect to the Borrower and the other Loan Parties in a form reasonably satisfactory to the Administrative Agent, as the same may be supplemented from time to time to the extent required by Section 5.04(f).
Permitted Business Acquisition shall mean any acquisition of all or substantially all the assets of, or all or substantially all the Equity Interests (other than directors qualifying shares) not previously held by the Borrower and its Subsidiaries in, or merger, consolidation or amalgamation with, a person or division or line of business of a person (or any subsequent investment made in a person, division or line of business previously acquired in a Permitted Business Acquisition), if immediately after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions related thereto shall be consummated in accordance with applicable laws; (iii) with respect to any such acquisition or investment with cash consideration in excess of $5,000,000, the Borrower shall be in Pro Forma Compliance immediately after giving effect to such acquisition or investment and any related transaction; (iv) any acquired or newly formed Subsidiary shall not be liable for any Indebtedness except for Indebtedness permitted by Section 6.01; (v) to the extent required by Section 5.10, any person acquired in such acquisition, if acquired by the Borrower or a Domestic Subsidiary, shall be merged into the Borrower or a Subsidiary Loan Party or become upon consummation of such acquisition a Subsidiary Loan Party; and (vi) the aggregate cash consideration in respect of such acquisitions and investments in assets that are not owned by the Borrower or Subsidiary Loan Parties or in Equity Interests in persons that are not Subsidiary Loan Parties or do not become Subsidiary Loan Parties upon consummation of such acquisition shall not exceed the greater of (x) $10,000,000 and (y) 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period.
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Permitted Cure Securities shall mean any equity securities of the Borrower, Holdings or any Parent Entity issued pursuant to the Cure Right other than Disqualified Stock.
Permitted Holder Group shall have the meaning assigned to such term in the definition of Permitted Holders.
Permitted Holders shall mean (i) the Co-Investors (and each person to whom any Co-Investor transfers Equity Interests of the Borrower, Holdings or any Parent Entity in connection with the primary equity syndication following the Closing Date), (ii) any person that has no material assets other than the capital stock of the Borrower, Holdings or any Parent Entity and that, directly or indirectly, holds or acquires beneficial ownership of 100% on a fully diluted basis of the voting Equity Interests of the Borrower, and of which no other person or group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date), other than any of the other Permitted Holders specified in clause (i), beneficially owns more than 50% (or, following a Qualified IPO, the greater of 35% and the percentage beneficially owned by the Permitted Holders specified in clause (i)) on a fully diluted basis of the voting Equity Interests thereof and (iii) any group (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date) the members of which include any of the other Permitted Holders specified in clause (i) or (ii) and that, directly or indirectly, hold or acquire beneficial ownership of the voting Equity Interests of the Borrower (a Permitted Holder Group ), so long as (1) each member of the Permitted Holder Group has voting rights proportional to the percentage of ownership interests held or acquired by such member and (2) no person or other group (other than the other Permitted Holders specified in clause (i) or (ii)) beneficially owns more than 50% (or, following a Qualified IPO, the greater of 35% and the percentage beneficially owned by the Permitted Holders specified in clause (i) or (ii)) on a fully diluted basis of the voting Equity Interests held by the Permitted Holder Group.
Permitted Investments shall mean:
(a) direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union or any agency thereof, in each case with maturities not exceeding two years;
(b) time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company that is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America having capital, surplus and undivided profits in excess of $250,000,000 and whose long-term debt, or whose parent holding companys long-term debt, is rated A (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act));
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(c) repurchase obligations with a term of not more than 180 days for underlying securities of the types described in clause (a) above entered into with a bank meeting the qualifications described in clause (b) above;
(d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys, or A-1 (or higher) according to S&P (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act));
(e) securities with maturities of two years or less from the date of acquisition, issued or fully guaranteed by any State, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or A by Moodys (or such similar equivalent rating or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act));
(f) shares of mutual funds whose investment guidelines restrict 95% of such funds investments to those satisfying the provisions of clauses (a) through (e) above;
(g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moodys and (iii) have portfolio assets of at least $5,000,000,000;
(h) time deposit accounts, certificates of deposit and money market deposits in an aggregate face amount not in excess of 0.5% of the total assets of the Borrower and the Subsidiaries, on a consolidated basis, as of the end of the Borrowers most recently completed fiscal year; and
(i) instruments equivalent to those referred to in clauses (a) through (h) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States of America to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction.
Permitted Junior Intercreditor Agreement shall mean, with respect to any Liens on Collateral that are intended to be junior to any Liens securing the Term B Loans, either (as the Borrower shall elect) (x) any First Lien/Second Lien Intercreditor Agreement if such Liens secure Second Lien Obligations (as defined therein), (y) another intercreditor agreement not materially less favorable to the Lenders vis-à-vis such junior Liens than such First Lien/Second Lien Intercreditor Agreement (as determined by the Borrower in good faith) or (z) another intercreditor agreement the terms of which are consistent with market terms governing security arrangements for the sharing of liens on a junior basis at the time such intercreditor agreement is proposed to be established, as determined by the Administrative Agent and the Borrower in the exercise of reasonable judgment.
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Permitted Liens shall have the meaning assigned to such term in Section 6.02.
Permitted Loan Purchase shall have the meaning assigned to such term in Section 9.04(i).
Permitted Loan Purchase Amount shall mean 25% of the sum of (x) the aggregate principal amount of the Term B Facility on the Closing Date plus (y) the aggregate principal amount of any Incremental Term Loans incurred since the Closing Date.
Permitted Loan Purchase Assignment and Acceptance shall mean an assignment and acceptance entered into by a Lender as an Assignor and the Borrower as an Assignee, in the form of Exhibit G or such other form as shall be approved by the Administrative Agent and the Borrower (such approval not to be unreasonably withheld or delayed).
Permitted Pari Passu Intercreditor Agreement shall mean, with respect to any Liens on Collateral that are intended to be secured on a pari passu basis with the Liens securing the Term B Loans, either (as the Borrower shall elect) (x) the First Lien/First Lien Intercreditor Agreement, (y) another intercreditor agreement not materially less favorable to the Lenders vis-à-vis such pari passu Liens than the First Lien/First Lien Intercreditor Agreement (as determined by the Borrower in good faith) or (z) another intercreditor agreement the terms of which are consistent with market terms governing security arrangements for the sharing of liens on a pari passu basis at the time such intercreditor agreement is proposed to be established, as determined by the Administrative Agent and the Borrower in the exercise of reasonable judgment.
Permitted Receivables Documents shall mean all documents and agreements evidencing, relating to or otherwise governing a Permitted Receivables Financing.
Permitted Receivables Financing shall mean one or more transactions pursuant to which (i) Receivables Assets or interests therein are sold to or financed by one or more Special Purpose Receivables Subsidiaries, and (ii) such Special Purpose Receivables Subsidiaries finance their acquisition of such Receivables Assets or interests therein, or the financing thereof, by selling or borrowing against Receivables Assets; provided , that recourse to the Borrower or any Subsidiary (other than the Special Purpose Receivables Subsidiaries) in connection with such transactions shall be limited to the extent customary for similar transactions in the applicable jurisdictions (including, to the extent applicable, in a manner consistent with the delivery of a true sale/absolute transfer opinion with respect to any transfer by the Borrower or any Subsidiary (other than a Special Purpose Receivables Subsidiary).
Permitted Refinancing Indebtedness shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to Refinance ), the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided , that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness
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does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs, fees, commissions, expenses, plus an amount equal to any existing commitment unutilized thereunder and letters of credit undrawn thereunder), (b) except with respect to Section 6.01(i), (i) the final maturity date of such Permitted Refinancing Indebtedness is on or after the earlier of (x) the final maturity date of the Indebtedness being Refinanced and (y) the Latest Maturity Date in effect at the time of incurrence thereof and (ii) the Weighted Average Life to Maturity of such Permitted Refinancing Indebtedness is greater than or equal to the lesser of (i) the Weighted Average Life to Maturity of the Indebtedness being Refinanced and (ii) the Weighted Average Life to Maturity of the Class of Term Loans then outstanding with the greatest remaining Weighted Average Life to Maturity, (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Loan Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to such Loan Obligations on terms in the aggregate not materially less favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced, (d) no Permitted Refinancing Indebtedness shall have obligors that are not (or would not have been) obligated with respect to the Indebtedness being so Refinanced (except that a Loan Party may be added as an additional obligor) and (e) if the Indebtedness being Refinanced is secured by Liens on any Collateral (whether senior to, equally and ratably with, or junior to the Liens on such Collateral securing the Loan Obligations or otherwise), such Permitted Refinancing Indebtedness may be secured by such Collateral (including any Collateral pursuant to after-acquired property clauses to the extent any such Collateral secured (or would have secured) the Indebtedness being Refinanced) on terms, taken as a whole, no less favorable to the Secured Parties than the Indebtedness being refinanced or on terms otherwise permitted by Section 6.02.
person shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company or government, individual or family trusts, or any agency or political subdivision thereof.
PIK Seller Note shall mean any pay-in-kind promissory notes issued by a Parent Entity to the Seller from time to time from and after the Closing Date pursuant to the terms of the Purchase Agreement.
Plan shall mean any employee pension benefit plan (other than a Multiemployer Plan) that is (i) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, (ii) sponsored or maintained (at the time of determination or at any time within the five years prior thereto) by Holdings, the Borrower, any Subsidiary or any ERISA Affiliate, and (iii) in respect of which Holdings, the Borrower, any Subsidiary or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an employer as defined in Section 3(5) of ERISA.
Platform shall have the meaning assigned to such term in Section 9.17.
Pledged Collateral shall have the meaning assigned to such term in the Collateral Agreement or the Holdings Guarantee and Pledge Agreement, as applicable.
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primary obligor shall have the meaning assigned to such term in the definition of the term Guarantee.
Prime Rate shall mean the rate of interest per annum as announced from time to time by Citicorp North America, Inc. as its prime rate in effect at its principal office in New York City.
Pro Forma Basis shall mean, as to any person, for any events as described below that occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if such events occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the Reference Period ): (i) pro forma effect shall be given to any Disposition, any acquisition, Investment, capital expenditure, construction, repair, replacement, improvement, development, disposition, merger, amalgamation, consolidation (including the Transactions) (or any similar transaction or transactions not otherwise permitted under Section 6.04 or 6.05 that require a waiver or consent of the Required Lenders and such waiver or consent has been obtained), any dividend, distribution or other similar payment, any designation of any Subsidiary as an Unrestricted Subsidiary and any Subsidiary Redesignation, New Project, and any restructurings of the business of the Borrower or any of its Subsidiaries that the Borrower or any of the Subsidiaries has determined to make and/or made and are expected to have a continuing impact and are factually supportable, which would include cost savings resulting from head count reduction, closure of facilities and similar operational and other cost savings, which adjustments the Borrower determines are reasonable as set forth in a certificate of a Financial Officer of the Borrower (the foregoing, together with any transactions related thereto or in connection therewith, the relevant transactions ), in each case that occurred during the Reference Period (or, in the case of determinations made pursuant to Section 2.21 or Article VI (other than Section 6.11), occurring during the Reference Period or thereafter and through and including the date upon which the relevant transaction is consummated), (ii) in making any determination on a Pro Forma Basis, (x) all Indebtedness (including Indebtedness issued, incurred or assumed as a result of, or to finance, any relevant transactions and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes and amounts outstanding under any Permitted Receivables Financing, in each case not to finance any acquisition) issued, incurred, assumed or permanently repaid during the Reference Period (or, in the case of determinations made pursuant to Section 2.21 or Article VI (other than Section 6.11), occurring during the Reference Period or thereafter and through and including the date upon which the relevant transaction is consummated) shall be deemed to have been issued, incurred, assumed or permanently repaid at the beginning of such period, (y) Interest Expense of such person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in the preceding clause (x), bearing floating interest rates shall be computed on a pro forma basis as if the rates that would have been in effect during the period for which pro forma effect is being given had been actually in effect during such
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periods, and (z) in giving effect to clause (i) above with respect to each New Project which commences operations and records not less than one full fiscal quarters operations during the Reference Period, the operating results of such New Project shall be annualized on a straight line basis during such period, taking into account any seasonality adjustments determined by the Borrower in good faith, and (iii) (A) any Subsidiary Redesignation then being designated, effect shall be given to such Subsidiary Redesignation and all other Subsidiary Redesignations after the first day of the relevant Reference Period and on or prior to the date of the respective Subsidiary Redesignation then being designated, collectively, and (B) any designation of a Subsidiary as an Unrestricted Subsidiary, effect shall be given to such designation and all other designations of Subsidiaries as Unrestricted Subsidiaries after the first day of the relevant Reference Period and on or prior to the date of the then applicable designation of a Subsidiary as an Unrestricted Subsidiary, collectively.
Pro forma calculations made pursuant to the definition of the term Pro Forma Basis shall be determined in good faith by a Responsible Officer of the Borrower and may include adjustments to reflect (1) operating expense reductions and other operating improvements, synergies or cost savings, in each case, related to mergers and other business combinations, acquisitions and divestitures projected by the Borrower in good faith to result from actions taken or expected to be taken (in the good faith determination of the Borrower) after the date any such transaction is consummated (including, to the extent applicable, the Transactions), (2) all adjustments of the type used in connection with the calculation of Pro-Forma Adjusted EBITDA as set forth in the Information Memorandum to the extent such adjustments, without duplication, continue to be applicable to such Reference Period, provided that any adjustment relating to new machines placed or to be placed on casino floors or other gaming establishments will be permitted to be given pro forma effect to the extent (i) such machines are under contract and expected to be placed in such locations within 6 months of the Reference Period in the good faith determination of the Borrower or (ii) the Borrower has incurred the capital or inventory cost of producing the machines, whether the machines are placed in inventory or delivered to customers, and (3) other operating expense reductions and other operating improvements, synergies or cost savings, in each case, projected by the Borrower in good faith to result from actions either taken or commenced or expected to be taken or commenced (in the good faith determination of the Borrower) within 12 months after the date any such transaction is consummated and, in the case of this clause (3), the amount of any adjustments pursuant to this clause (3) shall not exceed 20% of EBITDA for the Reference Period (calculated prior to giving effect to such cap); provided that the cap set forth in this clause (3) shall not apply to any calculations made with respect to the Financial Covenant. The Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer of the Borrower setting forth such demonstrable or additional operating expense reductions, other operating improvements or synergies and adjustments pursuant to clause (2) above, and information and calculations supporting them in reasonable detail.
For purposes of this definition, any amount in a currency other than Dollars will be converted to Dollars based on the average exchange rate for such currency for the most recent twelve month period immediately prior to the date of determination in a manner consistent with that used in calculating EBITDA for the applicable period.
Pro Forma Compliance shall mean, at any date of determination, that the Borrower and its Subsidiaries shall be in compliance, on a Pro Forma Basis after giving effect on a Pro Forma Basis to the relevant transactions (including the assumption, the issuance,
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incurrence and permanent repayment of Indebtedness), with the Financial Covenant recomputed as at the last day of the most recently ended fiscal quarter of the Borrower and its Subsidiaries for which the financial statements and certificates required pursuant to Section 5.04 have been delivered.
Pro Forma EBITDA shall have the meaning assigned to such term in Section 3.05.
Pro Rata Extension Offers shall have the meaning assigned to such term in Section 2.21(e).
Pro Rata Share shall have the meaning assigned to such term in Section 9.08(f).
Projections shall mean the projections of the Borrower and the Subsidiaries included in the Information Memorandum and any other projections and any forward-looking statements (including statements with respect to booked business) of such entities furnished to the Lenders or the Administrative Agent by or on behalf of the Borrower or any of the Subsidiaries prior to the Closing Date.
Public Company Compliance shall mean compliance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, the provisions of the Securities Act and the Exchange Act, and the rules of national securities exchange listed companies (in each case, as applicable to companies with equity or debt securities held by the public), including procuring directors and officers insurance, legal and other professional fees, and listing fees.
Public Lender shall have the meaning assigned to such term in Section 9.17.
Purchase Agreement shall mean the Equity Purchase Agreement, dated as of September 16, 2013, by AGS Holdings, LLC, as seller, AGS Capital and AcquisitionCo, as purchaser, and any other agreements or instruments contemplated thereby, in each case, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and in accordance with this Agreement.
Purchase Agreement Earn-outs shall mean any earn-outs or other purchase price adjustments payable pursuant to the terms of the Purchase Agreement.
Qualified Equity Interests shall mean any Equity Interest other than Disqualified Stock.
Qualified IPO shall mean an underwritten public offering of the Equity Interests of the Borrower, Holdings or any Parent Entity which generates cash proceeds of at least $25,000,000.
Rate shall have the meaning assigned to such term in the definition of the term Type.
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Real Property shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Loan Party, whether by lease, license, or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, incidental to the ownership, lease or operation thereof.
Receivables Assets shall mean accounts receivable (including any bills of exchange) and related assets and property from time to time originated, acquired or otherwise owned by the Borrower or any Subsidiary.
Receivables Net Investment shall mean the aggregate cash amount paid by the lenders or purchasers under any Permitted Receivables Financing in connection with their purchase of, or the making of loans secured by, Receivables Assets or interests therein, as the same may be reduced from time to time by collections with respect to such Receivables Assets or otherwise in accordance with the terms of the Permitted Receivables Documents (but excluding any such collections used to make payments of items included in clause (c) of the definition of Interest Expense); provided , however , that if all or any part of such Receivables Net Investment shall have been reduced by application of any distribution and thereafter such distribution is rescinded or must otherwise be returned for any reason, such Receivables Net Investment shall be increased by the amount of such distribution, all as though such distribution had not been made.
Reference Period shall have the meaning assigned to such term in the definition of the term Pro Forma Basis.
Refinance shall have the meaning assigned to such term in the definition of the term Permitted Refinancing Indebtedness, and Refinanced shall have a meaning correlative thereto.
Refinancing Effective Date shall have the meaning assigned to such term in Section 2.21(j).
Refinancing Notes shall mean any secured or unsecured notes or loans issued by the Borrower or any Subsidiary Loan Party (whether under an indenture, a credit agreement or otherwise) and the Indebtedness represented thereby; provided , that (a)(i) 100% of the Net Proceeds of such Refinancing Notes that are secured on a pari passu basis with the Term B Loans are used to permanently reduce Loans and/or replace Commitments substantially simultaneously with the issuance thereof or (ii) 90% of the Net Proceeds of any other Refinancing Notes are used to permanently reduce Loans and/or replace Commitments substantially simultaneously with the issuance thereof; (b) the principal amount (or accreted value, if applicable) of such Refinancing Notes does not exceed the principal amount (or accreted value, if applicable) of the aggregate portion of the Loans so reduced and/or Commitments so replaced (plus unpaid accrued interest and premium (including tender premiums) thereon and underwriting discounts, defeasance costs, fees, commissions and expenses); (c) the final maturity date of such Refinancing Notes is on or after the Term Facility Maturity Date or the Revolving Facility Maturity Date, as applicable, of the Term Loans so reduced or the Revolving Facility Commitments so replaced; (d) the Weighted Average Life to
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Maturity of such Refinancing Notes is greater than or equal to the Weighted Average Life to Maturity of the Term Loans so reduced or the Revolving Facility Commitments so replaced, as applicable; (e) in the case of Refinancing Notes in the form of notes issued under an indenture, the terms thereof do not provide for any scheduled repayment, mandatory redemption or sinking fund obligations prior to the Term Facility Maturity Date of the Term Loans so reduced or the Revolving Facility Maturity Date of the Revolving Facility Commitments so replaced, as applicable (other than customary offers to repurchase or mandatory prepayment provisions upon a change of control, asset sale or event of loss and customary acceleration rights after an event of default); (f) the other terms of such Refinancing Notes (other than pricing, fees, floors, funding discounts and redemption or prepayment premiums), taken as a whole, are substantially similar to, or not materially less favorable to the Borrower and its Subsidiaries than the terms, taken as a whole, applicable to the Term B Loans (except for covenants or other provisions applicable only to periods after the Latest Maturity Date in effect at the time such Refinancing Notes are issued), as determined by the Borrower in good faith; (g) there shall be no obligor in respect of such Refinancing Notes that is not a Loan Party and (h) Refinancing Notes that are secured by Collateral shall be subject to the provisions of a Permitted Pari Passu Intercreditor Agreement or a Permitted Junior Intercreditor Agreement, as applicable.
Refinancing Term Loans shall have the meaning assigned to such term in Section 2.21(j).
Register shall have the meaning assigned to such term in Section 9.04(b)(iv).
Regulation T shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation U shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Regulation X shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.
Related Fund shall mean, with respect to any Lender that is a fund that invests in bank or commercial loans and similar extensions of credit, any other fund that invests in bank or commercial loans and similar extensions of credit and is advised or managed by (a) such Lender, (b) an Affiliate of such Lender or (c) an entity (or an Affiliate of such entity) that administers, advises or manages such Lender.
Related Parties shall mean, with respect to any specified person, such persons Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and such persons Affiliates.
Related Sections shall have the meaning assigned to such term in Section 6.04.
Release shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, emanating or migrating in, into, onto or through the Environment.
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Replacement Revolving Facility Commitments shall have the meaning assigned to such term in Section 2.21(l).
Replacement Revolving Facility Effective Date shall have the meaning assigned to such term in Section 2.21(l).
Replacement Revolving Loans shall have the meaning assigned to such term in Section 2.21(l).
Reportable Event shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30-day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code).
Required Lenders shall mean, at any time, Lenders having (a) Loans (other than Swingline Loans) outstanding, (b) Revolving L/C Exposures, (c) Swingline Exposures and (d) Available Unused Commitments that, taken together, represent more than 50% of the sum of (w) all Loans (other than Swingline Loans) outstanding, (x) all Revolving L/C Exposures, (y) all Swingline Exposures and (z) the total Available Unused Commitments at such time; provided , that (i) the Loans, Revolving L/C Exposures, Swingline Exposures and Available Unused Commitment of any Defaulting Lender shall be disregarded in determining Required Lenders at any time and (ii) the portion of any Loans held by Debt Fund Affiliate Lenders in the aggregate in excess of 49.9% of the Required Amount of Loans shall be disregarded in determining Required Lenders at any time. For purposes of the foregoing, Required Amount of Loans means, at any time, the amount of Loans required to be held by Lenders in order for such Lenders to constitute Required Lenders (without giving effect to the foregoing clause (ii)).
Required Percentage shall mean, with respect to an Applicable Period, 50%; provided , that (a) if the Net First Lien Leverage Ratio as at the end of the Applicable Period is greater than 2.00:1.00 but less than or equal to 2.75:1.00, such percentage shall be 25%, and (b) if the Net First Lien Leverage Ratio as at the end of the Applicable Period is less than or equal to 2.00:1.00, such percentage shall be 0%.
Required Revolving Facility Lenders shall mean, at any time, Revolving Facility Lenders having (a) Loans (other than Swingline Loans) outstanding, (b) Revolving L/C Exposures, (c) Swingline Exposures and (d) Available Unused Commitments that, taken together, represent more than 50% of the sum of (w) all Revolving Facility Loans (other than Swingline Loans) outstanding, (x) all Revolving L/C Exposures, (y) all Swingline Exposures and (z) the total Available Unused Commitments at such time; provided , that the Revolving Facility Loans, Revolving L/C Exposures, Swingline Exposures and Available Unused Commitment of any Defaulting Lender shall be disregarded in determining Required Revolving Facility Lenders at any time.
Requirement of Law shall mean, as to any person, any law, treaty, rule, regulation, statute, order, ordinance, decree, judgment, consent decree, writ, injunction, settlement agreement or governmental requirement enacted, promulgated or imposed or entered into or agreed by any Governmental Authority or Gaming Authority, including Gaming Laws, in each case applicable to or binding upon such person or any of its property or assets or to which such person or any of its property or assets is subject.
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Responsible Officer of any person shall mean any executive officer or Financial Officer of such person, any other officer or similar official thereof responsible for the administration of the obligations of such person in respect of this Agreement, or any other duly authorized employee or signatory of such person.
Restricted Payments shall have the meaning assigned to such term in Section 6.06. The amount of any Restricted Payment made other than in the form of cash or cash equivalents shall be the fair market value thereof (as determined by the Borrower in good faith).
Retained Excess Cash Flow Overfunding shall mean, at any time, in respect of any Excess Cash Flow Period, the amount, if any, by which the portion of the Cumulative Credit attributable to the Retained Percentage of Excess Cash Flow for all Excess Cash Flow Interim Periods used in such Excess Cash Flow Period exceeds the actual Retained Percentage of Excess Cash Flow for such Excess Cash Flow Period.
Retained Percentage shall mean, with respect to any Excess Cash Flow Period (or Excess Cash Flow Interim Period), (a) 100% minus (b) the Required Percentage with respect to such Excess Cash Flow Period (or Excess Cash Flow Interim Period).
Revaluation Date shall mean, with respect to any Alternate Currency Letter of Credit, each of the following: (i) each date of issuance, extension or renewal of an Alternate Currency Letter of Credit, (ii) each date of an amendment of any Alternate Currency Letter of Credit having the effect of increasing the amount thereof, (iii) each date of any payment by the Issuing Bank under any Alternate Currency Letter of Credit, and (iv) such additional dates as the Administrative Agent or the Issuing Bank shall determine or the Required Lenders shall require.
Revolving Facility shall mean the Revolving Facility Commitments of any Class and the extensions of credit made hereunder by the Revolving Facility Lenders of such Class and, for purposes of Section 9.08(b), shall refer to all such Revolving Facility Commitments as a single Class.
Revolving Facility Borrowing shall mean a Borrowing comprised of Revolving Facility Loans of the same Class.
Revolving Facility Commitment shall mean, with respect to each Revolving Facility Lender, the commitment of such Revolving Facility Lender to make Revolving Facility Loans pursuant to Section 2.01(b), as such commitment may be (a) reduced from time to time pursuant to Section 2.08, (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 9.04, and (c) increased (or replaced) as provided under Section 2.21. The initial amount of each Lenders Revolving Facility Commitment is set forth on Schedule 2.01 , or in the Assignment and Acceptance or Incremental Assumption Agreement pursuant to which such Lender shall have assumed its Revolving Facility Commitment (or Incremental Revolving Facility Commitment), as applicable. The aggregate amount of the
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Lenders Revolving Facility Commitments on the date hereof is $25,000,000. On the date hereof, there is only one Class of Revolving Facility Commitments. After the date hereof, additional Classes of Revolving Facility Commitments may be added or created pursuant to Incremental Assumption Agreements.
Revolving Facility Credit Exposure shall mean, at any time with respect to any Class of Revolving Facility Commitments, the sum of (a) the aggregate principal amount of the Revolving Facility Loans of such Class outstanding at such time, (b) the Swingline Exposure applicable to such Class at such time and (c) the Revolving L/C Exposure applicable to such Class at such time minus, for the purpose of Section 4.01(d), the amount of Letters of Credit that have been Cash Collateralized in an amount equal to the Minimum L/C Collateral Amount at such time. The Revolving Facility Credit Exposure of any Revolving Facility Lender at any time shall be the product of (x) such Revolving Facility Lenders Revolving Facility Percentage of the applicable Class and (y) the aggregate Revolving Facility Credit Exposure of such Class of all Revolving Facility Lenders, collectively, at such time.
Revolving Facility Lender shall mean a Lender (including an Incremental Revolving Facility Lender) with a Revolving Facility Commitment or with outstanding Revolving Facility Loans.
Revolving Facility Loan shall mean a Loan made by a Revolving Facility Lender pursuant to Section 2.01(b). Unless the context otherwise requires, the term Revolving Facility Loans shall include the Other Revolving Loans.
Revolving Facility Maturity Date shall mean, as the context may require, (a) with respect to the Revolving Facility in effect on the Closing Date, December 20, 2018 and (b) with respect to any other Classes of Revolving Facility Commitments, the maturity dates specified therefor in the applicable Incremental Assumption Agreement.
Revolving Facility Percentage shall mean, with respect to any Revolving Facility Lender of any Class, the percentage of the total Revolving Facility Commitments of such Class represented by such Lenders Revolving Facility Commitment of such Class. If the Revolving Facility Commitments of such Class have terminated or expired, the Revolving Facility Percentages of such Class shall be determined based upon the Revolving Facility Commitments of such Class most recently in effect, giving effect to any assignments pursuant to Section 9.04.
Revolving Facility Termination Event shall have the meaning ascribed thereto in Section 2.05(k).
Revolving L/C Exposure of any Class shall mean at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit applicable to such Class outstanding at such time (calculated, in the case of Alternate Currency Letters of Credit, based on the Dollar Equivalent thereof) and (b) the aggregate principal amount of all L/C Disbursements applicable to such Class that have not yet been reimbursed at such time (calculated, in the case of Alternate Currency Letters of Credit, based on the Dollar Equivalent thereof). The Revolving L/C Exposure of any Class of any Revolving Facility Lender at any time shall mean its applicable
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Revolving Facility Percentage of the aggregate Revolving L/C Exposure applicable to such Class at such time. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the International Standard Practices, International Chamber of Commerce No. 590, such Letter of Credit shall be deemed to be outstanding in the amount so remaining available to be drawn. 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 such time; provided , that with respect to any Letter of Credit that, by its terms or the terms of any 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.
Revolving Yield Differential shall have the meaning assigned to such term in Section 2.21(b)(viii).
S&P shall mean Standard & Poors Ratings Group, Inc.
Sale and Lease-Back Transaction shall have the meaning assigned to such term in Section 6.03.
SEC shall mean the Securities and Exchange Commission or any successor thereto.
Secured Cash Management Agreement shall mean any Cash Management Agreement that is entered into by and between any Loan Party and any Cash Management Bank to the extent that such Cash Management Agreement is not otherwise designated in writing by the Borrower and such Cash Management Bank to the Administrative Agent to not be included as a Secured Cash Management Agreement.
Secured Hedge Agreement shall mean any Hedging Agreement that is entered into by and between any Loan Party and any Hedge Bank to the extent that such Hedging Agreement is not otherwise designated in writing by the Borrower and such Hedge Bank to the Administrative Agent to not be included as a Secured Hedge Agreement. Notwithstanding the foregoing, for all purposes of the Loan Documents, any Guarantee of, or grant of any Lien to secure, any obligations in respect of a Secured Hedge Agreement by a Guarantor shall not include any Excluded Swap Obligations.
Secured Parties shall mean, collectively, the Administrative Agent, the Collateral Agent, each Lender, each Issuing Bank, each Hedge Bank that is party to any Secured Hedge Agreement, each Cash Management Bank that is party to any Secured Cash Management Agreement and each sub-agent appointed pursuant to Section 8.02 by the Administrative Agent with respect to matters relating to the Loan Documents or by the Collateral Agent with respect to matters relating to any Security Document.
Securities Act shall mean the Securities Act of 1933, as amended.
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Security Documents shall mean the Mortgages, the Collateral Agreement, the Holdings Guarantee and Pledge Agreement, the IP Security Agreements (as defined in the Collateral Agreement), and each of the security agreements, pledge agreements and other instruments and documents executed and delivered pursuant to any of the foregoing or pursuant to Section 4.02 or 5.10.
Seller shall have the meaning assigned to such term in the first recital hereto.
Similar Business shall mean any business, the majority of whose revenues are derived from (i) business or activities conducted by the Borrower and its Subsidiaries on the Closing Date, (ii) any business that is a natural outgrowth or reasonable extension, development or expansion of any such business or any business similar, reasonably related, incidental, complementary or ancillary to any of the foregoing or (iii) any business that in the Borrowers good faith business judgment constitutes a reasonable diversification of businesses conducted by the Borrower and its Subsidiaries.
Special Flood Hazard Area shall have the meaning assigned to such term in Section 5.02(c).
Special Purpose Receivables Subsidiary shall mean (i) a direct or indirect Subsidiary of the Borrower established in connection with a Permitted Receivables Financing for the acquisition of Receivables Assets or interests therein, and which is organized in a manner intended to reduce the likelihood that it would be substantively consolidated with Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries (other than Special Purpose Receivables Subsidiaries) in the event Holdings (prior to a Qualified IPO), the Borrower or any such Subsidiary becomes subject to a proceeding under the U.S. Bankruptcy Code (or other insolvency law) and (ii) any Subsidiary of a Special Purposes Receivable Subsidiary.
Spot Rate shall mean, with respect to any currency, the rate at which such currency may be exchanged into another currency based on the exchange rate on the immediately prior Business Day as determined by OANDA Corporation and made available on its website at http://www.oanda.com/convert/fxhistory; provided , that the Administrative Agent or the Issuing Bank may obtain such spot rate from another financial institution designated by the Administrative Agent or the Issuing Bank if at the time of any such determination, for any reason, no such rate is being quoted.
Standby Letters of Credit shall have the meaning assigned to such term in Section 2.05(a).
Statutory Reserves shall mean the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board and any other banking authority, domestic or foreign, to which the Administrative Agent or any Lender (including any branch, Affiliate or other fronting office making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in Regulation D of the Board). Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities (as defined in Regulation D of the Board) and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D. Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
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Subagent shall have the meaning assigned to such term in Section 8.02.
subsidiary shall mean, with respect to any person (herein referred to as the parent), any corporation, partnership, association or other business entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, directly or indirectly, owned, Controlled or held, or (b) that is, at the time any determination is made, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
Subsidiary shall mean, unless the context otherwise requires, a subsidiary of the Borrower. Notwithstanding the foregoing, (a) except for purposes of Sections 3.08, 3.09, 3.13, 3.15, 3.16, 3.25(b), 3.26, 5.03, 5.09 and 7.01(k), and the definition of Unrestricted Subsidiary contained herein), an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its Subsidiaries for purposes of this Agreement, and (b) each Designated Entity shall be deemed to be a Subsidiary of the Borrower for purposes of this Agreement and any other Loan Documents to which it is a party.
Subsidiary Guarantee Agreement shall mean the Subsidiary Guarantee Agreement dated as of the date hereof, as amended, restated, supplemented or otherwise modified from time to time, between each Subsidiary Loan Party and the Collateral Agent.
Subsidiary Loan Party shall mean (a) each Wholly Owned Domestic Subsidiary of the Borrower that is not an Excluded Subsidiary and (b) any other Subsidiary of the Borrower that may be designated by the Borrower (by way of delivering to the Collateral Agent a supplement to the Collateral Agreement and a supplement to the Subsidiary Guarantee Agreement, in each case, duly executed by such Subsidiary) in its sole discretion from time to time to be a guarantor in respect of the Obligations and the obligations in respect of the Loan Documents, whereupon such Subsidiary shall be obligated to comply with the other requirements of Section 5.10(d) as if it were newly acquired.
Subsidiary Redesignation shall have the meaning provided in the definition of Unrestricted Subsidiary contained in this Section 1.01.
Swap Obligation shall mean, 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 Borrowing shall mean a Borrowing comprised of Swingline Loans.
Swingline Borrowing Request shall mean a request by the Borrower substantially in the form of Exhibit D-2 .
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Swingline Commitment shall mean, with respect to each Swingline Lender, the commitment of such Swingline Lender to make Swingline Loans pursuant to Section 2.04. The aggregate amount of the Swingline Commitments on the Closing Date is $5,000,000. The Swingline Commitment is part of, and not in addition to, the Revolving Facility Commitments.
Swingline Exposure shall mean at any time the aggregate principal amount of all outstanding Swingline Borrowings at such time. The Swingline Exposure of any Revolving Facility Lender at any time shall mean its applicable Revolving Facility Percentage of the aggregate Swingline Exposure at such time.
Swingline Lender shall mean (a) Citicorp North America, Inc., in its capacity as a lender of Swingline Loans, and (b) each Revolving Facility Lender that shall have become a Swingline Lender hereunder as provided in Section 2.04(d), each in its capacity as a lender of Swingline Loans hereunder.
Swingline Loans shall mean the swingline loans made to the Borrower pursuant to Section 2.04.
Taxes shall mean any and all present or future taxes, duties, levies, imposts, assessments, deductions, withholdings or other similar charges imposed by any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or other basis and any interest, fines, penalties or additions to tax with respect to the foregoing.
Term B Borrowing shall mean any Borrowing comprised of Term B Loans.
Term B Facility shall mean the Term B Loan Commitments and the Term B Loans made hereunder.
Term B Facility Maturity Date shall mean December 20, 2020.
Term B Loan Commitment shall mean, with respect to each Lender, the commitment of such Lender to make Term B Loans hereunder. The amount of each Lenders Term B Loan Commitment as of the Closing Date is set forth on Schedule 2.01 . The aggregate amount of the Term B Loan Commitments as of the Closing Date is $155,000,000.
Term B Loan Installment Date shall have the meaning assigned to such term in Section 2.10(a)(i).
Term B Loans shall mean (a) the term loans made by the Lenders to the Borrower pursuant to Section 2.01(a), and (b) any Incremental Term Loans in the form of Term B Loans made by the Incremental Term Lenders to the Borrower pursuant to Section 2.01(c).
Term Borrowing shall mean any Term B Borrowing or any Incremental Term Borrowing.
Term Facility shall mean the Term B Facility and/or any or all of the Incremental Term Facilities.
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Term Facility Commitment shall mean the commitment of a Lender to make Term Loans, including Term B Loans and/or Other Term Loans.
Term Facility Maturity Date shall mean, as the context may require, (a) with respect to the Term B Facility in effect on the Closing Date, the Term B Facility Maturity Date and (b) with respect to any other Class of Term Loans, the maturity dates specified therefor in the applicable Incremental Assumption Agreement.
Term Loan Installment Date shall mean any Term B Loan Installment Date or any Incremental Term Loan Installment Date.
Term Loans shall mean the Term B Loans and/or the Incremental Term Loans.
Term Yield Differential shall have the meaning assigned to such term in Section 2.21(b)(vii).
Termination Date shall mean the date on which (a) all Commitments shall have been terminated, (b) the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full (other than in respect of contingent indemnification and expense reimbursement claims not then due) and (c) all Letters of Credit (other than those that have been Cash Collateralized) have been cancelled or have expired and all amounts drawn or paid thereunder have been reimbursed in full.
Test Period shall mean, on any date of determination, the period of four consecutive fiscal quarters of the Borrower then most recently ended (taken as one accounting period) for which financial statements have been (or were required to be) delivered pursuant to Section 5.04(a) or 5.04(b) and, initially, the four fiscal quarter period ended September 30, 2013.
Third Party Funds shall mean any accounts or funds, or any portion thereof, received by Borrower or any of its Subsidiaries as agent on behalf of third parties in accordance with a written agreement that imposes a duty upon Borrower or one or more of its Subsidiaries to collect and remit those funds to such third parties.
Total Net Leverage Ratio shall mean, on any date, the ratio of (a) (i) the aggregate principal amount of Consolidated Debt of the Borrower and its Subsidiaries outstanding as of the last day of the Test Period most recently ended as of such date less (ii) without duplication, up to $25,000,000 of Unrestricted Cash and Permitted Investments of the Borrower and its Subsidiaries as of the last day of such Test Period, to (b) EBITDA for such Test Period, all determined on a consolidated basis in accordance with GAAP; provided , that the Total Net Leverage Ratio shall be determined for the relevant Test Period on a Pro Forma Basis.
Trade Letters of Credit shall have the meaning assigned to such term in Section 2.05(a).
Transaction Documents shall mean the Purchase Agreement and the Loan Documents.
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Transaction Expenses shall mean any fees or expenses incurred or paid by the Borrower or any of its Subsidiaries or any of their Affiliates in connection with the Transactions, this Agreement and the other Loan Documents, the Purchase Agreement and the transactions contemplated hereby and thereby.
Transactions shall mean, collectively, the transactions to occur pursuant to the Transaction Documents, including (a) the consummation of the AGS Acquisition; (b) the execution, delivery and performance of the Loan Documents, the creation of the Liens pursuant to the Security Documents and the initial borrowings hereunder; (c) the Equity Financing; (d) the issuance of one or more PIK Seller Notes; (e) the repayment in full of, and the termination of all commitments under, the Indebtedness of AGS Capital and its subsidiaries repaid on the Closing Date (including the Existing Credit Agreement); and (e) the payment of all fees and expenses in connection with the foregoing.
Type shall mean, when used in respect of any Loan or Borrowing, the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term Rate shall include the Adjusted LIBO Rate and the ABR.
Uniform Commercial Code shall mean the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.
Unrestricted Cash shall mean cash or cash equivalents of the Borrower or any of its Subsidiaries that would not appear as restricted on a consolidated balance sheet of the Borrower or any of its Subsidiaries.
Unrestricted Subsidiary shall mean (1) any Subsidiary of the Borrower identified on Schedule 1.01(E) , (2) any other Subsidiary of the Borrower, whether now owned or acquired or created after the Closing Date, that is designated by the Borrower as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent; provided , that the Borrower shall only be permitted to so designate a new Unrestricted Subsidiary after the Closing Date so long as (a) no Default or Event of Default has occurred and is continuing or would result therefrom, (b) immediately after giving effect to such designation, the Borrower shall be in Pro Forma Compliance with the Financial Covenant as of the last day of the then most recently ended Test Period, (c) such Unrestricted Subsidiary shall be capitalized (to the extent capitalized by the Borrower or any of its Subsidiaries) through Investments as permitted by, and in compliance with, Section 6.04, and any prior or concurrent Investments in such Subsidiary by the Borrower or any of its Subsidiaries shall be deemed to have been made under Section 6.04 and (d) without duplication of clause (c), any assets owned by such Unrestricted Subsidiary at the time of the initial designation thereof shall be treated as Investments pursuant to Section 6.04; and (3) any subsidiary of an Unrestricted Subsidiary. The Borrower may designate any Unrestricted Subsidiary to be a Subsidiary for purposes of this Agreement (each, a Subsidiary Redesignation ); provided , that (i) no Default or Event of Default has occurred and is continuing or would result therefrom, and (ii) the Borrower shall have delivered to the Administrative Agent an officers certificate executed by a Responsible Officer of the Borrower, certifying to the best of such officers knowledge, compliance with the requirements of preceding clause (i).
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U.S. Bankruptcy Code shall mean Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.
U.S. Dollars , Dollars or $ shall mean lawful money of the United States of America.
U.S. Lender shall mean any Lender other than a Foreign Lender.
USA PATRIOT Act shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107 56 (signed into law October 26, 2001)).
Voting Stock shall mean, with respect to any person, such persons Equity Interests having the right to vote for the election of directors of such person under ordinary circumstances.
Weighted Average Life to Maturity shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing : (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness.
Wholly Owned Domestic Subsidiary shall mean a Wholly Owned Subsidiary that is also a Domestic Subsidiary.
Wholly Owned Subsidiary of any person shall mean a subsidiary of such person, all of the Equity Interests of which (other than directors qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such person or another Wholly Owned Subsidiary of such person. Unless the context otherwise requires, Wholly Owned Subsidiary shall mean a Subsidiary of the Borrower that is a Wholly Owned Subsidiary of the Borrower.
Withdrawal Liability shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Working Capital shall mean, with respect to the Borrower and the Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided , that, for purposes of calculating Excess Cash Flow, increases or decreases in Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent or (b) the effects of purchase accounting.
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Section 1.02 Terms Generally . The definitions set forth or referred to in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any changes in GAAP after the Closing Date, any lease of the Borrower or the Subsidiaries, or of a special purpose or other entity not consolidated with the Borrower and its Subsidiaries at the time of its incurrence of such lease, that would be characterized as an operating lease under GAAP in effect on the Closing Date (whether such lease is entered into before or after the Closing Date) shall not constitute Indebtedness or a Capitalized Lease Obligation of the Borrower or any Subsidiary under this Agreement or any other Loan Document as a result of such changes in GAAP.
Section 1.03 Effectuation of Transactions .
Each of the representations and warranties of the Borrower contained in this Agreement (and all corresponding definitions) are made after giving effect to the Transactions as shall have taken place on or prior to the date of determination, unless the context otherwise require.
Section 1.04 Exchange Rates; Currency Equivalents . (a) The Administrative Agent shall determine the Spot Rate as of each Revaluation Date to be used for calculating Dollar Equivalent amounts of Alternate Currency Letters of Credit. Such Spot Rate shall become effective as of such Revaluation Date and shall be the Spot Rate employed in converting any amounts between the Dollars and each Alternate Currency until the next Revaluation Date to occur. Except for purposes of financial statements delivered by Loan Parties hereunder or calculating financial ratios hereunder or except as otherwise provided herein, the applicable amount of any currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as determined by the Administrative Agent in accordance with this
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Agreement. No Default or Event of Default shall arise as a result of any limitation or threshold set forth in Dollars in Article VI or clause (f) or (j) of Section 7.01 being exceeded solely as a result of changes in currency exchange rates from those rates applicable on the first day of the fiscal quarter in which such determination occurs or in respect of which such determination is being made.
(b) Wherever in this Agreement in connection with an Alternate Currency Letter of Credit, an amount, such as a required minimum or multiple amount, is expressed in Dollars, such amount shall be the Dollar Equivalent of such Dollar amount (rounded to the nearest unit of such Alternate Currency, with 0.5 of a unit being rounded upward), as determined by the Administrative Agent or the Issuing Bank, as applicable.
Section 1.05 Timing of Payment or Performance . Except as otherwise expressly provided herein, when the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment or performance shall extend to the immediately succeeding Business Day.
Section 1.06 Times of Day . Unless otherwise specified herein, all references herein to times of day shall be references to New York City time (daylight or standard, as applicable).
ARTICLE II
The Credits
Section 2.01 Commitments . Subject to the terms and conditions set forth herein:
(a) each Lender agrees to make Term B Loans in Dollars to the Borrower on the Closing Date in an aggregate principal amount not to exceed its Term B Loan Commitment, and
(b) each Lender agrees to make Revolving Facility Loans of a Class in Dollars to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lenders Revolving Facility Credit Exposure of such Class exceeding such Lenders Revolving Facility Commitment of such Class or (ii) the Revolving Facility Credit Exposure of such Class exceeding the total Revolving Facility Commitments of such Class. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Facility Loans, and
(c) each Lender having an Incremental Term Loan Commitment agrees, subject to the terms and conditions set forth in the applicable Incremental Assumption Agreement, to make Incremental Term Loans to the Borrower in an aggregate principal amount not to exceed its Incremental Term Loan Commitment.
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(d) Amounts of Term B Loans borrowed under Section 2.01(a) or Section 2.01(c) that are repaid or prepaid may not be reborrowed.
Section 2.02 Loans and Borrowings . (a) Each Loan shall be made as part of a Borrowing consisting of Loans under the same Facility and of the same Type made by the Lenders ratably in accordance with their respective Commitments under the applicable Facility (or, in the case of Swingline Loans, in accordance with their respective Swingline Commitments); provided , however , that Revolving Facility Loans of any Class shall be made by the Revolving Facility Lenders of such Class ratably in accordance with their respective Revolving Facility Percentages on the date such Loans are made hereunder. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided , that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lenders failure to make Loans as required.
(b) Subject to Section 2.14, each Borrowing (other than a Swingline Borrowing) shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith. Each Swingline Borrowing shall be an ABR Borrowing. Each Lender at its option may make any ABR Loan or Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided , that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.15 or 2.17 solely in respect of increased costs resulting from such exercise and existing at the time of such exercise.
(c) At the commencement of each Interest Period for any Eurocurrency Revolving Facility Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Revolving Facility Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided , that an ABR Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire unused available balance of the Revolving Facility Commitments or that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). Each Swingline Borrowing shall be in an amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type may be outstanding at the same time; provided , however , that the Borrower shall not be entitled to request any Borrowing that, if made, would result in more than 10 Eurocurrency Borrowings outstanding under all Facilities at any time. Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing of any Class if the Interest Period requested with respect thereto would end after the Revolving Facility Maturity Date or the Term Facility Maturity Date for such Class, as applicable.
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Section 2.03 Requests for Borrowings . To request a Revolving Facility Borrowing and/or a Term Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 12:00 noon, Local Time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 10:00 a.m. Local Time, on the Business Day of the proposed Borrowing; provided , that, (i) to request a Borrowing on the Closing Date, the Borrower shall notify the Administrative Agent of such request by telephone not later than 5:00 p.m., Local Time, one Business Day prior to the Closing Date and (ii) any such notice of an ABR Revolving Facility Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., Local Time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or electronic means to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) whether such Borrowing is to be a Borrowing of Term B Loans, Revolving Facility Loans, Refinancing Term Loans, Other Term Loans, Other Revolving Loans or Replacement Revolving Loans as applicable;
(ii) the aggregate amount of the requested Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;
(v) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term Interest Period; and
(vi) the location and number of the Borrowers account to which funds are to be disbursed.
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one months duration. Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lenders Loan to be made as part of the requested Borrowing.
Section 2.04 Swingline Loans . (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding the Swingline Commitment or (ii) the Revolving Facility Credit Exposure of the applicable Class exceeding the total Revolving Facility Commitments of such Class; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Borrowing. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.
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(b) To request a Swingline Borrowing, the Borrower shall notify the Administrative Agent and the Swingline Lender of such request by telephone (confirmed by a Swingline Borrowing Request by electronic means), not later than 1:00 p.m., Local Time, on the day of a proposed Swingline Borrowing. Each such notice and Swingline Borrowing Request shall be irrevocable and shall specify (i) the requested date of such Swingline Borrowing (which shall be a Business Day) and (ii) the amount of the requested Swingline Borrowing. The Swingline Lender shall consult with the Administrative Agent as to whether the making of the Swingline Loan is in accordance with the terms of this Agreement prior to the Swingline Lender funding such Swingline Loan. The Swingline Lender shall make each Swingline Loan on the proposed date thereof by wire transfer of immediately available funds by 3:00 p.m., Local Time, to the account of the Borrower (or, in the case of a Swingline Borrowing made to finance the reimbursement of an L/C Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank).
(c) The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., Local Time, on any Business Day require the Revolving Facility Lenders of the applicable Class to acquire participations on such Business Day in all or a portion of the outstanding Swingline Loans made by it. Such notice shall specify the aggregate amount of such Swingline Loans in which the Revolving Facility Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each such Lender, specifying in such notice such Revolving Facility Lenders applicable Revolving Facility Percentage of such Swingline Loan or Loans. Each Revolving Facility Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent for the account of the Swingline Lender, such Revolving Facility Lenders applicable Revolving Facility Percentage of such Swingline Loan or Loans. Each Revolving Facility Lender acknowledges and agrees that its respective obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Facility Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Revolving Facility Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Facility Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph (c), and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Facility Lenders
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that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided , that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.
(d) The Borrower may, at any time and from time to time, designate as additional Swingline Lenders one or more Revolving Facility Lenders that agree to serve in such capacity as provided below. The acceptance by a Revolving Facility Lender of an appointment as a Swingline Lender hereunder shall be evidenced by an agreement, which shall be in form and substance reasonably satisfactory to the Administrative Agent and the Borrower, executed by the Borrower, the Administrative Agent and such designated Swingline Lender, and, from and after the effective date of such agreement, (i) such Revolving Facility Lender shall have all the rights and obligations of a Swingline Lender under this Agreement and (ii) references herein to the term Swingline Lender shall be deemed to include such Revolving Facility Lender in its capacity as a lender of Swingline Loans hereunder.
Section 2.05 Letters of Credit . (a) General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance of one or more letters of credit or bank guarantees in Dollars or any Alternate Currency in the form of (x) trade letters of credit in support of trade obligations of the Borrower and its Subsidiaries incurred in the ordinary course of business (such letters of credit issued for such purposes, Trade Letters of Credit ) and (y) standby letters of credit or bank guarantees issued for any other lawful purposes of the Borrower and its Subsidiaries (such letters of credit or bank guarantees issued for such purposes, Standby Letters of Credit ; each such letter of credit or bank guarantee, issued hereunder, a Letter of Credit and collectively, the Letters of Credit ) for its own account or for the account of any Subsidiary in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the applicable Availability Period and prior to the date that is five Business Days prior to the applicable Revolving Facility Maturity Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension: Certain Conditions . To request the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic extension in accordance with paragraph (c) of this Section) or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (three Business Days in advance of the requested date of issuance, amendment or extension or such shorter period as the Administrative Agent and the Issuing Bank in their sole discretion may agree) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended or extended, and specifying the date of issuance, amendment or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with
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paragraph (c) of this Section), the amount and currency (which may be Dollars or any Alternate Currency) of such Letter of Credit, the name and address of the beneficiary thereof, whether such Letter of Credit constitutes a Standby Letter of Credit or a Trade Letter of Credit and such other information as shall be necessary to issue, amend or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Banks standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended or extended only if (and upon issuance, amendment or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment or extension (i) the Revolving L/C Exposure shall not exceed the Letter of Credit Sublimit, (ii) the Revolving Facility Credit Exposure shall not exceed the applicable Revolving Facility Commitments and (iii) no Alternate Currency Letter of Credit shall be issued if, after giving effect thereto, the aggregate amount of Revolving L/C Exposure with respect to all Alternate Currency Letters of Credit would exceed $3,000,000 (or such larger amount within the Letter of Credit Sublimit as the Administrative Agent and the applicable Issuing Bank may agree). For the avoidance of doubt, no Issuing Bank shall be obligated to issue an Alternate Currency Letter of Credit if such Issuing Bank does not otherwise issue letters of credit in such Alternate Currency.
(c) Expiration Date . Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year (unless otherwise agreed upon by the Borrower and the Issuing Bank in their sole discretion) after the date of the issuance of such Letter of Credit (or, in the case of any extension thereof, one year (unless otherwise agreed upon by the Borrower and the Issuing Bank in their sole discretion) after such renewal or extension) and (ii) the date that is five Business Days prior to the applicable Revolving Facility Maturity Date; provided , that any Letter of Credit with a one year tenor may provide for automatic renewal or extension thereof for additional one year periods (which, in no event, shall extend beyond the date referred to in clause (ii) of this paragraph (c)) so long as such Letter of Credit permits the Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof within a time period during such twelve-month period to be agreed upon at the time such Letter of Credit is issued; provided , further , that if the Issuing Bank consents in its sole discretion, the expiration date on any Letter of Credit may extend beyond the date referred to in clause (ii) above, provided , that if any such Letter of Credit is outstanding or is issued under the Revolving Facility Commitments of any Class after the date that is 30 days prior to the Revolving Facility Maturity Date for such Class the Borrower shall provide Cash Collateral pursuant to documentation reasonably satisfactory to the Collateral Agent and the relevant Issuing Bank in an amount equal to the Minimum L/C Collateral Amount on or prior to the date that is 30 days prior to such Revolving Facility Maturity Date or, if later, such date of issuance.
(d) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) under the Revolving Facility Commitments of any Class and without any further action on the part of the applicable Issuing Bank or the Revolving Facility Lenders, such Issuing Bank hereby grants to each Revolving Facility Lender under such Class, and each such Revolving Facility Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Revolving Facility
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Lenders applicable Revolving Facility Percentage of the aggregate amount available to be drawn under such Letter of Credit (calculated, in the case of Alternate Currency Letters of Credit, based on the Dollar Equivalent thereof). In consideration and in furtherance of the foregoing, each Revolving Facility Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, in Dollars, such Revolving Facility Lenders applicable Revolving Facility Percentage of each L/C Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason (calculated, in the case of any Alternate Currency Letter of Credit, based on the Dollar Equivalent thereof). Each Revolving Facility Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments or the fact that, as a result of changes in currency exchange rates, such Revolving Facility Lenders Revolving Facility Credit Exposure at any time might exceed its Revolving Facility Commitment at such time (in which case Section 2.11(f) would apply), and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement . If the applicable Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such L/C Disbursement by paying to the Administrative Agent an amount in Dollars equal to such L/C Disbursement (or, in the case of an Alternate Currency Letter of Credit, the Dollar Equivalent thereof) not later than 2:00 p.m., Local Time, on the first Business Day after the Borrower receives notice under paragraph (g) of this Section of such L/C Disbursement (or the second Business Day, if such notice is received after 12:00 noon, Local Time), together with accrued interest thereon from the date of such L/C Disbursement at the rate applicable to ABR Revolving Facility Loans of the applicable Class; provided , that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Facility Borrowing or a Swingline Borrowing of the applicable Class, as applicable, in an equivalent amount and, to the extent so financed, the Borrowers obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Facility Borrowing or Swingline Borrowing. If the Borrower fails to reimburse any L/C Disbursement when due, then the Administrative Agent shall promptly notify the applicable Issuing Bank and each other applicable Revolving Facility Lender of the applicable L/C Disbursement, the payment then due from the Borrower in respect thereof and, in the case of a Revolving Facility Lender, such Lenders Revolving Facility Percentage thereof. Promptly following receipt of such notice, each Revolving Facility Lender with a Revolving Facility Commitment of the applicable Class shall pay to the Administrative Agent in Dollars its Revolving Facility Percentage of the payment then due from the Borrower in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis , to the payment obligations of the Revolving Facility Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from the Revolving Facility Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving
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Facility Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Facility Lender pursuant to this paragraph to reimburse an Issuing Bank for any L/C Disbursement (other than the funding of an ABR Revolving Loan or a Swingline Borrowing as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such L/C Disbursement.
(f) Obligations Absolute . The obligation of the Borrower to reimburse L/C Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers obligations hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Issuing Bank, or any of the circumstances referred to in clauses (i), (ii) or (iii) of the first sentence; provided , that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are determined by final and binding decision of a court of competent jurisdiction to have been caused by such Issuing Banks failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the applicable Issuing Bank, such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
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(g) Disbursement Procedures . The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by electronic means) of any such demand for payment under a Letter of Credit and whether such Issuing Bank has made or will make an L/C Disbursement thereunder; provided , that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Revolving Facility Lenders with respect to any such L/C Disbursement.
(h) Interim Interest . If an Issuing Bank shall make any L/C Disbursement, then, unless the Borrower shall reimburse such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such L/C Disbursement is made to but excluding the date that the Borrower reimburses such L/C Disbursement, at the rate per annum then applicable to ABR Revolving Loans of the applicable Class; provided , that, if such L/C Disbursement is not reimbursed by the Borrower when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Facility Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account of such Revolving Facility Lender to the extent of such payment.
(i) Replacement of an Issuing Bank . An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12. From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term Issuing Bank shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of such Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement but shall not be required to issue additional Letters of Credit.
(j) Cash Collateralization Following Certain Events . If and when the Borrower is required to Cash Collateralize any Revolving L/C Exposure relating to any outstanding Letters of Credit pursuant to any of Section 2.05(c), 2.11(e), 2.11(f), 2.11(g), 2.22(a)(v) or 7.01, the Borrower shall deposit in an account with or at the direction of the Collateral Agent, in the name of the Collateral Agent and for the benefit of the Lenders, an amount in cash in Dollars equal to the Revolving L/C Exposure as of such date (or, in the case of Sections 2.05(c), 2.11(e), 2.11(f) and 2.22(a)(v), the portion thereof required by such sections). Each deposit of Cash Collateral (x) made pursuant to this paragraph or (y) made by the Administrative Agent pursuant to Section 2.22(a)(ii), in each case, shall be held by the Collateral Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Collateral Agent shall have exclusive dominion and control, including the
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exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of (i) for so long as an Event of Default shall be continuing, the Collateral Agent and (ii) at any other time, the Borrower, in each case, in Permitted Investments and at the risk and expense of the Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Collateral Agent to reimburse each Issuing Bank for L/C Disbursements for which such Issuing Bank has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the Revolving L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with Revolving L/C Exposure representing greater than 50% of the total Revolving L/C Exposure), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default or the existence of a Defaulting Lender or the occurrence of a limit under Section 2.11(e) or (f) being exceeded, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived or the termination of the Defaulting Lender status or the limits under Sections 2.11(e) and (f) no longer being exceeded, as applicable.
(k) Cash Collateralization Following Termination of the Revolving Facility . Notwithstanding anything to the contrary herein, in the event of the prepayment in full of all outstanding Revolving Facility Loans and the termination of all Revolving Facility Commitments (a Revolving Facility Termination Event ) in connection with which the Borrower notifies any one or more Issuing Banks that it intends to maintain one or more Letters of Credit initially issued under this Agreement in effect after the date of such Facility Termination Event (each, a Continuing Letter of Credit ), then the security interest of the Collateral Agent in the Collateral under the Security Documents may be terminated in accordance with Section 9.18 if each such Continuing Letter of Credit is Cash Collateralized in an amount equal to the Minimum L/C Collateral Amount, which shall be deposited with or at the direction of each such Issuing Bank.
(l) Additional Issuing Banks . From time to time, the Borrower may by notice to the Administrative Agent designate any Lender (in addition to the initial Issuing Bank) each of which agrees (in its sole discretion) to act in such capacity and is reasonably satisfactory to the Administrative Agent as an Issuing Bank. Each such additional Issuing Bank shall execute a counterpart of this Agreement upon the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes.
(m) Reporting . Unless otherwise requested by the Administrative Agent, each Issuing Bank shall (i) provide to the Administrative Agent copies of any notice received from the Borrower pursuant to Section 2.05(b) no later than the next Business Day after receipt thereof and (ii) report in writing to the Administrative Agent (A) on or prior to each Business Day on which such Issuing Bank expects to issue, amend or extend any Letter of Credit, the date of such issuance, amendment or extension, and the aggregate face amount of the Letters of Credit to be issued, amended or extended by it and outstanding after giving effect to
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such issuance, amendment or extension occurred (and whether the amount thereof changed), and the Issuing Bank shall be permitted to issue, amend or extend such Letter of Credit if the Administrative Agent shall not have advised the Issuing Bank that such issuance, amendment or extension would not be in conformity with the requirements of this Agreement, (B) on each Business Day on which such Issuing Bank makes any L/C Disbursement, the date of such L/C Disbursement and the amount of such L/C Disbursement and (C) on any other Business Day, such other information with respect to the outstanding Letters of Credit issued by such Issuing Bank as the Administrative Agent shall reasonably request.
Section 2.06 Funding of Borrowings . (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, Local Time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided , that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower as specified in the applicable Borrowing Request; provided , that ABR Revolving Loans and Swingline Borrowings made to finance the reimbursement of a L/C Disbursement and reimbursements as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with clause (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to be made by such Lender, the greater of (A) the Federal Funds Effective Rate and (B) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to ABR Loans at such time. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lenders Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.
(c) The foregoing notwithstanding, the Administrative Agent, in its sole discretion, may from its own funds make a Revolving Facility Loan on behalf of the Lenders (including by means of Swingline Loans to the Borrower). In such event, the applicable Lenders on behalf of whom the Administrative Agent made the Revolving Facility Loan shall
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reimburse the Administrative Agent for all or any portion of such Revolving Facility Loan made on its behalf upon written notice given to each applicable Lender not later than 2:00 p.m., Local Time, on the Business Day such reimbursement is requested. The entire amount of interest attributable to such Revolving Facility Loan for the period from and including the date on which such Revolving Facility Loan was made on such Lenders behalf to but excluding the date the Administrative Agent is reimbursed in respect of such Revolving Facility Loan by such Lender shall be paid to the Administrative Agent for its own account.
Section 2.07 Interest Elections . (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted into or continued as Eurocurrency Borrowings.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone, by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or electronic means to the Administrative Agent of a written Interest Election Request in the form of Exhibit E and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and
(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term Interest Period.
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If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one months duration. If less than all the outstanding principal amount of any Borrowing shall be converted or continued, then each resulting Borrowing shall be in an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum and satisfy the limitations specified in Sections 2.02(c) regarding the maximum number of Borrowings of the relevant Type.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender to which such Interest Election Request relates of the details thereof and of such Lenders portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
Section 2.08 Termination and Reduction of Commitments . (a) Unless previously terminated, the Revolving Facility Commitments of each Class shall terminate on the applicable Revolving Facility Maturity Date for such Class. On the Closing Date (after giving effect to the funding of the Term B Loans to be made on such date), the Term B Loan Commitments of each Lender as of the Closing Date will terminate.
(b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Facility Commitments of any Class; provided, that (i) each reduction of the Revolving Facility Commitments of any Class shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000 (or, if less, the remaining amount of the Revolving Facility Commitments of such Class) and (ii) the Borrower shall not terminate or reduce the Revolving Facility Commitments of any Class if, after giving effect to any concurrent prepayment of the Revolving Facility Loans in accordance with Section 2.11 and any Cash Collateralization of Letters of Credit in accordance with Section 2.05(j) or (k), the Revolving Facility Credit Exposure of such Class (excluding any Cash Collateralized Letter of Credit) would exceed the total Revolving Facility Commitments of such Class.
(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Facility Commitments of any Class under paragraph (b) of this Section 2.08 at least three Business Days prior to the effective date of such termination or reduction (or such shorter period acceptable to the Administrative Agent), specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.08 shall be irrevocable; provided ,
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that a notice of termination or reduction of the Revolving Facility Commitments of any Class delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.
Section 2.09 Repayment of Loans; Evidence of Debt . (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Facility Lender the then unpaid principal amount of each Revolving Facility Loan to the Borrower on the Revolving Facility Maturity Date applicable to such Revolving Facility Loans, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan applicable to any Class of Revolving Facility Commitments on the earlier of the Revolving Facility Maturity Date for such Class and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least five Business Days after such Swingline Loan is made; provided , that on each date that a Revolving Facility Borrowing is made by the Borrower, the Borrower shall repay all Swingline Loans then outstanding.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Facility and Type thereof and the Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lenders share thereof.
(d) The entries made in the accounts maintained pursuant to clause (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided , that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note (a Note ). In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent and reasonably acceptable to the Borrower. Thereafter, unless otherwise agreed to by the applicable Lender, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if requested by such payee, to such payee and its registered assigns).
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Section 2.10 Repayment of Term Loans and Revolving Facility Loans . (a) Subject to the other clauses of this Section,
(i) the Borrower shall repay Term B Loans extended on the Closing Date on the last day of each March, June, September and December of each year (commencing on the last day of the first full fiscal quarter of the Borrower ending after the Closing Date) and on the applicable Term Facility Maturity Date or, if such date is not a Business Day, on the next preceding Business Day (each such date being referred to as a Term B Loan Installment Date ), in an aggregate principal amount of such Term B Loans equal to (A) in the case of quarterly payments due prior to the applicable Term Facility Maturity Date, an amount equal to 0.25% of the aggregate principal amount of such Term B Loans outstanding immediately after the Closing Date, and (B) in the case of such payment due on the applicable Term Facility Maturity Date, an amount equal to the then unpaid principal amount of such Term B Loans outstanding;
(ii) in the event that any Incremental Term Loans are made, the Borrower shall repay such Incremental Term Loans on the dates and in the amounts set forth in the related Incremental Assumption Agreement (each such date being referred to as an Incremental Term Loan Installment Date ); and
(iii) to the extent not previously paid, outstanding Term Loans shall be due and payable on the applicable Term Facility Maturity Date.
(b) To the extent not previously paid, outstanding Revolving Facility Loans shall be due and payable on the applicable Revolving Facility Maturity Date.
(c) Prepayment of the Loans from:
(i) all Net Proceeds pursuant to Section 2.11(b) and Excess Cash Flow pursuant to Section 2.11(c) shall be allocated to the Class or Classes of Term Loans determined pursuant to Section 2.10(d), with the application thereof to reduce in direct order amounts due on the succeeding Term Loan Installment Dates under such Classes as provided in the remaining scheduled amortization payments under such Classes; provided , that any Lender, at its option, may elect to decline any such prepayment of any Term Loan held by it if it shall give written notice to the Administrative Agent thereof by 5:00 p.m. Local Time at least three Business Days prior to the date of such prepayment (any such Lender, a Declining Lender ) and on the date of any such prepayment, any amounts that would otherwise have been applied to prepay Term Loans owing to Declining Lenders shall instead be retained by the Borrower for application for any purpose not prohibited by this Agreement, and
(ii) any optional prepayments of the Term Loans pursuant to Section 2.11(a) shall be applied to the remaining installments of the Term Loans under the applicable Class or Classes as the Borrower may in each case direct.
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(d) Any mandatory prepayment of Term Loans pursuant to Section 2.11(b) or (c) shall be applied so that the aggregate amount of such prepayment is allocated among the Term B Loans and the Other Term Loans, if any, pro rata based on the aggregate principal amount of outstanding Term B Loans and Other Term Loans, if any; provided that, subject to the pro rata application to Loans outstanding within any Class of Term Loans, the Borrower may allocate such prepayment in its discretion among the Class or Classes of Term Loans as the Borrower may specify (so long as the Term B Loans incurred on the Closing Date are allocated at least their pro rata share of such prepayment). Prior to any prepayment of any Loan under any Facility hereunder, the Borrower shall select the Borrowing or Borrowings under the applicable Facility to be prepaid and shall notify the Administrative Agent by telephone (confirmed by electronic means) of such selection not later than 2:00 p.m., Local Time, (i) in the case of an ABR Borrowing, at least one Business Day before the scheduled date of such prepayment and (ii) in the case of a Eurocurrency Borrowing, at least three Business Days before the scheduled date of such prepayment (or, in each case such shorter period acceptable to the Administrative Agent); provided , that a notice of prepayment may state that such notice is conditioned upon the effectiveness of other credit facilities, indentures or similar agreements or other transactions, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Each repayment of a Borrowing (x) in the case of the Revolving Facility of any Class, shall be applied to the Revolving Facility Loans included in the repaid Borrowing such that each Revolving Facility Lender receives its ratable share of such repayment (based upon the respective Revolving Facility Credit Exposures of the Revolving Facility Lenders of such Class at the time of such repayment) and (y) in all other cases, shall be applied ratably to the Loans included in the repaid Borrowing. All repayments of Loans shall be accompanied by accrued interest on the amount repaid to the extent required by Section 2.13(d).
Section 2.11 Prepayment of Loans . (a) The Borrower shall have the right at any time and from time to time to prepay any Loan in whole or in part, without premium or penalty (but subject to Section 2.16), in an aggregate principal amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum or, if less, the amount outstanding, subject to prior notice in accordance with Section 2.10(d) ; provided , that :
(i) in the event of any optional prepayment of the Term B Loans pursuant to this Section 2.11(a) made prior to the first anniversary of the Closing Date, the Borrower shall pay to the applicable Lender with respect to such Term B Loans the Applicable Premium with respect to such Term B Loans on the date of such prepayment;
(ii) in the event of any optional prepayments of the Term B Loans pursuant to this Section 2.11(a) made on or after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, the Borrower shall pay to the applicable Lenders with respect to such Term B Loans a prepayment premium equal to 2% of the aggregate principal amount of the Term B Loans so prepaid;
(iii) in the event of any optional prepayments of the Term B Loans pursuant to this Section 2.11(a) made on or after the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date, the Borrower shall pay to the applicable Lenders with respect to such Term B Loans a prepayment premium equal to 1% of the aggregate principal amount of the Term B Loans so prepaid; and
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(iv) no premium shall be payable on any optional prepayments of the Term B Loans pursuant to this Section 2.11(a) made on or after the third anniversary of the Closing Date.
(b) The Borrower shall apply all Net Proceeds promptly upon receipt thereof to prepay Term Loans in accordance with clauses (c) and (d) of Section 2.10. Notwithstanding the foregoing, the Borrower may use a portion of such Net Proceeds to prepay or repurchase any Refinancing Notes that is secured by a pari passu Lien on the Collateral or other Indebtedness that is secured by pari passu Liens permitted by Section 6.02, in each case in an amount not to exceed the product of (x) the amount of such Net Proceeds and (y) a fraction, (A) the numerator of which is the outstanding principal amount of such Indebtedness secured by pari passu Liens and (B) the denominator of which is the sum of the outstanding principal amount of such Indebtedness and the outstanding principal amount of all Classes of Term Loans. Not later than five Business Days prior to the date of such prepayment, the Borrower shall provide written notice thereof to the Administrative Agent, including the amount of any required prepayment.
(c) Not later than 5 Business Days after the date on which the annual financial statements are, or are required to be, delivered under Section 5.04(a) with respect to each Excess Cash Flow Period, the Borrower shall calculate Excess Cash Flow for such Excess Cash Flow Period and, if and to the extent the amount of such Excess Cash Flow exceeds $3,000,000 (the ECF Threshold Amount ), the Borrower shall apply an amount equal to (i) the Required Percentage of such excess portion of such Excess Cash Flow minus (ii) to the extent not financed using the proceeds of the incurrence of funded term Indebtedness, the sum of (A) the amount of any voluntary prepayments during such Excess Cash Flow Period ( plus , without duplication of any amounts previously deducted under this clause (A), the amount of any voluntary prepayments after the end of such Excess Cash Flow Period but before the date of prepayment under this clause (c)) of Term Loans (it being understood that the amount of any such prepayment constituting a below-par Permitted Loan Purchase shall be calculated to equal the amount of cash used and not the principal amount deemed prepaid therewith) and (B) the amount of any permanent voluntary reductions during such Excess Cash Flow Period (plus, without duplication of any amounts previously deducted under this clause (B), the amount of any permanent voluntary reductions after the end of such Excess Cash Flow Period but before the date of prepayment under this clause (c)) of Revolving Facility Commitments to the extent that an equal amount of Revolving Facility Loans were simultaneously repaid, to prepay Term Loans in accordance with clauses (c) and (d) of Section 2.10. Such calculation will be set forth in a certificate signed by a Financial Officer of the Borrower delivered to the Administrative Agent, setting forth the amount, if any, of Excess Cash Flow for such fiscal year, the amount of any required prepayment in respect thereof and the calculation thereof in reasonable detail.
(d) Notwithstanding any other provisions of this Section 2.11 to the contrary, (i) to the extent that any Net Proceeds of any Asset Sale by a Foreign Subsidiary or Excess Cash Flow attributable to a Foreign Subsidiary would otherwise be required to be applied
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pursuant to Section 2.11(b) or Section 2.11(c) but is prohibited or delayed by applicable local law from being repatriated to the United States of America, the portion of such Net Proceeds or Excess Cash Flow so affected will not be required to be applied to repay Term Loans at the times provided in Section 2.11(b) or Section 2.11(c) but may be retained by the applicable Foreign Subsidiary so long, but only so long, as the applicable local law will not permit repatriation to the United States of America (the Borrower hereby agreeing to cause the applicable Foreign Subsidiary to promptly use commercially reasonable efforts to take all actions reasonably required by the applicable local law to permit such repatriation), and once such repatriation of any of such affected Net Proceeds or Excess Cash Flow that was otherwise required to be applied pursuant to Section 2.11(b) or Section 2.11(c) is permitted under the applicable local law, such repatriation will be effected and such repatriated Net Proceeds or Excess Cash Flow will be promptly applied (net of additional taxes payable or reserved against as a result thereof) to the repayment of the Term Loans pursuant to Section 2.11(b) or Section 2.11(c), to the extent provided therein and (ii) to the extent that the Borrower has determined in good faith that repatriation of any or all of such Net Proceeds or Excess Cash Flow that would otherwise be required to be applied pursuant to Section 2.11(b) or Section 2.11(c) would have a material adverse tax cost consequence if so repatriated, the Net Proceeds or Excess Cash Flow so affected may be retained by the applicable Foreign Subsidiary (the Borrower hereby agreeing to cause the applicable Subsidiary to promptly use commercially reasonable efforts to take all actions that are reasonably required to eliminate such tax effects); provided , that in the case of this clause (ii), on or before the date on which any Net Proceeds or Excess Cash Flow so retained would otherwise have been required to be applied to prepayments pursuant to Section 2.11(b) or Section 2.11(c), (x) the Borrower applies an amount equal to such Net Proceeds or Excess Cash Flow to such prepayments as if such Net Proceeds or Excess Cash Flow had been received by the Borrower rather than such Foreign Subsidiary, less the amount of additional taxes that would have been payable or reserved against if such Net Proceeds or Excess Cash Flow had been repatriated (or, if less, Net Proceeds or Excess Cash Flow that would be calculated if received by such Foreign Subsidiary) or (y) such Net Proceeds or Excess Cash Flow is applied to the permanent repayment of Indebtedness of a Foreign Subsidiary.
(e) In the event that the aggregate amount of Revolving Facility Credit Exposure of any Class exceeds the total Revolving Facility Commitments of such Class, the Borrower shall prepay Revolving Facility Borrowings or Swingline Borrowings of such Class (or, if no such Borrowings are outstanding, provide Cash Collateral in respect of outstanding Letters of Credit pursuant to Section 2.05(j)) in an aggregate amount equal to such excess.
(f) In the event that the Revolving L/C Exposure exceeds the Letter of Credit Sublimit, at the request of the Administrative Agent, the Borrower shall provide Cash Collateral pursuant to Section 2.05(j) in an amount equal to such excess.
(g) If as a result of changes in currency exchange rates, on any Revaluation Date, (i) the total Revolving Facility Credit Exposure of any Class exceeds the total Revolving Facility Commitments of such Class, (ii) the Revolving L/C Exposure exceeds the Letter of Credit Sublimit or (iii) the Revolving L/C Exposure with respect to all Alternate Currency Letters of Credit exceeds $3,000,000 (or such larger amount within the Letter of Credit Sublimit as the Administrative Agent and the applicable Issuing Bank may agree), the Borrower
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shall, at the request of the Administrative Agent, within ten (10) days of such Revaluation Date (A) prepay Revolving Facility Borrowings or Swingline Borrowings or (B) provide Cash Collateral pursuant to Section 2.05(j), in an aggregate amount such that the applicable exposure does not exceed the applicable commitment, sublimit or amount set forth above.
Section 2.12 Fees . (a) The Borrower agrees to pay to each Lender (other than any Defaulting Lender), through the Administrative Agent, on the last Business Day of March, June, September and December in each year and on the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a Commitment Fee ) on the daily amount of the applicable Available Unused Commitment of such Lender during the preceding quarter (or other period commencing with the Closing Date or ending with the date on which the last of the Commitments of such Lender shall be terminated) at a rate equal to the Applicable Commitment Fee. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. For the purpose of calculating any Lenders Commitment Fee, the outstanding Swingline Loans during the period for which such Lenders Commitment Fee is calculated shall be deemed to be zero. The Commitment Fee due to each Lender shall commence to accrue on the Closing Date and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein.
(b) The Borrower from time to time agrees to pay (i) to each Revolving Facility Lender of each Class (other than any Defaulting Lender), through the Administrative Agent, on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Facility Commitments of all the Lenders shall be terminated as provided herein, a fee in Dollars (an L/C Participation Fee ) on such Lenders Revolving Facility Percentage of the daily aggregate Revolving L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C Disbursements) of such Class, during the preceding quarter (or shorter period commencing with the Closing Date or ending with the Revolving Facility Maturity Date or the date on which the Revolving Facility Commitments of such Class shall be terminated) at the rate per annum equal to the Applicable Margin for Eurocurrency Revolving Facility Borrowings of such Class effective for each day in such period, and (ii) to each Issuing Bank, for its own account (x) the last Business Day of March, June, September and December of each year and on the date on which the Revolving Facility Commitments of all the Lenders shall be terminated, a fronting fee in respect of each Letter of Credit issued by such Issuing Bank for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 1/8 of 1% per annum of the daily stated amount of such Letter of Credit), plus (y) in connection with the issuance, amendment or transfer of any such Letter of Credit or any L/C Disbursement thereunder, such Issuing Banks customary documentary and processing fees and charges (collectively, Issuing Bank Fees ). All L/C Participation Fees and Issuing Bank Fees that are payable on a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of 360 days.
(c) The Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the Senior Facilities Administration Fee as set forth in the Fee Letter, as amended, restated, supplemented or otherwise modified from time to time, at the times specified therein (the Administrative Agent Fees ).
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(d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, if and as appropriate, among the Lenders, except that Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the Fees shall be refundable under any circumstances.
Section 2.13 Interest . (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the ABR plus the Applicable Margin.
(b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any Fees or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding clauses of this Section 2.13 or (ii) in the case of any other overdue amount, 2% plus the rate applicable to ABR Loans as provided in clause (a) of this Section; provided , that this clause (c) shall not apply to any Event of Default that has been waived by the Lenders pursuant to Section 9.08.
(d) Accrued interest on each Loan shall be payable in arrears (i) on each Interest Payment Date for such Loan, (ii) in the case of Revolving Facility Loans, upon termination of the applicable Revolving Facility Commitments and (iii) in the case of the Term Loans, on the applicable Term Facility Maturity Date; provided , that (A) interest accrued pursuant to clause (c) of this Section 2.13 shall be payable on demand, (B) in the event of any repayment or prepayment of any Loan (other than a prepayment of a Revolving Facility Loan that is an ABR Loan that is not made in conjunction with a permanent commitment reduction), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the ABR at times when the ABR is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable ABR, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
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Section 2.14 Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurocurrency Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or electronic means as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing shall be converted to or continued as on the last day of the Interest Period applicable thereto an ABR Borrowing, and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing.
Section 2.15 Increased Costs . (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or Issuing Bank; or
(ii) subject any Lender to any Tax with respect to any Loan Document (other than (i) Taxes indemnifiable under Section 2.17 or (ii) Excluded Taxes); or
(iii) impose on any Lender or Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered.
(b) If any Lender or Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lenders or Issuing Banks capital or on the capital of such Lenders or Issuing Banks holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by
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such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lenders or such Issuing Banks holding company could have achieved but for such Change in Law (taking into consideration such Lenders or such Issuing Banks policies and the policies of such Lenders or such Issuing Banks holding company with respect to capital adequacy), then from time to time the Borrower shall pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lenders or such Issuing Banks holding company for any such reduction suffered.
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in clause (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error; provided , that any such certificate claiming amounts described in clause (x) or (y) of the definition of Change in Law shall, in addition, state the basis upon which such amount has been calculated and certify that such Lenders or Issuing Banks demand for payment of such costs hereunder, and such method of allocation is not inconsistent with its treatment of other borrowers which, as a credit matter, are similarly situated to the Borrower and which are subject to similar provisions. The Borrower shall pay such Lender or Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Promptly after any Lender or any Issuing Bank has determined that it will make a request for increased compensation pursuant to this Section 2.15, such Lender or Issuing Bank shall notify the Borrower thereof. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of such Lenders or Issuing Banks right to demand such compensation; provided , that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders or Issuing Banks intention to claim compensation therefor; provided , further, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180 day period referred to above shall be extended to include the period of retroactive effect thereof.
Section 2.16 Break Funding Payments . In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to be the amount determined by such Lender (it being understood that the deemed amount shall not exceed the actual amount) to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the LIBO Rate that would have been applicable to such Loan, for the
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period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurocurrency Loan, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
Section 2.17 Taxes . (a) Any and all payments made by or on behalf of a Loan Party under this Agreement or any other Loan Document shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes; provided , that if a Loan Party, the Administrative Agent or any other applicable withholding agent shall be required by applicable Requirement of Law to deduct or withhold any Taxes from such payments, then (i) the applicable withholding agent shall make such deductions or withholdings as are reasonably determined by the applicable withholding agent to be required by any applicable Requirement of Law, (ii) the applicable withholding agent shall timely pay the full amount deducted or withheld to the relevant Governmental Authority within the time allowed and in accordance with applicable Requirement of Law, and (iii) to the extent withholding or deduction is required to be made on account of Indemnified Taxes or Other Taxes, the sum payable by the Loan Party shall be increased as necessary so that after all required deductions and withholdings have been made (including deductions or withholdings applicable to additional sums payable under this Section 2.17) the Administrative Agent or any Lender, as applicable, receives an amount equal to the sum it would have received had no such deductions or withholdings been made. Whenever any Indemnified Taxes or Other Taxes are payable by a Loan Party, as promptly as possible thereafter, such Loan Party shall send to the Administrative Agent for its own account or for the account of a Lender, as the case may be, a certified copy of an official receipt (or other evidence acceptable to the Administrative Agent or such Lender, acting reasonably) received by the Loan Party showing payment thereof. Without duplication, after any payment of Taxes by any Loan Party or the Administrative Agent to a Governmental Authority as provided in this Section 2.17, the Borrower shall deliver to the Administrative Agent or the Administrative Agent shall deliver to the Borrower, as the case may be, a copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by applicable Requirements of Law to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Administrative Agent, as the case may be.
(b) The Borrower shall timely pay any Other Taxes.
(c) The Borrower shall indemnify and hold harmless the Administrative Agent and each Lender within 15 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes imposed on the Administrative Agent or such Lender, as applicable, as the case may be (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17), and any reasonable expenses arising therefrom or with respect thereto, whether or not such
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Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate setting forth in reasonable detail the basis and calculation of the amount of such payment or liability delivered to the Borrower by a Lender or by the Administrative Agent (as applicable) on its own behalf or on behalf of a Lender shall be conclusive absent manifest error.
(d) Each Lender shall deliver to the Borrower and the Administrative Agent, at such time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law and such other reasonably requested information as will permit the Borrower or the Administrative Agent, as the case may be, to determine (A) whether or not any payments made hereunder or under any other Loan Document are subject to withholding of Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) such Lenders entitlement to any available exemption from, or reduction of, any such withholding of Taxes in respect of any payments to be made to such Lender by any Loan Party pursuant to any Loan Document or otherwise to establish such Lenders status for withholding tax purposes in the applicable jurisdiction. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.
(e) Without limiting the generality of Section 2.17(d), each Foreign Lender with respect to any Loan made to the Borrower shall, to the extent it is legally eligible to do so:
(i) deliver to the Borrower and the Administrative Agent, prior to the date on which the first payment to the Foreign Lender is due hereunder, two copies of (A) in the case of a Foreign Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of portfolio interest, United States Internal Revenue Service Form W-8BEN (or any applicable successor form) (together with a certificate (substantially in the form of Exhibit I hereto, such certificate, the Non-Bank Tax Certificate ) certifying that such Foreign Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a CFC related to the Borrower (within the meaning of Section 864(d)(4) of the Code), and that the interest payments in question are not effectively connected with the conduct by such Lender of a trade or business within the United States of America), (B) Internal Revenue Service Form W-8BEN or Form W-8ECI (or any applicable successor form), in each case properly completed and duly executed by such Foreign Lender claiming complete exemption from, or reduced rate of, U.S. federal withholding tax on payments by the Borrower under this Agreement, (C) Internal Revenue Service Form W-8IMY (or any applicable successor form) and all necessary attachments (including the forms described in clauses (A) and (B) above, provided that if the Foreign Lender is a partnership, and one or more of the partners is claiming portfolio interest treatment, the Non-Bank Tax Certificate may be provided by such Foreign Lender on behalf of such partners) or (D) any other form prescribed by applicable law as a basis for claiming
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exemption from or a reduction in United States federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
(ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification (or any applicable successor form) on or before the date that any such form or certification expires or becomes obsolete or invalid, after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower and the Administrative Agent, and from time to time thereafter if reasonably requested by the Borrower or the Administrative Agent.
Any Foreign Lender that becomes legally ineligible to update any form or certification previously delivered shall promptly notify the Borrower and the Administrative Agent in writing of such Foreign Lenders inability to do so.
Each person that shall become a Participant pursuant to Section 9.04 or a Lender pursuant to Section 9.04 shall, upon the effectiveness of the related transfer, be required to provide all the forms and statements required pursuant to this Section 2.17(e); provided , that a Participant shall furnish all such required forms and statements to the person from which the related participation shall have been purchased.
In addition, each Agent shall deliver to the Borrower (x)(I) prior to the date on which the first payment by the Borrower is due hereunder or (II) prior to the first date on or after the date on which such Agent becomes a successor Administrative Agent pursuant to Section 8.09 on which payment by the Borrower is due hereunder, as applicable, two copies of a properly completed and executed IRS Form W-9 certifying its exemption from U.S. federal backup withholding or such other properly completed and executed documentation prescribed by applicable law certifying its entitlement to an available exemption from applicable U.S. federal withholding taxes in respect of any payments to be made to such Agent by any Loan Party pursuant to any Loan Document including, as applicable, an IRS Form W-8IMY certifying that the Agent is a U.S. branch and intends to be treated as a U.S. person for purposes of withholding under Chapter 3 of the Code pursuant to Section 1.1441-1(b)(2)(iv) of the Treasury Regulations, and (y) on or before the date on which any such previously delivered documentation expires or becomes obsolete or invalid, after the occurrence of any event requiring a change in the most recent documentation previously delivered by it to the Borrower, and from time to time if reasonably requested by the Borrower, two further copies of such documentation.
(f) If any Lender or the Administrative Agent, as applicable, determines, in its sole discretion, that it has received a refund of an Indemnified Tax or Other Tax for which a payment has been made by a Loan Party pursuant to this Agreement or any other Loan Document, which refund in the good faith judgment of such Lender or the Administrative Agent, as the case may be, is attributable to such payment made by such Loan Party, then the Lender or the Administrative Agent, as the case may be, shall reimburse the Loan Party for such amount (net of all reasonable out-of-pocket expenses of such Lender or the Administrative
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Agent, as the case may be, and without interest other than any interest received thereon from the relevant Governmental Authority with respect to such refund) as the Lender or Administrative Agent, as the case may be, determines in its sole discretion to be the proportion of the refund as will leave it, after such reimbursement, in no better or worse position (taking into account expenses or any Taxes imposed on the refund) than it would have been in if the Indemnified Tax or Other Tax giving rise to such refund had not been imposed in the first instance; provided , that the Loan Party, upon the request of the Lender or the Administrative Agent agrees to repay the amount paid over to the Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender or the Administrative Agent in the event the Lender or the Administrative Agent is required to repay such refund to such Governmental Authority. In such event, such Lender or the Administrative Agent, as the case may be, shall, at the Borrowers request, provide the Borrower with a copy of any notice of assessment or other evidence of the requirement to repay such refund received from the relevant Governmental Authority ( provided , that such Lender or the Administrative Agent may delete any information therein that it deems confidential). A Lender or the Administrative Agent shall claim any refund that it determines is available to it, unless it concludes in its sole discretion that it would be adversely affected by making such a claim. No Lender nor the Administrative Agent shall be obliged to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party in connection with this clause (f) or any other provision of this Section 2.17.
(g) If the Borrower determines that a reasonable basis exists for contesting an Indemnified Tax or Other Tax for which a Loan Party has paid additional amounts or indemnification payments, each affected Lender or Agent, as the case may be, shall use reasonable efforts to cooperate with the Borrower as the Borrower may reasonably request in challenging such Tax. The Borrower shall indemnify and hold each Lender and Agent harmless against any out-of-pocket expenses incurred by such person in connection with any request made by the Borrower pursuant to this Section 2.17(g). Nothing in this Section 2.17(g) shall obligate any Lender or Agent to take any action that such person, in its sole judgment, determines may result in a material detriment to such person.
(h) Each U.S. Lender shall deliver to the Borrower and the Administrative Agent two Internal Revenue Service Forms W-9 (or substitute or successor form), properly completed and duly executed, certifying that such U.S. Lender is exempt from United States federal backup withholding (i) on or prior to the Closing Date (or on or prior to the date it becomes a party to this Agreement), (ii) on or before the date that such form expires or becomes obsolete or invalid, (iii) after the occurrence of a change in the U.S. Lenders circumstances requiring a change in the most recent form previously delivered by it to the Borrower and the Administrative Agent, and (iv) from time to time thereafter if reasonably requested by the Borrower or the Administrative Agent.
(i) If a payment made to any Lender or any Agent under this Agreement or any other Loan Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender or such Agent were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender or such Agent shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by
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applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA, to determine whether such Lender has or has not complied with such Lenders obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this Section 2.17(i), FATCA shall include any amendments made to FATCA after the date of this Agreement.
(j) The agreements in this Section 2.17 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable under any Loan Document.
For purposes of this Section 2.17, the term Lender includes any Issuing Bank and the term applicable Requirement of Law includes FATCA.
Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs . (a) Unless otherwise specified, the Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of L/C Disbursements, or of amounts payable under Sections 2.15, 2.16 or 2.17, or otherwise) prior to 2:00 p.m., Local Time, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent to the applicable account designated to the Borrower by the Administrative Agent, except payments to be made directly to the applicable Issuing Bank or the Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.05 shall be made directly to the persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof. Except as otherwise expressly provided herein, if any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments made under the Loan Documents shall be made in Dollars. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.
(b) Subject to Section 7.02, if at any time insufficient funds are received by and available to the Administrative Agent from the Borrower to pay fully all amounts of principal, unreimbursed L/C Disbursements, interest and fees then due from the Borrower hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (ii) second, towards payment of principal of Swingline Loans and unreimbursed L/C Disbursements then due from the Borrower
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hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed L/C Disbursements then due to such parties, and (iii) third, towards payment of principal then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of, or interest on, any of its Term Loans, Revolving Facility Loans or participations in L/C Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Term Loans, Revolving Facility Loans and participations in L/C Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender entitled to receive the same proportion of such payment, then the Lender receiving such greater proportion shall purchase participations in the Term Loans, Revolving Facility Loans and participations in L/C Disbursements and Swingline Loans of such other Lenders to the extent necessary so that the benefit of all such payments shall be shared by all such Lenders ratably in accordance with the principal amount of each such Lenders respective Term Loans, Revolving Facility Loans and participations in L/C Disbursements and Swingline Loans and accrued interest thereon; provided , that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this clause (c) shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in L/C Disbursements to any assignee or participant. The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the applicable Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as applicable, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as applicable, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b), 2.05(d) or (e), 2.06, or 2.18(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lenders obligations under such Sections until all such unsatisfied obligations are fully paid.
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Section 2.19 Mitigation Obligations; Replacement of Lenders . (a) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as applicable, in the future and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender is a Defaulting Lender, or if any Lender is the subject to a Disqualification, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require any such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided , that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if in respect of any Revolving Facility Commitment or Revolving Facility Loan, the Swingline Lender and the Issuing Bank), which consent, in each case, shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in L/C Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. Nothing in this Section 2.19 shall be deemed to prejudice any rights that the Borrower may have against any Lender that is a Defaulting Lender. No action by or consent of the removed Lender shall be necessary in connection with such assignment, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment the Borrower, Administrative Agent, such removed Lender and the replacement Lender shall otherwise comply with Section 9.04, provided , that if such removed Lender does not comply with Section 9.04 within one Business Day after the Borrowers request, compliance with Section 9.04 shall not be required to effect such assignment.
(c) If any Lender (such Lender, a Non-Consenting Lender ) has failed to consent to a proposed amendment, waiver, discharge or termination which pursuant to the terms of Section 9.08 requires the consent of all of the Lenders affected and with respect to
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which the Required Lenders shall have granted their consent, then the Borrower shall have the right (unless such Non-Consenting Lender grants such consent) at its sole expense (including with respect to the processing and recordation fee referred to in Section 9.04(b)(ii)(B)) to replace such Non-Consenting Lender by requiring such Non-Consenting Lender to (and any such Non-Consenting Lender agrees that it shall, upon the Borrowers request) assign its Loans and its Commitments (or, at the Borrowers option, the Loans and Commitments under the Facility that is the subject of the proposed amendment, waiver, discharge or termination) hereunder to one or more assignees reasonably acceptable to (i) the Administrative Agent (unless such assignee is a Lender, an Affiliate of a Lender or an Approved Fund) and (ii) if in respect of any Revolving Facility Commitment or Revolving Facility Loan, the Swingline Lender and the Issuing Bank; provided , that: (a) all Loan Obligations of the Borrower owing to such Non-Consenting Lender being replaced shall be paid in full to such Non-Consenting Lender concurrently with such assignment, (b) the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon and the replacement Lender or, at the option of the Borrower, the Borrower shall pay any amount required by Section 2.12(d)(y), if applicable, and (c) the replacement Lender shall grant its consent with respect to the applicable proposed amendment, waiver, discharge or termination. No action by or consent of the Non-Consenting Lender shall be necessary in connection with such assignment, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment the Borrower, Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04; provided , that if such Non-Consenting Lender does not comply with Section 9.04 within one Business Day after the Borrowers request, compliance with Section 9.04 shall not be required to effect such assignment.
Section 2.20 Illegality . If any Lender reasonably determines that any Change in Law has made it unlawful, or that any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurocurrency Loans, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans or to convert ABR Borrowings to Eurocurrency Borrowings shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall upon demand from such Lender (with a copy to the Administrative Agent), either convert all Eurocurrency Borrowings of such Lender to ABR Borrowings, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
Section 2.21 Incremental Commitments . (a) The Borrower may, by written notice to the Administrative Agent from time to time, request Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments, as applicable, in an amount not to exceed the Incremental Amount available at the time such Incremental Commitments are established from one or more Incremental Term Lenders and/or Incremental Revolving Facility Lenders (which may include any existing Lender) willing to provide such Incremental Term
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Loans and/or Incremental Revolving Facility Commitments, as the case may be, in their own discretion; provided , that each Incremental Revolving Facility Lender providing a commitment to make revolving loans shall be subject to the approval of the Administrative Agent and, to the extent the same would be required for an assignment under Section 9.04, the Issuing Bank and the Swingline Lender (which approvals shall not be unreasonably withheld) unless such Incremental Revolving Lender is a Revolving Facility Lender, an Affiliate of a Revolving Facility Lender or an Approved Fund of a Revolving Facility Lender. Such notice shall set forth (i) the amount of the Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments being requested (which shall be in minimum increments of $5,000,000 and a minimum amount of $10,000,000, or equal to the remaining Incremental Amount or, in each case, such lesser amount approved by the Administrative Agent), (ii) the date on which such Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments are requested to become effective, (iii) in the case of Incremental Revolving Facility Commitments, whether such Incremental Revolving Facility Commitments are to be (x) commitments to make additional Revolving Facility Loans on the same terms as the Initial Revolving Loans or (y) commitments to make revolving loans with pricing terms, final maturity dates, participation in mandatory prepayments or commitment reductions and/or other terms different from the Initial Revolving Loans ( Other Revolving Loans ) and (iv) in the case of Incremental Term Loan Commitments, whether such Incremental Term Loan Commitments are to be (x) commitments to make term loans with terms identical to Term B Loans or (y) commitments to make term loans with pricing, maturity, amortization, participation in mandatory prepayments and/or other terms different from the Term B Loans ( Other Term Loans ).
(b) The Borrower and each Incremental Term Lender and/or Incremental Revolving Facility Lender shall execute and deliver to the Administrative Agent an Incremental Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Term Loan Commitment of such Incremental Term Lender and/or Incremental Revolving Facility Commitment of such Incremental Revolving Facility Lender. Each Incremental Assumption Agreement shall specify the terms of the applicable Incremental Term Loans and/or Incremental Revolving Facility Commitments; provided , that:
(i) any commitments to make additional Term B Loans and/or additional Initial Revolving Loans shall have the same terms as the Term B Loans or Initial Revolving Loans, respectively,
(ii) the Other Term Loans incurred pursuant to clause (a) of this Section 2.21 shall rank pari passu in right of security with the Term B Loans,
(iii) the final maturity date of any such Other Term Loans shall be no earlier than the Term B Facility Maturity Date and, except as to pricing, amortization, final maturity date, participation in mandatory prepayments and ranking as to security reductions (which shall, subject to the other clauses of this proviso, be determined by the Borrower and the Incremental Term Loan Lenders in their sole discretion), shall have (x) substantially the same terms as the Term B Loans or (y) such other terms (including as to guarantees and collateral) as shall be reasonably satisfactory to the Administrative Agent,
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(iv) the Weighted Average Life to Maturity of any such Other Term Loans shall be no shorter than the remaining Weighted Average Life to Maturity of the Term B Loans,
(v) the Other Revolving Loans incurred pursuant to clause (a) of this Section 2.21 shall rank pari passu in right of security with the Initial Revolving Loans,
(vi) the final maturity date of any such Other Revolving Loans shall be no earlier than the Revolving Facility Maturity Date with respect to the Initial Revolving Loans and, except as to pricing, final maturity date, participation in mandatory prepayments and commitment reductions (which shall, subject to the other clauses of this proviso, be determined by the Borrower and the Incremental Revolving Facility Lenders in their sole discretion), shall have (x) substantially the same terms as the Initial Revolving Loans or (y) such other terms (including as to guarantees and collateral) as shall be reasonably satisfactory to the Administrative Agent,
(vii) with respect to any such Other Term Loan incurred pursuant to clause (a) of Section 2.21, the All-in Yield shall be the same as that applicable to the Term B Loans on the Closing Date, except that the All-in Yield in respect of any such Other Term Loan may exceed the All-in Yield in respect of such Term B Loans on the Closing Date by no more than 0.50%, or if it does so exceed such All-in Yield (such difference, the Term Yield Differential ) then the Applicable Margin (or the LIBOR floor as provided in the following proviso) applicable to such Term B Loans shall be increased such that after giving effect to such increase, the Term Yield Differential shall not exceed 0.50%; provided , that, to the extent any portion of the Term Yield Differential is attributable to a higher LIBOR floor being applicable to such Other Term Loans, such floor shall only be included in the calculation of the Term Yield Differential to the extent such floor is greater than the Adjusted LIBO Rate in effect for an Interest Period of three months duration at such time, and, with respect to such excess, the LIBOR floor applicable to the outstanding Term B Loans shall be increased to an amount not to exceed the LIBOR floor applicable to such Other Term Loans prior to any increase in the Applicable Margin applicable to such Term B Loans then outstanding;
(viii) with respect to any commitments to make any such Other Revolving Loans incurred pursuant to clause (a) of Section 2.21, the All-in Yield of such Other Revolving Loans shall be the same as that applicable to the Initial Revolving Loans on the Closing Date, except that the All-in Yield in respect of any such Other Revolving Loan may exceed the All-in Yield in respect of such Initial Revolving Loans on the Closing Date by no more than 0.50%, or if it does so exceed such All-in Yield (such difference, the Revolving Yield Differential ) then the Applicable Margin applicable to such Initial Revolving Loans shall be increased such that after giving effect to such increase, the Revolving Yield Differential shall not exceed 0.50%;
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(ix) (A) the Other Revolving Loans may participate on a pro rata basis or a less than pro rata basis (but not a greater than pro rata basis) than the Initial Revolving Loans in (x) any voluntary or mandatory prepayment or commitment reduction hereunder and (y) any Borrowing at the time such Borrowing is made and (B) the Other Term Loans may participate on a pro rata basis or a less than pro rata basis (but not a greater than pro rata basis) than the Term B Loans in any mandatory prepayment hereunder; and
(x) there shall be no obligor in respect of any Incremental Term Loan Commitments or Incremental Revolving Facility Commitments that is not a Loan Party.
Each party hereto hereby agrees that, upon the effectiveness of any Incremental Assumption Agreement, this Agreement shall be amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Term Loan Commitments and/or Incremental Revolving Facility Commitments evidenced thereby as provided for in Section 9.08(e). Any amendment to this Agreement or any other Loan Document that is necessary to effect the provisions of this Section 2.21 and any such collateral and other documentation shall be deemed Loan Documents hereunder and may be memorialized in writing by the Administrative Agent with the Borrowers consent (not to be unreasonably withheld) and furnished to the other parties hereto.
(c) Notwithstanding the foregoing, no Incremental Term Loan Commitment or Incremental Revolving Facility Commitment shall become effective under this Section 2.21 unless (i) on the date of such effectiveness, to the extent required by the relevant Incremental Assumption Agreement, the conditions set forth in clauses (b) and (c) of Section 4.01 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Responsible Officer of the Borrower and (ii) the Administrative Agent shall have received customary legal opinions, board resolutions and other customary closing certificates and documentation as required by the relevant Incremental Assumption Agreement and, to the extent required by the Administrative Agent, consistent with those delivered on the Closing Date under Section 4.02 and such additional customary documents and filings (including amendments to the Mortgages and other Security Documents and title endorsement bringdowns) as the Administrative Agent may reasonably request to assure that the Incremental Term Loans and/or Revolving Facility Loans in respect of Incremental Revolving Facility Commitments are secured by the Collateral ratably with one or more Classes of then-existing Term Loans and Revolving Facility Loans.
(d) Each of the parties hereto hereby agrees that the Administrative Agent may take any and all action as may be reasonably necessary to ensure that (i) all Incremental Term Loans (other than Other Term Loans), when originally made, are included in each Borrowing of the outstanding applicable Class of Term Loans on a pro rata basis, and (ii) all Revolving Facility Loans in respect of Incremental Revolving Facility Commitments (other than Other Revolving Loans), when originally made, are included in each Borrowing of the applicable Class of outstanding Revolving Facility Loans on a pro rata basis. The Borrower agrees that Section 2.16 shall apply to any conversion of Eurocurrency Loans to ABR Loans reasonably required by the Administrative Agent to effect the foregoing.
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(e) Notwithstanding anything to the contrary in this Agreement, including Section 2.18(c) (which provisions shall not be applicable to clauses (e) through (i) of this Section 2.21), pursuant to one or more offers made from time to time by the Borrower to all Lenders of any Class of Term Loans and/or Revolving Facility Commitments, on a pro rata basis (based, in the case of an offer to the Lenders under any Class of Term Loans, on the aggregate outstanding Term Loans of such Class and, in the case of an offer to the Lenders under any Revolving Facility, on the aggregate outstanding Revolving Facility Commitments under such Revolving Facility, as applicable) and on the same terms ( Pro Rata Extension Offers ), the Borrower is hereby permitted to consummate transactions with individual Lenders from time to time to extend the maturity date of such Lenders Loans and/or Commitments of such Class and to otherwise modify the terms of such Lenders Loans and/or Commitments of such Class pursuant to the terms of the relevant Pro Rata Extension Offer (including, without limitation, increasing the interest rate or fees payable in respect of such Lenders Loans and/or Commitments and/or modifying the amortization schedule in respect of such Lenders Loans). For the avoidance of doubt, the reference to on the same terms in the preceding sentence shall mean, (i) in the case of an offer to the Lenders under any Class of Term Loans, that all of the Term Loans of such Class are offered to be extended for the same amount of time and that the interest rate changes and fees payable with respect to such extension are the same and (ii) in the case of an offer to the Lenders under any Revolving Facility, that all of the Revolving Facility Commitments of such Facility are offered to be extended for the same amount of time and that the interest rate changes and fees payable with respect to such extension are the same. Any such extension (an Extension ) agreed to between the Borrower and any such Lender (an Extending Lender ) will be established under this Agreement by implementing an Incremental Term Loan for such Lender if such Lender is extending an existing Term Loan (such extended Term Loan, an Extended Term Loan ) or an Incremental Revolving Facility Commitment for such Lender if such Lender is extending an existing Revolving Facility Commitment (such extended Revolving Facility Commitment, an Extended Revolving Facility Commitment ). Each Pro Rata Extension Offer shall specify the date on which the Borrower proposes that the Extended Term Loan shall be made, which shall be a date not earlier than five Business Days after the date on which notice is delivered to the Administrative Agent (or such shorter period agreed to by the Administrative Agent in its reasonable discretion).
(f) The Borrower and each Extending Lender shall execute and deliver to the Administrative Agent an Incremental Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Extended Term Loans and/or Extended Revolving Facility Commitments of such Extending Lender. Each Incremental Assumption Agreement shall specify the terms of the applicable Extended Term Loans and/or Extended Revolving Facility Commitments; provided , that (i) except as to interest rates, fees, any other pricing terms, amortization, final maturity date and participation in prepayments and commitment reductions (which shall, subject to clauses (ii) and (iii) of this proviso, be determined by the Borrower and set forth in the Pro Rata Extension Offer), the Extended Term Loans shall have (x) the same terms as an existing Class of Term Loans or (y) such other terms as shall be reasonably satisfactory to the Administrative Agent, (ii) the final maturity date of any Extended Term Loans shall be no earlier than the latest Term Facility Maturity Date in effect on the date of incurrence, (iii) the Weighted Average Life to Maturity of any Extended Term Loans shall be no shorter than the remaining Weighted Average Life to
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Maturity of the Class of Term Loans to which such offer relates, (iv) except as to interest rates, fees, any other pricing terms, participation in mandatory prepayments and commitment reductions and final maturity (which shall be determined by the Borrower and set forth in the Pro Rata Extension Offer), any Extended Revolving Facility Commitment shall have (x) the same terms as an existing Class of Revolving Facility Commitments or (y) have such other terms as shall be reasonably satisfactory to the Administrative Agent, and (v) any Extended Term Loans and/or Extended Revolving Facility Commitments may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory repayments or prepayments hereunder. Upon the effectiveness of any Incremental Assumption Agreement, this Agreement shall be amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Extended Term Loans and/or Extended Revolving Facility Commitments evidenced thereby as provided for in Section 9.08(e). Any such deemed amendment may be memorialized in writing by the Administrative Agent with the Borrowers consent (not to be unreasonably withheld) and furnished to the other parties hereto. If provided in any Incremental Assumption Agreement with respect to any Extended Revolving Facility Commitments, and with the consent of each Swingline Lender and Issuing Bank, participations in Swingline Loans and Letters of Credit shall be reallocated to lenders holding such Extended Revolving Facility Commitments in the manner specified in such Incremental Assumption Agreement, including upon effectiveness of such Extended Revolving Facility Commitment or upon or prior to the maturity date for any Class of Revolving Facility Commitments.
(g) Upon the effectiveness of any such Extension, the applicable Extending Lenders Term Loan will be automatically designated an Extended Term Loan and/or such Extending Lenders Revolving Facility Commitment will be automatically designated an Extended Revolving Facility Commitment. For purposes of this Agreement and the other Loan Documents, (i) if such Extending Lender is extending a Term Loan, such Extending Lender will be deemed to have an Incremental Term Loan having the terms of such Extended Term Loan and (ii) if such Extending Lender is extending a Revolving Facility Commitment, such Extending Lender will be deemed to have an Incremental Revolving Facility Commitment having the terms of such Extended Revolving Facility Commitment.
(h) Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document (including without limitation this Section 2.21), (i) the aggregate amount of Extended Term Loans and Extended Revolving Facility Commitments will not be included in the calculation of the Incremental Amount, (ii) no Extended Term Loan or Extended Revolving Facility Commitment is required to be in any minimum amount or any minimum increment, (iii) any Extending Lender may extend all or any portion of its Term Loans and/or Revolving Facility Commitment pursuant to one or more Pro Rata Extension Offers (subject to applicable proration in the case of over participation) (including the extension of any Extended Term Loan and/or Extended Revolving Facility Commitment), (iv) there shall be no condition to any Extension of any Loan or Commitment at any time or from time to time other than notice to the Administrative Agent of such Extension and the terms of the Extended Term Loan or Extended Revolving Facility Commitment implemented thereby, (v) all Extended Term Loans, Extended Revolving Facility Commitments and all obligations in respect thereof shall be Loan Obligations of the relevant Loan Parties under this Agreement and the other Loan Documents that are secured by the Collateral on a pari passu basis with all other Obligations of
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the relevant Loan Parties under this Agreement and the other Loan Documents, (vi) no Issuing Bank or Swingline Lender shall be obligated to provide Swingline Loans or issue Letters of Credit under such Extended Revolving Facility Commitments unless it shall have consented thereto and (vii) there shall be no obligor in respect of any such Extended Term Loans or Extended Revolving Facility Commitments that is not a Loan Party.
(i) Each Extension shall be consummated pursuant to procedures set forth in the associated Pro Rata Extension Offer; provided , that the Borrower shall cooperate with the Administrative Agent prior to making any Pro Rata Extension Offer to establish reasonable procedures with respect to mechanical provisions relating to such Extension, including, without limitation, timing, rounding and other adjustments.
(j) Notwithstanding anything to the contrary in this Agreement, including Section 2.18(c) (which provisions shall not be applicable to clauses (j) through (o) of this Section 2.21), the Borrower may by written notice to the Administrative Agent establish one or more additional tranches of term loans under this Agreement (such loans, Refinancing Term Loans ), the net cash proceeds of which are used to Refinance in whole or in part any Class of Term Loans. Each such notice shall specify the date (each, a Refinancing Effective Date ) on which the Borrower proposes that the Refinancing Term Loans shall be made, which shall be a date not earlier than five Business Days after the date on which such notice is delivered to the Administrative Agent (or such shorter period agreed to by the Administrative Agent in its reasonable discretion); provided , that:
(i) before and after giving effect to the borrowing of such Refinancing Term Loans on the Refinancing Effective Date each of the conditions set forth in Section 4.01 shall be satisfied to the extent required by the relevant Incremental Assumption Agreement governing such Refinancing Term Loans;
(ii) the final maturity date of the Refinancing Term Loans shall be no earlier than the Term Facility Maturity Date of the refinanced Term Loans,
(iii) the Weighted Average Life to Maturity of such Refinancing Term Loans shall be no shorter than the then-remaining Weighted Average Life to Maturity of the refinanced Term Loans;
(iv) the aggregate principal amount of the Refinancing Term Loans shall not exceed the outstanding principal amount of the refinanced Term Loans plus amounts used to pay fees, premiums, costs and expenses (including original issue discount) and accrued interest associated therewith;
(v) all other terms applicable to such Refinancing Term Loans (other than provisions relating to original issue discount, upfront fees, interest rates or any other pricing terms and optional prepayment or mandatory prepayment or redemption terms and final maturity, which shall be as agreed between the Borrower and the Lenders providing such Refinancing Term Loans) taken as a whole shall be substantially similar to, or not materially less favorable to the Borrower and its Subsidiaries than, the terms, taken as a whole, applicable to the Term B Loans (except to the extent such covenants
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and other terms apply solely to any period after the Term B Facility Maturity Date or are otherwise reasonably acceptable to the Administrative Agent), as determined by the Borrower in good faith. In addition, notwithstanding the foregoing, the Borrower may establish Refinancing Term Loans to refinance and/or replace all or any portion of a Revolving Facility Commitment (regardless of whether Revolving Facility Loans are outstanding under such Revolving Facility Commitments at the time of incurrence of such Refinancing Term Loans), so long as (i) the aggregate amount of such Refinancing Term Loans does not exceed the aggregate amount of Revolving Facility Commitments terminated at the time of incurrence thereof and (ii) if the Revolving Facility Credit Exposure outstanding on the Refinancing Effective Date would exceed the aggregate amount of Revolving Facility Commitments outstanding, in each case after giving effect to the termination of such Revolving Facility Commitments, the Borrower shall take one or more actions such that such Revolving Facility Credit Exposure does not exceed such aggregate amount of Revolving Facility Commitments in effect on the Refinancing Effective Date after giving effect to the termination of such Revolving Facility Commitments (it being understood that such Refinancing Term Loans may be provided by the Lenders holding the Revolving Facility Commitments being terminated and/or by any other person that would be a permitted Assignee hereunder);
(vi) with respect to Refinancing Term Loans secured by Liens on the Collateral that rank junior in right of security to an existing Class of Term Loans, such Liens will be subject to a Permitted Junior Intercreditor Agreement;
(vii) there shall be no obligor in respect of such Refinancing Term Loans that is not a Loan Party; and
(viii) the Refinancing Term Loans may participate on a pro rata basis or a less than pro rata basis (but not a greater than pro rata basis) than the Term B Loans in any prepayment hereunder.
(k) The Borrower may approach any Lender or any other person that would be a permitted Assignee pursuant to Section 9.04 to provide all or a portion of the Refinancing Term Loans; provided , that any Lender offered or approached to provide all or a portion of the Refinancing Term Loans may elect or decline, in its sole discretion, to provide a Refinancing Term Loan. Any Refinancing Term Loans made on any Refinancing Effective Date shall be designated an additional Class of Term Loans for all purposes of this Agreement; provided , further , that any Refinancing Term Loans may, to the extent provided in the applicable Incremental Assumption Agreement governing such Refinancing Term Loans, be designated as an increase in any previously established Class of Term Loans made to the Borrower.
(l) Notwithstanding anything to the contrary in this Agreement, including Section 2.18(c) (which provisions shall not be applicable to clause (l) through (o) of this Section 2.21), the Borrower may by written notice to the Administrative Agent establish one or more additional Facilities providing for revolving commitments ( Replacement Revolving Facility Commitments and the revolving loans thereunder, Replacement Revolving Loans ), which replace in whole or in part any Class of Revolving Facility Commitments under this Agreement. Each such notice shall specify the date (each, a Replacement Revolving Facility
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Effective Date ) on which the Borrower proposes that the Replacement Revolving Facility Commitments shall become effective, which shall be a date not less than five Business Days after the date on which such notice is delivered to the Administrative Agent (or such shorter period agreed to by the Administrative Agent in its reasonable discretion); provided , that: (i) before and after giving effect to the establishment of such Replacement Revolving Facility Commitments on the Replacement Revolving Facility Effective Date, each of the conditions set forth in Section 4.01 shall be satisfied to the extent required by the relevant Incremental Assumption Agreement governing such Replacement Revolving Facility Commitments; (ii) after giving effect to the establishment of any Replacement Revolving Facility Commitments and any concurrent reduction in the aggregate amount of any other Revolving Facility Commitments, the aggregate amount of Revolving Facility Commitments shall not exceed the aggregate amount of the Revolving Facility Commitments outstanding immediately prior to the applicable Replacement Revolving Facility Effective Date; (iii) no Replacement Revolving Facility Commitments shall have a final maturity date (or require commitment reductions or amortizations) prior to the Revolving Facility Maturity Date in effect at the time of incurrence for the Revolving Facility Commitments being replaced; (iv) all other terms applicable to such Replacement Revolving Facility (other than provisions relating to (x) fees, interest rates and other pricing terms and prepayment and commitment reduction and optional redemption terms which shall be as agreed between the Borrower and the Lenders providing such Replacement Revolving Facility Commitments and (y) the amount of any letter of credit sublimit and swingline commitment under such Replacement Revolving Facility, which shall be as agreed between the Borrower, the Lenders providing such Replacement Revolving Facility Commitments, the Administrative Agent and the replacement issuing bank and replacement swingline lender, if any, under such Replacement Revolving Facility Commitments) taken as a whole shall be substantially similar to, or not materially more favorable to the Lenders providing such Replacement Revolving Facility Commitments than, those, taken as a whole, applicable to the Initial Revolving Loans (except to the extent such covenants and other terms apply solely to any period after the latest Revolving Facility Maturity Date in effect at the time of incurrence or are otherwise reasonably acceptable to the Administrative Agent); (v) there shall be no obligor in respect of such Replacement Revolving Facility that is not a Loan Party and (vi) the Replacement Revolving Commitments may participate on a pro rata basis or a less than pro rata basis (but not a greater than pro rata basis) than the Initial Revolving Loans in (x) any voluntary or mandatory prepayment or commitment reduction hereunder and (y) any Borrowing at the time such Borrowing is made. In addition, the Borrower may establish Replacement Revolving Facility Commitments to refinance and/or replace all or any portion of a Term Loan hereunder (regardless of whether such Term Loan is repaid with the proceeds of Replacement Revolving Loans or otherwise), so long as the aggregate amount of such Replacement Revolving Facility Commitments does not exceed the aggregate amount of Term Loans repaid at the time of establishment thereof (it being understood that such Replacement Revolving Facility Commitment may be provided by the Lenders holding the Term Loans being repaid and/or by any other Person that would be a permitted Assignee hereunder) so long as (i) before and after giving effect to the establishment such Replacement Revolving Facility Commitments on the Replacement Revolving Facility Effective Date each of the conditions set forth in Section 4.01 shall be satisfied to the extent required by the relevant agreement governing such Replacement Revolving Facility Commitments, (ii) the weighted average life to termination of such Replacement Revolving Facility Commitments shall be not shorter than the Weighted Average
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Life to Maturity then applicable to the refinanced Term Loans, (iii) the final termination date of the Replacement Revolving Facility Commitments shall be no earlier than the Term Facility Maturity Date of the refinanced Term Loans, (iv) with respect to Replacement Revolving Loans secured by Liens on Collateral that rank junior in right of security to the Revolving Facility Loans, such Liens will be subject to a Permitted Junior Intercreditor Agreement and (v) the requirement of clause (v) in the preceding sentence shall be satisfied mutatis mutandis.
(m) The Borrower may approach any Lender or any other person that would be a permitted Assignee of a Revolving Facility Commitment pursuant to Section 9.04 to provide all or a portion of the Replacement Revolving Facility Commitments; provided , that any Lender offered or approached to provide all or a portion of the Replacement Revolving Facility Commitments may elect or decline, in its sole discretion, to provide a Replacement Revolving Facility Commitment. Any Replacement Revolving Facility Commitment made on any Replacement Revolving Facility Effective Date shall be designated an additional Class of Revolving Facility Commitments for all purposes of this Agreement; provided , that any Replacement Revolving Facility Commitments may, to the extent provided in the applicable Incremental Assumption Agreement, be designated as an increase in any previously established Class of Revolving Facility Commitments.
(n) On any Replacement Revolving Facility Effective Date, subject to the satisfaction of the foregoing terms and conditions, each of the Lenders with Replacement Revolving Facility Commitments of such Class shall purchase from each of the other Lenders with Replacement Revolving Facility Commitments of such Class, at the principal amount thereof and in the applicable currencies, such interests in the Replacement Revolving Loans and participations in Letters of Credit and Swingline Loans under such Replacement Revolving Facility Commitments of such Class then outstanding on such Replacement Revolving Facility Effective Date as shall be necessary in order that, after giving effect to all such assignments and purchases, the Replacement Revolving Loans and participations of such Replacement Revolving Facility Commitments of such Class will be held by the Lenders thereunder ratably in accordance with their Replacement Revolving Facility Commitments.
(o) For purposes of this Agreement and the other Loan Documents, (i) if a Lender is providing a Refinancing Term Loan, such Lender will be deemed to have an Incremental Term Loan having the terms of such Refinancing Term Loan and (ii) if a Lender is providing a Replacement Revolving Facility Commitment, such Lender will be deemed to have an Incremental Revolving Facility Commitment having the terms of such Replacement Revolving Facility Commitment. Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document (including without limitation this Section 2.21), (i) the aggregate amount of Refinancing Term Loans and Replacement Revolving Facility Commitments will not be included in the calculation of the Incremental Amount, (ii) no Refinancing Term Loan or Replacement Revolving Facility Commitment is required to be in any minimum amount or any minimum increment, (iii) there shall be no condition to any incurrence of any Refinancing Term Loan or Replacement Revolving Facility Commitment at any time or from time to time other than those set forth in clauses (j) or (l) above, as applicable, and (iv) all Refinancing Term Loans, Replacement Revolving Facility Commitments and all obligations in respect thereof shall be Obligations under this Agreement and the other Loan Documents that are secured by the Collateral on a pari passu basis with all other Obligations under this Agreement and the other Loan Documents.
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(p) Notwithstanding anything in the foregoing to the contrary, (i) for the purpose of determining the number of outstanding Eurocurrency Borrowings upon the incurrence of any Incremental Loans, (x) to the extent the last date of Interest Periods for multiple Eurocurrency Borrowings under the Term Facilities fall on the same day, such Eurocurrency Borrowings shall be considered a single Eurocurrency Borrowing and (y) to the extent the last date of Interest Periods for multiple Eurocurrency Borrowings under the Revolving Facilities fall on the same day, such Eurocurrency Borrowings shall be considered a single Eurocurrency Borrowing and (ii) the initial Interest Period with respect to any Eurocurrency Borrowing of Incremental Loans may, at the Borrowers option, be of a duration of a number of Business Days that is less than one month, and the Adjusted LIBO Rate with respect to such initial Interest Period shall be the same as the Adjusted LIBO Rate applicable to any then-outstanding Eurocurrency Borrowing as the Borrower may direct, so long as the last day of such initial Interest Period is the same as the last day of the Interest Period with respect to such outstanding Eurocurrency Borrowing.
Section 2.22 Defaulting Lender . (a) Defaulting Lender Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(i) Waivers and Amendments . Such Defaulting Lenders right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definitions of Required Lenders or Required Revolving Facility Lenders.
(ii) Defaulting Lender Waterfall . Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, following an Event of Default or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 9.06 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder, second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Bank or the Swingline Lender hereunder, third , to Cash Collateralize the Issuing Banks Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.05(j), fourth , as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent, fifth , if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lenders potential future funding obligations with respect to Loans under this Agreement and (y) Cash Collateralize the Issuing Banks future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.05(j), sixth , to the payment of any amounts
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owing to the Lenders, the Issuing Banks or the Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, Issuing Bank or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement, seventh , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lenders breach of its obligations under this Agreement, and eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.22 shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(iii) Certain Fees . (A) No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender.
(B) Each Defaulting Lender shall be entitled to receive L/C Participation Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its pro rata share of the stated amount of Letters of Credit for which it has provided Cash Collateral.
(C) With respect to any Commitment Fee or L/C Participation Fee not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lenders participation in Letters of Credit or Swingline Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to each Issuing Bank and the Swingline Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to such Issuing Banks or the Swingline Lenders Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.
(iv) Reallocation of Participations to Reduce Fronting Exposure . All or any part of such Defaulting Lenders participation in Letters of Credit and Swingline Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective pro rata Commitments (calculated without regard to such Defaulting Lenders Commitment) but only to the extent that (x) the conditions set forth in Section 4.01 are satisfied at the time of such reallocation and (y) such reallocation does not cause the aggregate Revolving Facility Credit Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lenders Revolving Facility Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lenders increased exposure following such reallocation.
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(v) Cash Collateral, Repayment of Swingline Loans . If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, within three (3) Business Days following the written request of the (i) Administrative Agent or (ii) the Swingline Lender or any Issuing Bank, as applicable (with a copy to the Administrative Agent), (x) first , prepay Swingline Loans in an amount equal to the Swingline Lenders Fronting Exposure and (y) second, Cash Collateralize the Issuing Banks Fronting Exposure in accordance with the procedures set forth in Section 2.05(j).
(b) Defaulting Lender Cure . If the Borrower, the Administrative Agent and the Swingline Lender and each Issuing Bank agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Facility Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held pro rata by the Lenders in accordance with their Revolving Facility Commitments (without giving effect to Section 2.22(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided , that, no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; provided , further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lenders having been a Defaulting Lender.
(c) New Swingline Loans/Letters of Credit . So long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan and (ii) the Issuing Banks shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.
ARTICLE III
Representations and Warranties
On the date of each Credit Event, the Borrower and Holdings, jointly and severally, represent and warrant to each of the Lenders that:
Section 3.01 Organization; Powers . Except as set forth on Schedule 3.01 , each of Holdings (prior to a Qualified IPO), the Borrower and each of the Material Subsidiaries (a) is a partnership, limited liability company or corporation duly organized, validly existing and in
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good standing (or, if applicable in a foreign jurisdiction, enjoys the equivalent status under the laws of any jurisdiction of organization outside the United States of America) under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, (c) is qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not reasonably be expected to have a Material Adverse Effect, and (d) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder.
Section 3.02 Authorization . The execution, delivery and performance by Holdings (prior to a Qualified IPO), the Borrower and each of the Subsidiary Loan Parties of each of the Loan Documents to which it is a party and the borrowings hereunder (a) have been duly authorized by all corporate, stockholder, partnership or limited liability company action required to be obtained by Holdings, the Borrower and such Subsidiary Loan Parties and (b) will not (i) violate (A) any provision of law, statute, rule or regulation applicable to Holdings, the Borrower or any such Subsidiary Loan Party, (B) the certificate or articles of incorporation or other constitutive documents (including any partnership, limited liability company or operating agreements) or by-laws of Holdings, the Borrower, or any such Subsidiary Loan Party, (C) any applicable order of any court or any rule, regulation or order of any Governmental Authority applicable to Holdings, the Borrower or any such Subsidiary Loan Party or (D) any provision of any indenture, certificate of designation for preferred stock, agreement or other instrument to which Holdings, the Borrower or any such Subsidiary Loan Party is a party or by which any of them or any of their property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with due notice or lapse of time or both) a default under, give rise to a right of or result in any cancellation or acceleration of any right or obligation (including any payment) under any such indenture, certificate of designation for preferred stock, agreement or other instrument, where any such conflict, violation, breach or default referred to in clause (i) or (ii) of this Section 3.02(b), would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (iii) result in the creation or imposition of any Lien upon or with respect to (x) any property or assets now owned or hereafter acquired by the Borrower or any such Subsidiary Loan Party, other than the Liens created by the Loan Documents and Permitted Liens, or (y) any Equity Interests of the Borrower now owned or hereafter acquired by Holdings (prior to a Qualified IPO), other than Liens created by the Loan Documents or Liens permitted by Article VIA.
Section 3.03 Enforceability . This Agreement has been duly executed and delivered by Holdings and the Borrower and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), (iii) implied covenants of good faith and fair dealing and (iv) any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries that are not Loan Parties.
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Section 3.04 Governmental Approvals . No action, consent or approval of, registration or filing with or any other action by any Governmental Authority is or will be required for the execution, delivery or performance of each Loan Document, except for (a) the filing of Uniform Commercial Code financing statements, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions, (c) recordation of the Mortgages, (d) such actions, consents and approvals under Gaming Laws or from Gaming Authorities the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect, (e) such actions, consents and approvals as have been made or obtained and are in full force and effect, (f) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect and (g) filings or other actions listed on Schedule 3.04 and any other filings or registrations required by the Security Documents.
Section 3.05 Financial Statements . (a) The audited consolidated balance sheets, related statements of operations and comprehensive loss and related statements of cash flows of AGS Capital and its subsidiaries, for each of the fiscal years ended December 31, 2010, December 31, 2011 and December 31, 2012 and (b) the unaudited consolidated balance sheets, related statements of operations and comprehensive loss and related statements of cash flows of AGS Capital and its subsidiaries, for each of the fiscal quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, including, in each case, the notes thereto, if applicable, present fairly in all material respects the consolidated financial condition of the AGS Acquired Business as of the dates and for the periods referred to therein and the results of operations and, if applicable, cash flows for the periods then ended, and, except as set forth on Schedule 3.05 , were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, in the case of interim period financial statements, for the absence of notes and for normal year-end adjustments and except as otherwise noted therein. The calculation of pro forma EBITDA of AGS Capital and its subsidiaries for the twelve-month period ended September 30, 2013 that has been included in the Information Memorandum (the Pro Forma EBITDA ) has been prepared giving effect to the Transactions (as if such events occurred on the first day of such period). The calculation of Pro Forma EBITDA has been prepared in good faith based on assumptions believed by the Borrower to have been reasonable as of the date of delivery thereof (it being understood that such assumptions are based on good faith estimates of certain items and that the actual amount of such items on the Closing Date is subject to change).
Section 3.06 No Material Adverse Effect . Since December 31, 2012, there has been no event or circumstance that, individually or in the aggregate with other events or circumstances, has had or would reasonably be expected to have a Material Adverse Effect.
Section 3.07 Title to Properties; Possession Under Leases . (a) Each of the Borrower and the Subsidiaries has good record and insurable title in fee simple to, or valid leasehold interests in, or easements or other limited property interests in, all its Real Properties (including all Mortgaged Properties) and has good and marketable title to its personal property and assets, in each case, except for Permitted Liens and except for defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes and except where the failure to have such
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title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Permitted Liens or Liens arising by operation of law. The Equity Interests of the Borrower owned by Holdings (prior to a Qualified IPO) are free and clear of Liens, other than Liens permitted by Article VIA.
(b) The Borrower and each of the Subsidiaries has complied with all material obligations under all leases to which it is a party, except where the failure to comply would not reasonably be expected to have Material Adverse Effect, and all such leases are in full force and effect, except leases in respect of which the failure to be in full force and effect would not reasonably be expected to have a Material Adverse Effect.
(c) As of the Closing Date, none of Holdings, the Borrower and the Subsidiaries has received any written notice of any pending or contemplated condemnation proceeding affecting any material portion of the Mortgaged Properties or any sale or disposition thereof in lieu of condemnation that remains unresolved as of the Closing Date.
(d) As of the Closing Date, none of Holdings, the Borrower and its Subsidiaries is obligated under any right of first refusal, option or other contractual right to sell, assign or otherwise dispose of any Mortgaged Property or any interest therein, except as permitted under Section 6.02 or 6.05.
(e) Schedule 1.01(B) lists each Material Real Property owned by any Loan Party as of the Closing Date.
Section 3.08 Subsidiaries (a) Schedule 3.08(a) sets forth as of the Closing Date the name and jurisdiction of incorporation, formation or organization of each subsidiary of Holdings and, as to each such subsidiary, the percentage of each class of Equity Interests owned by Holdings or by any such subsidiary.
(b) As of the Closing Date, after giving effect to the Transactions, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors (or entities controlled by directors) and shares held by directors (or entities controlled by directors)) relating to any Equity Interests of the Borrower or any of the Subsidiaries, except as set forth on Schedule 3.08(b) .
Section 3.09 Litigation; Compliance with Laws . (a) There are no actions, suits or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of Holdings (prior to a Qualified IPO) or the Borrower, threatened in writing against Holdings or the Borrower or any of the Subsidiaries or any business, property or rights of any such person (i) that involve any Loan Document or the Transactions or (ii) that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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(b) None of Holdings (prior to a Qualified IPO), the Borrower, the Subsidiaries and their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any zoning, building, ordinance, code or approval or any building permit, but excluding any Environmental Laws, which are the subject of Section 3.16) or any restriction of record or agreement affecting any Mortgaged Property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(c) The Borrower and each Subsidiary are in compliance with all Gaming Laws that are applicable to them and their businesses, except where a failure to so comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 3.10 Federal Reserve Regulations . Neither the making of any Loan (or the extension of any Letter of Credit) hereunder nor the use of the proceeds thereof will violate the provisions of Regulation T, Regulation U or Regulation X of the Board.
Section 3.11 Investment Company Act . None of Holdings (prior to a Qualified IPO), the Borrower and the Subsidiaries is required to be registered as an investment company within the meaning of the Investment Company Act of 1940, as amended.
Section 3.12 Use of Proceeds . (a) The Borrower will use the proceeds of the Revolving Facility Loans and Swingline Loans, and may request the issuance of Letters of Credit (in each case subject to clause (b) below), solely for general corporate purposes (including, without limitation, for Permitted Business Acquisitions, any Purchase Agreement Earn-outs, Transaction Expenses and, in the case of Letters of Credit, for the back-up or replacement of existing letters of credit) and, in the case of Revolving Facility Loans made on the Closing Date, for the purposes set forth in clause (b) below; provided the amount of Revolving Facility Loans incurred on the Closing Date shall not exceed (i) $7,500,000, which amount may be used to fund working capital or other adjustments under the Purchase Agreement plus (ii) an amount not to exceed $3,100,000 to fund original issue discount or upfront fees in respect of Indebtedness incurred on the Closing Date in connection with the Transactions and (b) the Borrower will use the proceeds of the Term Loans made on the Closing Date to finance a portion of the Transactions, including the payment of any Purchase Agreement Earn-outs, and for the payment of Transaction Expenses.
Section 3.13 Tax Returns . Except as set forth on Schedule 3.13 :
(a) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, Holdings, the Borrower and each of the Subsidiaries has filed or caused to be filed all federal, state, local and non-U.S. Tax returns required to have been filed by it (including in its capacity as withholding agent) and each such Tax return is true and correct;
(b) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, Holdings, the Borrower and each of the Subsidiaries has timely paid or caused to be timely paid all Taxes shown to be due and payable
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by it on the returns referred to in clause (a) and all other Taxes or assessments (or made adequate provision (in accordance with GAAP) for the payment of all Taxes due), except Taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which Holdings, the Borrower or any of the Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP; and
(c) Other than as would not be, individually or in the aggregate, reasonably expected to have a Material Adverse Effect; as of the Closing Date, with respect to Holdings, the Borrower and each of the Subsidiaries, there are no claims being asserted in writing with respect to any Taxes.
Section 3.14 No Material Misstatements . (a) All written factual information (other than the Projections, forward looking information and information of a general economic nature or general industry nature) (the Information ) concerning Holdings, the Borrower, the Subsidiaries, the Transactions and any other transactions contemplated hereby included in the Information Memorandum or otherwise prepared by or on behalf of the foregoing or their representatives and made available to any Lenders or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby, when taken as a whole, was true and correct in all material respects, as of the date such Information was furnished to the Lenders and as of the Closing Date and did not, taken as a whole, contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein, taken as a whole, not materially misleading in light of the circumstances under which such statements were made (giving effect to all supplements and updates provided thereto).
(b) The Projections and other forward looking information and information of a general economic nature prepared by or on behalf of the Borrower or any of its representatives and that have been made available to any Lenders or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable as of the date thereof (it being understood that such Projections are as to future events and are not to be viewed as facts, such Projections are subject to significant uncertainties and contingencies and that actual results during the period or periods covered by any such Projections may differ significantly from the projected results, and that no assurance can be given that the projected results will be realized), as of the date such Projections and information were furnished to the Lenders and as of the Closing Date, and (ii) as of the Closing Date, have not been modified in any material respect by the Borrower.
Section 3.15 Employee Benefit Plans . Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) no Reportable Event has occurred during the past five years as to which the Borrower, Holdings, any of their Subsidiaries or any ERISA Affiliate was required to file a report with the PBGC; (ii) no ERISA Event has occurred or is reasonably expected to occur and (iii) none of the Borrower, Holdings, the Subsidiaries or any of their ERISA Affiliates has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA.
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Section 3.16 Environmental Matters . Except as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) no written notice, request for information, order, complaint or penalty has been received by the Borrower or any of its Subsidiaries, and there are no judicial, administrative or other actions, suits or proceedings pending or, to the Borrowers knowledge, threatened which allege a violation of or liability under any Environmental Laws, in each case relating to the Borrower or any of its Subsidiaries, (ii) each of the Borrower and its Subsidiaries has all environmental permits, licenses and other approvals necessary for its operations to comply with all Environmental Laws ( Environmental Permits ) and is, and in the prior eighteen (18)-month period, has been, in compliance with the terms of such Environmental Permits and with all other Environmental Laws, (iii) except as set forth on Schedule 3.16, no Hazardous Material is located at, on or under any property currently or, to the Borrowers knowledge, formerly owned, operated or leased by the Borrower or any of its Subsidiaries that would reasonably be expected to give rise to any cost, liability or obligation of the Borrower or any of its Subsidiaries under any Environmental Laws or Environmental Permits, and no Hazardous Material has been generated, used, treated, stored, handled, disposed of or controlled, transported or Released at any location in a manner that would reasonably be expected to give rise to any cost, liability or obligation of the Borrower or any of its Subsidiaries under any Environmental Laws or Environmental Permits, (iv) there are no agreements in which the Borrower or any of its Subsidiaries has expressly assumed or undertaken responsibility for any known or reasonably likely liability or obligation of any other person arising under or relating to Environmental Laws, which in any such case has not been made available to the Administrative Agent prior to the Closing Date, and (v) there has been no material written environmental assessment or audit conducted (other than customary assessments not revealing anything that would reasonably be expected to result in a Material Adverse Effect), by or on behalf of the Borrower or any of the Subsidiaries of any property currently or, to the Borrowers knowledge, formerly owned or leased by the Borrower or any of the Subsidiaries that has not been made available to the Administrative Agent prior to the Closing Date.
Section 3.17 Security Documents . (a) The Collateral Agreement and the Holdings Guarantee and Pledge Agreement are effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties), in each case, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. As of the Closing Date, in the case of the Pledged Collateral described in the Collateral Agreement and the Holdings Guarantee and Pledge Agreement, when certificates or promissory notes, as applicable, representing such Pledged Collateral and required to be delivered under the applicable Security Document are delivered to the Collateral Agent, and in the case of the other Collateral described in the Collateral Agreement (other than the Intellectual Property), when financing statements and other filings specified in the Perfection Certificate are filed in the offices specified in the Perfection Certificate, the Collateral Agent (for the benefit of the Secured Parties) shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and, subject to Section 9-315 of the New York Uniform Commercial Code, the proceeds thereof, as security for the Obligations to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, in each case prior and superior in right to the Lien of any other person (except (x) Liens having priority by operation of law and (y) in the case of Collateral other than certificated securities and instruments of which the Collateral Agent has possession, Permitted Liens).
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(b) When the Collateral Agreement or an ancillary document thereunder is properly filed and recorded in the United States Patent and Trademark Office and the United States Copyright Office, and, with respect to Collateral in which a security interest cannot be perfected by such filings, upon the proper filing of the financing statements referred to in clause (a) above, the Collateral Agent (for the benefit of the Secured Parties) shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties thereunder in the United States Intellectual Property included in the Collateral (but, in the case of the United States registered copyrights included in the Collateral, only to the extent such United States registered copyrights are listed in such ancillary document filed with the United States Copyright Office) listed in such ancillary document, in each case prior and superior in right to the Lien of any other person, except for Permitted Liens (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the Loan Parties after the Closing Date).
(c) The Mortgages, if any, executed and delivered on the Closing Date are, and the Mortgages executed and delivered after the Closing Date pursuant to Section 5.10 shall be, effective to create in favor of the Collateral Agent (for the benefit of the Secured Parties) legal, valid and enforceable Liens on all of the Loan Parties rights, titles and interests in and to the Mortgaged Property thereunder and the proceeds thereof, and when such Mortgages are filed or recorded in the proper real estate filing or recording offices, and all relevant mortgage taxes and recording charges are duly paid, the Collateral Agent (for the benefit of the Secured Parties) shall have valid Liens with record notice to third parties on, and security interests in, all rights, titles and interests of the Loan Parties in such Mortgaged Property and, to the extent applicable, subject to Section 9-315 of the Uniform Commercial Code, the proceeds thereof, in each case prior and superior in right to the Lien of any other person, except for Permitted Liens.
(d) Notwithstanding anything herein (including this Section 3.17) or in any other Loan Document to the contrary, (i) each of the parties hereto acknowledges and agrees that licensing by the Gaming Authorities may be required to enforce and/or exercise or foreclose upon certain security interests and such enforcement and/or exercise or foreclosure may be otherwise limited by the Gaming Laws and (ii) neither the Borrower nor any other Loan Party makes any representation or warranty as to the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law.
Section 3.18 Location of Real Property and Leased Premises . (a) The Perfection Certificate lists correctly, in all material respects, as of the Closing Date all material Real Property owned by the Borrower and the Subsidiary Loan Parties and the addresses thereof. As of the Closing Date, the Borrower and the Subsidiary Loan Parties own in fee all the Real Property set forth as being owned by them in the Perfection Certificate except to the extent set forth therein.
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(b) The Perfection Certificate lists correctly in all material respects, as of the Closing Date, all material Real Property leased by the Borrower and the Subsidiary Loan Parties and the addresses thereof. As of the Closing Date, the Borrower and the Subsidiary Loan Parties have in all material respects valid leases in all the Real Property set forth as being leased by them in the Perfection Certificate except to the extent set forth therein.
Section 3.19 Solvency . (a) On the Closing Date, immediately after giving effect to the Transactions, (i) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, direct, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (ii) the present fair saleable value of the property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date.
(b) As of the Closing Date, immediately after giving effect to the consummation of the Transactions, the Borrower does not intend to, and the Borrower does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such Subsidiary and the timing and amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
Section 3.20 Labor Matters . Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes pending or threatened against Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries; (b) the hours worked and payments made to employees of Holdings (prior to a Qualified IPO), the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters; and (c) all payments due from Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries or for which any claim may be made against Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of Holdings (prior to a Qualified IPO), the Borrower or such Subsidiary to the extent required by GAAP. Except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, the consummation of the Transactions will not give rise to a right of termination or right of renegotiation on the part of any union under any material collective bargaining agreement to which Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries (or any predecessor) is a party or by which Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries (or any predecessor) is bound.
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Section 3.21 Insurance . Schedule 3.21 sets forth a true, complete and correct description, in all material respects, of all material insurance (excluding any title insurance) maintained by or on behalf of the Borrower or the Subsidiaries as of the Closing Date. As of such date, such insurance is in full force and effect.
Section 3.22 No Default . No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.
Section 3.23 Intellectual Property; Licenses, Etc. Except as would not reasonably be expected to have a Material Adverse Effect or as set forth in Schedule 3.23 , (a) the Borrower and each of its Subsidiaries owns, or possesses the right to use, all Intellectual Property that are used or held for use in or are otherwise reasonably necessary for the present conduct of their respective businesses, (b) to the knowledge of the Borrower, the Borrower and its Subsidiaries are not interfering with, infringing upon, misappropriating or otherwise violating the Intellectual Property of any person, and (c) (i) no claim or litigation regarding any of the Intellectual Property owned by the Borrower and its Subsidiaries is pending or, to the knowledge of the Borrower, threatened and (ii) to the knowledge of the Borrower, no claim or litigation regarding any other Intellectual Property described in the foregoing clauses (a) and (b) is pending or threatened.
Section 3.24 Senior Debt . The Loan Obligations constitute Senior Debt (or the equivalent thereof) under the documentation governing any Material Indebtedness of any Loan Party permitted to be incurred hereunder constituting Indebtedness that is subordinated in right of payment to the Loan Obligations.
Section 3.25 USA PATRIOT Act; OFAC .
(a) Each Loan Party is in compliance in all material respects with the provisions of the USA PATRIOT Act. On or prior to the Closing Date, the Borrower has provided to the Administrative Agent all information related to the Loan Parties (including names, addresses and tax identification numbers (if applicable)) reasonably requested in writing by the Administrative Agent not less than ten (10) Business Days prior to the Closing Date and mutually agreed to be required under know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act, to be obtained by the Administrative Agent or any Lender.
(b) None of the Borrower or any of its Subsidiaries nor, to the knowledge of Borrower, any director, officer, agent, employee or Affiliate of Holdings, the Borrower or any of the Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ( OFAC ); and, the Borrower will not directly or indirectly use the proceeds of the Loans or the Letters of Credit or otherwise make available such proceeds to any person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
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Section 3.26 Foreign Corrupt Practices Act . None of Holdings, the Borrower or any of its Subsidiaries, nor, to the knowledge of the Borrower or any of its Subsidiaries, any of their directors, officers, agents or employees, has in the past (5) years (i) violated or is in violation of any provision of the United States Foreign Corrupt Practices Act of 1977 or similar law of a jurisdiction in which the Borrower or any of its subsidiaries conduct their business and to which they are lawfully subject or (ii) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment. No part of the proceeds of the Loans made hereunder will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of any provision of the United States Foreign Corrupt Practices Act of 1977, as amended.
ARTICLE IV
Conditions of Lending
The obligations of (a) the Lenders (including the Swingline Lender) to make Loans and (b) any Issuing Bank to issue, amend, extend or renew Letters of Credit or increase the stated amounts of Letters of Credit hereunder (each, a Credit Event ) are subject to the satisfaction (or waiver in accordance with Section 9.08) of the following conditions:
Section 4.01 All Credit Events . On the date of each Borrowing and on the date of each issuance, amendment, extension or renewal of a Letter of Credit:
(a) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing Request as required by Section 2.03 (or a Borrowing Request shall have been deemed given in accordance with the last paragraph of Section 2.03) or, in the case of the issuance of a Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit as required by Section 2.05(b).
(b) (i) In the case of each Credit Event that occurs on the Closing Date, the representations and warranties made by the Seller (with respect to the AGS Acquired Business in the Purchase Agreement that are material to the interests of the Lenders (but only to the extent that AcquisitionCo has the right to terminate its obligations under the Purchase Agreement as a result of a breach of such representations in the Purchase Agreement) shall be true and correct in all material respects, and the representations and warranties made in respect of the Borrower in Sections 3.01(a) and (d), 3.02(a) and (b)(i)(B) (limited to the Borrowers constitutive documents), 3.03, 3.10, 3.11, 3.17 (limited to creation, validity and perfection), 3.19, 3.25 and 3.26 shall be true and correct in all material respects; and (ii) in the case of each other Credit Event that occurs after the Closing Date, the representations and warranties set forth in the Loan Documents shall be true and correct in all material respects as of such date (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date).
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(c) In the case of each Borrowing or other Credit Event that occurs after the Closing Date, at the time of and immediately after such Borrowing or issuance, amendment, extension or renewal of a Letter of Credit (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), as applicable, no Event of Default or Default shall have occurred and be continuing.
(d) Each Borrowing and each other Credit Event that occurs after the Closing Date shall be deemed to constitute a representation and warranty by the Borrower on the date of such Borrowing, issuance, amendment, extension or renewal as applicable, as to the matters specified in paragraphs (b) and (c) of this Section 4.01.
Section 4.02 First Credit Event . On or prior to the Closing Date:
(a) The Administrative Agent (or its counsel) shall have received from each of Holdings, the Borrower, the Issuing Bank and the Lenders (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence reasonably satisfactory to the Administrative Agent (which may include delivery of a signed signature page of this Agreement by facsimile or other means of electronic transmission (e.g., pdf)) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received, on behalf of itself, the Lenders and each Issuing Bank, a written opinion of Paul, Weiss, Rifkind, Wharton & Garrison LLP, special counsel for the Loan Parties, (A) dated the Closing Date, (B) addressed to each Issuing Bank, the Administrative Agent and the Lenders on the Closing Date and (C) in form and substance reasonably satisfactory to the Administrative Agent covering such matters relating to the Loan Documents as the Administrative Agent shall reasonably request.
(c) The Administrative Agent shall have received a certificate of the Secretary or Assistant Secretary or similar officer of each Loan Party dated the Closing Date and certifying:
(i) a copy of the certificate or articles of incorporation, certificate of limited partnership, certificate of formation or other equivalent constituent and governing documents, including all amendments thereto, of such Loan Party, (1) in the case of a corporation, certified as of a recent date by the Secretary of State (or other similar official) of the jurisdiction of its organization, or (2) otherwise certified by the Secretary or Assistant Secretary of such Loan Party or other person duly authorized by the constituent documents of such Loan Party,
(ii) a certificate as to the good standing (to the extent such concept or a similar concept exists under the laws of such jurisdiction) of such Loan Party as of a recent date from such Secretary of State (or other similar official),
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(iii) that attached thereto is a true and complete copy of the by-laws (or partnership agreement, limited liability company agreement or other equivalent constituent and governing documents) of such Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (iv) below,
(iv) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors (or equivalent governing body) of such Loan Party (or its managing general partner or managing member) authorizing the execution, delivery and performance of the Loan Documents dated as of the Closing Date to which such person is a party and, in the case of the Borrower, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect on the Closing Date,
(v) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party, and
(vi) as to the absence of any pending proceeding for the dissolution or liquidation of such Loan Party or, to the knowledge of such person, threatening the existence of such Loan Party.
(d) The Administrative Agent shall have received a completed Perfection Certificate, dated the Closing Date and signed by a Responsible Officer of the Borrower, together with all attachments contemplated thereby, and the results of a search of the Uniform Commercial Code (or equivalent), tax and judgment, United States Patent and Trademark Office and United States Copyright Office filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are Permitted Liens or have been, or will be simultaneously or substantially concurrently with the closing under this Agreement, released (or arrangements reasonably satisfactory to the Administrative Agent for such release shall have been made).
(e) The AGS Acquisition shall have been consummated or shall be consummated simultaneously or substantially concurrently with the closing under this Agreement in accordance with applicable law and the terms and conditions of the AGS Acquisition as set forth in the Purchase Agreement, without giving effect to any amendment, waiver, consent or other modification thereof by AcquisitionCo that is materially adverse to the interests of the Lenders (in their capacities as such) unless it is approved by the Arrangers (which approval shall not be unreasonably withheld or delayed).
(f) Prior to, simultaneously, or substantially concurrently with the closing under this Agreement, the Co-Investors shall have contributed an aggregate amount in cash in the form of common equity, or other Equity Interests on terms reasonably acceptable to the Administrative Agent, and which shall be further contributed as common equity to the Borrower, which would cause the Equity Interests of Holdings to represent not less than 35% of the total pro forma consolidated capitalization of Holdings (the Equity Financing ).
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(g) The Administrative Agent shall have received the financial statements referred to in Section 3.05.
(h) On the Closing Date, after giving effect to the Transactions and the other transactions contemplated hereby, none of Holdings, the Borrower or any of the Subsidiaries shall have any Indebtedness of the type described in clause (a) of the definition thereof other than (i) the Loans and other extensions of credit under this Agreement (including the Existing Letters of Credit, which shall be deemed to be Letters of Credit issued under and subject to this Agreement), (ii) other Indebtedness permitted to be incurred or outstanding on or prior to the Closing Date pursuant to the Purchase Agreement as in effect on September 16, 2013, as may be modified with the Administrative Agents consent and (iii) other Indebtedness permitted under Section 6.01.
(i) The Administrative Agent shall have received a solvency certificate substantially in the form of Exhibit C and signed by a Financial Officer of the Borrower confirming the solvency of Borrower and its Subsidiaries on a consolidated basis after giving effect to the Transactions on the Closing Date.
(j) The Agents shall have received all fees payable thereto or to any Lender on or prior to the Closing Date and, to the extent invoiced, all other amounts due and payable pursuant to the Loan Documents on or prior to the Closing Date, including, to the extent invoiced at least three Business Days prior to the Closing Date, reimbursement or payment of all reasonable and documented out-of-pocket expenses (including reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP) required to be reimbursed or paid by the Loan Parties hereunder or under any Loan Document.
(k) Except as set forth in Schedule 5.10 (which, for the avoidance of doubt, shall override the applicable clauses of the definition of Collateral and Guarantee Requirement) and subject to the grace periods and post-closing periods set forth in such definition, the Collateral and Guarantee Requirement shall be satisfied (or waived) as of the Closing Date.
(l) The Administrative Agent shall have received all documentation and other information required by Section 3.25(a), to the extent such information has been requested not less than ten (10) Business Days prior to the Closing Date.
(m) Except as set forth on Schedule 4.06 to the Purchase Agreement as of September 16, 2013 ( provided , that Schedule 4.06 shall be deemed to incorporate by reference all information disclosed in any other section of the Disclosure Schedules (as defined in the Purchase Agreement as of September 16, 2013) if it is reasonably apparent on its face that such disclosure may be applicable to this condition), since June 30, 2013 and until September 16, 2013, there shall not have been any Material Adverse Effect as defined in the Purchase Agreement. Since September 16, 2013, no Material Adverse Effect (as defined in the Purchase Agreement as in effect on September 16, 2013, as may be modified with the Administrative Agents consent) shall have occurred.
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(n) The Borrower shall have delivered to the Administrative Agent a certificate, dated as of the Closing Date, to the effect set forth in Section 4.01(b)(i) and Section 4.02(m) hereof.
For purposes of determining compliance with the conditions specified in this Section 4.02, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender prior to the Closing Date specifying its objection thereto and, in the case of a Borrowing, such Lender shall not have made available to the Administrative Agent such Lenders ratable portion of the initial Borrowing.
ARTICLE V
Affirmative Covenants
The Borrower covenants and agrees with each Lender that, until the Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause each of the Subsidiaries to:
Section 5.01 Existence; Business and Properties . (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except, in the case of a Subsidiary of the Borrower, where the failure to do so would not reasonably be expected to have a Material Adverse Effect, and except as otherwise permitted under Section 6.05, and except for the liquidation or dissolution of Subsidiaries if the assets of such Subsidiaries to the extent they exceed estimated liabilities are acquired by the Borrower or a Wholly Owned Subsidiary of the Borrower in such liquidation or dissolution; provided , that Subsidiary Loan Parties may not be liquidated into Subsidiaries that are not Loan Parties and Domestic Subsidiaries may not be liquidated into Foreign Subsidiaries (except in each case as permitted under Section 6.05).
(b) Except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, do or cause to be done all things necessary to (i) lawfully obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, Intellectual Property, licenses and rights with respect thereto used in or necessary to the normal conduct of its business, and (ii) at all times maintain, protect and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition (ordinary wear and tear excepted), from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as permitted by this Agreement).
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Section 5.02 Insurance . (a) Maintain, with financially sound and reputable insurance companies, insurance (subject to customary deductibles and retentions) in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations, cause the Borrower and Subsidiary Guarantors to be listed as insured and the Collateral Agent to be listed as a co-loss payee on property and casualty policies and as an additional insured on liability policies. Notwithstanding the foregoing, the Borrower and the Subsidiaries may self-insure with respect to such risks with respect to which companies of established reputation engaged in the same general line of business in the same general area usually self-insure.
(b) Except as the Collateral Agent may agree, cause all such property and casualty insurance policies with respect to the Mortgaged Property located in the United States of America to be endorsed or otherwise amended to include a standard or New York lenders loss payable endorsement, in form and substance reasonably satisfactory to the Collateral Agent; deliver a certificate of an insurance broker to the Collateral Agent; cause each such policy covered by this clause (b) to provide that it shall not be cancelled or not renewed upon less than 30 days prior written notice thereof by the insurer to the Collateral Agent; deliver to the Collateral Agent, prior to or concurrently with the cancellation or nonrenewal of any such policy of insurance covered by this clause (b), a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent), or insurance certificate with respect thereto, together with evidence satisfactory to the Collateral Agent of payment of the premium therefor, in each case of the foregoing, to the extent customarily maintained, purchased or provided to, or at the request of, lenders by similarly situated companies in connection with credit facilities of this nature.
(c) If any portion of any Mortgaged Property is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area (each a Special Flood Hazard Area ) with respect to which flood insurance has been made available under the National Flood Insurance Act of 1968 (as now or hereafter in effect or successor act thereto), (i) maintain, or cause to be maintained, with a financially sound and reputable insurer, flood insurance in an amount and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (ii) deliver to the Collateral Agent evidence of such compliance in form and substance reasonably acceptable to the Collateral Agent.
(d) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that:
(i) the Administrative Agent, the Collateral Agent, the Lenders, the Issuing Bank and their respective agents or employees shall not be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) the Loan Parties shall look solely to their insurance companies or any other parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Administrative Agent, the Collateral Agent, the Lenders, any Issuing Bank or their agents or employees. If, however, the insurance policies, as a
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matter of the internal policy of such insurer, do not provide waiver of subrogation rights against such parties, as required above, then each of Holdings and the Borrower, on behalf of itself and behalf of each of its Subsidiaries, hereby agrees, to the extent permitted by law, to waive, and further agrees to cause each of their Subsidiaries to waive, its right of recovery, if any, against the Administrative Agent, the Collateral Agent, the Lenders, any Issuing Bank and their agents and employees; and
(ii) the designation of any form, type or amount of insurance coverage by the Collateral Agent (including acting in the capacity as the Collateral Agent) under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Collateral Agent or the Lenders that such insurance is adequate for the purposes of the business of Holdings, the Borrower and the Subsidiaries or the protection of their properties.
Section 5.03 Taxes . Pay its obligations in respect of all Tax liabilities, assessments and governmental charges, before the same shall become delinquent or in default, except where (i) the amount or validity thereof is being contested in good faith by appropriate proceedings and the Borrower or a Subsidiary thereof has set aside on its books adequate reserves therefor in accordance with GAAP or (ii) the failure to make payment could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
Section 5.04 Financial Statements, Reports, etc. Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders):
(a) within 120 days after the end of the fiscal year ending on December 31, 2013 and within 90 days after the end of each fiscal year thereafter, a consolidated balance sheet, related statements of operations and comprehensive loss and related statements of cash flows showing the financial position of the Borrower and its Subsidiaries as of the close of such fiscal year and the consolidated results of their operations during such year and, starting with the fiscal year ending December 31, 2014, setting forth in comparative form the corresponding figures for the prior fiscal year, which consolidated balance sheet, related statements of operations and comprehensive loss and related statements of cash flows and owners equity shall be accompanied by customary managements discussion and analysis and audited by independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which opinion shall not be qualified as to scope of audit or as to the status of the Borrower or any Material Subsidiary as a going concern, other than solely with respect to, or resulting solely from an upcoming maturity date under this Agreement occurring within one year from the time such opinion is delivered) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery by the Borrower of annual reports on Form 10-K of the Borrower and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(a) to the extent such annual reports include the information specified herein);
(b) within 75 days after the end of the fiscal quarter ending on March 31, 2014 and, thereafter, within 60 days after the end of each of the first three fiscal quarters of each fiscal year (commencing with the fiscal quarter ending June 30, 2014), a
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consolidated balance sheet and related statements of operations and comprehensive loss and related statements of cash flows showing the financial position of the Borrower and its Subsidiaries as of the close of such fiscal quarter and the consolidated results of their operations during such fiscal quarter and the then-elapsed portion of the fiscal year and, starting with the fiscal quarter ending March 31, 2015, setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year, all of which shall be in reasonable detail, which consolidated balance sheet and related statements of operations and comprehensive loss and related statements of cash flows shall be accompanied by customary managements discussion and analysis and shall be certified by a Financial Officer of the Borrower on behalf of the Borrower as fairly presenting, in all material respects, the financial position and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes) (it being understood that the delivery by the Borrower of quarterly reports on Form 10-Q of the Borrower and its consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(b) to the extent such quarterly reports include the information specified herein);
(c) (x) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying that no Event of Default or Default has occurred or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, (ii) commencing with the fiscal quarter ending on the last day of the second full fiscal quarter after the Closing Date, setting forth computations in reasonable detail satisfactory to the Administrative Agent demonstrating compliance with the Financial Covenant, and (iii) setting forth the calculation and uses of the Cumulative Credit for the fiscal period then ended if the Borrower shall have used the Cumulative Credit for any purpose during such fiscal period and (y) concurrently with any delivery of financial statements under clause (a) above, if the accounting firm is not restricted from providing such a certificate by its policies office, a certificate of the accounting firm opining on or certifying such statements stating whether they obtained knowledge during the course of their examination of such statements of any Default or Event of Default under the Financial Covenant (which certificate may be limited to accounting matters and disclaim responsibility for legal interpretations);
(d) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries with the SEC, or after an initial public offering, distributed to its stockholders generally, as applicable; provided , however , that such reports, proxy statements, filings and other materials required to be delivered pursuant to this clause (d) shall be deemed delivered for purposes of this Agreement when posted to the website of the Borrower or the website of the SEC and written notice of such posting has been delivered to the Administrative Agent;
(e) within 90 days after the beginning of each fiscal year, a consolidated annual budget for such fiscal year consisting of a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year and the related consolidated statements of projected cash flow and projected income (collectively, the Budget ), which Budget shall in each case be accompanied by the statement of a Financial Officer of the Borrower to the effect that the Budget is based on assumptions believed by the Borrower to be reasonable as of the date of delivery thereof;
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(f) upon the reasonable request of the Administrative Agent not more frequently than once a year, an updated Perfection Certificate (or, to the extent such request relates to specified information contained in the Perfection Certificate, such information) reflecting all changes since the date of the information most recently received pursuant to this clause (f) or Section 5.10(f);
(g) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any of the Subsidiaries, or compliance with the terms of any Loan Document as in each case the Administrative Agent may reasonably request (for itself or on behalf of any Lender); and
(h) in the event that Holdings or any Parent Entity reports on a consolidated basis, such consolidated reporting at such Parent Entitys level in a manner consistent with that described in clauses (a) and (b) of this Section 5.04 for the Borrower (together with a reconciliation showing the adjustments necessary to determine compliance by the Borrower and its Subsidiaries with the Financial Covenant) will satisfy the requirements of such paragraphs.
The Borrower hereby acknowledges and agrees that all financial statements furnished pursuant to paragraphs (a), (b) and (d) above are hereby deemed to be Borrower Materials suitable for distribution, and to be made available, to Public Lenders as contemplated by Section 9.17 and may be treated by the Administrative Agent and the Lenders as if the same had been marked PUBLIC in accordance with such paragraph (unless the Borrower otherwise notifies the Administrative Agent in writing on or prior to delivery thereof).
The Borrower shall also hold live quarterly conference calls with the opportunity to ask questions of management not later than ten Business Days following the date upon which the financial statements required pursuant to Sections 5.04(a) or (b), as applicable, were furnished to the Administrative Agent (or such later time approved by the Administrative Agent). No fewer than five Business Days prior to the date such conference call is to be held (or such later time approved by the Administrative Agent), the Borrower shall give notice to the Administrative Agent of such quarterly conference call for the benefit of the Lenders, which notice shall contain the time and the date of such conference call and information on how to access such quarterly conference call.
Section 5.05 Litigation and Other Notices . Furnish to the Administrative Agent (which will promptly thereafter furnish to the Lenders) written notice of the following promptly after any Responsible Officer of Holdings (prior to a Qualified IPO) or the Borrower obtains actual knowledge thereof:
(a) any Event of Default or Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;
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(b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings, the Borrower or any of the Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect;
(c) any other development specific to Holdings, the Borrower or any of the Subsidiaries that is not a matter of general public knowledge and that has had, or would reasonably be expected to have, a Material Adverse Effect; and
(d) the occurrence of any ERISA Event that, together with all other ERISA Events that have occurred, would reasonably be expected to have a Material Adverse Effect.
Section 5.06 Compliance with Laws . Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect; provided , that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or to laws related to Taxes, which are the subject of Section 5.03.
Section 5.07 Maintaining Records; Access to Properties and Inspections . Maintain all financial records in accordance with GAAP and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender to visit and inspect the financial records and the properties of Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries at reasonable times, upon reasonable prior notice to Holdings (prior to a Qualified IPO) or the Borrower, and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender upon reasonable prior notice to Holdings (prior to a Qualified IPO) or the Borrower to discuss the affairs, finances and condition of Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiaries with the officers thereof and independent accountants therefor (so long as the Borrower has the opportunity to participate in any such discussions with such accountants), in each case, subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract.
Section 5.08 Use of Proceeds . Use the proceeds of the Loans made and Letters of Credit issued in the manner contemplated by Section 3.12.
Section 5.09 Compliance with Environmental Laws . Comply, and make reasonable efforts to cause all lessees and other persons occupying its properties to comply, with all Environmental Laws applicable to its operations and properties; and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case with respect to this Section 5.09, to the extent the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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Section 5.10 Further Assurances; Additional Security .
(a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents) that the Collateral Agent may reasonably request (including, without limitation, those required by applicable law), to satisfy the Collateral and Guarantee Requirement and to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties and provide to the Collateral Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Collateral Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.
(b) If any asset (other than Real Property) that has an individual fair market value (as determined in good faith by the Borrower) in an amount greater than $5,000,000 is acquired by the Borrower or any Subsidiary Loan Party after the Closing Date or owned by an entity at the time it becomes a Subsidiary Loan Party (in each case other than (x) assets constituting Collateral under a Security Document that become subject to the Lien of such Security Document upon acquisition thereof and (y) assets constituting Excluded Property), the Borrower or such Subsidiary Loan Party, as applicable, will (i) promptly notify the Collateral Agent of such acquisition or ownership and (ii) cause such asset to be subjected to a Lien (subject to any Permitted Liens) securing the Obligations and take, and cause the Subsidiary Loan Parties to take, such actions as shall be required by this Agreement or any Security Document reasonably requested by the Collateral Agent to grant and perfect such Liens, including actions described in clause (a) of this Section 5.10, all at the expense of the Loan Parties, subject to clause (g) below.
(c) (i) Grant and cause each of the Subsidiary Loan Parties to grant to the Collateral Agent security interests in, and mortgages on, any Material Real Property of the Borrower or such Subsidiary Loan Parties, as applicable, that are not Mortgaged Property as of the Closing Date, to the extent acquired after the Closing Date, within 90 days after such acquisition (or such later date as the Collateral Agent may agree in its reasonable discretion) pursuant to documentation substantially in the form of Exhibit F or in such other form as is reasonably satisfactory to the Collateral Agent (each, an Additional Mortgage ), which security interest and mortgage shall constitute valid and enforceable Liens subject to no other Liens except Permitted Liens or Liens arising by operation of law, at the time of recordation thereof, (ii) record or file, and cause each such Subsidiary to record or file, the Additional Mortgage or instruments related thereto in such manner and in such places as is required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent (for the benefit of the Secured Parties) required to be granted pursuant to the Additional Mortgages and pay, and cause each such Subsidiary to pay, in full, all Taxes, fees and other charges required to be paid in connection with such recording or filing, in each case subject to clause (g) below, and (iii) deliver to the Collateral Agent an updated Schedule 1.01(B) reflecting such additional Mortgaged Properties. Unless otherwise waived by the Collateral Agent, with respect to each such Additional Mortgage, the Borrower shall cause the requirements set forth in clauses (f) and (g) of the definition of Collateral and Guarantee Requirement to be satisfied with respect to such Material Real Property.
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(d) If any additional direct or indirect Subsidiary of the Borrower is formed or acquired after the Closing Date (with any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Subsidiary being deemed to constitute the acquisition of a Subsidiary) and if such Subsidiary is a Subsidiary Loan Party, within 15 Business Days after the date such Subsidiary is formed or acquired (or such longer period as the Collateral Agent shall agree), notify the Collateral Agent thereof and, within twenty (20) Business Days after the date such Subsidiary is formed or acquired or such longer period as the Collateral Agent shall agree (or, with respect to clauses (f), (g) and (h) of the definition of Collateral and Guarantee Requirement, within 90 days after such formation or acquisition or such longer period as set forth therein or as the Collateral Agent may agree in its reasonable discretion, as applicable), cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party, subject to clause (g) below.
(e) If any additional Foreign Subsidiary of the Borrower is formed or acquired after the Closing Date (with any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Subsidiary being deemed to constitute the acquisition of a Subsidiary) and if such Subsidiary is a first tier Foreign Subsidiary of a Loan Party, within 15 Business Days after the date such Foreign Subsidiary is formed or acquired (or such longer period as the Collateral Agent may agree in its reasonable discretion), notify the Collateral Agent thereof and, within 50 Business Days after the date such Foreign Subsidiary is formed or acquired or such longer period as the Collateral Agent shall agree, cause the Collateral and Guarantee Requirement to be satisfied with respect to any Equity Interest in such Foreign Subsidiary owned by or on behalf of any Loan Party, subject to clause (g) below.
(f) Furnish to the Collateral Agent prompt written notice of any change (A) in any Loan Partys corporate or organization name, (B) in any Loan Partys identity or organizational structure, (C) in any Loan Partys organizational identification number, (D) in any Loan Partys jurisdiction of organization or (E) in the location of the chief executive office of any Loan Party that is not a registered organization; provided , that the applicable Loan Party shall not effect or permit any such change unless all filings have been made, or will have been made within 30 days following such change (or such longer period as the Collateral Agent may agree in its reasonable discretion), under the Uniform Commercial Code that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral in which a security interest may be perfected by such filing, for the benefit of the Secured Parties, with the same priority as immediately prior to such change.
(g) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10 and the other provisions of the Loan Documents with respect to Collateral need not be satisfied with respect to any of the following (collectively, the Excluded Property ): (i) any Real Property other than Material Real Property, (ii) motor vehicles and other assets subject to certificates of title and letter of credit rights (in each case, other than to the extent a Lien on such assets or such rights can be perfected by filing a UCC-1) and commercial tort claims with a value of less than $3,000,000, (iii) pledges and security interests prohibited by applicable Requirements of Law (including any Gaming Law) or enforceable contractual
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obligation not in violation of Section 6.09(c) binding on the assets that existed at the time of the acquisition thereof and was not created or made binding on the assets in contemplation of or in connection with the acquisition of such assets (except in the case of assets (A) owned on the Closing Date or (B) acquired after the Closing Date with Indebtedness of the type permitted pursuant to clauses (i) or (j) of Section 6.01) (in each case, except to the extent such prohibition is unenforceable after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code), (iv) assets to the extent a security interest in such assets could reasonably be expected to result in material adverse tax consequences as determined in writing in good faith by the Borrower, (v) any lease, license or other agreement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or create a right of termination in favor of any other party thereto (other than the Borrower or any Guarantor) after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code, (vi) those assets as to which the Collateral Agent and the Borrower reasonably agree that the cost or other consequence of obtaining or perfecting such a security interest or perfection thereof are excessive in relation to the value afforded thereby, (vii) any governmental licenses (including gaming licenses) or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby after giving effect to the applicable anti-assignment provisions of Article 9 of the Uniform Commercial Code, (viii) pending United States intent-to-use trademark applications for which a verified statement of use or an amendment to allege use has not been filed with and accepted by the United States Patent and Trademark Office, (ix) other customary exclusions under applicable local law or in applicable local jurisdictions set forth in the Security Documents, (x) assets subject to Liens securing Permitted Receivables Financings, (xi) any Excluded Securities, (xii) any Third Party Funds and (xiii) all assets of Holdings other than Equity Interests in the Borrower directly held by Holdings and pledged pursuant to the Holdings Guarantee and Pledge Agreement; provided , that the Borrower may in its sole discretion elect to exclude any property from the definition of Excluded Property. Notwithstanding anything herein to the contrary, (A) the Collateral Agent may grant extensions of time or waiver of requirement for the creation or perfection of security interests in or the obtaining of insurance (including title insurance) or surveys with respect to particular assets (including extensions beyond the Closing Date for the perfection of security interests in the assets of the Loan Parties on such date) where it reasonably determines, in consultation with the Borrower, that perfection or obtaining of such items cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the other Loan Documents, (B) no control agreement or control, lockbox or similar arrangement shall be required with respect to any deposit accounts, securities accounts or commodities accounts, (C) no foreign-law governed security documents shall be required, (D) Liens required to be granted from time to time pursuant to, or any other requirements of, the Collateral and Guarantee Requirement and the Security Documents shall be subject to exceptions and limitations set forth in the Security Documents and, to the extent appropriate in the applicable jurisdiction, as otherwise agreed between the Administrative Agent and the Borrower and (E), to the extent any Mortgaged Property is located in a jurisdiction with mortgage recording or similar tax, the amount secured by the Security Document with respect to such Mortgaged Property shall be limited to the fair market value of such Mortgaged Property as determined in good faith by the Borrower (subject to any applicable laws in the relevant jurisdiction or such lesser amount agreed to by the Collateral Agent).
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Section 5.11 Rating . Exercise commercially reasonable efforts to maintain ratings from each of Moodys and S&P for the Term B Loans.
ARTICLE VI
Negative Covenants
The Borrower covenants and agrees with each Lender that, until the Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not permit any of the Subsidiaries to:
Section 6.01 Indebtedness . Incur, create, assume or permit to exist any Indebtedness, except:
(a) Indebtedness existing on the Closing Date ( provided , that any such Indebtedness that is (x) not intercompany Indebtedness and (y) in excess of $2,000,000 shall be set forth on Schedule 6.01 ) and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness (other than intercompany indebtedness Refinanced with Indebtedness owed to a person not affiliated with the Borrower or any Subsidiary);
(b) Indebtedness created hereunder (including pursuant to Section 2.21) and under the other Loan Documents and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness;
(c) Indebtedness of the Borrower or any Subsidiary pursuant to Hedging Agreements entered into for non-speculative purposes;
(d) Indebtedness owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any person providing workers compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Borrower or any Subsidiary, pursuant to reimbursement or indemnification obligations to such person, in each case in the ordinary course of business or consistent with past practice or industry practices;
(e) Indebtedness of the Borrower to Holdings or any Subsidiary and of any Subsidiary to Holdings, the Borrower or any other Subsidiary; provided , that (i) Indebtedness of any Subsidiary that is not a Subsidiary Loan Party owing to the Loan Parties shall be subject to Section 6.04 and (ii) Indebtedness owed by any Loan Party to any Subsidiary that is not a Loan Party shall be subordinated to the Loan Obligations under this Agreement on subordination terms described in the global intercompany note substantially in the form of Exhibit J hereto or on other subordination terms reasonably satisfactory to the Administrative Agent and the Borrower;
(f) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations, in each case provided in the ordinary course of business or consistent with past practice or industry practices, including those incurred to secure health, safety and environmental obligations in the ordinary course of business or consistent with past practice or industry practices;
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(g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or other cash management services, in each case incurred the ordinary course of business;
(h) (i) Indebtedness of a Subsidiary acquired after the Closing Date or a person merged or consolidated with the Borrower or any Subsidiary after the Closing Date and Indebtedness otherwise incurred or assumed by the Borrower or any Subsidiary in connection with the acquisition of assets or Equity Interests, where such acquisition, merger or consolidation is not prohibited by this Agreement (including a Permitted Business Acquisition); provided , that, (x)(I) the Net First Lien Leverage Ratio on a Pro Forma Basis immediately after giving effect to such acquisition, merger or consolidation, the incurrence of such Indebtedness and the use of proceeds thereof, and any related transactions is no greater than the Net First Lien Leverage Ratio in effect immediately prior thereto, and (II) the Total Net Leverage Ratio on a Pro Forma Basis immediately after giving effect to such acquisition, merger or consolidation, the incurrence of such Indebtedness and the use of proceeds thereof (but without netting any of the net cash proceeds of such Indebtedness incurred on such date against the applicable amount of Consolidated Debt for purposes of such calculation), and any related transactions is not greater than 4.50 to 1.00 or (y) the Total Net Leverage Ratio on a Pro Forma Basis immediately after giving effect to such acquisition, merger or consolidation, the incurrence of such Indebtedness and the use of proceeds thereof and any related transactions is no greater than the Total Net Leverage Ratio in effect immediately prior thereto; provided that (1) the incurrence of any Indebtedness for borrowed money pursuant to this clause (h)(i) incurred in contemplation of such acquisition, merger or consolidation (except for any seller note or other seller financing) shall be subject to the last paragraph of this Section 6.01 and (2) the aggregate outstanding principal amount of Indebtedness permitted under this clause (h)(i) incurred by a Subsidiary other than a Subsidiary Loan Party in contemplation of such acquisition, merger or consolidation, together with the aggregate principal amount of Indebtedness of a Subsidiary other than a Subsidiary Loan Party then outstanding pursuant to Section 6.01(s)(i), shall not exceed the greater of $10,000,000 and 4.25% of Consolidated Total Assets as at the end of the then most recently ended Test Period, and (ii) any Permitted Refinancing Indebtedness incurred to Refinance any such Indebtedness;
(i) (x) Capitalized Lease Obligations, mortgage financings and other Indebtedness incurred by the Borrower or any Subsidiary prior to or within 270 days after the acquisition, lease, construction, repair, replacement or improvement of the respective property (real or personal, and whether through the direct purchase of property or the Equity Interest of any person owning such property) permitted under this Agreement in order to finance such acquisition, lease, construction, repair, replacement or improvement, in an aggregate principal amount that immediately after giving effect to the incurrence thereof, together with the aggregate principal amount of any other Indebtedness outstanding pursuant to this Section 6.01(i)(x), would not exceed (A) the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period plus (B) any additional amounts, so long
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as immediately after giving effect to the incurrence of such additional amounts under this clause (B) and the use of proceeds thereof, the Total Net Leverage Ratio on a Pro Forma Basis is not greater than 4.50 to 1.00, and (y) any Permitted Refinancing Indebtedness in respect thereof;
(j) Capitalized Lease Obligations incurred by the Borrower or any Subsidiary in respect of any Sale and Lease-Back Transaction that is permitted under Section 6.03 and any Permitted Refinancing Indebtedness in respect thereof;
(k) other Indebtedness of the Borrower or any Subsidiary, in an aggregate principal amount that, immediately after giving effect to the incurrence thereof, together with the aggregate principal amount of any other Indebtedness outstanding pursuant to this Section 6.01(k), would not exceed the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period, and any Permitted Refinancing Indebtedness in respect thereof;
(l) [Reserved];
(m) Guarantees (i) by Holdings, the Borrower or any Subsidiary Loan Party of any Indebtedness of the Borrower or any Subsidiary Loan Party permitted to be incurred under this Agreement, (ii) by the Borrower or any Subsidiary Loan Party of Indebtedness otherwise permitted hereunder of any Subsidiary that is not a Subsidiary Loan Party to the extent such Guarantees are permitted by Section 6.04 (other than Section 6.04(v)), (iii) by any Subsidiary that is not a Subsidiary Loan Party of Indebtedness of another Subsidiary that is not a Subsidiary Loan Party, and (iv) by the Borrower of Indebtedness of Subsidiaries that are not Subsidiary Loan Parties incurred for working capital purposes in the ordinary course of business on ordinary business terms so long as such Indebtedness is permitted to be incurred under Section 6.01(t) to the extent such Guarantees are permitted by Section 6.04 (other than Section 6.04(v)); provided , that Guarantees by the Borrower or any Subsidiary Loan Party under this Section 6.01(m) of any other Indebtedness of a person that is subordinated to other Indebtedness of such person shall be expressly subordinated to the Loan Obligations to at least the same extent as such underlying Indebtedness is subordinated;
(n) Indebtedness arising from agreements of the Borrower or any Subsidiary providing for indemnification, adjustment of purchase or acquisition price or similar obligations (including earn-outs), in each case, incurred or assumed in connection with the Transactions, any Permitted Business Acquisition, other Investments or the disposition of any business, assets or a Subsidiary not prohibited by this Agreement;
(o) Indebtedness in respect of letters of credit, bank guarantees, warehouse receipts or similar instruments issued to support performance obligations and trade letters of credit (other than obligations in respect of other Indebtedness) in the ordinary course of business or consistent with past practice or industry practices;
(p) other Indebtedness or Disqualified Stock of the Borrower or any Subsidiaries in an aggregate outstanding principal amount or liquidation preference not greater than 100.0% of the net cash proceeds received by the Borrower from (x) the issuance or sale of its Qualified Equity Interests or (y) a contribution to its common equity with the net cash
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proceeds from the issuance and sale by Holdings or any Parent Entity of its Qualified Equity Interests or a contribution to its common equity (in each case of (x) and (y), other than proceeds from the sale of Equity Interests to, or contributions from, the Borrower or any of its Subsidiaries and other than Permitted Cure Securities), to the extent that such net cash proceeds do not increase the Cumulative Credit and do not constitute Excluded Contributions;
(q) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;
(r) (i) Indebtedness secured by Liens on the Collateral ranking pari passu with the Liens on the Collateral securing the Term B Loans so long as (x) at the time of incurrence thereof, no Default or Event of Default shall have occurred and be continuing and (y) immediately after giving effect to the incurrence of such Indebtedness and the use of proceeds thereof, the Net First Lien Leverage Ratio on a Pro Forma Basis is not greater than 3.75 to 1.00; provided that, (1) the net cash proceeds of Indebtedness incurred under this clause (r) at such time shall not be netted against the applicable amount of Consolidated Debt for purposes of such calculation of the Net First Lien Leverage Ratio and (2) the incurrence of any Indebtedness pursuant to this clause (r)(i) shall be subject to the last paragraph of this Section 6.01 and (ii) any Permitted Refinancing Indebtedness in respect thereof;
(s) (i) other Indebtedness so long as (x) at the time of incurrence thereof, no Default or Event of Default shall have occurred and be continuing, (y) immediately after giving effect to the incurrence of such Indebtedness and the use of proceeds thereof, the Total Net Leverage Ratio on a Pro Forma Basis is not greater than 4.50 to 1.00 and (z) the aggregate principal amount of Indebtedness permitted under this clause (s)(i) incurred by a Subsidiary other than a Subsidiary Loan Party, together with the aggregate principal amount of Indebtedness of a Subsidiary other than a Subsidiary Loan Party then outstanding pursuant to Section 6.01(h)(i) incurred in contemplation of an acquisition, merger or consolidation, shall not exceed the greater of $10,000,000 and 4.25% of Consolidated Total Assets as at the end of the then most recently ended Test Period; provided that, (1) the net cash proceeds of Indebtedness incurred under this clause (s) at such time shall not be netted against the applicable amount of Consolidated Debt for purposes of such calculation of the Total Net Leverage Ratio and (2) the incurrence of any Indebtedness pursuant to this clause (s)(i) shall be subject to the last paragraph of this Section 6.01 and (ii) any Permitted Refinancing Indebtedness in respect thereof;
(t) Indebtedness of Subsidiaries that are not Subsidiary Loan Parties in an aggregate principal amount outstanding that, immediately after giving effect to the incurrence thereof, together with the aggregate principal amount of any other Indebtedness outstanding pursuant to this Section 6.01(t), would not exceed the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period, and any Permitted Refinancing Indebtedness in respect thereof;
(u) Indebtedness incurred in the ordinary course of business in respect of obligations of the Borrower or any Subsidiary to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services; provided , that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business and not in connection with the borrowing of money or any Hedging Agreements.
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(v) Indebtedness representing deferred compensation to employees, consultants or independent contractors of the Borrower (or, to the extent such work is done for the Borrower or its Subsidiaries, any direct or indirect parent thereof) or any Subsidiary incurred in the ordinary course of business;
(w) Indebtedness in connection with Permitted Receivables Financings;
(x) obligations in respect of Cash Management Agreements;
(y) Refinancing Notes and any Permitted Refinancing Indebtedness incurred in respect thereof;
(z) (i) Indebtedness in an aggregate principal amount outstanding not to exceed at the time of incurrence the Incremental Amount available at such time; provided , that (1) there shall be no obligor in respect of any such Indebtedness that is not a Loan Party and (2) the incurrence of any Indebtedness pursuant to this clause (z)(i) shall be subject to the last paragraph of this Section 6.01 and (ii) any Permitted Refinancing Indebtedness in respect thereof;
(aa) Guarantees of Indebtedness under ordinary course customer financing lines or credit;
(bb) Indebtedness incurred on behalf of, or representing Guarantees of Indebtedness of, joint ventures in an aggregate principal amount that, immediately after giving effect to the incurrence thereof, together with the aggregate principal amount of any other Indebtedness outstanding pursuant to this Section 6.01(bb), would not exceed the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period, and any Permitted Refinancing Indebtedness in respect thereof;
(cc) Indebtedness issued by the Borrower or any Subsidiary to current or former officers, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings or any Parent Entity permitted by Section 6.06;
(dd) Indebtedness consisting of obligations of the Borrower or any Subsidiary under deferred compensation or other similar arrangements incurred by such person in connection with the Transactions and Permitted Business Acquisitions or any other Investment permitted hereunder;
(ee) Indebtedness of the Borrower or any Subsidiary to or on behalf of any joint venture (regardless of the form of legal entity) that is not a Subsidiary arising in the ordinary course of business in connection with the cash management operations (including with respect to intercompany self-insurance arrangements) of the Borrower and its Subsidiaries;
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(ff) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the stated amount of such Letter of Credit; and
(gg) all premium (if any, including tender premiums) expenses, defeasance costs, interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (ff) above or refinancings thereof.
For purposes of determining compliance with this Section 6.01, the amount of any Indebtedness denominated in any currency other than Dollars shall be calculated based on customary currency exchange rates in effect, in the case of such Indebtedness incurred (in respect of term Indebtedness) or committed (in respect of revolving Indebtedness) on or prior to the Closing Date, on the Closing Date and, in the case of such Indebtedness incurred (in respect of term Indebtedness) or committed (in respect of revolving Indebtedness) after the Closing Date, on the date on which such Indebtedness was incurred (in respect of term Indebtedness) or committed (in respect of revolving Indebtedness); provided , that if such Indebtedness is incurred to refinance other Indebtedness denominated in a currency other than Dollars (or in a different currency from the Indebtedness being refinanced), and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such Dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed (i) the outstanding or committed principal amount, as applicable, of such Indebtedness being refinanced plus (ii) the aggregate amount of fees, underwriting discounts, premiums (including tender premiums), defeasance costs and other costs and expenses incurred in connection with such refinancing.
Further, for purposes of determining compliance with this Section 6.01, (A) Indebtedness need not be permitted solely by reference to one category of permitted Indebtedness described in Sections 6.01(a) through (gg) but may be permitted in part under any combination thereof and (B) in the event that an item of Indebtedness (or any portion thereof) meets the criteria of one or more of the categories of permitted Indebtedness described in Sections 6.01(a) through (gg), the Borrower shall, in its sole discretion, classify or reclassify, or later divide, classify or reclassify, such item of Indebtedness (or any portion thereof) in any manner that complies with this Section 6.01 and will only be required to include the amount and type of such item of Indebtedness (or any portion thereof) in one of the above clauses and such item of Indebtedness (or any portion thereof) shall be treated as having been incurred or existing pursuant to only one of such clauses; provided , that all Indebtedness outstanding on the Closing Date under this Agreement shall at all times be deemed to have been incurred pursuant to clause (b) of this Section 6.01. In addition, with respect to any Indebtedness that was permitted to be incurred hereunder on the date of such incurrence, any Increased Amount of such Indebtedness shall also be permitted hereunder after the date of such incurrence.
With respect to any term Indebtedness for borrowed money incurred under Section 6.01(h)(i) (to the extent set forth therein), 6.01(r)(i), 6.01(s)(i) or 6.01(z)(i), (A) the stated maturity date of such Indebtedness shall be no earlier than the Term B Facility Maturity Date as in effect at the time such Indebtedness is incurred and (B) the Weighted Average Life to Maturity of such Indebtedness shall be no shorter than the remaining Weighted Average Life to Maturity of the Term B Loans in effect at the time such Indebtedness is incurred.
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Section 6.02 Liens . Create, incur, assume or permit to exist any Lien on any property or assets (including stock or other securities of any person) of the Borrower or any Subsidiary at the time owned by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, Permitted Liens ):
(a) Liens on property or assets of the Borrower and the Subsidiaries existing on the Closing Date (or created following the Closing Date pursuant to agreements in existence on the Closing Date requiring the creation of such Liens) and, to the extent securing Indebtedness in an aggregate principal amount in excess of $2,000,000, set forth on Schedule 6.02(a) and any modifications, replacements, renewals or extensions thereof; provided , that such Liens shall secure only those obligations that they secure on the Closing Date (and any Permitted Refinancing Indebtedness in respect of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of the Borrower or any Subsidiary other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien, and (B) proceeds and products thereof;
(b) any Lien created under the Loan Documents (including Liens created under the Security Documents securing obligations in respect of Secured Hedge Agreements and Secured Cash Management Agreements) or permitted in respect of any Mortgaged Property by the terms of the applicable Mortgage;
(c) any Lien on any property or asset of the Borrower or any Subsidiary securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(h); provided , that (i) in the case of Liens that do not extend to the Collateral, such Lien does not apply to any other property or assets of the Borrower or any of the Subsidiaries not securing such Indebtedness at the date of the acquisition of such property or asset and accessions and additions thereto and proceeds and products thereof (other than after-acquired property required to be subjected to such Lien pursuant to the terms of such Indebtedness (and refinancings thereof), it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), (ii) in the case of Liens on the Collateral that are (or are intended to be) junior in priority to the Liens securing the Term B Loans, such Liens shall be subject to a Permitted Junior Intercreditor Agreement and (iii) in the case of Liens on the Collateral that are (or are intended to be) pari passu with the Liens on the Collateral securing the Term B Loans, such Liens shall be subject to a Permitted Pari Passu Intercreditor Agreement;
(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent by more than 30 days or that are being contested in compliance with Section 5.03;
(e) Liens imposed by law, such as landlords, carriers, warehousemens, mechanics, materialmens, repairmens, suppliers, construction or other like Liens, securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Borrower or any Subsidiary shall have set aside on its books reserves in accordance with GAAP;
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(f) (i) pledges and deposits and other Liens made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any Subsidiary;
(g) deposits and other Liens incurred in the ordinary course of business to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capitalized Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof), in each case, incurred in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;
(h) zoning restrictions, easements, survey exceptions, trackage rights, leases (other than Capitalized Lease Obligations), licenses, special assessments, rights-of-way, covenants, conditions, restrictions and declarations on or with respect to the use of Real Property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of the Borrower or any Subsidiary;
(i) Liens securing Indebtedness permitted by Section 6.01(i); provided , that such Liens do not apply to any property or assets of the Borrower or any Subsidiary other than the property or assets acquired, leased, constructed, replaced, repaired or improved with such Indebtedness (or the Indebtedness Refinanced thereby), and accessions and additions thereto, proceeds and products thereof and customary security deposits; provided , further , that individual financings provided by one lender may be cross-collateralized to other financings provided by such lender (and its Affiliates) (it being understood that with respect to any Liens on the Collateral being incurred under this clause (i) to secure Permitted Refinancing Indebtedness, if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were secured on a basis junior to the Liens securing the Loan Obligations, then any Liens on such Collateral being incurred under this clause (i) to secure Permitted Refinancing Indebtedness shall also be secured on a basis junior to the Liens securing the Loan Obligations);
(j) Liens arising out of capitalized lease transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such transaction and any accessions and additions thereto or proceeds and products thereof and related property;
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(k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j);
(l) Liens disclosed by the title insurance policies delivered on (with respect to all Mortgages delivered on the Closing Date) or subsequent to the Closing Date and pursuant to Section 5.10 or Schedule 5.10 and any replacement, extension or renewal of any such Lien; provided , that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal; provided , further , that the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement;
(m) any interest or title of a lessor or sublessor under any leases or subleases entered into by the Borrower or any Subsidiary in the ordinary course of business;
(n) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks and other financial institutions not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposits, sweep accounts, reserve accounts or similar accounts of the Borrower or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any Subsidiary, including with respect to credit card charge-backs and similar obligations, or (iii) relating to purchase orders and other agreements entered into with customers, suppliers or service providers of the Borrower or any Subsidiary in the ordinary course of business;
(o) Liens (i) arising solely by virtue of any statutory or common law provision relating to bankers liens, rights of set-off or similar rights, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, (iii) encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to brokerage accounts incurred in the ordinary course of business and not for speculative purposes or (iv) in respect of Third Party Funds;
(p) Liens securing obligations in respect of trade-related letters of credit, bankers acceptances or similar obligations permitted under Section 6.01(f), (k) or (o) and covering the property (or the documents of title in respect of such property) financed by such letters of credit, bankers acceptances or similar obligations and the proceeds and products thereof;
(q) leases or subleases, licenses or sublicenses (including with respect to Intellectual Property) granted to others in the ordinary course of business not interfering in any material respect with the business of the Borrower and its Subsidiaries, taken as a whole;
(r) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(s) Liens solely on any cash earnest money deposits made by the Borrower or any of the Subsidiaries in connection with any letter of intent or purchase agreement in respect of any Investment permitted hereunder;
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(t) (i) Liens with respect to property or assets of any Subsidiary that is not a Loan Party securing obligations of a Subsidiary that is not a Loan Party permitted under Section 6.01 and (ii) Liens with respect to property or assets of any person securing Indebtedness permitted under Section 6.01(bb) (it being understood that with respect to any Liens on the Collateral being incurred under this clause (t)(ii) to secure Permitted Refinancing Indebtedness, if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were secured on a basis junior to the Liens securing the Term B Loans, then any Liens on such Collateral being incurred under this clause (t)(ii) to secure Permitted Refinancing Indebtedness shall also be secured on a basis junior to the Liens securing the Term B Loans);
(u) Liens on any amounts held by a trustee under any indenture or other debt agreement issued in escrow pursuant to customary escrow arrangements pending the release thereof, or under any indenture or other debt agreement pursuant to customary discharge, redemption or defeasance provisions;
(v) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business;
(w) agreements to subordinate any interest of the Borrower or any Subsidiary in any accounts receivable or other proceeds arising from inventory consigned by the Borrower or any of their Subsidiaries pursuant to an agreement entered into in the ordinary course of business;
(x) Liens arising from precautionary Uniform Commercial Code financing statements regarding operating leases or other obligations not constituting Indebtedness;
(y) Liens on Equity Interests in joint ventures (i) securing obligations of such joint venture or (ii) pursuant to the relevant joint venture agreement or arrangement;
(z) Liens on securities that are the subject of repurchase agreements constituting Permitted Investments under clause (c) of the definition thereof;
(aa) Liens in respect of Permitted Receivables Financings that extend only to the Receivables Assets subject thereto;
(bb) Liens securing insurance premiums financing arrangements; provided , that such Liens are limited to the applicable unearned insurance premiums;
(cc) in the case of Real Property that constitutes a leasehold interest, any Lien to which the fee simple interest (or any superior leasehold interest) is subject;
(dd) Liens securing Indebtedness or other obligation (i) of the Borrower or a Subsidiary in favor of the Borrower or any Subsidiary Loan Party and (ii) of any Subsidiary that is not Loan Party in favor of any Subsidiary that is not a Loan Party;
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(ee) Liens on not more than $5,000,000 of deposits securing Hedging Agreements entered into for non-speculative purposes;
(ff) Liens on goods or inventory the purchase, shipment or storage price of which is financed by a documentary letter of credit, bank guarantee or bankers acceptance issued or created for the account of the Borrower or any Subsidiary in the ordinary course of business; provided , that such Lien secures only the obligations of the Borrower or such Subsidiaries in respect of such letter of credit, bank guarantee or bankers acceptance to the extent permitted under Section 6.01;
(gg) Liens on Collateral that are junior to the Liens securing the Term B Loans, so long as such junior Liens are subject to a Permitted Junior Intercreditor Agreement;
(hh) Liens on Collateral that are pari passu with the Liens securing the Term B Loans, so long as (i) immediately after giving effect to the incurrence of the Indebtedness secured by such pari passu Liens and the use of proceeds thereof (but without netting any of the net cash proceeds of such Indebtedness incurred on such date against the applicable amount of Consolidated Debt for purposes of such calculation), the Net First Lien Leverage Ratio on a Pro Forma Basis is not greater than 3.75 to 1.00 and (ii) such pari passu Liens are subject to a Permitted Pari Passu Intercreditor Agreement; provided , that, if any pari passu Liens pursuant to this clause (hh) secure Indebtedness that is in the form of term loans (other than High Yield-Style Loans) (any such Indebtedness secured by such pari passu Liens, a Pari Term Loan ), then such Pari Term Loans shall be subject to the last paragraph of this Section 6.02;
(ii) Liens on Collateral that are pari passu with the Liens securing the Term B Loans, so long as such pari passu Liens (i) secure Indebtedness permitted by Section 6.01(b), 6.01(h), 6.01(r), 6.01(y) or 6.01(z) and (ii) are subject to a Permitted Pari Passu Intercreditor Agreement; provided , that, if any pari passu Liens pursuant to this clause (ii) secure Indebtedness that is in the form of a Pari Term Loan incurred pursuant to Section 6.01(r) or Section 6.01(z), then such Pari Term Loans shall be subject to the last paragraph of this Section 6.02
(jj) [Reserved];
(kk) Liens to secure any Indebtedness issued or incurred to Refinance (or successive Indebtedness issued or incurred for subsequent Refinancings) as a whole, or in part, any Indebtedness secured by any Lien permitted by this Section 6.02; provided , however , that (v) with respect to any Liens on the Collateral being incurred under this clause (kk), if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were secured on a basis junior to the Liens securing the Term B Loans, then such Liens on such Collateral being incurred under this clause (kk) shall also be secured on a basis junior to the Liens securing the Term B Loans, (w) with respect to any Liens on the Collateral being incurred under this clause (kk), if Liens on the Collateral securing the Indebtedness being Refinanced (if any) were secured on a basis pari passu with the Liens securing the Term B Loans, then such Liens on such Collateral being incurred under this clause (kk) may also be secured on a basis pari passu with the Liens securing the Term B Loans, so long as such Liens are subject to a Permitted Pari Passu
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Intercreditor Agreement, (x) (other than Liens contemplated by the foregoing clauses (v) and (w)) such new Lien shall be limited to all or part of the same type of property that secured the original Lien ( plus improvements on and accessions to such property, proceeds and products thereof, customary security deposits and any other assets pursuant to after-acquired property clauses to the extent such assets secured (or would have secured) the Indebtedness being Refinanced), (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount (or accreted value, if applicable) or, if greater, committed amount of the applicable Indebtedness at the time the original Lien became a Lien permitted hereunder, (B) unpaid accrued interest and premium (including tender premiums) and (C) an amount necessary to pay any associated underwriting discounts, defeasance costs, fees, commissions and expenses, and (z) on the date of the incurrence of the Indebtedness secured by such Liens, the grantors of any such Liens shall be no different from the grantors of the Liens securing the Indebtedness being Refinanced or grantors that would have been obligated to secure such Indebtedness or a Loan Party; and
(ll) other Liens with respect to property or assets of the Borrower or any Subsidiary securing obligations in an aggregate principal amount that at the time of, and after giving effect to, the incurrence of such Liens, would not exceed the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period.
For purposes of determining compliance with this Section 6.02, (A) a Lien securing an item of Indebtedness need not be permitted solely by reference to one category of permitted Liens described in Sections 6.02(a) through (ll) but may be permitted in part under any combination thereof and (B) in the event that a Lien securing an item of Indebtedness (or any portion thereof) meets the criteria of one or more of the categories of permitted Liens described in Sections 6.02(a) through (ll), the Borrower shall, in its sole discretion, classify or reclassify, or later divide, classify or reclassify, such Lien securing such item of Indebtedness (or any portion thereof) in any manner that complies with this covenant and will only be required to include the amount and type of such Lien or such item of Indebtedness (or any portion thereof) secured by such Lien in one of the above clauses and such Lien securing such item of Indebtedness (or any portion thereof) will be treated as being incurred or existing pursuant to only one of such clauses. In addition, with respect to any Lien securing Indebtedness that was permitted to secure such Indebtedness at the time of the incurrence of such Indebtedness, such Lien shall also be permitted to secure any Increased Amount of such Indebtedness.
With respect to any Pari Term Loans secured by Liens referred to in the proviso to Section 6.02(hh) or Section 6.02(ii), if the All-in Yield in respect of such Pari Term Loans exceeds the All-in Yield in respect of the Term B Loans on the Closing Date by more than 0.50% (such difference, the Pari Yield Differential ), then the Applicable Margin (or LIBOR floor as provided in the following proviso) applicable to such Term B Loans on the Closing Date shall be increased such that after giving effect to such increase, the Pari Yield Differential shall not exceed 0.50%; provided , that, to the extent any portion of the Pari Yield Differential is attributable to a higher LIBOR floor being applicable to such Pari Term Loans, such floor shall only be included in the calculation of the Pari Yield Differential to the extent such floor is greater than the Adjusted LIBO Rate in effect for an Interest Period of three months duration at
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such time, and, with respect to such excess, the LIBOR floor applicable to such outstanding Term B Loans shall be increased to an amount not to exceed the LIBOR floor applicable to such Pari Term Loans prior to any increase in the Applicable Margin applicable to such Term B Loans then outstanding.
Section 6.03 Sale and Lease-Back Transactions . Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter, as part of such transaction, rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a Sale and Lease-Back Transaction ); provided , that a Sale and Lease-Back Transaction shall be permitted (a) with respect to (i) Excluded Property, (ii) property owned by the Borrower or any Subsidiary Loan Party that is acquired after the Closing Date so long as such Sale and Lease-Back Transaction is consummated within 180 days of the acquisition of such property or (iii) property owned by any Subsidiary that is not a Loan Party regardless of when such property was acquired, and (b) with respect to any other property owned by the Borrower or any Subsidiary Loan Party, (x) if at the time the lease in connection therewith is entered into, no Default or Event of Default shall have occurred and be continuing or would result therefrom and (y) with respect to any such Sale and Lease-Back Transaction pursuant to this clause (b) with aggregate Net Proceeds in excess of $3,000,000, the Borrower or the applicable Subsidiary Loan Party shall receive at least fair market value (as determined in good faith by the Borrower) or, if not for fair market value, the shortfall is permitted as an Investment under Section 6.04, and (z) the Net Proceeds therefrom are used to prepay the Term Loans to the extent required by Section 2.11(b).
Section 6.04 Investments, Loans and Advances . (i) Purchase or acquire (including pursuant to any merger with a person that is not a Wholly Owned Subsidiary immediately prior to such merger) any Equity Interests, evidences of Indebtedness or other securities of any other person, (ii) make any loans or advances to or Guarantees of the Indebtedness of any other person (other than loans or advances in respect of (A) intercompany current liabilities incurred in connection with the cash management operations of the Borrower and the Subsidiaries and (B) intercompany loans, advances or Indebtedness having a term not exceeding 364 days (inclusive of any roll-overs or extensions of terms) and made in the ordinary course of business or consistent with industry practices), or (iii) purchase or otherwise acquire, in one transaction or a series of related transactions, (x) all or substantially all of the property and assets or business of another person or (y) assets constituting a business unit, line of business or division of such person (each of the foregoing, an Investment ), except:
(a) the Transactions;
(b) (i) Investments by the Borrower or any Subsidiary in the Equity Interests of the Borrower or any Subsidiary; (ii) intercompany loans from the Borrower or any Subsidiary to the Borrower or any Subsidiary; and (iii) Guarantees by the Borrower or any Subsidiary of Indebtedness otherwise permitted hereunder of the Borrower or any Subsidiary; provided , that as at any date of determination, the aggregate outstanding amount of (A) Investments (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) made after the Closing Date by the Loan Parties pursuant to
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subclause (i) in Subsidiaries that are not Subsidiary Loan Parties, plus (B) net outstanding intercompany loans made after the Closing Date by the Loan Parties to Subsidiaries that are not Subsidiary Loan Parties pursuant to subclause (ii), plus (C) outstanding Guarantees by the Loan Parties of Indebtedness after the Closing Date of Subsidiaries that are not Subsidiary Loan Parties pursuant to subclause (iii), plus (D) Investments (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) made after the Closing Date by the Loan Parties in Subsidiaries that are not Loan Parties pursuant to Section 6.04(u), shall not exceed the sum of (X) the greater of (1) $10,000,000 and (2) 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period plus (Y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment;
(c) Permitted Investments and Investments that were Permitted Investments when made;
(d) Investments arising out of the receipt by the Borrower or any Subsidiary of non-cash consideration for the Disposition of assets permitted under Section 6.05;
(e) loans and advances to officers, directors, employees or consultants of the Borrower or any Subsidiary (i) in the ordinary course of business not to exceed the greater of $3,000,000 and 1.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period in the aggregate at any time outstanding (calculated without regard to write-downs or write-offs thereof), (ii) in respect of payroll payments and expenses in the ordinary course of business and (iii) in connection with such persons purchase of Equity Interests of Holdings (or any Parent Entity) solely to the extent that the amount of such loans and advances shall be contributed to the Borrower in cash as common equity;
(f) (i) accounts receivable, security deposits and prepayments arising, trade credit granted and Customer Development Agreements (and Customer Notes issued thereunder) (x) entered into in the ordinary course of business or (y) limited to an amount not to exceed $3,000,000 outstanding at any one time and (ii) any assets or securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business;
(g) Hedging Agreements entered into for non-speculative purposes;
(h) Investments existing on, or contractually committed as of, the Closing Date consisting of intercompany loans or as set forth on Schedule 6.04 and any extensions, renewals or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (h) is not increased at any time above the amount of such Investment existing or committed on the Closing Date (other than pursuant to an increase as required by the terms of any such Investment as in existence on the Closing Date);
(i) Investments resulting from pledges and deposits under Sections 6.02(f), (g), (o), (r), (s), (ee) and (ll);
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(j) other Investments by the Borrower or any Subsidiary in an aggregate outstanding amount (valued at the time of the making thereof, and without giving effect to any write-downs or write-offs thereof) not to exceed the sum of (X) the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period, plus (Y) so long as no Event of Default shall have occurred and be continuing, any portion of the Cumulative Credit on the date of such election that the Borrower elects to apply to this Section 6.04(j)(Y) in a written notice of a Responsible Officer thereof, which notice shall set forth calculations in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied, and plus (Z) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment pursuant to clause (X); provided , that if any Investment pursuant to this Section 6.04(j) is made in any person that was not a Subsidiary on the date on which such Investment was made but becomes a Subsidiary thereafter, then such Investment may, at the option of the Borrower, upon such person becoming a Subsidiary and so long as such person remains a Subsidiary, be deemed to have been made pursuant to Section 6.04(b) (to the extent permitted by the proviso thereto in the case of any Subsidiary that is not a Loan Party) and not in reliance on this Section 6.04(j);
(k) Investments constituting Permitted Business Acquisitions;
(l) intercompany loans between Subsidiaries that are not Loan Parties and Guarantees by Subsidiaries that are not Loan Parties permitted by Section 6.01(m);
(m) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case in the ordinary course of business or Investments acquired by the Borrower or a Subsidiary as a result of a foreclosure by the Borrower or any of the Subsidiaries with respect to any secured Investments or other transfer of title with respect to any secured Investment in default;
(n) Investments of a Subsidiary acquired after the Closing Date or of a person merged into the Borrower or merged into or consolidated with a Subsidiary after the Closing Date, in each case, (i) to the extent such acquisition, merger or consolidation is permitted under this Section 6.04, (ii) in the case of any acquisition, merger or consolidation, in accordance with Section 6.05 and (iii) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;
(o) acquisitions by the Borrower of obligations of one or more officers or other employees of Holdings, any Parent Entity, the Borrower or its Subsidiaries in connection with such officers or employees acquisition of Equity Interests of Holdings or any Parent Entity, so long as no cash is actually advanced by the Borrower or any of the Subsidiaries to such officers or employees in connection with the acquisition of any such obligations;
(p) Guarantees by the Borrower or any Subsidiary of operating leases (other than Capitalized Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by the Borrower or any Subsidiary in the ordinary course of business;
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(q) Investments to the extent that payment for such Investments is made with Equity Interests of the Borrower, Holdings or any Parent Entity; provided , that the issuance of such Equity Interests are not included in any determination of the Cumulative Credit;
(r) [Reserved];
(s) Investments consisting of Restricted Payments permitted under Section 6.06;
(t) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers;
(u) Investments in Subsidiaries that are not Loan Parties after giving effect to the applicable Investments in an aggregate outstanding amount (valued at the time of the making thereof and without giving effect to any write-downs or write-offs thereof) not to exceed, when taken together with all Investments outstanding under Section 6.04(b), the sum of (x) the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period in the aggregate plus (y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of Investments theretofore made pursuant to this Section 6.04(u);
(v) Guarantees permitted under Section 6.01 (except to the extent such Guarantee is expressly subject to this Section 6.04);
(w) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Borrower or such Subsidiary;
(x) Investments by the Borrower and its Subsidiaries, including loans to any direct or indirect parent of the Borrower, if the Borrower or any other Subsidiary would otherwise be permitted to make a Restricted Payment in such amount ( provided , that the amount of any such Investment shall also be deemed to be a Restricted Payment under the appropriate clause of Section 6.06 for all purposes of this Agreement);
(y) Investments consisting of Receivable Assets or arising as a result of Permitted Receivables Financings;
(z) Investments consisting of the licensing or contribution of Intellectual Property pursuant to joint marketing or other arrangements with other persons;
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(aa) to the extent constituting Investments, purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of Intellectual Property in each case in the ordinary course of business;
(bb) Investments received substantially contemporaneously in exchange for Equity Interests of the Borrower, Holdings or any Parent Entity; provided , that the issuance of such Equity Interests are not included in any determination of the Cumulative Credit;
(cc) Guarantees of Indebtedness in respect of ordinary course customer financing lines of credit;
(dd) Investments in joint ventures in an aggregate outstanding amount (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) not to exceed the sum of (X) the greater of $10,000,000 and 4.25% of the Consolidated Total Assets as at the end of the then most recently ended Test Period plus (Y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment; provided , that if any Investment pursuant to this clause (dd) is made in any person that was not a Subsidiary on the date on which such Investment was made but becomes a Subsidiary thereafter, then such Investment may, at the option of the Borrower, upon such person becoming a Subsidiary and so long as such person remains a Subsidiary, be deemed to have been made pursuant to Section 6.04(b) (to the extent permitted by the proviso thereto in the case of any Subsidiary that is not a Loan Party) and not in reliance on this Section 6.04(dd); and
(ee) Investments in Similar Businesses in an aggregate outstanding amount (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) not to exceed the sum of (X) the greater of $10,000,000 and 5% of the Consolidated Total Assets as at the end of the then most recently ended Test Period plus (Y) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received in respect of any such Investment; provided , that if any Investment pursuant to this clause (ee) is made in any person that was not a Subsidiary on the date on which such Investment was made but becomes a Subsidiary thereafter, then such Investment may, at the option of the Borrower, upon such person becoming a Subsidiary and so long as such person remains a Subsidiary, be deemed to have been made pursuant to Section 6.04(b) (to the extent permitted by the proviso thereto in the case of any Subsidiary that is not a Loan Party) and not in reliance on this Section 6.04(ee).
The amount of Investments that may be made at any time pursuant to Section 6.04(b), 6.04(j) or 6.04(ee) (such Sections, the Related Sections ) may, at the election of the Borrower, be increased by the amount of Investments that could be made at such time under the other Related Section; provided , that the amount of each such increase in respect of one Related Section shall be treated as having been used under the other Related Section.
Any Investment in any person other than the Borrower or a Subsidiary Loan Party that is otherwise permitted by this Section 6.04 may be made through intermediate Investments in Subsidiaries that are not Loan Parties and such intermediate Investments shall be disregarded for purposes of determining the outstanding amount of Investments pursuant to any clause set
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forth above. The amount of any Investment made other than in the form of cash or cash equivalents shall be the fair market value thereof (as determined by the Borrower in good faith) valued at the time of the making thereof, and without giving effect to any subsequent write-downs or write-offs thereof.
Section 6.05 Mergers, Consolidations, Sales of Assets and Acquisitions . Merge into or consolidate with any other person, or permit any other person to merge into or consolidate with it, or Dispose of (in one transaction or in a series of related transactions) all or any part of its assets (whether now owned or hereafter acquired), or Dispose of any Equity Interests of any Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of related transactions) all of the assets of any other person or division or line of business of a person, except that this Section 6.05 shall not prohibit:
(a) (i) the purchase and Disposition of inventory, or the sale of receivables pursuant to non-recourse factoring arrangements, or the Disposition of any Customer Notes, in each case in the ordinary course of business by the Borrower or any Subsidiary, (ii) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business by the Borrower or any Subsidiary or, with respect to operating leases, otherwise for fair market value on market terms (as determined in good faith by the Borrower), (iii) the Disposition of surplus, obsolete, damaged or worn out equipment or other property in the ordinary course of business by the Borrower or any Subsidiary, (iv) assignments by the Borrower and any Subsidiary in connection with insurance arrangements of their rights and remedies under, and with respect to, the Purchase Agreement in respect of any breach by any Seller of its representations and warranties set forth therein or (v) the Disposition of Permitted Investments in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing or would result therefrom, (i) the merger or consolidation of any Subsidiary with or into the Borrower in a transaction in which the Borrower is the survivor, (ii) the merger or consolidation of any Subsidiary with or into any Subsidiary Loan Party in a transaction in which the surviving or resulting entity is or becomes a Subsidiary Loan Party and, in the case of each of clauses (i) and (ii), no person other than the Borrower or a Subsidiary Loan Party receives any consideration (unless otherwise permitted by Section 6.04), (iii) the merger or consolidation of any Subsidiary that is not a Subsidiary Loan Party with or into any other Subsidiary that is not a Subsidiary Loan Party, (iv) the liquidation or dissolution or change in form of entity of any Subsidiary if the Borrower determines in good faith that such liquidation, dissolution or change in form is in the best interests of the Borrower and is not materially disadvantageous to the Lenders or (v) any Subsidiary may merge or consolidate with any other person in order to effect an Investment permitted pursuant to Section 6.04 so long as the continuing or surviving person shall be a Subsidiary (unless otherwise permitted by Section 6.04), which shall be a Loan Party if the merging or consolidating Subsidiary was a Loan Party and which together with each of its Subsidiaries shall have complied with the requirements of Section 5.10;
(c) Dispositions to the Borrower or a Subsidiary (upon voluntary liquidation or otherwise); provided , that any Dispositions by a Loan Party to a Subsidiary that is not a Subsidiary Loan Party in reliance on this clause (c) shall be made in compliance with Section 6.07;
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(d) Sale and Lease-Back Transactions permitted by Section 6.03;
(e) Investments permitted by Section 6.04, Permitted Liens, and Restricted Payments permitted by Section 6.06;
(f) Dispositions of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;
(g) other Dispositions of assets; provided , that the Net Proceeds thereof, if any, are applied in accordance with Section 2.11(b);
(h) Permitted Business Acquisitions (including any merger, consolidation or amalgamation in order to effect a Permitted Business Acquisition); provided , that following any such merger, consolidation or amalgamation involving the Borrower, the Borrower is the surviving corporation;
(i) leases, licenses or subleases or sublicenses any real or personal property in the ordinary course of business;
(j) Dispositions of inventory or Dispositions or abandonment of Intellectual Property of the Borrower and its Subsidiaries determined in good faith business judgment of the management of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower or any of the Subsidiaries;
(k) acquisitions and purchases made with the proceeds of any Asset Sale pursuant to the first proviso of clause (a) of the definition of Net Proceeds;
(l) the purchase and Disposition (including by capital contribution) of Receivables Assets including pursuant to Permitted Receivables Financings; and
(m) any exchange of assets for services and/or other assets of comparable or greater value; provided , that (i) at least 90% of the consideration received by the transferor consists of assets that will be used in a business or business activity permitted hereunder and (ii) in the event of a swap with a fair market value (as determined in good faith by the Borrower) in excess of $5,000,000, the Administrative Agent shall have received a certificate from a Responsible Officer of the Borrower with respect to such fair market value; provided , further, that (A) the aggregate gross consideration (including exchange assets, other non-cash consideration and cash proceeds) of any or all assets exchanged in reliance upon this clause (m) shall not exceed, in any fiscal year of the Borrower, the greater of $7,000,000 and 3% of the Consolidated Total Assets as at the end of the then most recently ended Test Period, (B) no Default or Event of Default exists or would result therefrom, and (C) the Net Proceeds, if any, thereof are applied in accordance with Section 2.11(b).
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Notwithstanding anything to the contrary contained in Section 6.05 above, (i) no Disposition of assets under Section 6.05(d) (to the extent required under Section 6.03(b)) or Section 6.05(g) shall be permitted unless such Disposition is for fair market value (as determined in good faith by the Borrower), or if not for fair market value, the shortfall is permitted as an Investment under Section 6.04, and (ii) no Disposition of assets under Section 6.05(g) or Section 6.05(d) (to the extent permitted pursuant to Section 6.03(b)) shall be permitted unless such Disposition (except to Loan Parties) is for at least 75% cash consideration; provided , that the provisions of this clause (ii) shall not apply to any individual transaction or series of related transactions involving assets with a fair market value (as determined in good faith by the Borrower) of less than $2,500,000 provided , further , that for purposes of this clause (ii), each of the following shall be deemed to be cash: (a) the amount of any liabilities (as shown on the Borrowers or such Subsidiarys most recent balance sheet or in the notes thereto) that are assumed by the transferee of any such assets or are otherwise cancelled in connection with such transaction, (b) any notes or other obligations or other securities or assets received by the Borrower or such Subsidiary from the transferee that are converted by the Borrower or such Subsidiary into cash within 180 days after receipt thereof (to the extent of the cash received) and (c) any Designated Non-Cash Consideration received by the Borrower or any of its Subsidiaries in such Disposition having an aggregate fair market value (as determined in good faith by the Borrower), taken together with all other Designated Non-Cash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of $10,000,000 and 4.25% of Consolidated Total Assets as at the end of the Test Period ended immediately prior to the receipt of such Designated Non-Cash Consideration (with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value).
Section 6.06 Dividends and Distributions . Declare or pay any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional Equity Interests (other than Disqualified Stock) of the person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value (or permit any Subsidiary to purchase or acquire) any of the Borrowers Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests (other than Disqualified Stock) of the person redeeming, purchasing, retiring or acquiring such shares) (all of the foregoing, Restricted Payments ); provided , however , that:
(a) Restricted Payments may be made to the Borrower or any Wholly Owned Subsidiary of the Borrower (or, in the case of non-Wholly Owned Subsidiaries, to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary and to each other owner of Equity Interests of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of the Borrower or such Subsidiary) based on their relative ownership interests);
(b) Restricted Payments may be made in respect of (i) overhead, legal, accounting and other professional fees and expenses of Holdings or any Parent Entity, (ii) fees and expenses related to any public offering or private placement of Equity Interests or debt securities of Holdings or any Parent Entity whether or not consummated, (iii) franchise and
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similar taxes and other fees and expenses in connection with the maintenance of its (and any Parent Entitys) existence and its (or any Parent Entitys indirect) ownership of the Borrower, (iv) payments permitted by Section 6.07(b) (other than Section 6.07(b)(vii)), (v) in respect of any taxable period for which the Borrower and/or any of its Subsidiaries are members of a consolidated, combined, affiliated, unitary or similar tax group for U.S. federal and/or applicable state, local or foreign tax purposes of which a direct or indirect parent of the Borrower is the common parent, or for which the Borrower is a disregarded entity for U.S. federal income tax purposes that is wholly owned (directly or indirectly) by a C corporation for U.S. federal and/or applicable state or local income tax purposes, distributions to any direct or indirect parent of the Borrower in an amount not to exceed the amount of any U.S. federal, state, local or foreign taxes that the Borrower and/or its Subsidiaries, as applicable, would have paid for such taxable period had the Borrower and/or its Subsidiaries, as applicable, been a stand-alone corporate taxpayer or a stand-alone corporate group, and (vi) customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers, directors and employees of Holdings or any Parent Entity, in each case in order to permit Holdings or any Parent Entity to make such payments; provided , that in the case of sub-clauses (i) and (iii), the amount of such Restricted Payments shall not exceed the portion of any amounts referred to in such sub-clauses (i) and (iii) that are allocable to the Borrower and its Subsidiaries (which shall be 100% at any time that, as the case may be, (x) Holdings owns no material assets other than the Equity Interests in the Borrower and assets incidental to such equity ownership or (y) any Parent Entity owns directly or indirectly no material assets other than Equity Interests in Holdings and any Parent Entity and assets incidental to such equity ownership);
(c) Restricted Payments may be made to Holdings, the proceeds of which are used to purchase or redeem the Equity Interests of Holdings or any Parent Entity (including related stock appreciation rights or similar securities) held by then present or former directors, consultants, officers or employees of any Parent Entity, Holdings, the Borrower or any of the Subsidiaries or by any Plan or any shareholders agreement then in effect upon such persons death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such shares of stock or related rights were issued; provided , that the aggregate amount of such purchases or redemptions under this clause (c) shall not exceed in any fiscal year $2,000,000 (which shall increase to $4,000,000 subsequent to a Qualified IPO) ( plus (x) the amount of net proceeds contributed to the Borrower that were (x) received by Holdings or any Parent Entity during such calendar year from sales of Equity Interests of Holdings or any Parent Entity to directors, consultants, officers or employees of Holdings, any Parent Entity, the Borrower or any Subsidiary in connection with permitted employee compensation and incentive arrangements; provided , that such proceeds are not included in any determination of the Cumulative Credit, (y) the amount of net proceeds of any key-man life insurance policies received during such calendar year, and (z) the amount of any cash bonuses otherwise payable to members of management, directors or consultants of Holdings, any Parent Entity, the Borrower or the Subsidiaries in connection with the Transactions that are foregone in return for the receipt of Equity Interests), which, if not used in any year, may be carried forward to any subsequent calendar year; and provided , further , that cancellation of Indebtedness owing to the Borrower or any Subsidiary from members of management of Holdings, any Parent Entity, the Borrower or its Subsidiaries in connection with a repurchase of Equity Interests of Holdings or any Parent Entity will not be deemed to constitute a Restricted Payment for purposes of this Section 6.06;
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(d) any person may make non-cash repurchases of Equity Interests deemed to occur upon exercise of stock options if such Equity Interests represent a portion of the exercise price of such options;
(e) Restricted Payments may be made in an aggregate amount equal to a portion of the Cumulative Credit on the date of such election that the Borrower elects to apply to this Section 6.06(e), which such election shall (unless such Restricted Payment is made pursuant to clause (a) of the definition of Cumulative Credit) be set forth in a written notice of a Responsible Officer of the Borrower, which notice shall set forth calculations in reasonable detail the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied; provided , that no Event of Default shall have occurred and be continuing or would result therefrom and, immediately after giving effect thereto, the Net First Lien Leverage Ratio on a Pro Forma Basis shall not be greater than 3.75 to 1.00;
(f) Restricted Payments in connection with the consummation of the Transactions;
(g) Restricted Payments may be made to pay, or to allow Holdings or any Parent Entity to make payments, in cash, in lieu of the issuance of fractional shares, upon the exercise of warrants or upon the conversion or exchange of Equity Interests of any such person;
(h) after a Qualified IPO, Restricted Payments may be made to pay, or to allow Holding or any Parent Entity to pay, dividends and make distributions to, or repurchase or redeem shares from, its equity holders in an amount equal to 6.0% per annum of the net proceeds received by the Borrower from any public offering of Equity Interests of the Borrower or any direct or indirect parent of the Borrower;
(i) Restricted Payments may be made to Holdings or any Parent Entity to finance any Investment that if made by the Borrower or any Subsidiary directly would be permitted to be made pursuant to Section 6.04; provided , that (A) such Restricted Payments shall be made substantially concurrently with the closing of such Investment and (B) such parent shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or a Subsidiary or (2) the merger, consolidation or amalgamation (to the extent permitted in Section 6.05) of the person formed or acquired into the Borrower or a Subsidiary in order to consummate such Permitted Business Acquisition or Investment, in each case, in accordance with the requirements of Section 5.10;
(j) other Restricted Payments, when taken together with any payments or distributions made pursuant to Section 6.09(b)(i)(F), may be made in an aggregate amount not to exceed $10,000,000;
(k) beginning on the fifth anniversary of the issue date of any PIK Seller Note, Restricted Payments used to fund cash interest payments or AHYDO catch-up payments on such PIK Seller Note; or
(l) Restricted Payments made with Excluded Contributions.
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Section 6.07 Transactions with Affiliates . (a) Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates (other than the Borrower, Holdings, and the Subsidiaries or any person that becomes a Subsidiary as a result of such transaction) in a transaction (or series of related transactions) involving aggregate consideration in excess of $3,000,000, unless such transaction is (i) otherwise permitted (or required) under this Agreement or (ii) upon terms that are substantially no less favorable to the Borrower or such Subsidiary, as applicable, than would be obtained in a comparable arms-length transaction with a person that is not an Affiliate, as determined by the Board of Directors of the Borrower or such Subsidiary in good faith.
(b) The foregoing clause (a) shall not prohibit, to the extent otherwise permitted under this Agreement,
(i) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the board of directors of Holdings or of the Borrower,
(ii) loans or advances to employees or consultants of Holdings (or any Parent Entity), the Borrower or any of the Subsidiaries in accordance with Section 6.04(e),
(iii) transactions among the Borrower or any Subsidiary or any entity that becomes a Subsidiary as a result of such transaction (including via merger, consolidation or amalgamation in which the Borrower or a Subsidiary is the surviving entity),
(iv) the payment of fees, reasonable out-of-pocket costs and indemnities to directors, officers, consultants and employees of Holdings, any Parent Entity, the Borrower and the Subsidiaries in the ordinary course of business (limited, in the case of any Parent Entity, to the portion of such fees and expenses that are allocable to the Borrower and its Subsidiaries (which shall be 100% for so long as Holdings or such Parent Entity, as the case may be, owns no assets other than the Equity Interests in the Borrower, Holdings or any Parent Entity and assets incidental to the ownership of the Borrower and its Subsidiaries)),
(v) subject to the limitations set forth in Section 6.07(b)(xiv), if applicable, the Transactions and any transactions pursuant to the Transaction Documents and permitted transactions, agreements and arrangements in existence on the Closing Date and, to the extent involving aggregate consideration in excess of $2,000,000, set forth on Schedule 6.07 or any amendment thereto or replacement thereof or similar arrangement to the extent such amendment, replacement or arrangement is not adverse to the Lenders when taken as a whole in any material respect (as determined by the Borrower in good faith),
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(vi) (A) any employment agreements entered into by the Borrower or any of the Subsidiaries in the ordinary course of business, (B) any subscription agreement or similar agreement pertaining to the repurchase of Equity Interests pursuant to put/call rights or similar rights with employees, officers or directors, and (C) any employee compensation, benefit plan or arrangement, any health, disability or similar insurance plan which covers employees, and any reasonable employment contract and transactions pursuant thereto,
(vii) Restricted Payments permitted under Section 6.06, including payments to Holdings (and any Parent Entity), and Investments permitted under Section 6.04,
(viii) any purchase by Holdings of the Equity Interests of the Borrower; provided , that any Equity Interests of the Borrower purchased by Holdings shall be pledged to the Collateral Agent (and deliver the relevant certificates or other instruments (if any) representing such Equity Interests to the Collateral Agent) on behalf of the Lenders to the extent required by the Holdings Guarantee and Pledge Agreement,
(ix) payments by the Borrower or any of the Subsidiaries to the Fund or any Fund Affiliate made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by the majority of the Board of Directors of the Borrower, or a majority of the Disinterested Directors of the Borrower, in good faith,
(x) transactions for the purchase or sale of goods, equipment, products, parts and services entered into in the ordinary course of business,
(xi) any transaction in respect of which the Borrower delivers to the Administrative Agent a letter addressed to the Board of Directors of the Borrower from an accounting, appraisal or investment banking firm, in each case of nationally recognized standing that is in the good faith determination of the Borrower qualified to render such letter, which letter states that (i) such transaction is on terms that are no less favorable to the Borrower or such Subsidiary, as applicable, than would be obtained in a comparable arms-length transaction with a person that is not an Affiliate or (ii) such transaction is fair to the Borrower or such Subsidiary, as applicable, from a financial point of view,
(xii) subject to subclause (xiv) below, if applicable, the payment of all fees, expenses, bonuses and awards related to the Transactions, including fees to the Fund or any Fund Affiliate,
(xiii) transactions with joint ventures for the purchase or sale of goods, equipment, products, parts and services entered into in the ordinary course of business,
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(xiv) any agreement to pay, and the payment of, monitoring, consulting, management, transaction, advisory or similar fees payable to the Fund or any Fund Affiliate (A) in an aggregate amount in any fiscal year not to exceed the sum of (1) the greater of $1,000,000 and 3% of EBITDA for such fiscal year, plus reasonable out of pocket costs and expenses in connection therewith and unpaid amounts accrued for prior periods; plus (2) any deferred fees (to the extent such fees were within such amount in clause (A)(1) above originally), plus (B) 1% of the value of transactions with respect to which the Fund or any Fund Affiliate provides any transaction, advisory or other services, plus (C) a transaction fee of not more than $2,500,000 to be paid to the Fund or a Fund Affiliate in connection with the Transactions, plus (D) so long as no Event of Default has occurred and is continuing, in the event of a Qualified IPO, the present value of all future amounts payable pursuant to any agreement referred to in clause (A)(1) above in connection with the termination of such agreement with the Fund and its Fund Affiliates; provided , that if any such payment pursuant to clause (D) is not permitted to be paid as a result of an Event of Default, such payment shall accrue and may be payable when no Events of Default are continuing to the extent that no further Event of Default would result therefrom,
(xv) the issuance, sale or transfer of Equity Interests of the Borrower, including in connection with capital contributions by Holdings (or any Parent Entity) to the Borrower,
(xvi) the issuance of Equity Interests to the management of Holdings, any Parent Entity, the Borrower or any Subsidiary in connection with the Transactions,
(xvii) payments by Holdings (and any Parent Entity), the Borrower and the Subsidiaries pursuant to a tax sharing agreement or arrangement (whether written or as a matter of practice) that complies with clause (v) of Section 6.06(b),
(xviii) transactions pursuant to any Permitted Receivables Financing,
(xix) payments, loans (or cancellation of loans) or advances to employees or consultants that are (i) approved by a majority of the Disinterested Directors of Holdings or the Borrower in good faith, (ii) made in compliance with applicable law and (iii) otherwise permitted under this Agreement,
(xx) transactions with customers, clients or suppliers, purchasers or sellers of goods or services, in each case in the ordinary course of business or otherwise in compliance with the terms of this Agreement that are fair to the Borrower or the Subsidiaries,
(xxi) transactions between the Borrower or any of the Subsidiaries and any person, a director of which is also a director of the Borrower or any direct or indirect parent company of the Borrower; provided , however , that (A) such director abstains from voting as a director of the Borrower or such direct or indirect parent company, as the case may be, on any matter involving such other person and (B) such person is not an Affiliate of the Borrower for any reason other than such directors acting in such capacity,
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(xxii) transactions permitted by, and complying with, the provisions of Section 6.05,
(xxiii) intercompany transactions undertaken in good faith (as certified by a Responsible Officer of the Borrower) for the purpose of improving the consolidated tax efficiency of the Borrower and the Subsidiaries and not for the purpose of circumventing any covenant set forth herein, and
(xxiv) Investments by the Fund or a Fund Affiliate in securities of the Borrower or any of the Subsidiaries so long as (A) the Investment is being offered generally to other investors on the same or more favorable terms and (B) the Investment constitutes less than 5.0% of the outstanding issue amount of such class of securities.
Notwithstanding the foregoing, any portfolio company that is an Affiliate of the Fund or a Fund Affiliate shall not be considered an Affiliate of the Borrower or its Subsidiaries with respect to any transaction, so long as such transaction is in the ordinary course of business.
Section 6.08 Business of the Borrower and the Subsidiaries . Notwithstanding any other provisions hereof, engage at any time to any material respect in any business or business activity substantially different from any business or business activity conducted by any of them on the Closing Date or any Similar Business, and in the case of a Special Purpose Receivables Subsidiary, Permitted Receivables Financings.
Section 6.09 Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. (a) Amend or modify in any manner materially adverse to the Lenders when taken as a whole (as determined in good faith by the Borrower), or grant any waiver or release under or terminate in any manner (if such granting or termination shall be materially adverse to the Lenders when taken as a whole (as determined in good faith by the Borrower)), the articles or certificate of incorporation, by-laws, limited liability company operating agreement, partnership agreement or other organizational documents of the Borrower or any of the Subsidiary Loan Parties.
(b) (i) Make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of, or in respect of, principal of or interest on any Indebtedness that is subordinated in right of payment to the Term B Loans or on any PIK Seller Note ( Junior Financing ), or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination in respect of any Junior Financing, except for:
(A) Refinancings with any Indebtedness permitted to be incurred under Section 6.01;
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(B) payments of regularly-scheduled interest and fees due thereunder, other non-principal payments thereunder, any mandatory prepayments of principal, interest and fees thereunder, scheduled payments thereon necessary to avoid the Junior Financing from constituting applicable high yield discount obligations within the meaning of Section 163(i)(l) of the Code, and, to the extent this Agreement is then in effect, principal on the scheduled maturity date of any Junior Financing (or within one year thereof);
(C) payments or distributions in respect of all or any portion of the Junior Financing with the proceeds contributed to the Borrower by Holdings from the issuance, sale or exchange by Holdings (or any Parent Entity) of Equity Interests that are not Disqualified Stock made within eighteen months prior thereto; provided , that such proceeds are not included in any determination of the Cumulative Credit;
(D) the conversion of any Junior Financing to Equity Interests of the Borrower, Holdings or any Parent Entity; and
(E) so long as (1) no Event of Default has occurred and is continuing or would result therefrom and (2) after giving effect to such payments or distributions, the Net First Lien Leverage Ratio on a Pro Forma Basis is not greater than 3.75 to 1.00, payments or distributions in respect of Junior Financings prior to any scheduled maturity made, in an aggregate amount, not to exceed a portion of the Cumulative Credit on the date of such election that the Borrower elects to apply to this Section 6.09(b)(i)(E) in a written notice of a Responsible Officer thereof, which notice shall set forth calculations in reasonable detail of the amount of Cumulative Credit immediately prior to such election and the amount thereof elected to be so applied;
(F) other payments and distributions, when taken together with any payments or distributions made pursuant to Section 6.06(j), in an aggregate amount not to exceed $10,000,000; or
(ii) Amend or modify, or permit the amendment or modification of, any provision of any Junior Financing that constitutes Material Indebtedness, or any agreement, document or instrument evidencing or relating thereto, other than amendments or modifications that (A) are not materially adverse to Lenders when taken as a whole (as determined in good faith by the Borrower) and that do not affect the subordination or payment provisions thereof (if any) in a manner adverse to the Lenders when taken as a whole (as determined in good faith by the Borrower) or (B) otherwise comply with the definition of Permitted Refinancing Indebtedness.
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(c) Permit any Material Subsidiary to enter into any agreement or instrument that by its terms restricts (i) the payment of dividends or distributions or the making of cash advances to the Borrower or any Subsidiary that is a direct or indirect parent of such Subsidiary or (ii) the granting of Liens by the Borrower or such Material Subsidiary that is a Loan Party pursuant to the Security Documents, in each case other than those arising under any Loan Document, except, in each case, restrictions existing by reason of:
(A) restrictions imposed by applicable law;
(B) contractual encumbrances or restrictions in effect on the Closing Date under Indebtedness existing on the Closing Date and set forth on Schedule 6.01 , any Refinancing Notes or any agreements related to any Permitted Refinancing Indebtedness in respect of any such Indebtedness that does not materially expand the scope of any such encumbrance or restriction (as determined in good faith by the Borrower);
(C) any restriction on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Equity Interests or assets of a Subsidiary pending the closing of such sale or disposition;
(D) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business;
(E) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the specific property or assets securing such Indebtedness;
(F) any restrictions imposed by any agreement relating to Indebtedness incurred pursuant to Section 6.01or Permitted Refinancing Indebtedness in respect thereof, to the extent such restrictions are not materially more restrictive, taken as a whole, than the restrictions contained in this Agreement (as determined in good faith by the Borrower);
(G) customary provisions contained in leases or licenses of Intellectual Property and other similar agreements entered into in the ordinary course of business;
(H) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;
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(I) customary provisions restricting assignment of any agreement entered into in the ordinary course of business;
(J) customary restrictions and conditions contained in any agreement relating to the sale, transfer, lease or other disposition of any asset permitted under Section 6.05 pending the consummation of such sale, transfer, lease or other disposition;
(K) customary restrictions and conditions contained in the document relating to any Lien, so long as (1) such Lien is a Permitted Lien and such restrictions or conditions relate only to the specific asset subject to such Lien, and (2) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this Section 6.09;
(L) customary net worth provisions contained in Real Property leases entered into by Subsidiaries, so long as the Borrower has determined in good faith that such net worth provisions would not reasonably be expected to impair the ability of the Borrower and its Subsidiaries to meet their ongoing obligations;
(M) any agreement in effect at the time such subsidiary becomes a Subsidiary, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary;
(N) restrictions in agreements representing Indebtedness permitted under Section 6.01 of a Subsidiary of the Borrower that is not a Subsidiary Loan Party;
(O) customary restrictions contained in leases, subleases, licenses or Equity Interests or asset sale agreements otherwise permitted hereby as long as such restrictions relate to the Equity Interests and assets subject thereto;
(P) restrictions on cash or other deposits imposed by customers under contracts entered into in the ordinary course of business;
(Q) restrictions contained in any Permitted Receivables Document with respect to any Special Purpose Receivables Subsidiary; or
(R) any encumbrances or restrictions of the type referred to in Section 6.09(c)(i) and 6.09(c)(ii) above imposed by any amendments, modifications, restatements, renewals, increases,
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supplements, refundings, replacements or refinancings of or similar arrangements to the contracts, instruments or obligations referred to in clauses (A) through (Q) above; provided , that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements, refinancings or similar arrangements are, in the good faith judgment of the Borrower, no more restrictive with respect to such dividend, other payment and Lien restrictions than those contained in the dividend, other payment or Lien restrictions as contemplated by such provisions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement, refinancing or similar arrangement.
Section 6.10 Fiscal Year . In the case of the Borrower, permit its fiscal year to end on any date other than December 31 without prior notice to the Administrative Agent.
Section 6.11 Net First Lien Leverage Ratio . Permit the Net First Lien Leverage Ratio on the last day of any fiscal quarter (beginning with the fiscal quarter ended on June 30, 2014) to exceed 5.50 to 1.00.
ARTICLE VIA
Holdings Negative Covenants
Holdings (prior to a Qualified IPO) covenants and agrees with each Lender that, until the Termination Date, unless the Required Lenders shall otherwise consent in writing, (a) Holdings will not create, incur, assume or permit to exist any Lien other than (i) Liens created under the Loan Documents and (ii) Liens not prohibited by Section 6.02 on any of the Equity Interests issued by the Borrower held by Holdings, (b) Holdings shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence; provided , that so long as no Default has occurred and is continuing or would result therefrom, Holdings may merge with any other person (and if it is not the survivor of such merger, the survivor shall assume Holdings obligations, as applicable, under the Loan Documents) and (c) Holdings shall comply with clause (c) of the definition of Change in Control.
ARTICLE VII
Events of Default
Section 7.01 Events of Default . In case of the happening of any of the following events (each, an Event of Default ):
(a) any representation or warranty made or deemed made by Holdings, the Borrower or any other Loan Party herein or in any other Loan Document or any certificate or document delivered pursuant hereto or thereto shall prove to have been false or misleading in any material respect when so made or deemed made; provided , that the failure of any representation or warranty made or deemed made by any Loan Party (other than the representations and warranties referred to in clause (i) of Section 4.01(b)) to be true and correct in any material respect on the Closing Date will not constitute an Event of Default hereunder;
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(b) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or the reimbursement with respect to any L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in clause (b) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the Borrower of any covenant, condition or agreement contained in, Section 5.01(a), 5.05(a) or 5.08 or in Article VI;
(e) default shall be made in the due observance or performance by Holdings (prior to a Qualified IPO), the Borrower or any of the Subsidiary Loan Parties of any covenant, condition or agreement contained in any Loan Document (other than those specified in clauses (b), (c) and (d) above) and such default shall continue unremedied for a period of 30 days (or 60 days if such default results solely from the failure of a Subsidiary that is not a Loan Party to duly observe or perform any such covenant, condition or agreement) after notice thereof from the Administrative Agent to the Borrower;
(f) (i) any event or condition occurs that (A) results in any Material Indebtedness becoming due prior to its scheduled maturity or (B) enables or permits (with all applicable grace periods having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; or (ii) the Borrower or any of the Subsidiaries shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided , that this clause (f) shall not apply to any secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness;
(g) there shall have occurred a Change in Control;
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any of the Material Subsidiaries, or of a substantial part of the property or assets of the Borrower or any Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of the Material Subsidiaries or for a substantial part of the property or assets of the Borrower or any of the Material Subsidiaries or (iii) the winding-up or liquidation of the Borrower or any Material Subsidiary (except in a transaction permitted hereunder); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
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(i) the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (h) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of the Material Subsidiaries or for a substantial part of the property or assets of the Borrower or any Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable or admit in writing its inability or fail generally to pay its debts as they become due;
(j) the failure by the Borrower or any Material Subsidiary to pay one or more final judgments aggregating in excess of $15,000,000 (to the extent not covered by insurance), which judgments are not discharged or effectively waived or stayed for a period of 45 consecutive days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any Material Subsidiary to enforce any such judgment;
(k) (i) an ERISA Event or ERISA Events shall have occurred, (ii) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any Plan or Plans, (iii) the Borrower or any Subsidiary or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, or (iv) the Borrower or any Subsidiary shall engage in any prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan; and in each case in clauses (i) through (iv) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to have a Material Adverse Effect; or
(l) (i) any Loan Document shall for any reason be asserted in writing by Holdings (prior to a Qualified IPO), the Borrower or any Subsidiary Loan Party not to be a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to assets that constitute a material portion of the Collateral shall cease to be, or shall be asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected security interest (perfected as or having the priority required by this Agreement or the relevant Security Document and subject to such limitations and restrictions as are set forth herein and therein) in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the limitations of foreign laws, rules and regulations as they apply to pledges of Equity Interests in Foreign Subsidiaries or the application thereof, or from the failure of the Collateral Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Agreement and the Holdings Guarantee and Pledge Agreement or to file Uniform Commercial Code continuation statements or take the actions described on Schedule 3.04 and except to the extent that such loss is covered by a lenders title insurance policy and the
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Collateral Agent shall be reasonably satisfied with the credit of such insurer, or (iii) a material portion of the Guarantees pursuant to the Security Documents by Holdings (prior to a Qualified IPO) or the Subsidiary Loan Parties guaranteeing the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof), or shall be asserted in writing by Holdings (prior to a Qualified IPO) or any Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations (other than in accordance with the terms thereof); provided , that no Event of Default shall occur under this Section 7.01(l) if the Loan Parties cooperate with the Collateral Agent to replace or perfect such security interest and Lien, such security interest and Lien is replaced and the rights, powers and privileges of the Secured Parties are not materially adversely affected by such replacement;
then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) above), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate forthwith the Commitments, (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding and (iii) if the Loans have been declared due and payable pursuant to clause (ii) above, demand Cash Collateral pursuant to Section 2.05(j); and in any event with respect to the Borrower described in clause (h) or (i) above, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable and the Administrative Agent shall be deemed to have made a demand for Cash Collateral to the full extent permitted under Section 2.05(j), without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.
For purposes of clauses (h) and (i) of this Section 7.01, Material Subsidiary shall mean any Subsidiary that would not be an Immaterial Subsidiary under clause (a) of the definition thereof.
Section 7.02 Treatment of Certain Payments . Any amount received by the Administrative Agent or the Collateral Agent from any Loan Party (or from proceeds of any Collateral) following any acceleration of the Obligations under this Agreement or any Event of Default with respect to the Borrower under Section 7.01(h) or (i), in each case that is continuing, shall be applied: (i) first, to the payment of all reasonable and documented out-of-pocket costs and expenses and indemnification amounts then due to the Administrative Agent or the Collateral Agent from the Borrower and all fees owed to them in connection with the collection or sale or otherwise in connection with this Agreement or any other Loan Document, including all court costs and reasonable and documented fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent or the Collateral Agent under this Agreement or any other Loan Document on behalf of any Loan Party and any other
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reasonable and documented costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document in its capacity as such, (ii) second, towards payment in full of interest and fees then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (iii) third, towards payment in full of principal of Swingline Loans and unreimbursed L/C Disbursements then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed L/C Disbursements then due to such parties, (iv) fourth, towards payment in full of other Obligations (including Obligations of the Loan Parties owing under or in respect of any Secured Cash Management Agreement or Secured Hedge Agreement) then due from the Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of such Obligations then due to such parties and (v) last, the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Requirements of Law.
Section 7.03 Right to Cure . Notwithstanding anything to the contrary contained in Section 7.01, in the event that the Borrower fails (or, but for the operation of this Section 7.03, would fail) to comply with the requirements of the Financial Covenant, from the last day of the applicable Fiscal Quarter until the expiration of the 10th Business Day subsequent to the date the certificate calculating such Financial Covenant is required to be delivered pursuant to Section 5.04(c), Holdings, the Borrower and any Parent Entity shall have the right to issue Permitted Cure Securities for cash or otherwise receive cash contributions to the capital of such entities, and in each case, to contribute any such cash to the capital of the Borrower (collectively, the Cure Right ), and upon the receipt by the Borrower of such cash (the Cure Amount ), pursuant to the exercise of the Cure Right, the Financial Covenant shall be recalculated giving effect to a pro forma adjustment by which EBITDA shall be increased with respect to such applicable quarter and any four-quarter period that contains such quarter, solely for the purpose of measuring the Financial Covenant and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; provided , that (i) in each four consecutive fiscal quarter period there shall be at least two fiscal quarters in which a Cure Right is not exercised, (ii) a Cure Right shall not be exercised more than five times during the term of the Revolving Facility, (iii) for purposes of this Section 7.03, the Cure Amount shall be no greater than the amount required for purposes of complying with the Financial Covenant and (iv) there shall be no pro forma reduction in Indebtedness with the proceeds of the exercise of the Cure Right for determining compliance with the Financial Covenant for the fiscal quarter in respect of which such Cure Right is exercised (either directly through prepayment or indirectly as a result of the netting of unrestricted cash). If, after giving effect to the adjustments in this paragraph, the Borrower shall then be in compliance with the requirements of the Financial Covenant, the Borrower shall be deemed to have satisfied the requirements of the Financial Covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the Financial Covenant that had occurred shall be deemed cured for the purposes of this Agreement.
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ARTICLE VIII
The Agents
Section 8.01 Appointment . (a) Each Lender (in its capacities as a Lender and the Swingline Lender (if applicable) and on behalf of itself and its Affiliates as potential counterparties to Secured Cash Management Agreements and Secured Hedging Agreements) and each Issuing Bank (in such capacities and on behalf of itself and its Affiliates as potential counterparties to Secured Cash Management Agreements and Secured Hedging Agreements) hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, including as the Collateral Agent for such Lender and the other Secured Parties under the Security Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States of America, each of the Lenders and the Issuing Banks hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lenders or Issuing Banks behalf. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.
(b) In furtherance of the foregoing, each Lender (in its capacities as a Lender and the Swingline Lender (if applicable) and on behalf of itself and its Affiliates as potential counterparties to Secured Cash Management Agreements or Secured Hedge Agreements) and each Issuing Bank (in such capacities and on behalf of itself and its Affiliates as potential counterparties to Secured Cash Management Agreements and Secured Hedging Agreements) hereby appoints and authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent (and any Subagents appointed by the Collateral Agent pursuant to Section 8.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights or remedies thereunder at the direction of the Collateral Agent) shall be entitled to the benefits of this Article VIII (including, without limitation, Section 8.07) as though the Collateral Agent (and any such Subagents) were an Agent under the Loan Documents, as if set forth in full herein with respect thereto.
Section 8.02 Delegation of Duties . The Administrative Agent and the Collateral Agent may execute any of their respective duties under this Agreement and the other Loan Documents (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) by or through agents, employees or attorneys-in-fact and shall be entitled to
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advice of counsel and other consultants or experts concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Each Agent may also from time to time, when it deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact (each, a Subagent ) with respect to all or any part of the Collateral; provided , that no such Subagent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent or the Collateral Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Subagent so appointed by an Agent to more fully or certainly vest in and confirm to such Subagent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by such Agent. If any Subagent, or successor thereto, shall become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Subagent, to the extent permitted by law, shall automatically vest in and be exercised by the Administrative Agent or the Collateral Agent until the appointment of a new Subagent. No Agent shall be responsible for the negligence or misconduct of any agent, attorney-in-fact or Subagent that it selects with reasonable care.
Section 8.03 Exculpatory Provisions . None of the Agents, or their respective Affiliates or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such persons own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. No Agent shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. No Agent shall have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, and (b) no Agent shall, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by such Agent or any of its Affiliates in any capacity. The Agents shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice describing such Default or Event of Default is given to the Administrative Agent by the Borrower, a Lender or Issuing Bank. No Agent shall 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 Loan Document, (ii) the contents of any certificate, report or
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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 Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
Section 8.04 Reliance by Agents . Each 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) or conversation believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. Each 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. In determining compliance with any condition hereunder to any Credit Event, that by its terms must be fulfilled to the satisfaction of a Lender or any Issuing Bank, each Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless such Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to such Credit Event. Each Agent may consult with legal counsel (including counsel to Holdings or the 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. Each Agent may deem and treat the Lender specified in the Register with respect to any amount owing hereunder as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with such Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all or other Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all or other Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.
Section 8.05 Notice of Default . Neither Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has received written notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a notice of default. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all or other Lenders); provided , that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
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Section 8.06 Non-Reliance on Agents and Other Lenders . Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into the business, operations, property, financial and other condition and creditworthiness of, the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
Section 8.07 Indemnification . The Lenders agree to indemnify each Agent and the Revolving Facility Lenders agree to indemnify each Issuing Bank, in each case in its capacity as such (to the extent not reimbursed by Holdings or the Borrower and without limiting the obligation of Holdings or the Borrower to do so), in the amount of its pro rata share (based on its aggregate Revolving Facility Credit Exposure and, in the case of the indemnification of each Agent, outstanding Term Loans and unused Commitments hereunder; provided , that the aggregate principal amount of Swingline Loans owing to the Swingline Lender and of L/C Disbursements owing to any Issuing Bank shall be considered to be owed to the Revolving Facility Lenders ratably in accordance with their respective Revolving Facility Credit Exposure) (determined at the time such indemnity is sought), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent or such Issuing Bank in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent or such Issuing Bank under or in connection with any of the foregoing; provided , that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable
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decision of a court of competent jurisdiction to have resulted from such Agents or such Issuing Banks gross negligence or willful misconduct. The failure of any Lender to reimburse any Agent or any Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lenders to such Agent or such Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse such Agent or such Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse such Agent or such Issuing Bank, as the case may be, for such other Lenders ratable share of such amount. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
Section 8.08 Agent in Its Individual Capacity . Each Agent and its affiliates may make loans to, accept deposits from, and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued, or Letter of Credit or Swingline Loan participated in, by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms Lender and Lenders shall include each Agent in its individual capacity.
Section 8.09 Successor Administrative Agent . The Administrative Agent may resign as Administrative Agent and Collateral Agent upon 10 days notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent and Collateral Agent under this Agreement and the other Loan Documents, then the Required Lenders shall have the right, subject to the reasonable consent of the Borrower (so long as no Event of Default under Section 7.01(b), (c), (h) or (i) shall have occurred and be continuing), to appoint a successor which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent and Collateral Agent, and the term Administrative Agent shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agents rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agents notice of resignation, the retiring Administrative Agents resignation shall nevertheless thereupon become effective (except in the case of the Collateral Agent holding collateral security on behalf of such Secured Parties, the retiring Collateral Agent shall continue to hold such collateral security as nominee until such time as a successor Collateral Agent is appointed), and the Lenders shall assume and perform all of the duties of the Administrative Agent and Collateral Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agents resignation as Administrative Agent, the provisions of this Section 8.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.
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Section 8.10 Arrangers, Syndication Agent and Documentation Agent . Notwithstanding any other provision of this Agreement or any provision of any other Loan Document, each of the persons named on the cover page hereof as Joint Bookrunner, Joint Lead Arranger, Syndication Agent or Documentation Agent is named as such for recognition purposes only, and in its capacity as such shall have no rights, duties, responsibilities or liabilities with respect to this Agreement or any other Loan Document, except that each such person and its Affiliates shall be entitled to the rights expressly stated to be applicable to them in Section 9.05 and 9.17 (subject to the applicable obligations and limitations as set forth therein).
Section 8.11 Security Documents, Collateral Agent and Collateral Agent . The Lenders authorize the Collateral Agent to release any Collateral or Guarantors in accordance with Section 9.18 or if approved, authorized or ratified in accordance with Section 9.08.
The Lenders hereby irrevocably authorize and instruct the Collateral Agent to, without any further consent of any Lender, enter into (or acknowledge and consent to) or amend, renew, extend, supplement, restate, replace, waive or otherwise modify any First Lien/First Lien Intercreditor Agreement, any First Lien/Second Lien Intercreditor Agreement, any Permitted Junior Intercreditor Agreement, any Permitted Pari Passu Intercreditor Agreement or any other intercreditor agreement with the collateral agent or other representatives of the holders of Indebtedness that is permitted to be secured by a Lien on the Collateral that is permitted (including with respect to priority) under this Agreement and to subject the Liens on the Collateral securing the Obligations to the provisions thereof. The Lenders irrevocably agree that (x) the Collateral Agent may rely exclusively on a certificate of a Responsible Officer of the Borrower as to whether any such other Liens are permitted and (y) any First Lien/First Lien Intercreditor Agreement, any First Lien/Second Lien Intercreditor Agreement or any other intercreditor agreement referred to in the foregoing sentence, entered into by the Collateral Agent, shall be binding on the Secured Parties, and each Lender hereby agrees that it will take no actions contrary to the provisions, if entered into and if applicable, any Permitted Pari Passu Intercreditor Agreement or any Permitted Junior Intercreditor Agreement. The foregoing provisions are intended as an inducement to any future providers of Indebtedness not prohibited by Section 6.01 hereof to extend credit to the Loan Parties and such persons are intended third-party beneficiaries of such provisions. Furthermore, the Lenders (including in their capacities as potential Cash Management Banks and potential Hedge Banks) hereby authorize the Administrative Agent and the Collateral Agent to release any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Loan Document (i) to the holder of any Lien on such property that is permitted by clauses (c), (i), (j) and (aa) of Section 6.02 or Section 6.02(a) (if the Liens thereunder are of a type that is contemplated by any of the foregoing clauses) in each case to the extent the contract or agreement pursuant to which such Lien is granted prohibits any other Liens on such property or (ii) that is or becomes Excluded Property; and the Administrative Agent and the Collateral Agent shall do so upon request of the Borrower; provided , that prior to any such request, the Borrower shall have in each case delivered to the Administrative Agent a certificate of a Responsible Officer of the Borrower certifying (x) that such Lien is permitted under this Agreement, (y) in the case of a request pursuant to clause (i) of this sentence, that the contract or agreement pursuant to which such Lien is granted prohibits any other Lien on such property and (z) in the case of a request pursuant to clause (ii) of this sentence, that (A) such property is or has become Excluded Property and (B) if such property has become Excluded Property as a result of a contractual restriction, such restriction does not violate Section 6.09(c).
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Section 8.12 Right to Realize on Collateral and Enforce Guarantees . In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, (i) the Administrative Agent (irrespective of whether the principal of any Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (A) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of any or all of the Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Banks and the Administrative Agent and any Subagents allowed in such judicial proceeding, and (B) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and (ii) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under the Loan Documents. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or Issuing Bank or to authorize the Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank in any such proceeding.
Anything contained in any of the Loan Documents to the contrary notwithstanding, the Borrower, the Administrative Agent, the Collateral Agent and each Secured Party hereby agree that (a) no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guarantee, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by the Administrative Agent, on behalf of the Secured Parties in accordance with the terms hereof and all powers, rights and remedies under the Security Documents may be exercised solely by the Collateral Agent, and (b) in the event of a foreclosure by the Collateral Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Collateral Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Collateral Agent, as agent for and representative of the Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by the Collateral Agent at such sale or other Disposition.
Section 8.13 Withholding Tax . To the extent required by any applicable Requirement of Law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any authority of the United States or other jurisdiction asserts a claim that the Administrative Agent
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did not properly withhold Tax from amounts paid to or for the account of any Lender for any reason (including because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances that rendered the exemption from, or reduction of, withholding Tax ineffective), such Lender shall indemnify the Administrative Agent (to the extent that the Administrative Agent has not already been reimbursed by any applicable Loan Party and without limiting the obligation of any applicable Loan Party to do so) fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including penalties, fines, additions to Tax and interest, together with all expenses incurred, including legal expenses, allocated staff costs and any out of pocket expenses. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this Section 8.13.
ARTICLE IX
Miscellaneous
Section 9.01 Notices; Communications . (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 9.01(b) 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 telecopier or other electronic means 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:
(i) if to any Loan Party or the Administrative Agent, the Issuing Bank as of the Closing Date or the Swingline Lender to the address, telecopier number, electronic mail address or telephone number specified for such person on Schedule 9.01 ; and
(ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided , that the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to Article II if such Lender or Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by them, provided , that approval of such procedures may be limited to particular notices or communications.
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(c) 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 telecopier 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 Section 9.01(b) above shall be effective as provided in such Section 9.01(b).
(d) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto.
(e) Documents required to be delivered pursuant to Section 5.04 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically (including as set forth in Section 9.17) and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrowers website on the Internet at the website address listed on Schedule 9.01 , or (ii) on which such documents are posted on the Borrowers behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided , that (A) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender, and (B) the Borrower shall notify the Administrative Agent (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions ( i.e. , soft copies) of such documents. Except for such certificates required by Section 5.04(c), the Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
Section 9.02 Survival of Agreement . All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and each Issuing Bank and shall survive the making by the Lenders of the Loans and the execution and delivery of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation made by such persons or on their behalf, and shall continue in full force and effect until the Termination Date. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Sections 2.15, 2.16, 2.17 and 9.05) shall survive the Termination Date.
Section 9.03 Binding Effect . This Agreement shall become effective when it shall have been executed by Holdings, the Borrower and the Administrative Agent and when the Administrative Agent shall have received copies hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of Holdings, the Borrower, the Administrative Agent, each Issuing Bank and each Lender and their respective permitted successors and assigns.
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Section 9.04 Successors and Assigns . (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 9.04. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in clause (c) of this Section 9.04), and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement or the other Loan Documents.
(b) (i) Subject to the conditions set forth in subclause (ii) below, any Lender may assign to one or more assignees (each, an Assignee ) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Borrower, which consent, with respect to the assignment of a Term Loan, will be deemed to have been given if the Borrower has not responded within ten (10) Business Days after the delivery of any request for such consent; provided , that no consent of the Borrower shall be required for an assignment of a Term Loan to a Lender, an Affiliate of a Lender, an Approved Fund (as defined below), or in the case of assignments during the primary syndication of the Commitments and Loans to persons identified to and agreed by the Borrower in writing prior to the Closing Date, or for an assignment of a Revolving Facility Commitment or Revolving Facility Loan to a Revolving Facility Lender, an Affiliate of a Revolving Facility Lender or Approved Fund with respect to a Revolving Facility Lender, or, in each case, if an Event of Default under Section 7.01(b), (c), (h) or (i) has occurred and is continuing, any other person; and
(B) the Administrative Agent; provided , that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender, an Approved Fund or an Affiliate of the Borrower made in accordance with Section 9.04(i) or Section 9.21; and
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(C) the Issuing Bank and the Swingline Lender; provided , that no consent of the Issuing Bank and the Swingline Lender shall be required for an assignment of all or any portion of a Term Loan.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lenders Commitments or Loans under any Facility, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) $1,000,000 in the case of Term Loans and (y) $5,000,000 in the case of Revolving Facility Loans or Revolving Facility Commitments, unless each of the Borrower and the Administrative Agent otherwise consent; provided , that such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds (with simultaneous assignments to or by two or more Related Funds shall be treated as one assignment), if any;
(B) the parties to each assignment shall (1) execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent or (2) if previously agreed with the Administrative Agent, manually execute and deliver to the Administrative Agent an Assignment and Acceptance, in each case together with a processing and recordation fee of $3,500 (which fee may be waived or reduced in the reasonable discretion of the Administrative Agent);
(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any tax forms required to be delivered pursuant to Section 2.17; and
(D) the Assignee shall not be the Borrower or any of the Borrowers Affiliates or Subsidiaries except in accordance with Section 9.04(i) or Section 9.21.
For the purposes of this Section 9.04, Approved Fund means any person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or
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manages a Lender. Notwithstanding the foregoing or anything to the contrary herein, no Lender shall be permitted to assign or transfer any portion of its rights and obligations under this Agreement to (A) any Ineligible Institution, (B) any Defaulting Lender or any of its Subsidiaries, or any person who, upon becoming a Lender hereunder, would constitute any of the foregoing persons described in this clause (B), or (C) a natural person. Notwithstanding the foregoing, each Loan Party and the Lenders acknowledge and agree that the Administrative Agent shall not have any responsibility or obligation to determine whether any Lender or potential Lender is an Ineligible Institution and the Administrative Agent shall have no liability with respect to any assignment made to an Ineligible Institution. Any assigning Lender shall, in connection with any potential assignment, provide to the Borrower a copy of its request (including the name of the prospective assignee) concurrently with its delivery of the same request to the Administrative Agent irrespective of whether or not an Event of Default under Section 7.01(b), (c), (h) or (i) has occurred and is continuing.
(iii) Subject to acceptance and recording thereof pursuant to subclause (v) below, from and after the effective date specified in each Assignment and Acceptance the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lenders rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.05 (subject to the limitations and requirements of those Sections)); provided , that an Assignee shall not be entitled to receive any greater payment pursuant to Section 2.17 than the applicable Assignor would have been entitled to receive had no such assignment occurred. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with clause (c) of this Section 9.04.
(iv) The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal and interest amounts of the Loans and Revolving L/C Exposure owing to, each Lender pursuant to the terms hereof from time to time (the Register ). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent, the Issuing Bank, the Swingline Lender and the Lenders shall treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank, the Swingline Lender and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignees completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder),
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the processing and recordation fee referred to in clause (b) of this Section, if applicable, and any written consent to such assignment required by clause (b) of this Section and any applicable tax forms, the Administrative Agent shall accept such Assignment and Acceptance and promptly record the information contained therein in the Register. No assignment, whether or not evidenced by a promissory note, shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this subclause (v).
(c) [Reserved].
(d) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations in Loans and Commitments to one or more banks or other entities other than any Ineligible Institution (to the extent that the list of Ineligible Institutions has been made available to all Lenders) (a Participant ) in all or a portion of such Lenders rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided , that (A) such Lenders obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided , that (x) such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to clauses (i), (ii), (iii) or (vi) of the first proviso to Section 9.08(b) and (2) directly affects such Participant (but, for the avoidance of doubt, not any waiver of any Default or Event of Default) and (y) no other agreement with respect to amendment, modification or waiver may exist between such Lender and such Participant. Subject to clause (d)(iii) of this Section 9.04, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 (subject to the limitations and requirements of those Sections and Section 2.19) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to clause (b) of this Section 9.04. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender; provided , that such Participant shall be subject to Section 2.18(c) as though it were a Lender. Notwithstanding the foregoing, each Loan Party and the Lenders acknowledge and agree that the Administrative Agent shall not have any responsibility or obligation to determine whether any Participant or potential Participant is an Ineligible Institution and the Administrative Agent shall have no liability with respect to any participation made to an Ineligible Institution.
(ii) Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts and interest amounts of each Participants interest in the Loans or other obligations under the Loan Documents (the Participant Register ). The entries in the Participant Register shall be
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conclusive absent manifest error, and each party hereto shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. Without limitation of the requirements of Section 9.04(d), no Lender shall have any obligation to disclose all or any portion of a Participant Register to any person (including the identity of any Participant or any information relating to a Participants interest in any Commitments, Loans or other Loan Obligations under any Loan Document), except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other Loan Obligation is in registered form for U.S. federal income tax purposes or is otherwise required by applicable law.
(iii) A Participant shall not be entitled to receive any greater payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers prior written consent (not to be unreasonably withheld or delayed), which consent shall state that it is being given pursuant to this Section 9.04(d)(iii); provided , that each potential Participant shall provide such information as is reasonably requested by the Borrower in order for the Borrower to determine whether to provide its consent.
(e) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank and in the case of any Lender that is an Approved Fund, any pledge or assignment to any holders of obligations owed, or securities issued, by such Lender, including to any trustee for, or any other representative of, such holders, and this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided , that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.
(f) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in clause (e) above.
(g) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower or the Administrative Agent. Each of Holdings, the Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided , however , that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto and each Loan Party for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.
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(h) If the Borrower wishes to replace the Loans or Commitments under any Facility with ones having different terms, it shall have the option, with the consent of the Administrative Agent and subject to at least three Business Days advance notice to the Lenders under such Facility, instead of prepaying the Loans or reducing or terminating the Commitments to be replaced, to (i) require the Lenders under such Facility to assign such Loans or Commitments to the Administrative Agent or its designees and (ii) amend the terms thereof in accordance with Section 9.08 (with such replacement, if applicable, being deemed to have been made pursuant to Section 9.08(d)). Pursuant to any such assignment, all Loans and Commitments to be replaced shall be purchased at par (allocated among the Lenders under such Facility in the same manner as would be required if such Loans were being optionally prepaid or such Commitments were being optionally reduced or terminated by the Borrower), accompanied by payment of any accrued interest and fees thereon and any amounts owing pursuant to Section 9.05(b). By receiving such purchase price, the Lenders under such Facility shall automatically be deemed to have assigned the Loans or Commitments under such Facility pursuant to the terms of the form of Assignment and Acceptance attached hereto as Exhibit A , and accordingly no other action by such Lenders shall be required in connection therewith. The provisions of this clause (h) are intended to facilitate the maintenance of the perfection and priority of existing security interests in the Collateral during any such replacement.
(i) Notwithstanding anything to the contrary in this Agreement, including Section 2.18(c) (which provisions shall not be applicable to clauses (i) or (j) of this Section 9.04), any of Holdings or its Subsidiaries, including the Borrower, may purchase by way of assignment and become an Assignee with respect to Term Loans at any time and from time to time from Lenders in accordance with Section 9.04(b) hereof (each, a Permitted Loan Purchase ); provided , that, in respect of any Permitted Loan Purchase, (A) any such purchase occurs pursuant to Dutch auction procedures open to all Lenders of the relevant Class of Term Loans on a pro rata basis in accordance with customary procedures to be agreed between the Borrower and the Administrative Agent; provided , that any of Holdings or its Subsidiaries, including the Borrower shall be entitled to make open market purchases of the Term Loans without complying with such Dutch auction procedures so long as the aggregate principal amount (calculated on the par amount thereof) of all Term Loans purchased in open market purchases from the Closing Date does not exceed the Permitted Loan Purchase Amount, (B) no Permitted Loan Purchase shall be made from the proceeds of any extensions of credit under the Revolving Facility, (C) upon consummation of any such Permitted Loan Purchase, the Loans purchased pursuant thereto shall be deemed to be automatically and immediately cancelled and extinguished in accordance with Section 9.04(j), (D) in connection with any such Permitted Loan Purchase, any of Holdings or its Subsidiaries, including the Borrower, and such Lender that is the Assignor shall execute and deliver to the Administrative Agent a Permitted Loan Purchase Assignment and Acceptance (and for the avoidance of doubt, (x) shall make the representations and warranties set forth in the Permitted Loan Purchase Assignment and Acceptance and (y) shall not be required to execute and deliver an Assignment and Acceptance pursuant to Section 9.04(b)(ii)(B)) and shall otherwise comply with the conditions to Assignments under this Section 9.04 and (E) no Default or Event of Default would exist after giving effect on a Pro Forma Basis to such Permitted Loan Purchase.
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(j) Each Permitted Loan Purchase shall, for purposes of this Agreement be deemed to be an automatic and immediate cancellation and extinguishment of such Term Loans and the Borrower shall, upon consummation of any Permitted Loan Purchase, notify the Administrative Agent that the Register be updated to record such event as if it were a prepayment of such Loans.
(k) In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swingline Loans in accordance with its Revolving Facility Percentage; provided , that notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
(l) Notwithstanding anything to the contrary herein, the rights of the Lenders to make assignments and grant participations shall be subject to the approval of any Gaming Authority, to the extent required by any applicable Gaming Laws.
Section 9.05 Expenses; Indemnity . (a) The Borrower agrees to pay (i) all reasonable and documented out-of-pocket expenses (including Other Taxes) incurred by the Administrative Agent or the Collateral Agent in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent or the Collateral Agent in connection with the administration of this Agreement and any amendments, modifications or waivers of the provisions hereof or thereof, including the reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP, counsel for the Administrative Agent, the Collateral Agent and the Arrangers, and, if necessary, the reasonable fees, charges and disbursements of one local counsel per jurisdiction, and (ii) all out-of-pocket expenses (including Other Taxes) incurred by the Agents or any Lender in connection with the enforcement of their rights in connection with this Agreement and the other Loan Documents, in connection with the Loans made or the Letters of Credit issued hereunder, including the fees, charges and disbursements of a single counsel for all such persons, taken as a whole, and, if necessary, a single local counsel in each appropriate jurisdiction for all such persons, taken as a whole (and, in the case of an actual or perceived conflict of interest where such person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel with the Borrowers prior written consent (not to be unreasonably withheld), of another firm of such for such affected person).
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(b) The Borrower agrees to indemnify the Administrative Agent, the Collateral Agent, the Arrangers, the Joint Bookrunners, each Issuing Bank, each Lender, the Syndication Agent, the Documentation Agent, each of their respective Affiliates, successors and assignors, and each of their respective directors, trustees, officers, employees, agents, trustees and advisors, (each such person being called an Indemnitee ) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements (excluding the allocated costs of in house counsel and limited to not more than one counsel for all such Indemnitees, taken as a whole, and, if necessary, a single local counsel in each appropriate jurisdiction for all such Indemnitees, taken as a whole (and, in the case of an actual or perceived conflict of interest where the Indemnitee affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel with the Borrowers prior written consent (not to be unreasonably withheld), of another firm of counsel for such affected Indemnitee)), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby, (ii) the use of the proceeds of the Loans or the use of any Letter of Credit, (iii) any violation of or liability under Environmental Laws by the Borrower or any Subsidiary, (iv) any actual or alleged presence, Release or threatened Release of or exposure to Hazardous Materials at, under, on, from or to any property owned, leased or operated by the Borrower or any Subsidiary or (v) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto and regardless of whether such matter is initiated by a third party or by Holdings, the Borrower or any of their subsidiaries or Affiliates; provided , that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Parties, (y) arose from a material breach of such Indemnitees or any of its Related Parties obligations under any Loan Document (as determined by a court of competent jurisdiction in a final, non-appealable judgment) or (z) arose from any claim, actions, suits, inquiries, litigation, investigation or proceeding that does not involve an act or omission of the Borrower or any of its Affiliates and is brought by an Indemnitee against another Indemnitee (other than any claim, actions, suits, inquiries, litigation, investigation or proceeding against any Agent or an Arranger in its capacity as such). None of the Indemnitees (or any of their respective affiliates) shall be responsible or liable to the Fund, Holdings, the Borrower or any of their respective subsidiaries, Affiliates or stockholders or any other person or entity for any special, indirect, consequential or punitive damages, which may be alleged as a result of the Facilities or the Transactions. The provisions of this Section 9.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of the Administrative Agent, any Issuing Bank or any Lender. All amounts due under this Section 9.05 shall be payable within fifteen (15) days of written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
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(c) Except as expressly provided in Section 9.05(a) with respect to Other Taxes, which shall not be duplicative with any amounts paid pursuant to Section 2.17, this Section 9.05 shall not apply to any Taxes (other than Taxes that represent losses, claims, damages, liabilities and related expenses resulting from a non-Tax claim), which shall be governed exclusively by Section 2.17 and, to the extent set forth therein, Section 2.15.
(d) To the fullest extent permitted by applicable law, Holdings and the Borrower shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(e) The agreements in this Section 9.05 shall survive the resignation of the Administrative Agent, the Collateral Agent or any Issuing Bank, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations and the termination of this Agreement.
Section 9.06 Right of Set-off . If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of Holdings (prior to a Qualified IPO), the Borrower or any Subsidiary against any of and all the obligations of Holdings (prior to a Qualified IPO) or the Borrower now or hereafter existing under this Agreement or any other Loan Document held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured; provided , that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.22 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender and each Issuing Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have.
Section 9.07 Applicable Law . THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
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DOCUMENT (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLE OF CONFLICTS OF LAW THAT COULD REQUIRE THE APPLICATION OF ANY OTHER LAW.
Section 9.08 Waivers; Amendment . (a) No failure or delay of the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, each Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by Holdings, the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by clause (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, the Borrower or any other Loan Party in any case shall entitle such person to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (x) as provided in Section 2.21, (y) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings (prior to a Qualified IPO), the Borrower and the Required Lenders (or, in respect of any waiver, amendment or modification of Section 4.01 after the Closing Date, solely as relates to the Revolving Facility Loans and Letters of Credit, the Required Revolving Facility Lenders voting as a single Class, rather than the Required Lenders), and (z) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each Loan Party party thereto and the Administrative Agent and consented to by the Required Lenders; provided , however , that no such agreement shall:
(i) decrease or forgive the principal amount of, or extend the final maturity of, or decrease the rate of interest on, any Loan or any L/C Disbursement, or extend the stated expiration of any Letter of Credit beyond the applicable Revolving Facility Maturity Date (except as provided in Section 2.05(c)), without the prior written consent of each Lender directly adversely affected thereby (which, notwithstanding the foregoing, such consent of such Lender directly adversely affected thereby shall be the only consent required hereunder to make such modification); provided , that any amendment to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i),
(ii) increase or extend the Commitment of any Lender, or decrease the Commitment Fees, L/C Participation Fees or any other Fees of any Lender without the prior written consent of such Lender (which, notwithstanding the foregoing, such consent of such Lender shall be the only consent required hereunder to make such modification); provided , that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the aggregate Commitments shall not constitute an increase of the Commitments of any Lender,
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(iii) extend or waive any Term Loan Installment Date or reduce the amount due on any Term Loan Installment Date or extend any date on which payment of interest on any Loan or any L/C Disbursement or any Fees is due, without the prior written consent of each Lender directly adversely affected thereby (which, notwithstanding the foregoing, such consent of such Lender directly adversely affected thereby shall be the only consent required hereunder to make such modification),
(iv) amend the provisions of Section 7.02 in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby (which, notwithstanding the foregoing, such consent of such Lender directly adversely affected thereby shall be the only consent required hereunder to make such modification),
(v) amend or modify the provisions of this Section 9.08 or the definition of the terms Required Lenders, Majority Lenders or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the prior written consent of each Lender adversely affected thereby (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the Closing Date),
(vi) release all or substantially all of the Collateral or release all or substantially all of the Subsidiary Loan Parties from their respective Guarantees under the Subsidiary Guarantee Agreement, unless, in the case of a Subsidiary Loan Party, all or substantially all of the Equity Interests of such Subsidiary Loan Party is sold or otherwise disposed of in a transaction permitted by this Agreement or unless, in each case, such release is otherwise pursuant to the terms of the Collateral Agreement or the Subsidiary Guarantee Agreement, as applicable, without the prior written consent of each Lender;
(vii) effect any waiver, amendment or modification that by its terms adversely affects the rights in respect of payments or collateral of Lenders participating in any Facility differently from those of Lenders participating in another Facility, without the consent of the Majority Lenders participating in the adversely affected Facility (it being agreed that the Required Lenders may waive, in whole or in part, any prepayment or Commitment reduction required by Section 2.11 so long as the application of any prepayment or Commitment reduction still required to be made is not changed);
provided , further , that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, Swingline Lender or an Issuing Bank hereunder without the prior written consent of the Administrative Agent, Swingline Lender or such Issuing Bank acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any Assignee of such Lender.
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(c) Without the consent of any Lender or Issuing Bank, the Loan Parties and the Administrative Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law or this Agreement or in each case to otherwise enhance the rights or benefits of any Lender under any Loan Document.
(d) Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings (prior to a Qualified IPO) and the Borrower (a) to permit additional extensions of credit to be outstanding hereunder from time to time and the accrued interest and fees and other obligations in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and the Revolving Facility Loans and the accrued interest and fees and other obligations in respect thereof and (b) to include appropriately the holders of such extensions of credit in any determination of the requisite lenders required hereunder, including Required Lenders and the Required Revolving Facility Lenders.
(e) Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of the Borrower and the Administrative Agent (but without the consent of any Lender) to the extent necessary (A) to cure any ambiguity, omission, defect or inconsistency or (B) to integrate any Incremental Term Loan Commitments or Incremental Revolving Facility Commitments in a manner consistent with Section 2.21, including, with respect to Other Revolving Loans or Other Term Loans, as may be necessary to establish such Incremental Term Loan Commitments or Revolving Facility Loans as a separate Class or tranche from the existing Term Loan Commitments or Incremental Revolving Facility Commitments, as applicable, or (C) to cure any ambiguity, omission, defect or inconsistency.
(f) Each of the parties hereto hereby agrees that the Administrative Agent may take any and all action as may be necessary to ensure that all Term Loans established pursuant to Section 2.21 after the Closing Date that will be included in an existing Class of Term Loans outstanding on such date (an Applicable Date ), when originally made, are included in each Borrowing of outstanding Term Loans of such Class (the Existing Class Loans ), on a pro rata basis, and/or to ensure that, immediately after giving effect to such new Term Loans (the New Class Loans and, together with the Existing Class Loans, the Class Loans ), each Lender holding Class Loans will be deemed to hold its Pro Rata Share of each Class Loan on the Applicable Date (but without changing the amount of any such Lenders Term Loans), and each such Lender shall be deemed to have effectuated such assignments as shall be required to ensure
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the foregoing. The Pro Rata Share of any Lender on the Applicable Date is the ratio of (1) the sum of such Lenders Existing Class Loans immediately prior to the Applicable Date plus the amount of New Class Loans made by such Lender on the Applicable Date over (2) the aggregate principal amount of all Class Loans on the Applicable Date.
(g) With respect to the incurrence of any secured or unsecured Indebtedness (including any intercreditor agreement relating thereto), the Borrower may elect (in its discretion, but shall not be obligated) to deliver to the Administrative Agent a certificate of a Responsible Officer at least three Business Days prior to the incurrence thereof (or such shorter time as the Administrative Agent may agree), together with either drafts of the material documentation relating to such Indebtedness or a description of such Indebtedness (including a description of the Liens intended to secure the same or the subordination provisions thereof, as applicable) in reasonably sufficient detail to be able to make the determinations referred to in this paragraph, which certificate shall either, at the Borrowers election, (x) state that the Borrower has determined in good faith that such Indebtedness satisfies the requirements of the applicable provisions of Sections 6.01 and 6.02 (taking into account any other applicable provisions of this Section 9.08), in which case such certificate shall be conclusive evidence thereof, or (y) request the Administrative Agent to confirm, based on the information set forth in such certificate and any other information reasonably requested by the Administrative Agent, that such Indebtedness satisfies such requirements, in which case the Administrative Agent may determine whether, in its reasonable judgment, such requirements have been satisfied (in which case it shall deliver to the Borrower a written confirmation of the same), with any such determination of the Administrative Agent to be conclusive evidence thereof, and the Lenders hereby authorize the Administrative Agent to make such determinations.
(h) Notwithstanding the foregoing, this Agreement may be amended, waived or otherwise modified with the written consent of the Required Revolving Facility Lenders (and not the Required Lenders), the Administrative Agent, Holdings (prior to a Qualified IPO) and the Borrower with respect to the provisions of Section 4.01, solely as they relate to the Revolving Facility Loans and Letters of Credit.
Section 9.09 Interest Rate Limitation . Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the Charges ), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender or any Issuing Bank, shall exceed the maximum lawful rate (the Maximum Rate ) that may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender or such Issuing Bank, shall be limited to the Maximum Rate; provided , that such excess amount shall be paid to such Lender or such Issuing Bank on subsequent payment dates to the extent not exceeding the legal limitation.
Section 9.10 Entire Agreement . This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is
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superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect in accordance with its terms. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.
Section 9.11 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
Section 9.12 Severability . In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Section 9.13 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile transmission (or other electronic transmission pursuant to procedures approved by the Administrative Agent) shall be as effective as delivery of a manually signed original.
Section 9.14 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
Section 9.15 Jurisdiction; Consent to Service of Process . (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally
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submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any other Loan Party or its properties in the courts of any jurisdiction.
(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement or any other Loan Document to serve process in any other manner permitted by law.
Section 9.16 Confidentiality . Each of the Lenders, each Issuing Bank and each of the Agents agrees that it shall maintain in confidence any information relating to Holdings, any Parent Entity, the Borrower and any Subsidiary furnished to it by or on behalf of Holdings, any Parent Entity, the Borrower or any Subsidiary (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender, such Issuing Bank or such Agent without violating this Section 9.16 or (c) was available to such Lender, such Issuing Bank or such Agent from a third party having, to such persons knowledge, no obligations of confidentiality to Holdings, any Parent Entity, the Borrower or any other Loan Party) and shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know and any numbering, administration or settlement service providers or to any person that approves or administers the Loans on behalf of such Lender (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to, or examinations by, Governmental Authorities or self-regulatory authorities, including the National Association of Insurance Commissioners or the National Association of Securities Dealers, Inc., (C) to its parent companies, Affiliates or auditors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (D) in order to enforce its rights under any Loan Document in a legal proceeding, (E) to any pledgee under Section 9.04(d) or any other prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as such person shall have been instructed to keep the same confidential in
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accordance with this Section 9.16) and (F) to any direct or indirect contractual counterparty in Hedging Agreements or such contractual counterpartys professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 9.16).
Section 9.17 Platform; Borrower Materials . The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders and the Issuing Bank materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials ) by posting the Borrower Materials on IntraLinks or another similar electronic system (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 Holdings, the Borrower or its Subsidiaries or any of their respective securities) (each, a Public Lender ). The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (i) all such Borrower Materials 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, (ii) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers, the Issuing Bank and the Lenders to treat such Borrower Materials as solely containing information that is either (A) publicly available information or (B) not material (although it may be sensitive and proprietary) with respect to Holdings, the Borrower or its Subsidiaries or any of their respective securities for purposes of United States Federal and state securities laws ( provided , however , that such Borrower Materials shall be treated as set forth in Section 9.16, to the extent such Borrower Materials constitute information subject to the terms thereof), (iii) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Investor; and (iv) the Administrative Agent and the Arrangers 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.
Section 9.18 Release of Liens and Guarantees .
(a) The Lenders, the Issuing Banks and other Secured Parties hereby irrevocably agree that the Liens granted to the Collateral Agent by the Loan Parties on any Collateral shall be automatically released: (i) in full upon the occurrence of the Termination Date as set forth in Section 9.18(d) below; (ii) upon the Disposition of such Collateral by any Loan Party to a person that is not (and is not required to become) a Loan Party in a transaction not prohibited by this Agreement (and the Collateral Agent may rely conclusively on a certificate to that effect provided to it by any Loan Party upon its reasonable request without further inquiry), (iii) to the extent that such Collateral comprises property leased to a Loan Party by a person that is not a Loan Party, upon termination or expiration of such lease (and the Collateral Agent may rely conclusively on a certificate to that effect provided to it by any Loan Party upon its reasonable request without further inquiry), (iv) if the release of such Lien is approved, authorized or ratified in writing by the Required Lenders (or such other percentage of the Lenders whose consent may be required in accordance with Section 9.08), (v) to the extent that the property constituting such Collateral is owned by any Guarantor, upon the release of such Guarantor from its obligations under the Guarantee in accordance with the Holdings Guarantee
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and Pledge Agreement or the Subsidiary Guarantee, as applicable, or clause (b) below (and the Collateral Agent may rely conclusively on a certificate to that effect provided to it by any Loan Party upon its reasonable request without further inquiry), (vi) as provided in Section 8.11 (and the Collateral Agent may rely conclusively on a certificate to that effect provided to it by any Loan Party upon its reasonable request without further inquiry), and (vii) as required by the Collateral Agent to effect any Disposition of Collateral in connection with any exercise of remedies of the Collateral Agent pursuant to the Security Documents. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those being released) upon (or obligations (other than those being released) of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any Disposition, all of which shall continue to constitute part of the Collateral except to the extent otherwise released in accordance with the provisions of the Loan Documents.
(b) In addition, (i) the Lenders, the Issuing Banks and other Secured Parties hereby irrevocably agree that the Subsidiary Loan Parties shall be released from the Guarantees upon consummation of any transaction not prohibited hereunder resulting in such Subsidiary ceasing to constitute a Subsidiary Loan Party or otherwise becoming an Excluded Subsidiary (and the Collateral Agent may rely conclusively on a certificate to that effect provided to it by any Loan Party upon its reasonable request without further inquiry) and (ii) immediately prior to the consummation of a Qualified IPO, the Guarantee incurred by Holdings of the Obligations shall automatically terminate and Holdings shall be released from its obligations under the Loan Documents, shall cease to be a Loan Party and any Liens created by any Loan Documents on any assets or Equity Interests owned by Holdings shall automatically be released (unless the Borrower shall elect in its sole discretion that such release of Holdings shall not be effected).
(c) The Lenders, the Issuing Banks and other Secured Parties hereby authorize the Administrative Agent and the Collateral Agent, as applicable, to execute and deliver any instruments, documents, and agreements necessary or desirable to evidence and confirm the release of any Guarantor or Collateral pursuant to the foregoing provisions of this Section 9.18, all without the further consent or joinder of any Lender. Upon release pursuant to this Section 9.18, any representation, warranty or covenant contained in any Loan Document relating to any such Collateral or Guarantor shall no longer be deemed to be made. In connection with any release hereunder, the Administrative Agent and the Collateral Agent shall promptly (and the Secured Parties hereby authorize the Administrative Agent and the Collateral Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrowers expense in connection with the release of any Liens created by any Loan Document in respect of such Subsidiary, property or asset; provided , that the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower containing such certifications as the Administrative Agent shall reasonably request.
(d) Notwithstanding anything to the contrary contained herein or any other Loan Document, on the Termination Date, upon request of the Borrower, the Administrative Agent and/or the Collateral Agent, as applicable, shall (without notice to, or vote or consent of, any Secured Party) take such actions as shall be required to release its security interest in all Collateral, and to release all obligations under any Loan Document, whether or not
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on the date of such release there may be any (i) obligations in respect of any Secured Hedge Agreements or any Secured Cash Management Agreements and (ii) any contingent indemnification obligations or expense reimburse claims not then due; provided , that the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower containing such certifications as the Administrative Agent shall reasonably request. Any such release of obligations shall be deemed subject to the provision that such obligations shall be reinstated if after such release any portion of any payment in respect of the obligations guaranteed thereby shall be rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payment had not been made. The Borrower agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent or the Collateral Agent (and their respective representatives) in connection with taking such actions to release security interest in all Collateral and all obligations under the Loan Documents as contemplated by this Section 9.18(d).
(e) Obligations of the Borrower or any of its Subsidiaries under any Secured Cash Management Agreement or Secured Hedge Agreement (after giving effect to all netting arrangements relating to such Secured Hedge Agreements) shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed. No person shall have any voting rights under any Loan Document solely as a result of the existence of obligations owed to it under any such Secured Hedge Agreement or Secured Cash Management Agreement. For the avoidance of doubt, no release of Collateral or Guarantors effected in the manner permitted by this Agreement shall require the consent of any holder of obligations under Secured Hedge Agreements or any Secured Cash Management Agreements.
Section 9.19 Judgment Currency . If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of the Borrower in respect of any such sum due from it to the Administrative Agent or the Lenders hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the Judgment Currency ) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the Agreement Currency ), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent from the Borrower in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or the person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent in such currency, the Administrative Agent agrees to return the amount of any excess to the Borrower (or to any other person who may be entitled thereto under applicable law).
191
Section 9.20 USA PATRIOT Act Notice . Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the USA PATRIOT Act.
Section 9.21 Affiliate Lenders .
(a) Each Lender who is an Affiliate of the Borrower, excluding (x) Holdings, the Borrower and their respective Subsidiaries and (y) any Debt Fund Affiliate Lender (each, an Affiliate Lender ; it being understood that (x) neither Holdings, the Borrower, nor any of their Subsidiaries may be Affiliate Lenders and (y) Debt Fund Affiliate Lenders and Affiliate Lenders may be Lenders hereunder in accordance with Section 9.04, subject in the case of Affiliate Lenders, to this Section 9.21), in connection with any (i) consent (or decision not to consent) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document, (ii) other action on any matter related to any Loan Document or (iii) direction to the Administrative Agent, the Collateral Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, agrees that, except with respect to any amendment, modification, waiver, consent or other action (1) described in clauses (i), (ii), (iii) or (iv) of the first proviso of Section 9.08(b) or (2) that affects such Affiliate Lender (in its capacity as a Lender) in a disproportionately adverse manner as compared to other Lenders, such Affiliate Lender shall be deemed to have voted its interest as a Lender without discretion in such proportion as the allocation of voting with respect to such matter by Lenders who are not Affiliate Lenders. Each Affiliate Lender hereby irrevocably appoints the Administrative Agent (such appointment being coupled with an interest) as such Affiliate Lenders attorney-in-fact, with full authority in the place and stead of such Affiliate Lender and in the name of such Affiliate Lender, from time to time in the Administrative Agents discretion to take any action and to execute any instrument that the Administrative Agent may deem reasonably necessary to carry out the provisions of this clause (a).
(b) Notwithstanding anything to the contrary in this Agreement, no Affiliate Lender shall have any right to (a) attend (including by telephone) any meeting or discussions (or portion thereof) among the Administrative Agent or any Lender to which representatives of the Borrower are not then present, (b) receive any information or material prepared by Administrative Agent or any Lender or any communication by or among Administrative Agent and/or one or more Lenders, except to the extent such information or materials have been made available to the Borrower or its representatives, (c) make or bring (or participate in, other than as a passive participant in or recipient of its pro rata benefits of) any claim, in its capacity as a Lender, against Administrative Agent, the Collateral Agent or any other Lender with respect to any duties or obligations or alleged duties or obligations of such Agent or any other such Lender under the Loan Documents, (d) purchase any Term Loan if, after giving effect to such purchase, Affiliate Lenders in the aggregate would own Term Loans with an aggregate principal amount in excess of 25% of the aggregate principal amount of all Term Loans then outstanding or (e) purchase any Revolving Facility Loans or Revolving Facility Commitments.
192
Section 9.22 Agency of the Borrower for the Loan Parties .
Each of the other Loan Parties hereby appoints the Borrower as its agent for all purposes relevant to this Agreement and the other Loan Documents, including the giving and receipt of notices and the execution and delivery of all documents, instruments and certificates contemplated herein and therein and all modifications hereto and thereto.
Section 9.23 No Liability of the Issuing Banks . The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower proves were caused by (i) such Issuing Banks willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Banks willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.
Section 9.24 Application of Gaming Laws .
(a) This Agreement and the other Loan Documents are subject to Gaming Laws. Without limiting the foregoing and notwithstanding anything herein or in any other Loan Document to the contrary, the Lenders, Agents and Secured Parties acknowledge that (i) they are subject to the jurisdiction of the Gaming Authorities, in their discretion, for licensing, qualification or findings of suitability or to file or provide other information, and (ii) all rights, remedies and powers in or under this Agreement and the other Loan Documents, including with respect to the Collateral (including the pledge and delivery of the Pledged Collateral (as defined in the applicable Security Documents)), any Mortgaged Property and the ownership and operation of facilities, are, in each case, subject to the jurisdiction of the Gaming Authorities, and may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Laws and only to the extent that required approvals (including prior approvals) are obtained from the relevant Gaming Authorities.
193
(b) The Lenders, Agents and Secured Parties agree to cooperate with all Gaming Authorities in connection with the provision in a timely manner of such documents or other information as may be requested by such Gaming Authorities relating to the Loan or Loan Documents.
(c) The Lenders acknowledge and agree that if the Borrower receives a notice from any applicable Gaming Authority that any Lender is a Disqualified holder (and such Lender is notified by the Borrower in writing of such Disqualification), the Borrower shall, following any available appeal of such determination by such Gaming Authority (unless the rules of the applicable Gaming Authority do not permit such Lender to retain its Loans or Commitments pending appeal of such determination), have the right to (i) cause such Disqualified holder to transfer and assign, without recourse all of its interests, rights and obligations in its Loans and Commitments or (ii) in the event that (A) the Borrower is unable to assign such Loan or Commitments after using its best efforts to cause such an assignment and (B) no Default or Event of Default has occurred and is continuing, prepay such Disqualified holders Loan and terminate such Disqualified holders Commitments, as applicable. Notice to such Disqualified holder shall be given ten days prior to the required date of assignment or prepayment, as the case may be, and shall be accompanied by evidence demonstrating that such transfer or prepayment is required pursuant to Gaming Laws. If reasonably requested by any Disqualified holder, the Borrower will use commercially reasonable efforts to cooperate with any such holder that is seeking to appeal such determination and to afford such holder an opportunity to participate in any proceedings relating thereto. Notwithstanding anything herein to the contrary, any prepayment of a Loan shall be at a price that, unless otherwise directed by a Gaming Authority, shall be equal to the sum of the principal amount of such Loan and interest to the date on which such Lender or holder became a Disqualified holder (plus any fees and other amounts accrued for the account of such Disqualified holder to the date such Lender or holder became a Disqualified holder).
(d) If during the existence of an Event of Default hereunder or any of the other Loan Documents, it shall become necessary or, in the opinion of the Administrative Agent, advisable for an agent, supervisor, receiver or other representative of the Lenders to become licensed or found qualified under any Gaming Law as a condition to receiving the benefit of any Collateral encumbered by the Loan Documents or to otherwise enforce the rights of the Agents, Secured Parties and the Lenders under the Loan Documents, the Borrower hereby agrees to consent to the application for such license or qualification and to execute such further documents as may be required in connection with the evidencing of such consent.
[Signature Pages Follow]
194
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first written above.
AP GAMING HOLDINGS, LLC |
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By: |
/s/ Robert Miodunski |
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Name: Robert Miodunski |
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Title: Authorized Signatory |
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AP GAMING I, LLC |
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By: |
/s/ Robert Miodunski |
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Name: Robert Miodunski |
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Title: Authorized Signatory |
[Signature Page to First Lien Credit Agreement]
CITICORP NORTH AMERICA, INC.
as Administrative Agent and as a Lender |
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By: |
/s/ Matthew Burke | |
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Name: Matthew Burke |
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Title: Vice President |
[Signature Page to First Lien Credit Agreement]
CITICORP NORTH AMERICA, INC. as a Lender and as Issuing Bank |
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By: | /s/ Matthew Burke | |
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Name: Matthew Burke Title: Vice President |
[Signature Page to First Lien Credit Agreement]
CREDIT SUISSE AG, Cayman Islands Branch as a Revolving Facility Lender |
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By: | /s/ Robert Hetu | |
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Name: Robert Hetu Title: Authorized Signatory |
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By: | /s/ Alex Verdone | |
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Name: Alex Verdone Title: Authorized Signatory |
[Signature Page to First Lien Credit Agreement]
DEUTSCHE BANK AG NEW YORK BRANCH as a Revolving Facility Lender |
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By: | /s/ Mary Kay Coyle | |
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Name: Mary Kay Coyle Title: Managing Director |
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DEUTSCHE BANK AG NEW YORK BRANCH as a Revolving Facility Lender |
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By: | /s/ Anca Trifan | |
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Name: Anca Trifan Title: Managing Director |
AP Gaming I, LLC
[Signature Page to First Lien Credit Agreement]
NOMURA CORPORATE FUNDING AMERICAS, LLC as a Revolving Facility Lender |
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By: | /s/ Sean P. Kelly | |
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Name: Sean Kelly Title: Managing Director |
[Signature Page to First Lien Credit Agreement]
EXHIBIT A
EXECUTION
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the First Lien Credit Agreement, dated as of December 20, 2013 (as the same may be amended, restated, or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time (the Lenders ) and Citicorp North America, Inc., as administrative agent (in such capacity, the Administrative Agent ) for the Lenders. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Effective Date set forth below (the Effective Date ) (but not prior to the registration of the information contained herein in the Register pursuant to Section 9.04(b)(v) of the Credit Agreement), the interests set forth below (the Assigned Interest ) in the Assignors rights and obligations under the Credit Agreement and the other Loan Documents, including, without limitation, the amounts and percentages set forth below of (i) the Commitments of the Assignor on the Effective Date set forth below and (ii) the Loans owing to the Assignor which are outstanding on the Effective Date. Each of the Assignor and the Assignee hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Exhibit A hereto. From and after the Effective Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
2. Pursuant to Section 9.04(b)(ii) of the Credit Agreement, this Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if required by Section 9.04(b)(ii)(B) of the Credit Agreement, a processing and recordation fee of $3,500 and (ii) if the Assignee is not already a Lender under the Credit Agreement, a completed Administrative Questionnaire and any tax forms required to be delivered pursuant to Section 2.17 of the Credit Agreement.
3. This Assignment and Acceptance shall be construed in accordance with and governed by the laws of the State of New York, without regard to any principle of conflicts of law that could require the application of any other law.
Date of Assignment: |
Legal Name of Assignor ( Assignor ): |
Legal Name of Assignee ( Assignee ): |
Assignees Address for Notices: |
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Effective Date of Assignment: |
Facility/Commitment |
Principal Amount
Assigned 1 |
Percentage Assigned of
Commitment (set forth, to at least 8 decimals, as a percentage of the Facility and the Aggregate Commitments of all Lenders thereunder) |
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Term Loans/Facility Commitments |
$ | % | ||||||
Revolving Facility Loans/Commitments |
$ | % |
[Remainder of page intentionally left blank]
1 | Minimum amount of Commitments and/or Loans assigned is governed by Section 9.04(b)(ii) of the Credit Agreement. |
2 | To be completed to the extent consents are required under Section 9.04(b)(i) of the Credit Agreement. |
3 | Consent of the Administrative Agent shall not be required for an assignment of all or any portion of a Loan to a Lender, an Affiliate of a Lender, an Approved Fund or an Affiliate of the Borrower made in accordance with Section 9.04(i) (see Exhibit G to the Credit Agreement) or Section 9.21 of the Credit Agreement. |
4 | Consent of the Borrower shall not be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or if an Event of Default under Sections 7.01(b), (c), (h) or (i) of the Credit Agreement has occurred and is continuing. Consent of the Borrower, with respect to the assignment of a Term Loan, shall be deemed to have been given if the Borrower has not responded within ten (10) Business Days after any request for such consent. |
[Signature Page to the Assignment and Acceptance]
EXHIBIT A
REPRESENTATIONS AND WARRANTIES
Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
By executing and delivering this Assignment and Acceptance, the assigning Lender hereunder and the Assignee hereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows:
1. | Such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim and that its applicable Commitment, and the outstanding balances of its Term Loans and Revolving Facility Loans, in each case without giving effect to assignments hereof which have not become effective, are as set forth in such Assignment and Acceptance. |
2. | Except as set forth in (1) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, or the financial condition of Holdings, the Borrower or any Subsidiary or the performance or observance by Holdings, the Borrower or any Subsidiary of any of its obligations under the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto. |
3. | The Assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance. |
4. | The Assignee confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Section 3.05 (or delivered pursuant to Section 5.04) of the Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance. |
5. | The Assignee will independently and without reliance upon any Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement. |
Exh. A-1
6. | The Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to such Agent by the terms of the Credit Agreement, together with such powers as are reasonably incidental thereto. |
7. | The Assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender. |
Exh. A-2
EXHIBIT B
C ONFIDENTIAL I NFORMATION M EMORANDUM
Administrative Details Form
Deal Name:
General Information
Your Institutions Legal Name:
Tax Withholding:
Note: To avoid the potential of having interest income withheld, all investors must deliver all current and appropriate tax forms.
Tax ID #: |
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Sub-Allocation: ( United States only )
Note: If your institution is sub-allocating its allocation, please fill out the information below. Additionally, an administrative detail form is required for each legal entity. Execution copies (e.g. Credit Agreement/Assignment Agreement) will be sent for signature to the Sub-Allocation Contact below.
Sub-Allocated Amount: | $ | |||||
Signing Credit Agreement? | ¨ Yes | x No | ||||
Coming In Via Assignment? | ¨ Yes | x No |
Sub-Allocation Contact: | ||||||||
NAME: | ||||||||
Address: |
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E-mail: |
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City: |
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State: | Phone #: |
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Postal Code: |
Country: | Fax #: |
Contact List | ||||||||
Business/Credit Matters: ( Responsible for trading and credit approval process of the deal ) | ||||||||
Primary: |
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NAME: | ||||||||
Address: |
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E-mail: |
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City: |
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State: |
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Postal Code: |
Fax #: |
Backup: |
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NAME: | ||||||||
Address: |
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E-mail: |
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City: |
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State: | Phone #: |
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Postal Code: 10016 |
Country: | Fax #: |
C ONFIDENTIAL I NFORMATION M EMORANDUM
Administrative Details Form
Admin/Operations Matters: I
Primary:
NAME: I |
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Address: |
I |
E-mail: |
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City: |
New Castle | State: DE | Phone #: |
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Postal Code: |
Country: | Fax #: |
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Backup:
NAME: |
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Address: |
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E-mail: |
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City: |
New Castle | State: DE | Phone #: |
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Postal Code: |
Country: | Fax #: |
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Closing Contact: ( Responsible for Deal Closing matters )
NAME: |
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Address: |
See above |
E-mail: |
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City: |
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State: | Phone #: |
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Postal Code: |
Country: | Fax #: |
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Disclosure Contact: ( Receives disclosure materials, such as financial reports, via our web site )
NAME: | ||||||||
Address: |
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E-mail: |
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City: |
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State: | Phone #: |
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Postal Code: |
Country: | Fax #: |
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C ONFIDENTIAL I NFORMATION M EMORANDUM
Administrative Details Form
Routing Instructions
Routing Instructions for this deal: |
Correspondent Bank:
City: |
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State: | Account Name: | |||||||
______________ |
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Postal Code: | Account#: |
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Payment Type: | Benef. Acct. Name: |
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x Fed | ¨ ABA | ¨ CHIPS | Benef. Acct. #: |
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ABA/CHIPS # : |
Reference: |
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Attention: |
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Administrative Agent Information
Bank Loans Syndication FACILITY Agent Contact |
Agent Wiring Instructions | |||||
Name: | ||||||
Telephone: | Citibank N.A. | |||||
Fax: | ABA #: | |||||
Address: |
Acct Name: |
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Acct #: | ||||||
Email: |
EXHIBIT C
FORM OF
SOLVENCY CERTIFICATE
[], 201[]
This Solvency Certificate is delivered pursuant to Section 4.02(i) of the First Lien Credit Agreement, dated as of December 20, 2013 (as the same may be amended, restated, or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time (the Lenders ) and Citicorp North America, Inc., as Administrative Agent. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The undersigned hereby certifies, solely in [his][her] capacity as an Authorized Signatory of the Borrower and not in [his][her] individual capacity, as follows:
1. I am a Financial Officer of the Borrower. I am familiar with the Transactions, and have reviewed the Credit Agreement, financial statements referred to in Section 3.05 of the Credit Agreement and such documents and made such investigation as I have deemed relevant for the purposes of this Solvency Certificate.
2. As of the date hereof, immediately after giving effect to the consummation of the Transactions, on and as of such date (i) the fair value of the assets of the Borrower and its subsidiaries on a consolidated basis, at a fair valuation, exceeds the debts and liabilities, direct, subordinated, contingent or otherwise, of the Borrower and its subsidiaries on a consolidated basis; (ii) the present fair saleable value of the property of the Borrower and its subsidiaries on a consolidated basis is greater than the amount that will be required to pay the probable liability of the Borrower and its subsidiaries on a consolidated basis on their debts and other liabilities, direct, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Borrower and its subsidiaries on a consolidated basis are able to pay their debts and liabilities, direct, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Borrower and its subsidiaries on a consolidated basis do not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted following the Closing Date.
3. As of the date hereof, immediately after giving effect to the consummation of the Transactions, the Borrower does not intend to, and the Borrower does not believe that it or any of its subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing and amounts of cash to be received by it or any such subsidiary and the timing and amounts of cash to be payable on or in respect of its debts or the debts of any such subsidiary.
This Solvency Certificate is being delivered by the undersigned Authorized Signatory only in [his][her] capacity as a Financial Officer of the Borrower and not individually and the undersigned shall have no personal liability to the Administrative Agent or the Lenders with respect thereto.
[ Remainder of Page Intentionally Left Blank ]
IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate on the date first written above.
AP GAMING I, LLC, as Borrower |
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By: |
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Name: |
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Title: |
[Signature Page to the Solvency Certificate]
EXHIBIT D-1
FORM OF BORROWING REQUEST
Date: 1 ,
To: | Citicorp North America, Inc., as administrative agent (in such capacity, the Administrative Agent ) under that certain First Lien Credit Agreement, dated as of December 20, 2013 (as the same may be amended, restated, or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time and the Administrative Agent. |
Ladies and Gentlemen:
Reference is made to the above-described Credit Agreement. Terms defined in the Credit Agreement, wherever used herein, unless otherwise defined herein, shall have the same meanings herein as are prescribed by the Credit Agreement. The undersigned hereby irrevocably notifies you of the Borrowing specified below:
1. | The Borrowing will be a Borrowing of Loans. 2 |
2. | The aggregate amount of the proposed Borrowing is: $ . |
3. | The Business Day of the proposed Borrowing is: . |
4. | The Borrowing is comprised of $ of ABR Loans and $ of the Eurocurrency Loans. |
1 | The Borrower must notify the Administrative Agent by telephone not later than 12:00 p.m., Local Time (a) in the case of a Eurocurrency Borrowing, three (3) Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, no later than 10:00 a.m., Local Time, on the Business Day of the proposed Borrowing; provided , that, (i) to request a Borrowing on the Closing Date, the Borrower shall notify the Administrative Agent of such request by telephone not later than 5:00 p.m., Local Time, one Business Day prior to the Closing Date and (ii) any such notice of an ABR Revolving Facility Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., Local Time, on the date of the proposed Borrowing. Each telephonic Borrowing Request will be irrevocable and must be confirmed promptly by hand delivery or electronic means of this form to the Administrative Agent. |
2 | Term B Loans, Revolving Facility Loans, Refinancing Term Loans, Other Term Loans, Other Revolving Loans or Replacement Revolving Loans. |
5. | The duration of the Interest Period for the Eurocurrency Loans, if any, included in the Borrowing shall be month(s). |
6. | The location and number of the account to which the proceeds of such Borrowing are to be deposited is . |
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds thereof:
(A) The representations and warranties set forth in the Loan Documents are true and correct in all material respects as of the date hereof, with the same effect as though made on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of such earlier date); and
(B) No Event of Default or Default has occurred and is continuing or would result from the proposed Borrowing.
This Borrowing Request is issued pursuant to and is subject to the Credit Agreement, executed as of the date first written above.
AP GAMING I, LLC, as Borrower | ||
By: |
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Name: | ||
Title: |
[Signature Page to the Borrowing Request]
EXHIBIT D-2
FORM OF SWINGLINE BORROWING REQUEST
Date: 1 ,
To: | Citicorp North America, Inc., as administrative agent (in such capacity, the Administrative Agent ) under that certain First Lien Credit Agreement, dated as of December 20, 2013 (as the same may be amended, restated, or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time and the Administrative Agent. |
Ladies and Gentlemen:
Reference is made to the above-described Credit Agreement. Terms defined in the Credit Agreement, wherever used herein, unless otherwise defined herein, shall have the same meanings herein as are prescribed by the Credit Agreement. The undersigned hereby irrevocably notifies you, pursuant to Section 2.04(b) of the Credit Agreement, of the Swingline Borrowing specified below:
1. | The Business Day of the proposed Swingline Borrowing is: . |
2. | The amount of the proposed Swingline Borrowing is: $ . |
3. | The location and number of the account to which the proceeds of such Swingline Borrowing are to be deposited is . |
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Swingline Borrowing, before and after giving effect thereto and to the application of the proceeds thereof:
(A) The representations and warranties set forth in the Loan Documents are true and correct in all material respects as of the date hereof, with the same effect as though made on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of such earlier date); and
(B) No Event of Default or Default has occurred and is continuing or would result from the proposed Swingline Borrowing.
1 | The Borrower must notify the Administrative Agent and the Swingline Lender by telephone not later than 1:00 p.m., Local Time, on the day of the proposed Swingline Borrowing. Each telephonic Swingline Borrowing Request will be irrevocable and must be confirmed by delivery of this form by electronic means to the Administrative Agent. |
This Swingline Borrowing Request is issued pursuant to and is subject to the Credit Agreement, executed as of the date first written above.
AP GAMING I, LLC, as Borrower | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to the Swingline Borrowing Request]
EXHIBIT E
FORM OF INTEREST ELECTION REQUEST
Date: 1 ,
To: | Citicorp North America, Inc., as administrative agent for the Lenders (in such capacity, the Administrative Agent ) under that certain First Lien Credit Agreement, dated as of December 20, 2013 (as the same may be amended, restated, or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time and the Administrative Agent. |
Ladies and Gentlemen:
Reference is made to the above-described Credit Agreement. Terms defined in the Credit Agreement, wherever used herein, unless otherwise defined herein, shall have the same meanings herein as are prescribed by the Credit Agreement. This notice constitutes an Interest Election Request and the undersigned Borrower hereby makes an election with respect to Loans under the Credit Agreement, and in that connection such Borrower specifies the following information with respect to such election:
1. | Borrowing to which this request applies (including Facility, principal amount and Type of Loans subject to election): . 2 |
2. | Effective date of election (which shall be a Business Day): . |
3. | The Loans are to be [converted into] [continued as] [ABR] [Eurocurrency] Loans. |
4. | The duration of the Interest Period for the Eurocurrency Loans, if any, included in the election shall be months. |
(signature page follows)
1 | The Borrower must notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 of the Credit Agreement if such Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each telephonic Interest Election Request will be irrevocable and must be confirmed promptly by hand delivery or electronic means of this form to the Administrative Agent. |
2 | If different options are being elected with respect to different portions of the Borrowing, the portions thereof must be allocated to each resulting Borrowing (in which case the information to be specified pursuant to Paragraphs 3 and 4 shall be specified for each resulting Borrowing). |
This Interest Election Request is issued pursuant to and is subject to the Credit Agreement, executed as of the date first written above.
AP GAMING I, LLC, as Borrower | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to the Interest Election Request]
EXHIBIT F
[Reserved]
Exh. B-1
EXHIBIT G
FORM OF PERMITTED LOAN PURCHASE ASSIGNMENT AND ACCEPTANCE
Reference is made to the First Lien Credit Agreement, dated as of December 20, 2013 (as the same may be amended, restated, or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company ( Holdings ), AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time and Citicorp North America, Inc., as administrative agent (in such capacity, the Administrative Agent ). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The Assignor identified on Schedule l hereto (the Assignor ) and the [Borrower][Holdings] agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below) and pursuant to the terms and conditions set forth in the Credit Agreement for Permitted Loan Purchases (including, without limitation, Section 9.04(i) and 9.04(j) thereof), the interest described in Schedule 1 hereto (the Assigned Interest ) in and to the Assignors rights and obligations under the Credit Agreement with respect to those credit facilities contained in the Credit Agreement as are set forth on Schedule 1 hereto (individually, an Assigned Facility ; collectively, the Assigned Facilities ), in a principal amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Permitted Loan Purchase Assignment and Acceptance and to consummate the transactions contemplated hereby; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of the Subsidiaries or any other obligor or the performance or observance by the Borrower, any of the Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (d) attaches any Notes held by it evidencing the Assigned Facilities. To the extent the Assignor has retained any interest in the Assigned Facility and holds a Note evidencing such interest, the Assignor
hereby requests that the Administrative Agent exchange the attached Notes for a new Note or Notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally authorized to enter into this Permitted Loan Purchase Assignment and Acceptance and has taken all action necessary to execute and deliver this Permitted Loan Purchase Assignment and Acceptance and to consummate the transaction contemplated hereby; (b) represents and warrants that it satisfied the requirements, if any, specified in the Credit Agreement that are required to be satisfied in order to make a Permitted Loan Purchase of the Assigned Interest and (c) represents and warrants that it is not in possession of material non-public information (within the meaning of United States federal and state securities laws (or, in the case of any such person that is not a public reporting company, material information of a type that would not be reasonably expected to be publicly available if such person were a public reporting company) with respect to Holdings, the Borrower, the Subsidiaries or their respective securities that (A) has not been disclosed to the Assignor or the Lenders generally (other than because any such Assignor or other Lender does not wish to receive material non-public information (or, in the case of any such person that is not a public reporting company, material information of a type that would not be reasonably expected to be publicly available if such person were a public reporting company) with respect to Holdings, the Borrower, the Subsidiaries or their respective securities) and (B) could reasonably be expected to have a material effect upon, or otherwise be material to, Assignors decision to assign the Assigned Facilities to the Assignee.
4. The effective date of this Permitted Loan Purchase Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule 1 hereto (the Effective Date ). Following the execution of this Permitted Loan Purchase Assignment and Acceptance, the Assigned Interest shall be deemed to be automatically and immediately (contributed to the Borrower, if applicable, and) cancelled and extinguished. The Administrative Agent shall update the Register, effective as of the Effective Date, to record such event as if it were a prepayment of such Assigned Interest pursuant to Section 9.04(j) of the Credit Agreement.
5. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued prior to the Effective Date. No payments in respect of the Assigned Interest (which shall be deemed to have been cancelled and extinguished as of the Effective Date) shall be due to the Assignor or the Assignee from and after the Effective Date.
6. As of the Effective Date, the Assignor shall, to the extent provided in this Permitted Loan Purchase Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
2
7. This Permitted Loan Purchase Assignment and Acceptance shall be binding upon, and inure to the benefit of the parties hereto and their respective successors and assigns. This Permitted Loan Purchase Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Permitted Loan Purchase Assignment and Acceptance by electronic means shall be effective as delivery of a manually executed counterpart of this Permitted Loan Purchase Assignment and Acceptance.
8. This Permitted Loan Purchase Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York.
[ Signature page follows ]
3
IN WITNESS WHEREOF, the parties hereto have caused this Permitted Loan Purchase Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto.
[INSERT NAME], | ||
as Assignor | ||
By: |
|
|
Name: | ||
Title: | ||
[INSERT NAME], | ||
as Assignee | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to the Permitted Loan Purchase Assignment and Acceptance]
SCHEDULE 1
Assigned Interests
Facility Assigned |
(1) Amount
of Loans / Commitments Assigned |
(2) Aggregate
Amount of Commitments and Outstanding Loans of All Lenders |
(3) Aggregate Amount
of Outstanding Term Loans |
(1) / (2) x 100% | (1) / (3) x 100% | |||||
Term B Loans |
||||||||||
Refinancing Term Loans |
||||||||||
Other Term Loans |
||||||||||
Extended Term Loans |
EXHIBIT H
[Reserved]
EXHIBIT I-1
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Treated As Partnerships For
U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Credit Agreement, dated as of December 20, 2013 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time and Citicorp North America, Inc., as Administrative Agent. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to the provisions of Section 2.17(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Borrower and the Administrative Agent with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent in writing and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made by the Borrower or the Administrative Agent to the undersigned, or in either of the two calendar years preceding each such payment.
[Signature Page Follows]
[Foreign Lender] |
||
By: | ||
Name: | ||
Title: | ||
[Address] |
Dated: , 20[ ]
EXHIBIT I-2
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Treated As Partnerships For
U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Credit Agreement, dated as of December, 2013 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time and Citicorp North America, Inc., as Administrative Agent. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to the provisions of 2.17(e) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished the Borrower and the Administrative Agent with an IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent in writing and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding each such payment.
[Signature Page Follows]
[Foreign Lender] | ||
By: |
|
|
Name: | ||
Title: | ||
[Address] |
Dated: , 20[ ]
EXHIBIT I-3
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Treated As Partnerships For
U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Credit Agreement, dated as of December 20, 2013 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time (the Lenders ) and Citicorp North America, Inc., as Administrative Agent. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to the provisions of Section 2.17(e) and Section 9.04(d) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) with respect to such participation, it is not a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding each such payment.
[Signature Page Follows]
[Foreign Participant] | ||
By: |
|
|
Name: | ||
Title: | ||
[Address] |
Dated: , 20[ ]
EXHIBIT I-4
FORM OF U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Treated As Partnerships For
U.S. Federal Income Tax Purposes)
Reference is made to the First Lien Credit Agreement, dated as of December 20, 2013 (as amended, supplemented or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time (the Lenders ) and Citicorp North America, Inc., as Administrative Agent. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to the provisions of Section 2.17(e) and Section 9.04(d) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a 10-percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with an IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding each such payment.
[Signature Page Follows]
[Foreign Participant] | ||
By: |
|
|
Name: | ||
Title: | ||
[Address] |
Dated: , 20[ ]
[Signature Page to the Non-Bank Tax Certificate Exhibit I-4]
EXHIBIT J
FORM OF GLOBAL INTERCOMPANY NOTE
[], 201[]
FOR VALUE RECEIVED, each of the undersigned, to the extent a borrower from time to time from any other entity listed on the signature pages hereto (each, in such capacity, an Issuer ), hereby promises to pay on demand to the order of such other entity listed below (each, in such capacity as lender to the applicable Issuer, a Holder and, together with each Issuer, a Note Party ), in immediately available funds in the currencies as shall be agreed upon from time to time, at such location as the applicable Holder shall from time to time designate, the unpaid principal amount of all loans and advances or other credit extensions made by such Holder to such Issuer. Each Issuer promises also to pay interest on the unpaid principal amount of all such loans and advances or other credit extensions in like money at said location from the date of such loans and advances until paid at such rate per annum as shall be agreed upon from time to time by such Issuer and such Holder.
With respect to any Issuer and any Holder between whom loans, advances or other credit extensions exist as of the date of this intercompany promissory note (this Note ) (such loans, advances or other credit extensions, Existing Obligations ), (a) if any Existing Obligation is evidenced by a promissory note or other instrument or agreement in existence as of the date hereof (an Existing Note ), it is agreed to between such Issuer and such Holder that the obligations under such Existing Note are hereafter to be evidenced by this Note and (b) it is agreed to between such Issuer and such Holder that the agreements in existence as of the date hereof with respect to any Existing Obligation (including agreements contained in any Existing Note) as to principal, amortization, currency, payment location and interest rate (if any) will continue to have effect under this Note until modified by agreement between such Issuer and such Holder.
Reference is hereby made to the First Lien Credit Agreement, dated as of December 20, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company, AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the lenders party thereto from time to time (collectively, the Lenders and individually, a Lender ), Citicorp North America, Inc., as administrative agent (in such capacity, the Agent ). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
Anything in this Note to the contrary notwithstanding, the indebtedness evidenced by this Note owed by any Issuer that is the Borrower or a Subsidiary Loan Party to any Holder that is not a Loan Party shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to (i) all Obligations of the Borrower or such Issuer under the Credit Agreement and (ii) all other Indebtedness of such Issuer or any guaranty thereof other than Indebtedness that by its terms expressly provides that it shall not be Senior Indebtedness hereunder (such Obligations and such Indebtedness and other indebtedness and obligations in connection with any renewal, refunding, restructuring or refinancing thereof, including interest
thereon accruing after the commencement of any proceedings referred to in clause (i) below, whether or not such interest is an allowed claim in such proceeding, being hereinafter collectively referred to as Senior Indebtedness ):
(i) In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to any Issuer or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of such Issuer, whether or not involving insolvency or bankruptcy, then, if a Default has occurred and is continuing, (x) the holders of Senior Indebtedness shall be paid in full in cash in respect of all amounts constituting Senior Indebtedness before any Holder is entitled to receive (whether directly or indirectly), or make any demands for, any payment on account of this Note and (y) until the holders of Senior Indebtedness are paid in full in cash in respect of all amounts constituting Senior Indebtedness, any payment or distribution to which such Holder would otherwise be entitled (other than debt securities of such Issuer that are subordinated, to at least the same extent as this Note, to the payment of all Senior Indebtedness then outstanding (such securities being hereinafter referred to as Restructured Debt Securities )) shall be made to the holders of Senior Indebtedness;
(ii) if any Event of Default has occurred and is continuing with respect to any Senior Indebtedness (including any Default under the Credit Agreement), then no payment or distribution of any kind or character shall be made by or on behalf of any Issuer or any other Person on its behalf with respect to this Note; and
(iii) if any payment or distribution of any character, whether in cash, securities or other property (other than Restructured Debt Securities), in respect of this Note shall (despite these subordination provisions) be received by any Holder in violation of clause (i) or (ii) before all Senior Indebtedness shall have been paid in full in cash, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness (or their representatives), ratably according to the respective aggregate amounts remaining unpaid thereon, to the extent necessary to pay all Senior Indebtedness in full in cash.
To the fullest extent permitted by law, no present or future holder of Senior Indebtedness shall be prejudiced in its right to enforce the subordination of this Note by any act or failure to act on the part of any Issuer or by any act or failure to act on the part of such holder or any trustee or agent for such holder. Each Holder and each Issuer hereby agree that the subordination of this Note is for the benefit of the Agent and the Lenders and the Agent and the Lenders are obligees under this Note to the same extent as if their names were written herein as such and the Agent may, on behalf of itself and the Lenders, proceed to enforce the subordination provisions herein.
The indebtedness evidenced by this Note owed by any Issuer that is not the Borrower or a Subsidiary Loan Party shall not be subordinated to, and shall rank pari passu in right of payment with, any other obligation of such Issuer.
Notwithstanding the foregoing, nothing contained in the subordination provisions set forth above is intended to or will impair, as between each Issuer and each Holder, the obligations of such Issuer, which are absolute and unconditional, to pay to such Holder the principal of and interest on this Note as and when due and payable in accordance with its terms, or is intended to or will affect the relative rights of such Holder and other creditors of such Issuer other than the holders of Senior Indebtedness.
Each Holder is hereby authorized to record all loans and advances or other credit extensions made by it to any Issuer (all of which shall be evidenced by this Note), and all repayments or prepayments thereof, in its books and records, such books and records constituting prima facie evidence of the accuracy of the information contained therein. For the avoidance of doubt, this Note as between each Issuer and each Holder contains additional terms to any intercompany loan agreement between them and this Note does not in any way replace such intercompany loans between them nor does this Note in any way change the principal amount of any intercompany loans between them.
Upon execution and delivery after the date hereof by the Borrower or any subsidiary of the Borrower of a counterpart signature page hereto, such subsidiary shall become a Note Party hereunder with the same force and effect as if originally named as a Note Party hereunder. The rights and obligations of each Note Party hereunder shall remain in full force and effect notwithstanding the addition of any new Note Party as a party to this Note.
Each Issuer hereby waives presentment, demand, protest or notice of any kind in connection with this Note. All payments under this Note shall be made without offset, counterclaim or deduction of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[Remainder of page intentionally left blank ]
EACH AS ISSUER AND HOLDER: | ||
AP GAMING HOLDINGS, LLC | ||
By: |
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Name: | ||
Title: | ||
AP GAMING I, LLC | ||
By: |
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Name: | ||
Title: | ||
AP GAMING II, INC. | ||
By: |
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Name: | ||
Title: | ||
AP GAMING ACQUISITION, LLC | ||
By: |
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Name: | ||
Title: | ||
AP GAMING NV, LLC | ||
By: |
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Name: | ||
Title: | ||
AGS CAPITAL, LLC | ||
By: |
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Name: | ||
Title: |
[Signature Page to the Global Intercompany Note]
AGS, LLC | ||
By: |
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Name: |
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Title: |
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AGS PARTNERS, LLC | ||
By: |
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Name: |
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Title: |
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AGS ILLINOIS, LLLP | ||
By: |
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Name: |
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Title: |
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American Gaming Systems Canada ULC | ||
By: |
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Name: |
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Title: |
[Signature Page to the Global Intercompany Note]
Exhibit 10.19
COLLATERAL AGREEMENT
dated and effective as of
December 20, 2013
among
AP GAMING I, LLC,
each Subsidiary Party party hereto
and
CITICORP NORTH AMERICA, INC.,
as Collateral Agent
TABLE OF CONTENTS
Page | ||||
ARTICLE I. | ||||
DEFINITIONS | ||||
SECTION 1.01. Credit Agreement |
1 | |||
SECTION 1.02. Other Defined Terms |
1 | |||
ARTICLE II. | ||||
[INTENTIONALLY OMITTED] | ||||
ARTICLE III. | ||||
PLEDGE OF SECURITIES | ||||
SECTION 3.01. Pledge |
7 | |||
SECTION 3.02. Delivery of the Pledged Collateral |
9 | |||
SECTION 3.03. Representations, Warranties and Covenants |
10 | |||
SECTION 3.04. Certification of Limited Liability Company and Limited Partnership Interests |
11 | |||
SECTION 3.05. Registration in Nominee Name; Denominations |
12 | |||
SECTION 3.06. Voting Rights; Dividends and Interest, Etc |
12 | |||
SECTION 3.07. Unlimited Liability Corporations |
14 | |||
ARTICLE IV. | ||||
SECURITY INTERESTS IN PERSONAL PROPERTY | ||||
SECTION 4.01. Security Interest |
15 | |||
SECTION 4.02. Representations and Warranties |
17 | |||
SECTION 4.03. Covenants |
19 | |||
SECTION 4.04. Other Actions |
21 | |||
SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral |
22 | |||
ARTICLE V. | ||||
REMEDIES | ||||
SECTION 5.01. Remedies Upon Default |
23 | |||
SECTION 5.02. Application of Proceeds |
25 | |||
SECTION 5.03. Grant of License to Use Intellectual Property |
26 | |||
SECTION 5.04. Securities Act, Etc |
27 |
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Page | ||||
ARTICLE VI. | ||||
MISCELLANEOUS | ||||
SECTION 6.01. Notices |
27 | |||
SECTION 6.02. Security Interest Absolute |
27 | |||
SECTION 6.03. Limitation By Law |
28 | |||
SECTION 6.04. Binding Effect; Several Agreement |
28 | |||
SECTION 6.05. Successors and Assigns |
28 | |||
SECTION 6.06. Agents Fees and Expenses |
28 | |||
SECTION 6.07. Agent Appointed Attorney-in-Fact |
29 | |||
SECTION 6.08. GOVERNING LAW |
30 | |||
SECTION 6.09. Waivers; Amendment |
30 | |||
SECTION 6.10. WAIVER OF JURY TRIAL |
30 | |||
SECTION 6.11. Severability |
31 | |||
SECTION 6.12. Counterparts |
31 | |||
SECTION 6.13. Headings |
31 | |||
SECTION 6.14. Jurisdiction; Consent to Service of Process |
31 | |||
SECTION 6.15. Termination or Release |
32 | |||
SECTION 6.16. Additional Subsidiaries |
33 | |||
SECTION 6.17. Compliance with Gaming Laws |
34 | |||
SECTION 6.18. Subject to Any Applicable Intercreditor Agreement |
35 | |||
SECTION 6.19. Other First Lien Obligations |
35 | |||
SECTION 6.20. Person Serving as Agent |
36 | |||
SECTION 6.21. General Authority of the Agent |
36 | |||
SECTION 6.22. Application of Gaming Laws |
37 | |||
Schedules |
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Schedule I Subsidiary Parties |
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Schedule II Commercial Tort Claims |
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Schedule III Pledged Stock; Pledged Debt |
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Schedule IV Intellectual Property |
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Exhibits |
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Exhibit I Form of Supplement to the Collateral Agreement |
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Exhibit II Form of Perfection Certificate |
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Exhibit III Form of Other First Lien Secured Party Consent |
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Exhibit IV Form of Intellectual Property Security Agreement |
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COLLATERAL AGREEMENT dated and effective as of December 20, 2013 (this Agreement ), among AP GAMING I, LLC, a Delaware limited liability company (the Borrower ), each Subsidiary of the Borrower listed on Schedule I hereto and each Subsidiary of the Borrower that becomes a party hereto (each, a Subsidiary Party ) and CITICORP NORTH AMERICA, INC., as Collateral Agent (together with its successors and permitted assigns in such capacity, the Agent ) for the Secured Parties (as defined below).
Reference is made to the First Lien Credit Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement ), among the Borrower, AP Gaming Holdings, LLC, a Delaware limited liability company, the Lenders party thereto from time to time, the Agent, as administrative agent (together with its successors and assigns in such capacity, the Credit Agreement Agent ), and the other parties party thereto.
The Lenders and the Issuing Banks have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders and the Issuing Banks to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. The Subsidiary Parties, as affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement. The Subsidiary Parties are willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Banks to extend such credit under the Credit Agreement and to induce the holders of any other Other First Lien Obligations to make extensions of credit under the applicable Other First Lien Agreements, as applicable. Accordingly, the parties hereto agree as follows:
ARTICLE I.
Definitions
SECTION 1.01. Credit Agreement .
(a) Capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement. All terms defined in Article 9 of the New York UCC (as defined herein) and not defined in this Agreement or the Credit Agreement have the meanings specified therein. The term instrument shall have the meaning specified in Article 9 of the New York UCC.
(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.
SECTION 1.02. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
Account Debtor means any person who is or who may become obligated to any Pledgor under, with respect to or on account of an Account.
Agreement has the meaning assigned to such term in the introductory paragraph of this agreement, as amended, restated, supplemented or otherwise modified from time to time.
Applicable First Lien Representative means the Applicable Authorized Representative as defined in the First Lien Intercreditor Agreement upon and during the effectiveness thereof. The Applicable First Lien Representative shall be the Credit Agreement Agent unless and until another person is designated as the Applicable First Lien Representative pursuant to the First Lien Intercreditor Agreement.
Article 9 Collateral has the meaning assigned to such term in Section 4.01.
Authorized Representative means (i) the Credit Agreement Agent with respect to the Credit Agreement and (ii) with respect to any Series of Other First Lien Obligations, the duly authorized representative of the Secured Parties of such Series of Other First Lien Obligations designated as Authorized Representative for such Secured Parties in the related Other First Lien Secured Party Consent delivered to the Agent.
Borrower has the meaning assigned to such term in the introductory paragraph of this Agreement.
Collateral means Article 9 Collateral and Pledged Collateral. For the avoidance of doubt, the term Collateral does not include any Excluded Property.
Copyright License means any written agreement, now or hereafter in effect, granting any right to any Pledgor under any copyright (whether applied for or registered) now or hereafter owned by a third party, and all rights of any Pledgor under any such agreement (including any such rights that such Pledgor has the right to license).
Copyrights means all of the following now owned or hereafter acquired by any Pledgor (or, as required in the context of the definition of Copyright License, any third party licensor): (a) all copyright rights in any work subject to the copyright laws of the United States or any other country; and (b) all registrations and applications for registration of any such Copyright in the United States or any other country, including registrations, supplemental registrations and pending applications for registration in the United States Copyright Office, including those listed on Schedule IV .
Credit Agreement has the meaning assigned to such term in the preliminary statement of this Agreement.
Credit Agreement Agent has the meaning assigned to such term in the preliminary statement of this Agreement.
Credit Agreement Loan Obligations means the Loan Obligations as defined in the Credit Agreement.
Credit Agreement Secured Obligations means the Obligations as defined in the Credit Agreement.
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Credit Agreement Secured Parties means the Secured Parties as defined in the Credit Agreement.
Event of Default means an Event of Default under and as defined in the Credit Agreement or any Other First Lien Agreement.
Federal Securities Laws has the meaning assigned to such term in Section 5.04.
First Lien Intercreditor Agreement means a Permitted Pari Passu Intercreditor Agreement as defined in the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time).
General Intangibles means all general intangibles as defined in the New York UCC, including all choses in action and causes of action and all other intangible personal property of any Pledgor of every kind and nature (other than Accounts) now owned or hereafter acquired by any Pledgor, including corporate or other business records, indemnification claims, contract rights (including rights under leases, whether entered into as lessor or lessee, swap agreements and other agreements), Intellectual Property, goodwill, registrations, franchises, tax refund claims and any letter of credit rights, guarantee, claim, security interest or other security held by or granted to any Pledgor to secure payment by an Account Debtor of any of the Accounts.
Intellectual Property means all intellectual property of every kind and nature of any Pledgor, whether now owned or hereafter acquired by any Pledgor, including inventions, designs, Patents, Copyrights, Trademarks, Patent Licenses, Copyright Licenses, Trademark Licenses, trade secrets, domain names, confidential or proprietary technical and business information, know-how, show-how or other data or information and all related documentation.
Intellectual Property Collateral means any Article 9 Collateral consisting of Intellectual Property.
Intercreditor Agreement means a First Lien Intercreditor Agreement (upon and during the effectiveness thereof) or a Permitted Junior Intercreditor Agreement (upon and during the effectiveness thereof), as the case may be.
IP Security Agreement means those certain intellectual property security agreements executed in connection with this Agreement substantially in the form attached to this Agreement as Exhibit IV or such other form as shall be reasonably acceptable to the Agent, in each case, as may be from time to time modified, amended, restated and or supplemented.
Loan Documents means (a) the Credit Agreement, (b) all Other First Lien Agreements, (c) the Security Documents and (d) for purposes of Section 5.02 and Section 6.06 only, the First Lien Intercreditor Agreement (upon and during the effectiveness thereof).
Mortgaged Property means each Material Real Property encumbered by one or more Mortgages to secure the Secured Obligations.
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Mortgages means, collectively, the mortgages, trust deeds, deeds of trust, deeds to secure debt, assignment of leases and rents, and other security documents delivered from time to time with respect to the Mortgaged Properties, as amended, supplemented or otherwise modified from time to time.
Nevada Gaming Authority has the meaning assigned to such term in Section 6.17(a).
Nevada Gaming Laws has the meaning assigned to such term in Section 6.17(a).
Nevada Licensee has the meaning assigned to such term in Section 6.17(a).
New York UCC means the Uniform Commercial Code as from time to time in effect in the State of New York.
Other First Lien Agreement means any indenture, credit agreement (excluding the Credit Agreement) or other agreement, document or instrument, pursuant to which any Pledgor has or will incur Other First Lien Obligations; provided that, in each case, the Indebtedness thereunder has been designated as Other First Lien Obligations pursuant to and in accordance with Section 6.19.
Other First Lien Obligations means (a) the due and punctual payment by any Pledgor of (i) the unpaid principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable as a claim in such proceeding) on Indebtedness under any Other First Lien Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations of such Pledgor to any Secured Party under any Other First Lien Agreement, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable as a claim in such proceeding), (b) the due and punctual performance of all other obligations of such Pledgor under or pursuant to any Other First Lien Agreement and (c) the due and punctual payment and performance of all the obligations of each other Pledgor under or pursuant to any Other First Lien Agreement.
Other First Lien Secured Parties means, collectively, the holders of Other First Lien Obligations and any Authorized Representative with respect thereto.
Other First Lien Secured Party Consent means a consent substantially in the form of Exhibit III to this Agreement (or such other form as the Agent may agree) executed by the Authorized Representative of any holders of Other First Lien Obligations pursuant to Section 6.19.
Patent License means any written agreement, now or hereafter in effect, granting to any Pledgor any right to make, use or sell any invention covered by a letters patent or patent application now or hereafter owned by a third party (including any such rights that such Pledgor has the right to license).
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Patents means all of the following now owned or hereafter acquired by any Pledgor (or, as required in the context of the definition of Patent License, any third party licensor): (a) all letters patent of the United States or the equivalent thereof in any other country, and all applications for letters patent of the United States or the equivalent thereof in any other country, including those listed on Schedule IV , and (b) all reissues, continuations, divisions, continuations-in-part or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein.
Perfection Certificate means a certificate substantially in the form of Exhibit II , completed and supplemented with the schedules and attachments contemplated thereby, and duly executed by a Responsible Officer of the Borrower.
Permitted Liens means Liens that are (a) permitted by Section 6.02 of the Credit Agreement and (b) not prohibited by any Other First Lien Agreement.
Pledged Collateral has the meaning assigned to such term in Section 3.01.
Pledged Debt has the meaning assigned to such term in Section 3.01.
Pledged Securities means any promissory notes, stock certificates or other certificated securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.
Pledged Stock has the meaning assigned to such term in Section 3.01.
Pledgor means (i) with respect to the Credit Agreement Secured Obligations, the Borrower and each Subsidiary Party; and (ii) with respect to any Series of Other First Lien Obligations, the Borrower and each Subsidiary Party, excluding any of the foregoing if such person or persons are not intended to provide collateral with respect to such Series pursuant to the terms of the Other First Lien Agreement governing such Series.
Prior Agent has the meaning assigned to such term in Section 6.21.
Real Property means, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Pledgor, together with, in each case, all easements, hereditaments and appurtenances relating thereto, and all improvements situated, placed or constructed upon, or fixed to or incorporated into, or which becomes a component part of such real property, and appurtenant fixtures incidental to the ownership or lease thereof.
Regulation S-X Excluded Collateral has the meaning assigned to such term in Section 3.01.
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Requirement of Law means, as to any person, any law, treaty, rule, regulation, statute, order, ordinance, decree, judgment, consent decree, writ, injunction, settlement agreement or governmental requirement enacted, promulgated or imposed or entered into or agreed by any Governmental Authority or Gaming Authority (including Gaming Laws), in each case applicable to or binding upon such person or any of its property or assets or to which such person or any of its property or assets is subject.
Rule 3-10 has the meaning assigned to such term in Section 3.01.
Rule 3-16 has the meaning assigned to such term in Section 3.01.
SEC has the meaning assigned to such term in Section 3.01
Secured Obligations means, collectively, the Credit Agreement Secured Obligations and any Other First Lien Obligations, or any of the foregoing.
Secured Parties means the persons holding any Secured Obligations and in any event including (i) all Credit Agreement Secured Parties and (ii) all Other First Lien Secured Parties.
Security Documents has the meaning assigned to such term in the Credit Agreement and any analogous term in any Other First Lien Agreement (but, with respect to the Secured Obligations of any Series, the term Security Documents shall not include any document which by its terms is solely for the benefit of the holders of one or more other Series of Secured Obligations and not such Series of Secured Obligations).
Security Interest has the meaning assigned to such term in Section 4.01.
Series means (a) with respect to the Secured Parties, each of (i) the Credit Agreement Secured Parties (in their capacities as such) and (ii) the Other First Lien Secured Parties that become subject to this Agreement and the First Lien Intercreditor Agreement after the date hereof that are represented by a common Authorized Representative (in its capacity as such for such Other First Lien Secured Parties) and (b) with respect to any Secured Obligations, each of (i) the Credit Agreement Secured Obligations and (ii) the Other First Lien Obligations incurred pursuant to any Other First Lien Agreement, which pursuant to any Other First Lien Secured Party Consent, are to be represented hereunder by a common Authorized Representative (in its capacity as such for such Other First Lien Obligations).
Specified Excluded Collateral means, solely with respect to any Series of Other First Lien Obligations, any asset that is not intended to be collateral with respect to such Series pursuant to the terms of the Other First Lien Agreement governing such Series (including the Regulation S-X Excluded Collateral to the extent applicable to such Series in accordance with the last paragraph of Section 3.01).
Subsidiary Party has the meaning assigned to such term in the preliminary statement of this Agreement.
Successor Agent has the meaning assigned to such term in Section 6.21.
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Termination Date means the Termination Date as defined in the Credit Agreement.
Trademark License means any written agreement, now or hereafter in effect, granting to any Pledgor any right to use any trademark, service mark or general intangibles of like nature now or hereafter owned by a third party (including any such rights that such Pledgor has the right to license).
Trademarks means all of the following now owned or hereafter acquired by any Pledgor (or, as required in the context of the definition of Trademark License, any third party licensor): (a) all trademarks, service marks, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations thereof (if any), and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States or any other country or any political subdivision thereof, and all renewals thereof, including those listed on Schedule IV and (b) all goodwill associated with or symbolized by the foregoing.
ULC has the meaning assigned to such term in Section 3.07.
ULC Interests has the meaning assigned to such term in Section 3.07.
ULC Laws means the Companies Act (Nova Scotia), the Business Corporations Act (Alberta) and the Business Corporations Act (British Columbia).
ARTICLE II.
[Intentionally Omitted]
ARTICLE III.
Pledge of Securities
SECTION 3.01. Pledge . As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Pledgor hereby assigns and pledges to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, and hereby grants to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, a security interest in all of such Pledgors right, title and interest in, to and under:
(a) the Equity Interests directly owned by it (which such Equity Interests constituting Pledged Stock on the date hereof shall be listed on Schedule III ) and any other Equity Interests obtained in the future by such Pledgor and any certificates representing all such Equity Interests (the Pledged Stock ); provided that the Pledged Stock shall not include any Excluded Property;
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(b) (i) the debt securities currently issued to any Pledgor (which debt securities constituting Pledged Debt shall be listed on Schedule III ), (ii) any debt securities in the future issued to such Pledgor and (iii) the promissory notes and any other instruments, if any, evidencing such debt securities (the items referred to in subclauses (i) through (iii), collectively, the Pledged Debt ); provided that the Pledged Debt shall not include any Excluded Property;
(c) subject to Section 3.06, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other proceeds received in respect of, the Pledged Stock and the Pledged Debt;
(d) subject to Section 3.06, all rights and privileges of such Pledgor with respect to the Pledged Stock and the Pledged Debt and other property referred to in clause (c) above; and
(e) all proceeds of any of the foregoing (the items referred to in clauses (a) through this clause (e) being collectively referred to as the Pledged Collateral ); provided , that the Pledged Collateral shall not include any Excluded Property.
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, forever; subject , however , to the terms, covenants and conditions hereinafter set forth.
Notwithstanding anything else to the contrary, in the event that Rule 3-10 ( Rule 3-10 ) or Rule 3-16 ( Rule 3-16 ) of Regulation S-X under the Securities Act of 1933, as amended, as amended, modified or interpreted by the Securities Exchange Commission ( SEC ), would require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any other Governmental Authority) of separate financial statements of the Borrower or any Subsidiary of the Borrower due to the fact that such persons Equity Interests secure any Series of the Other First Lien Obligations affected thereby, then the Equity Interests of such person (the Regulation S-X Excluded Collateral ) will automatically be deemed not to be part of the Collateral securing such Series of Other First Lien Obligations affected thereby, but only to the extent necessary to not be subject to such requirement and only for so long as required to not be subject to such requirement. In such event, this Agreement may be amended or modified, without the consent of any Secured Party, to the extent necessary to release the Lien on the Regulation S-X Excluded Collateral in favor of the Agent with respect only to the relevant Series of Other First Lien Obligations. In the event that Rule 3-10 or Rule 3-16 is amended, modified or interpreted by the SEC to permit (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) any Regulation S-X Excluded Collateral to secure the Other First Lien Obligations in excess of the amount then pledged without the filing with the SEC (or any other Governmental Authority) of separate financial statements of such person, then the Equity Interests of such person will automatically be deemed to be a part of the Collateral for the relevant Series of Other First Lien Obligations. For the avoidance of doubt and notwithstanding anything to the contrary in this Agreement, nothing in this paragraph shall limit the pledge of such Equity Interests and other securities from securing the Secured Obligations (other than the relevant Series of
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Other First Lien Obligations) at all relevant times or from securing any Other First Lien Obligations that are not in respect of securities subject to regulation by the SEC. To the extent any proceeds of any collection or sale of Equity Interests deemed by this paragraph to no longer constitute part of the Collateral for the relevant Series of Other First Lien Obligations are to be applied by the Agent in accordance with Section 5.02 hereof, such proceeds shall, notwithstanding the terms of Section 5.02 and the First Lien Intercreditor Agreement, not be applied to the payment of such Series of Other First Lien Obligations.
SECTION 3.02. Delivery of the Pledged Collateral .
(a) Subject to the provisions of Section 6.17, each Pledgor agrees promptly (and in any event within 45 days after the acquisition (or such longer time as the Applicable First Lien Representative shall permit in its reasonable discretion)) to deliver or cause to be delivered to the Agent, for the benefit of the Secured Parties, any and all Pledged Securities to the extent such Pledged Securities are either (i) Equity Interests that constitute Pledged Stock or (ii) in the case of promissory notes or other instruments evidencing Indebtedness, are required to be delivered pursuant to paragraph (b) of this Section 3.02.
(b) Each Pledgor will cause any Indebtedness for borrowed money (other than Excluded Property) (i) having, in each case, an aggregate principal amount in excess of $2,000,000 or (ii) payable by the Borrower or any Subsidiary owed to such Pledgor by any person to be evidenced by a duly executed promissory note that is pledged and delivered to the Agent, for the benefit of the Secured Parties, pursuant to the terms hereof (including clause (a) above). To the extent any such promissory note is a demand note, each Pledgor party thereto agrees, if requested by the Agent, to immediately demand payment thereunder upon an Event of Default specified under Section 7.01(b), (c), (h) or (i) of the Credit Agreement or under any equivalent provision of any Other First Lien Agreement, unless such demand would not be commercially reasonable or would otherwise expose such Pledgor to liability to the maker.
(c) Subject to the provisions of Section 6.17, upon delivery to the Agent, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraphs (a) and (b) of this Section 3.02 shall be accompanied by stock powers or note powers, as applicable, duly executed in blank or other instruments of transfer reasonably satisfactory to the Agent and by such other instruments and documents as the Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied to the extent necessary to perfect the security interest in or allow realization on the Pledged Collateral by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule III (or a supplement to Schedule III , as applicable) and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.
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SECTION 3.03. Representations, Warranties and Covenants . The Pledgors, jointly and severally, represent, warrant and covenant to and with the Agent, for the benefit of the Secured Parties, that:
(a) Schedule III (as supplemented after the date hereof from time to time, as applicable) correctly sets forth (and, with respect to any Pledged Stock issued by an issuer that is not a subsidiary of the Borrower, correctly sets forth, to the knowledge of the relevant Pledgor), as of the date of such Schedule (or supplement, as applicable), the percentage of the issued and outstanding Equity Interests of the issuer thereof represented by such Pledged Stock and includes (i) all Equity Interests required to be pledged hereunder and (ii) all debt securities and promissory notes or instruments evidencing Indebtedness, in each case of this clause (ii), required to be pledged hereunder (and, in each case, to otherwise satisfy the Collateral and Guarantee Requirement);
(b) the Pledged Stock (and, with respect to any Pledged Stock issued by an issuer that is not a subsidiary of the Borrower, to the knowledge of the relevant Pledgor) have been duly and validly authorized and issued by the issuers thereof and are fully paid and, with respect to Equity Interests constituting capital stock of a corporation, nonassessable (subject to the assessability of the shares of a ULC under the ULC Laws);
(c) except for the security interests granted hereunder (or otherwise not prohibited by the Loan Documents and each Other First Lien Agreement then in effect), each Pledgor (i) is and, subject to any transfers made not in violation of the Credit Agreement and each Other First Lien Agreement, will continue to be, the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule III as owned by such Pledgor, (ii) holds the same free and clear of all Liens, other than Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than pursuant to a transaction not prohibited by the Credit Agreement and each Other First Lien Agreement and other than Permitted Liens, and (iv) subject to the rights of such Pledgor under the Loan Documents and each Other First Lien Agreement then in effect to Dispose of Pledged Collateral, will use commercially reasonable efforts to defend its title or interest thereto or therein against any and all Liens (other than Permitted Liens), however arising, of all persons;
(d) other than as set forth in the Credit Agreement or the schedules thereto or, after the termination of the Credit Agreement, in any Other First Lien Agreement, and except for restrictions and limitations imposed by the Loan Documents, any Other First Lien Agreement, Gaming Laws or securities laws generally or otherwise not prohibited by the Credit Agreement and each Other First Lien Agreement (or, in the case of shares of a ULC, any requirement under the ULC Laws that transfers of such shares be approved by the directors of the ULC), the Pledged Stock (other than partnership interest) is and will continue to be freely transferable and assignable, and none of the Pledged Stock is or will be subject to any option, right of first refusal, shareholders agreement, charter, by-law, memorandum of association or articles of association provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Collateral hereunder, the Disposition thereof pursuant hereto or the exercise by the Agent of rights and remedies hereunder other than under applicable Requirements of Law (including Gaming Laws);
(e) each Pledgor has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;
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(f) other than as set forth in the Credit Agreement or the schedules thereto or as required under Gaming Laws, as of the date hereof, no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);
(g) by virtue of the execution and delivery by the Pledgors of this Agreement, when any Pledged Securities are delivered to the Agent, for the benefit of the Secured Parties, in accordance with this Agreement and a financing statement naming the Agent as the secured party and covering the Pledged Collateral to which such Pledged Securities relate is filed in the appropriate filing office pursuant to Section 4.02(b), the Agent will obtain, for the benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Collateral under the applicable Uniform Commercial Code, subject only to Permitted Liens, as security for the payment and performance of the Secured Obligations to the extent such perfection is governed by the applicable Uniform Commercial Code; and
(h) Subject to Section 6.17, the pledge effected hereby is effective to vest in the Agent, for the benefit of the Secured Parties, the rights of the Agent in the Pledged Collateral as set forth herein.
SECTION 3.04. Certification of Limited Liability Company and Limited Partnership Interests .
(a) In respect of each interest in any limited liability company or limited partnership Controlled by any Pledgor, pledged hereunder and that is a security (within the meaning of Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction), such interest shall at all times be a security governed by Article 8 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction and at all times be evidenced by a certificate delivered to the Agent pursuant to the terms hereof, unless promptly thereafter (and in any event within 30 days or such longer period as the Agent may permit in its reasonable discretion), such Pledgor provides notification to the Agent of the election to have such interest no longer constitute a security (within the meaning of Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction), and thereafter complies with the following clause (b).
(b) In respect of each interest in any limited liability company or limited partnership Controlled by a Pledgor, pledged hereunder and that is not a security (within the meaning of Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction), such Pledgor shall at no time elect to treat such interest as a security within the meaning of Article 8 of the New York UCC or issue any certificate representing such interest, unless promptly thereafter (and in any event within 30 days or such longer period as the Agent may permit in its reasonable discretion), such Pledgor provides notification to the Agent of such election and delivers any such certificate to the Agent pursuant to the terms hereof.
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SECTION 3.05. Registration in Nominee Name; Denominations . The Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities (other than Pledged Securities that are ULC Interests) in the name of the applicable Pledgor, endorsed or assigned in blank or in favor of the Agent or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Following the occurrence and during the continuance of an Event of Default, each Pledgor will promptly give to the Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. If an Event of Default shall have occurred and be continuing, the Agent shall have the right to exchange the certificates representing Pledged Securities (other than Pledged Securities that are ULC Interests) for certificates of smaller or larger denominations for any purpose consistent with this Agreement. With respect to Pledged Securities that are ULC Interests, at any time at which an Event of Default has occurred and is continuing, the Agent shall have the right to require the Pledgors to cause the ULC Interests to be transferred and registered as the Agent may direct and each applicable Pledgor covenants that, at the time of any such transfer, it will provide all required consents and approvals. Each Pledgor shall use its commercially reasonable efforts to cause any Subsidiary of the Borrower that is not a party to this Agreement to comply with a request by the Agent, pursuant to this Section 3.05, to exchange certificates representing Pledged Securities of such Subsidiary for certificates of smaller or larger denominations.
SECTION 3.06. Voting Rights; Dividends and Interest, Etc .
(a) Unless and until an Event of Default shall have occurred and be continuing and the Agent shall have given written notice to the relevant Pledgors of the Agents intention to exercise its rights hereunder:
(i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Collateral or any part thereof for any purpose not prohibited by the terms of this Agreement, the Credit Agreement and each Other First Lien Agreement then in effect; provided that, except as not prohibited by the Credit Agreement, any other Loan Documents and each Other First Lien Agreement then in effect, such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights and remedies of any of the Agent or the other Secured Parties under this Agreement, the Credit Agreement, any other Loan Documents or any Other First Lien Agreement or the ability of the Secured Parties to exercise the same.
(ii) The Agent shall promptly execute and deliver to each Pledgor, or cause to be executed and delivered to such Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.
(iii) Each Pledgor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are not prohibited by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, any other Loan Documents and each Other First Lien Agreement then in effect and applicable laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged
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Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities, received in exchange for Pledged Securities or any part thereof, or in redemption thereof or as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, shall be promptly (and in any event within 45 days following their receipt (or such longer time as the Applicable First Lien Representative shall permit in its reasonable discretion)) delivered to the Agent, for the benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Agent).
(b) Upon the occurrence and during the continuance of an Event of Default and upon written notice by the Agent to the relevant Pledgors of the Agents intention to exercise its rights hereunder, all rights of any Pledgor to receive dividends, interest, principal or other distributions with respect to the Pledged Securities that are not ULC Interests that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall cease, and all such rights shall thereupon become vested, for the benefit of the Secured Parties, in the Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions; provided , that notwithstanding the occurrence and continuation of an Event of Default, any Pledgor may continue to exercise dividend and distribution rights solely to the extent permitted under subclause (i), subclause (iii) and subclause (v) of Section 6.06(b) of the Credit Agreement. All dividends, interest, principal or other distributions received by any Pledgor contrary to the provisions of this Section 3.06 shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Agent, for the benefit of the Secured Parties, and shall be forthwith delivered to the Agent, for the benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Agent). Any and all money and other property paid over to or received by the Agent pursuant to the provisions of this paragraph (b) shall be retained by the Agent in an account to be established by the Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Borrower has delivered to the Agent a certificate to that effect, the Agent shall promptly repay to each Pledgor (without interest) all dividends, interest, principal or other distributions that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.06 and that remain in such account. With respect to Pledged Securities that are ULC Interests, all rights of any Pledgor to receive dividends, interest, principal or other distributions (except for any dividend or distribution comprised of Pledged Securities that are certificated, which shall be delivered to the Agent to hold hereunder in accordance with the terms herein) that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.06 shall continue and not become vested or held in trust for or on behalf of the Agent until such time as such ULC Interests are effectively transferred into the name of the Agent, any other Secured Party or any other Person on the books and records of the applicable ULC.
(c) Upon the occurrence and during the continuance of an Event of Default and after written notice by the Agent to the Borrower of the Agents intention to exercise its rights hereunder, subject to applicable Gaming Laws, all rights of any Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i)
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of this Section 3.06 with respect to Pledged Securities that are not ULC Interests, and the obligations of the Agent under paragraph (a)(ii) of this Section 3.06, shall cease, and all such rights shall thereupon become vested in the Agent, for the benefit of the Secured Parties, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Applicable First Lien Representative, the Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived and the Borrower has delivered to the Agent a certificate to that effect, all rights of any Pledgor to exercise the voting and/or other consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.06 shall continue and all such rights shall no longer be vested in the Agent for the benefit of the Secured Parties, and the obligations of the Agent under paragraph (a)(ii) of this Section 3.06 shall be reinstated. With respect to Pledged Securities that are ULC Interests, all rights of any Pledgor to exercise the voting and/or other consensual rights and powers that such Pledgor is authorized to exercise pursuant to paragraph (a)(i) of this Section 3.06 shall continue and all such rights shall not become vested in the Agent or the Agent for the benefit of the Secured Parties until such time as such ULC Interests are effectively transferred into the name of the Agent, any other Secured Party or any other Person on the books and records of the applicable ULC.
(d) Any notice given by the Agent to the Borrower suspending any Pledgors rights under paragraph (a)(i) of this Section 3.06 may be given by telephone if promptly confirmed in writing and (ii) may suspend the rights of the Pledgors under paragraph (a)(i) or paragraph (a)(iii) of this Section 3.06 in part without suspending all such rights (as specified by the Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Agents rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.
SECTION 3.07. Unlimited Liability Corporations . Notwithstanding the grant of security interest made by a Pledgor in favor of the Agent, its successor and assigns, for the benefit of the Secured Parties, of all of its Pledged Securities, any Pledgor that owns any shares or other Equity Interests in the capital stock (for the purposes of this Article III, ULC Interests ) in any unlimited liability corporation (for the purposes of this Article III, a ULC ) pledged hereunder shall remain registered as the sole registered and beneficial owner of such ULC Interests and will remain as registered and beneficial owner until such time as such ULC Interests are effectively transferred into the name of the Agent, any other Secured Party or any other person on the books and records of such ULC. Nothing in this Agreement is intended to or shall constitute the Agent, any other Secured Party or any person as a shareholder of any ULC until such time as notice is given to such ULC and further steps are taken thereunder so as to register the Agent, any other Secured Party or any other person as the holder of the ULC Interests of such ULC. To the extent any provision hereof would have the effect of constituting the Agent, any other Secured Party or any other person as a shareholder of a ULC prior to such time, such provision shall be severed therefrom and ineffective with respect to the ULC Interests of such ULC without otherwise invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it relates to Pledged Securities which are not ULC Interests. Except upon the exercise of rights to sell or otherwise dispose of ULC Interests following the occurrence and during the continuance of an Event of Default hereunder, no Pledgor
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shall cause or permit, or enable any ULC in which it holds ULC Interests to cause or permit, the Agent, or any other Secured Party to: (a) be registered as shareholders of such ULC; (b) have any notation entered in its favor in the share register of such ULC; (c) be held out as a shareholder of such ULC; (d) receive, directly or indirectly, any dividends, property or other distributions from such ULC by reason of the Agent holding a security interest in such ULC; or (e) act as a shareholder of such ULC, or exercise any rights of a shareholder of such ULC including the right to attend a meeting of, or to vote the ULC Interests of, such ULC.
ARTICLE IV.
Security Interests in Personal Property
SECTION 4.01. Security Interest .
(a) As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Pledgor hereby assigns and pledges to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, and hereby grants to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, a security interest (the Security Interest ) in all right, title and interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the Article 9 Collateral ):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all cash and Deposit Accounts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) Goods;
(ix) all Instruments other than to the extent constituting Pledged Debt, which are governed by Article II;
(x) all Intellectual Property;
(xi) all Inventory;
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(xii) all Investment Property (other than to the extent constituting Pledged Collateral, which are governed by Article II);
(xiii) all Letter of Credit Rights;
(xiv) all Commercial Tort Claims described on Schedule II hereto (as may be supplemented from time to time pursuant to Section 4.04);
(xv) all books and records pertaining to the Article 9 Collateral; and
(xvi) to the extent not otherwise included, all proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing;
Notwithstanding anything to the contrary in this Agreement, any other Loan Document or any Other First Lien Agreement, this Agreement shall not constitute a grant of a security interest in (and the Article 9 Collateral shall not include), and the other provisions of the Loan Documents and any Other First Lien Agreement with respect to Collateral need not be satisfied with respect to, the Excluded Property. In addition, for the avoidance of doubt, the provisions of Section 9.24 (Application of Gaming Laws) of the Credit Agreement and Section 6.22 (Gaming Laws) of this Agreement shall apply to all the terms and provisions of this Agreement.
(b) Each Pledgor hereby irrevocably authorizes the Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements (including fixture filings with respect to the Mortgaged Properties) with respect to the Article 9 Collateral or any part thereof and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (i) whether such Pledgor is an organization, the type of organization and any organizational identification number issued to such Pledgor, (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Article 9 Collateral relates and (iii) a description of collateral that describes such property in any other manner as the Agent may reasonably determine is necessary or advisable to ensure the perfection of the security interest in the Article 9 Collateral granted under this Agreement, including describing such property as all assets or all personal property or words of similar effect. Each Pledgor agrees to provide such information to the Agent promptly upon request.
The Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office such documents as may be reasonably necessary or advisable for the purpose of perfecting, confirming, continuing, enforcing or protecting the Security Interest granted by each Pledgor in such Pledgors Patents, Trademarks and Copyrights, without the signature of such Pledgor, and naming such Pledgor or the Pledgors as debtors and the Agent as secured party. Notwithstanding anything to the contrary herein, no Pledgor shall be required to take any action under the laws of any jurisdiction other than the United States of America (or any political subdivision thereof) for the purpose of perfecting the Security Interest in any Article 9 Collateral of such Pledgor constituting Patents, Trademarks or Copyrights or any other assets.
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(c) The Security Interest is granted as security only and shall not subject the Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Pledgor with respect to or arising out of the Article 9 Collateral.
(d) Notwithstanding anything to the contrary in this Agreement, none of the Pledgors shall be required to enter into any control agreements or control, lockbox or similar arrangements with respect to any Deposit Accounts, Securities Accounts, Commodities Accounts or any other assets (other than the delivery of Pledged Securities to the Agent to the extent required by Article III).
SECTION 4.02. Representations and Warranties . The Pledgors jointly and severally represent and warrant to the Agent, for the benefit of the Secured Parties that:
(a) Each Pledgor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder, except where the failure to have such rights and title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and has full power and authority to grant to the Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person as of the date hereof other than any consent or approval that has been obtained and is in full force and effect or has otherwise been disclosed herein or in the Credit Agreement and the schedules thereto or, after the termination of the Credit Agreement, in any Other First Lien Agreement.
(b) The Perfection Certificate attached hereto as Exhibit II has been duly prepared, completed and executed and the information set forth therein, including the exact legal name of each Pledgor, is correct and complete, in all material respects, as of the Closing Date. Except as provided in Section 5.10 of the Credit Agreement, the Uniform Commercial Code financing statements or other appropriate filings, recordings or registrations containing a description of the Article 9 Collateral have been prepared by the Agent based upon the information provided to the Agent in the Perfection Certificate for filing in each governmental, municipal or other office specified in Schedule 4 to the Perfection Certificate (or specified by notice from the Borrower to the Agent after the Closing Date in the case of filings, recordings or registrations required by Section 5.10 of the Credit Agreement or, after the termination of the Credit Agreement, any equivalent provision of each Other First Lien Agreement), and constitute all the filings, recordings and registrations (other than filings required to be made in the United States Patent and Trademark Office and the United States Copyright Office in order to perfect the Security Interest in Article 9 Collateral consisting of United States issued Patents, United States registered Trademarks and United States registered Copyrights) that are necessary as of the Closing Date to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements or amendments. Except as provided in Section 5.10 of the Credit Agreement, each Pledgor represents and warrants that IP Security Agreements executed
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by the applicable Pledgors containing a description of all Article 9 Collateral consisting of Intellectual Property that are United States issued Patents (and Patents for which U.S. registration applications are pending) and United States registered Trademarks (and Trademarks for which U.S. registration applications are pending) have been delivered to the Agent for recording with the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, to protect the validity of and to establish a legal, valid and perfected security interest (or, in the case of Patents and Trademarks, notice thereof) in favor of the Agent, for the benefit of the Secured Parties, in respect of all Article 9 Collateral consisting of such Intellectual Property in which a security interest may be perfected by recording with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary (other than (x) the Uniform Commercial Code financing statements and (y) such actions as are necessary to perfect the Security Interest with respect to any Article 9 Collateral consisting of Patents, Trademarks and Copyrights (or registration or application for registration thereof) acquired or developed after the Closing Date).
(c) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Secured Obligations, and (ii) subject to the filings described in Section 4.02(b) and filings required to be made under the Loan Documents after the Closing Date, as applicable, a perfected security interest in all Article 9 Collateral in which a security interest may be perfected by filing, recording or registering a Uniform Commercial Code financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) subject to Section 4.02(b), a security interest that shall be perfected in all Article 9 Collateral in which a security interest may be perfected upon the receipt and recording of the IP Security Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral other than Permitted Liens.
(d) The Article 9 Collateral is owned by the Pledgors free and clear of any Lien, other than Permitted Liens. None of the Pledgors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Pledgor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Pledgor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Permitted Liens.
(e) None of the Pledgors holds any Commercial Tort Claim reasonably estimated to exceed $3,000,000 individually as of the Closing Date except as indicated on Schedule II to this Agreement.
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SECTION 4.03. Covenants .
(a) Each Pledgor agrees to furnish to the Agent prompt written notice of any change (i) in any Pledgors corporate or organization name, (ii) in any Pledgors identity or organizational structure, (ii) in any Pledgors organizational identification number, (iv) in any Pledgors jurisdiction of organization or (v) in the location of the chief executive office of any Pledgor that is not a registered organization; provided that such Pledgor agrees not to effect or permit any such change unless all filings have been made, or will have been made within any applicable statutory period following such change, under the Uniform Commercial Code or otherwise that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Article 9 Collateral in which a security interest may be perfected by such filing, for the benefit of the Secured Parties. Each Pledgor agrees promptly to notify the Agent if any material portion of the Article 9 Collateral is damaged or destroyed.
(b) Subject to the rights of such Pledgor under the Loan Documents and each Other First Lien Agreement then in effect to Dispose of Collateral, each Pledgor shall, at its own expense, use commercially reasonable efforts to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Agent, for the benefit of the Secured Parties, in the Article 9 Collateral and the priority thereof against any Lien that is not a Permitted Lien.
(c) Each Pledgor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement and the granting of the Security Interest and the filing of any Uniform Commercial Code financing statements (including fixture filings with respect to any Mortgaged Properties) or other documents in connection herewith or therewith, all in accordance with the terms hereof and the terms of the Credit Agreement and each Other First Lien Agreement then in effect.
Without limiting the generality of the foregoing, each Pledgor hereby authorizes the Agent, with prompt notice thereof to the Pledgors, to supplement this Agreement by supplementing Schedule IV or adding additional schedules hereto to specifically identify any asset or item that may constitute Copyrights, Patents or Trademarks; provided that any Pledgor shall have the right, exercisable within 90 days after the Borrower has been notified by the Agent of the specific identification of such Article 9 Collateral (or such later date as the Agent may agree), to advise the Agent in writing of any inaccuracy of the representations and warranties made by such Pledgor hereunder with respect to such Collateral. Each Pledgor agrees that it will use its commercially reasonable efforts to take such action as shall be necessary in order that all representations and warranties hereunder shall be true and correct with respect to such Article 9 Collateral within 90 days after the date on which the Borrower has been notified by the Agent of the specific identification of such Article 9 Collateral (or such later date as the Agent may agree).
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(d) After the occurrence of an Event of Default and during the continuance thereof, the Agent shall have the right to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Agent shall have the right to share any information it gains from such inspection or verification with any Secured Party, subject to Section 9.16 (Confidentiality) of the Credit Agreement and any equivalent provision of any Other First Lien Agreement.
(e) At its option, the Agent may discharge any past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and that is not a Permitted Lien, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Pledgor fails to do so as required by the Credit Agreement, each Other First Lien Agreement or this Agreement, and each Pledgor jointly and severally agrees to reimburse the Agent on demand for any reasonable and documented payment made or any reasonable and documented out-of-pocket expense incurred by the Agent pursuant to the foregoing authorization; provided , however , that nothing in this Section 4.03(e) shall be interpreted as excusing any Pledgor from the performance of, or imposing any obligation on the Agent or any Secured Party to cure or perform, any covenants or other promises of any Pledgor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents or any Other First Lien Agreement.
(f) Each Pledgor (rather than the Agent or any Secured Party) shall remain liable for the observance and performance of all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral and each Pledgor jointly and severally agrees to indemnify and hold harmless the Agent and the other Secured Parties from and against any and all liability for such performance.
(g) None of the Pledgors shall make or permit to be made an assignment, pledge or hypothecation of the Article 9 Collateral or shall grant any other Lien in respect of the Article 9 Collateral, except as not prohibited by the Credit Agreement and any Other First Lien Agreement. None of the Pledgors shall make or permit to be made any transfer of the Article 9 Collateral and each Pledgor shall remain at all times in possession of the Article 9 Collateral owned by it, except as not prohibited by the Credit Agreement and any Other First Lien Agreement. Notwithstanding the foregoing, if the Agent shall have notified the Pledgors in writing that an Event of Default under clause (b), (c), (h) or (i) of Section 7.01 of the Credit Agreement or the equivalent provisions of any Other First Lien Agreement shall have occurred and be continuing, and during the continuance thereof, the Pledgors shall not Dispose of any Article 9 Collateral to the extent requested by the Agent in writing, unless such Disposition is not otherwise prohibited by the Credit Agreement and each Other First Lien Agreement then in effect during an Event of Default under clause (b), (c), (h) or (i) of Section 7.01 of the Credit Agreement or the equivalent provisions of such Other First Lien Agreements.
(h) None of the Pledgors will, without the Agents prior written consent (which consent shall not be unreasonably withheld), grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with prudent business practices, except as not prohibited by the Credit Agreement and any Other First Lien Agreement.
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(i) Each Pledgor irrevocably makes, constitutes and appoints the Agent (and all officers, employees or agents designated by the Agent) as such Pledgors true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Pledgor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Pledgor at any time or times shall fail to obtain or maintain any of the policies of insurance required by the Loan Documents or any Other First Lien Agreement, or to pay any premium in whole or part relating thereto, the Agent may, without waiving or releasing any obligation or liability of the Pledgors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Agent reasonably deems advisable. All sums disbursed by the Agent in connection with this Section 4.03(i), including reasonable and documented attorneys fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Pledgors to the Agent and shall be additional Secured Obligations secured hereby.
SECTION 4.04. Other Actions . In order to further ensure the attachment, perfection and priority of, and the ability of the Agent to enforce, for the benefit of the Secured Parties, the Agents security interest in the Article 9 Collateral, each Pledgor agrees, in each case at such Pledgors own expense, to take the following actions with respect to the following Article 9 Collateral:
(a) Instruments and Tangible Chattel Paper . If any Pledgor shall at any time own or acquire any Instruments (other than any Instruments constituting Pledged Debt, which are governed by Article II, and other than Excluded Securities or checks received and processed in the ordinary course of business) or Tangible Chattel Paper evidencing an amount in excess of $3,000,000, such Pledgor shall promptly (and in any event within 30 days of its acquisition or such longer period as the Agent may permit in its reasonable discretion) notify the Agent and promptly (and in any event within 5 days following such notice or such longer period as the Agent may permit in its reasonable discretion) endorse, assign and deliver the same to the Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Agent may from time to time reasonably request.
(b) Commercial Tort Claims . If any Pledgor shall at any time hold or acquire a Commercial Tort Claim in an amount reasonably estimated to exceed $3,000,000, such Pledgor shall promptly notify the Agent thereof in a writing signed by such Pledgor, including a summary description of such claim, and deliver to the Agent in writing a supplement to Schedule II including such description.
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SECTION 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral . Except as not prohibited by the Loan Documents or, after the termination of the Credit Agreement, each Other First Lien Agreement:
(a) Each Pledgor agrees that it will not knowingly do any act or omit to do any act (and will exercise commercially reasonable efforts to prevent its licensees from doing any act or omitting to do any act) whereby any Patent material to the normal conduct of such Pledgors business may become prematurely invalidated or dedicated to the public, and agrees that it shall take commercially reasonable steps with respect to any material products covered by any such Patent as necessary and sufficient to establish and preserve its rights under applicable patent laws.
(b) Each Pledgor will, and will use its commercially reasonable efforts to cause its licensees or its sublicensees to, for each Trademark material to the normal conduct of such Pledgors business, (i) maintain such Trademark in full force free from any adjudication of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of federal or foreign registration or claim of trademark or service mark as required under applicable law and (iv) not knowingly use or knowingly permit its licensees use of such Trademark in violation of any third-party rights.
(c) Each Pledgor will, and will use its commercially reasonable efforts to cause its licensees or its sublicensees to, for each work covered by a material Copyright necessary to the normal conduct of such Pledgors business that it publishes, displays and distributes, use copyright notice as required under applicable copyright laws.
(d) Each Pledgor shall notify the Agent promptly if it knows that any Patent, Trademark or Copyright material to the normal conduct of such Pledgors business may imminently become prematurely abandoned, lapsed or dedicated to the public, or of any materially adverse determination or development, excluding office actions and similar determinations or developments in the United States Patent and Trademark Office, United States Copyright Office or any court, regarding such Pledgors ownership of any such material Patent, Trademark or Copyright or its right to register or to maintain the same.
(e) Each Pledgor, either itself or through any agent, employee, licensee or designee, shall (i) inform the Agent on an annual basis at or about the time of delivery of financial statements for such year (commencing with the financial statements for the fiscal year ended December 31, 2014) of each application for, or registration or issuance of, any Patent or Trademark with the United States Patent and Trademark Office and each registration of any Copyright with the United States Copyright Office, in each case, filed by or on behalf of, or issued to or acquired by, any Pledgor during the preceding twelve-month period, and (ii) upon the reasonable request of the Agent, execute and deliver any and all agreements, instruments, documents and papers as the Agent may reasonably request to evidence the Agents security interest in such Patent, Trademark or Copyright; provided , that the provisions hereof shall automatically apply to any such Patent, Trademark or Copyright and any such Patent, Trademark or Copyright shall automatically constitute Collateral as if such would have constituted Collateral at the time of execution hereof and be subject to the Lien and Security Interest created by this Agreement without further action by any party.
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(f) Each Pledgor shall exercise its reasonable business judgment consistent with its practice in any proceeding before the United States Patent and Trademark Office or the United States Copyright Office with respect to maintaining and pursuing each material application relating to any Patent, Trademark and/or Copyright (and obtaining the relevant grant or registration) material to the normal conduct of such Pledgors business and to maintain (i) each issued Patent and (ii) the registrations of each Trademark and each Copyright, which in each case is material to the normal conduct of such Pledgors business, including, when applicable and necessary in such Pledgors reasonable business judgment, timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if any Pledgor believes necessary in its reasonable business judgment, to initiate opposition, interference and cancellation proceedings against third parties.
(g) In the event that any Pledgor knows or has reason to know that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the normal conduct of its business has been materially infringed, misappropriated or diluted by a third party, such Pledgor shall promptly notify the Agent and shall, if such Pledgor deems it necessary in its reasonable business judgment, promptly sue and recover any and all damages, and take such other actions as are reasonably appropriate under the circumstances.
(h) Upon and during the continuance of an Event of Default, at the request of the Agent, each Pledgor shall use commercially reasonable efforts to obtain all requisite consents or approvals from the licensor under each Copyright License, Patent License or Trademark License to effect the assignment of all such Pledgors right, title and interest thereunder to (in the Agents sole discretion) the designee of the Agent or the Agent.
ARTICLE V.
Remedies
SECTION 5.01. Remedies Upon Default . In accordance with, and to the extent consistent with, the terms of any applicable Intercreditor Agreement and applicable Requirements of Law (including Gaming Laws), the Agent may take any action specified in this Section 5.01. Upon the occurrence and during the continuance of an Event of Default, each Pledgor agrees to deliver each item of Collateral to the Agent on demand, and it is agreed that the Agent shall have the right to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Pledgors to the Agent or to license or sublicense (subject to any such licensees obligation to maintain the quality of goods and services provided under any Trademark consistent with the quality of such goods and services provided by the Pledgors immediately prior to such Event of Default), whether general, special or otherwise, and whether on an exclusive or a nonexclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers thereunder cannot be obtained) and (b) with or without legal process and with or without prior notice or demand for performance, to take possession of the Article 9 Collateral and without liability for trespass to the applicable Pledgor to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of or removing the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the applicable Uniform
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Commercial Code or other applicable law. Without limiting the generality of the foregoing, each Pledgor agrees that the Agent shall have the right, subject to the requirements of applicable law, to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any brokers board or on any securities exchange, for cash, upon credit or for future delivery as the Agent shall deem appropriate. The Agent shall be authorized in connection with any sale of a security (if it deems it advisable to do so) pursuant to the foregoing to restrict the prospective bidders or purchasers to persons who represent and agree that they are purchasing such security for their own account, for investment, and not with a view to the distribution or sale thereof. Upon consummation of any such Disposition of Collateral pursuant to this Section 5.01, the Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such Disposition shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption, stay, valuation and appraisal that such Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.
The Agent shall give the applicable Pledgors 10 days written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Agents intention to make any Disposition of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a brokers board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Agent may fix and state in the notice (if any) of such sale. At any such sale, the Collateral, or the portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Agent may (in its sole and absolute discretion) determine. The Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In the case of any sale of all or any part of the Collateral made on credit or for future delivery, the Collateral so sold may be retained by the Agent until the sale price is paid by the purchaser or purchasers thereof, but the Agent shall not incur any liability in the event that any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may be sold again upon notice given in accordance with provisions above. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section 5.01, any Secured Party may bid for or purchase for cash, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Pledgor (all such rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and such Secured Party may, upon compliance with the terms of sale, hold, retain and Dispose of such property in accordance with Section 5.02 without further accountability to any Pledgor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Agent shall be free to carry out such sale pursuant to such agreement and no Pledgor shall be entitled to the return of the Collateral or any portion thereof subject
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thereto, notwithstanding the fact that after the Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Agent may proceed by a suit or suits at law or in equity to foreclose under this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. To the extent provided in this Section 5.01, any Disposition pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.
SECTION 5.02. Application of Proceeds . The Agent shall, subject to any applicable Intercreditor Agreement, promptly apply the proceeds, moneys or balances of any collection or sale of Collateral realized through the exercise by the Agent of its remedies hereunder, as well as any Collateral consisting of cash at any time when remedies are being exercised hereunder, as follows:
FIRST, to the payment of all out-of-pocket costs and expenses incurred by the Agent in connection with such collection or sale or otherwise in connection with this Agreement, any other Loan Document, any Other First Lien Agreement or any of the Secured Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Agent hereunder or under any other Loan Document or any Other First Lien Agreement on behalf of any Pledgor, any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document or any Other First Lien Agreement, and other fees, indemnities and other amounts owing or reimbursable to the Agent under any Loan Document or any Other First Lien Agreement in its capacity as such;
SECOND, to the payment in full of the Secured Obligations secured by such Collateral (the amounts so applied to be distributed among the Series of Secured Obligations pro rata based on the respective amounts of such Secured Obligations owed to the applicable Secured Parties in respect of each Series on the date of any such distribution (or in accordance with such other method of distribution as may be set forth in any applicable Intercreditor Agreement), with (x) the portion thereof distributed to the Credit Agreement Secured Parties to be further distributed in accordance with the order of priority set forth in Section 7.02 of the Credit Agreement and (y) the portion thereof distributed to the Secured Parties of any other Series to be further distributed in accordance with the applicable provisions of the Other First Lien Agreements governing such Series); and
THIRD, to the Pledgors, their successors or assigns, or as a court of competent jurisdiction may otherwise direct;
provided , that in no event shall the proceeds of any collection or sale of any Specified Excluded Collateral be applied to the relevant Series of Secured Obligations under any Other First Lien Agreement.
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The Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon the request of the Agent prior to any distribution under this Section 5.02, each Authorized Representative shall provide to the Agent certificates, in form and substance reasonably satisfactory to the Agent, setting forth the respective amounts referred to in this Section 5.02 that each applicable Secured Party or its Authorized Representative believes it is entitled to receive, and the Agent shall be fully entitled to rely on such certificates. Upon any sale of Collateral by the Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Agent or such officer or be answerable in any way for the misapplication thereof.
SECTION 5.03. Grant of License to Use Intellectual Property . For the purpose of enabling the Agent to exercise rights and remedies under this Agreement at such time as the Agent shall be lawfully entitled to exercise such rights and remedies, each Pledgor grants (such grant effective solely after the occurrence and during the continuance of an Event of Default) to (in the Agents sole discretion) a designee of the Agent or the Agent, for the benefit of the Secured Parties, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to any Pledgor) to use, license or sublicense any of the Article 9 Collateral consisting of Intellectual Property now owned or hereafter acquired by such Pledgor, wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof, the right to prosecute and maintain all Intellectual Property and the right to sue for past infringement of the Intellectual Property; provided , however , that nothing in this Section 5.03 shall require Pledgors to grant any license that is prohibited by any rule of law, statute or regulation, or is prohibited by, or constitutes a breach or default under or results in the termination of, any contract, license, instrument or other agreement with an unaffiliated third party, to the extent not prohibited by the Loan Documents and each Other First Lien Agreement, with respect to such Intellectual Property Collateral; and, provided , further , that such licenses to be granted hereunder shall be subject to (i) the maintenance of quality standards with respect to the goods and services on which Trademarks are used sufficient to preserve the validity of such Trademarks and (ii) those exclusive Copyright Licenses, Patent Licenses and Trademark Licenses granted by the Pledgors in effect on the date hereof and those granted by any Pledgor hereafter, as permitted under the Loan Documents and any Other First Lien Agreement, to the extent conflicting. The use of such license by the Agent may be exercised solely upon the occurrence and during the continuation of an Event of Default and subject to any Intercreditor Agreement; provided that any license, sublicense or other transaction entered into by the Agent in accordance herewith shall be binding upon the Pledgors notwithstanding any subsequent cure of an Event of Default. Furthermore, each Pledgor hereby grants to the Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Copyright Office or the United States Patent and Trademark Office or any state office in order to effect the potential license granted herein and record the same.
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SECTION 5.04. Securities Act, Etc . In view of the position of the Pledgors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar federal statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the Federal Securities Laws ) with respect to any Disposition of the Pledged Collateral permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Agent if the Agent were to attempt to Dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could Dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to Dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Agent, subject to any applicable Intercreditor Agreement, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws or, to the extent applicable, Blue Sky or other state securities laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Agent, subject to any applicable Intercreditor Agreement, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.04 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells.
ARTICLE VI.
Miscellaneous
SECTION 6.01. Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement (whether or not then in effect), and all notices to any holder of obligations under any Other First Lien Agreements shall be given at its address set forth in the Other First Lien Secured Party Consent or in the First Lien Intercreditor Agreement (upon and during the effectiveness thereof), in each case of the foregoing, as such address may be changed by written notice to the Agent and the Borrower. All communications and notices hereunder to any Pledgor shall be given to it in care of the Borrower, with such notice to be given as provided in Section 9.01 of the Credit Agreement (whether or not then in effect).
SECTION 6.02. Security Interest Absolute . To the extent not prohibited by applicable law, all rights of the Agent hereunder, the Security Interest, the security interest in the Pledged Collateral and all obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of any Loan Document, any other agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or
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any consent to any departure from any Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Secured Obligations or this Agreement (other than a defense of payment or performance).
SECTION 6.03. Limitation By Law . All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law or regulation (including any Gaming Law), and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law or regulation (including any Gaming Law) that may be controlling and to be limited to the extent necessary so that they shall not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law or regulation (including any Gaming Law).
SECTION 6.04. Binding Effect; Several Agreemen t. This Agreement shall become effective as to any party to this Agreement when a counterpart hereof executed on behalf of such party shall have been delivered to the Agent and a counterpart hereof shall have been executed on behalf of the Agent, and thereafter shall be binding upon such party and the Agent and their respective permitted successors and assigns, and shall inure to the benefit of such party, the Agent and the other Secured Parties and their respective permitted successors and assigns, except that no party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as not prohibited by this Agreement or the Credit Agreement or, after the termination of the Credit Agreement, any Other First Lien Agreement. This Agreement shall be construed as a separate agreement with respect to each party and may be amended, modified, supplemented, waived or released in accordance with Section 6.09 or 6.15, as applicable.
SECTION 6.05. Successors and Assigns . Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any Pledgor or the Agent that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns.
SECTION 6.06. Agents Fees and Expenses .
(a) The parties hereto agree that the Agent shall be entitled to reimbursement of its expenses incurred hereunder by the Pledgors, and the Agent and other Indemnitees shall be indemnified by the Pledgors, in each case of this clause (a), mutatis mutandis , as provided in Section 9.05 of the Credit Agreement and the equivalent provision of any Other First Lien Agreement.
(b) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. The provisions of this Section 6.06 shall remain operative and in full force and effect regardless of the termination of this Agreement, any other Loan Document or any Other First Lien Agreement, the
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consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement, any other Loan Document or any Other First Lien Agreement, or any investigation made by or on behalf of the Agent or any other Secured Party. All amounts due under this Section 6.06 shall be payable within fifteen days (or such longer period as the Agent may agree) of written demand therefor, accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
(c) The agreements in this Section 6.06 shall survive the resignation of the Agent and the termination of this Agreement.
SECTION 6.07. Agent Appointed Attorney-in-Fact . Each Pledgor hereby appoints the Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and, upon the occurrence and during the continuance of an Event of Default, taking any action and executing any instrument that the Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, subject to any applicable Requirements of Law (including Gaming Laws) and any applicable Intercreditor Agreement, the Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Agents name or in the name of such Pledgor, (a) to receive, endorse, assign or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (c) to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral; (d) to sign the name of any Pledgor on any invoice or bill of lading relating to any of the Collateral; (e) to send verifications of Accounts to any Account Debtor; (f) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (g) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (h) to notify, or to require any Pledgor to notify, Account Debtors to make payment directly to the Agent; and (i) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.
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SECTION 6.08. GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.09. Waivers; Amendment; Extension of Time .
(a) No failure or delay by the Agent , any Issuing Bank, any Lender or any other Secured Party in exercising any right, power or remedy hereunder or under any other Loan Document or any Other First Lien Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of the Agent , any Issuing Bank, the Lenders or any other Secured Party hereunder and under the other Loan Documents and any Other First Lien Agreement are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Pledgor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan, the increase of any Other First Lien Obligations or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Agent, any Lender, any Issuing Bank or any other Secured Party may have had notice or knowledge of such Default or Event of Default at the time. No notice or demand on any Pledgor in any case shall entitle any Pledgor to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Agent and the Pledgor or Pledgors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement and any equivalent provision in each applicable Other First Lien Agreement and, by each other Authorized Representative to the extent required by (and in accordance with) such applicable Other First Lien Agreement, or, in each case, as otherwise provided in any applicable Intercreditor Agreement. The Agent may conclusively rely on a certificate of an officer of the Borrower as to whether any amendment contemplated by this Section 6.09(b) is permitted.
(c) Notwithstanding anything to the contrary contained herein, the Agent may grant extensions of time or waivers of the requirement for the creation or perfection of security interests in or the obtaining of insurance (including title insurance) or surveys with respect to particular assets (including extensions beyond the Closing Date for the perfection of security interests in the assets of the Pledgors on such date) where it reasonably determines, in consultation with the Borrower, that perfection or obtaining of such items cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement, any other Loan Documents or any Other First Lien Agreement.
SECTION 6.10. WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
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THIS AGREEMENT, ANY OTHER LOAN DOCUMENTS OR ANY OTHER FIRST LIEN AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.
SECTION 6.11. Severability . In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 6.12. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 6.04. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.
SECTION 6.13. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
SECTION 6.14. Jurisdiction; Consent to Service of Process .
(a) Subject to the final sentence of this clause (a), each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, any other Loan Document, any Other First Lien Agreement or the transactions relating hereto or thereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement, any other Loan Document or any Other First Lien Agreement shall affect any right that the Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement, any other Loan Document or any Other First Lien Agreement against any Pledgor or or its properties in the courts of any jurisdiction.
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(b) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, any other Loan Document or any Other First Lien Agreement in any New York State or federal court of the United States of America sitting in New York County, and any appellate court from any thereof. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. Nothing in this Agreement, any other Loan Document or any Other First Lien Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 6.15. Termination or Release .
(a) This Agreement and the pledges made by the Pledgors herein and all other security interests granted by the Pledgors hereby shall automatically terminate and be released upon the occurrence of the Termination Date or, if any Other First Lien Obligations are outstanding on the Termination Date, the date after the Termination Date when all such Other First Lien Obligations (other than contingent or unliquidated obligations or liabilities not then due and any other obligations that, by the terms of any Other First Lien Agreements, are not required to be paid in full prior to termination and release of the Collateral) have been paid in full and the Secured Parties have no further commitment to extend credit under any Other First Lien Agreement.
(b) A Subsidiary Party shall automatically be released from its obligations hereunder and the security interests in the Collateral of such Subsidiary Party shall be automatically released upon the consummation of any transaction not prohibited by the Credit Agreement and each Other First Lien Agreement then in effect as a result of which such Subsidiary Party ceases to be a Subsidiary of the Borrower or otherwise becomes an Excluded Subsidiary or ceases to be a Guarantor or is otherwise released from its obligations under the Subsidiary Guarantee Agreement, all without delivery of any instrument or performance of any act by any party, and all rights to the applicable portions of the Collateral shall revert to such Subsidiary Party.
(c) The security interest in such Collateral shall be automatically released, all without delivery of any instrument or performance of any act by any party, (i) upon any sale or other transfer by any Pledgor of any Collateral that is not prohibited by the Credit Agreement and each Other First Lien Agreement to any person that is not a Pledgor, (ii) upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement and any equivalent provision of each applicable Other First Lien Agreement (in each case, to the extent required thereby), or (iii) as otherwise may be provided in any applicable Intercreditor Agreements.
(d) Solely with respect to the Credit Agreement Secured Obligations, a Pledgor shall automatically be released from its obligations hereunder and/or the security interests in any Collateral securing Credit Agreement Secured Obligations shall in each case be automatically released upon the occurrence of any of the circumstances set forth in Section 9.18 of the Credit Agreement without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to any applicable Pledgor.
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(e) Solely with respect to any Series of Other First Lien Obligations, a Pledgor shall automatically be released from its obligations hereunder and/or the security interests in any Collateral securing such Series of Other First Lien Obligations shall in each case be automatically released upon the occurrence of any of the circumstances set forth in any provision governing release of collateral in the applicable Other First Lien Agreement governing such Series of Other First Lien Obligations, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to any applicable Pledgor.
(f) If any Collateral shall become subject to the automatic release provisions set forth in the First Lien Intercreditor Agreement (upon and during the effectiveness thereof), the lien created hereunder on such Collateral shall be automatically released to the extent (and only to the extent) provided therein.
(g) In connection with any termination or release pursuant to this Section 6.15, the Agent shall execute and deliver to any Pledgor, at such Pledgors expense, all documents (forms of which shall be reasonably acceptable to the Agent), that such Pledgor shall reasonably request to evidence such termination or release (including Uniform Commercial Code termination statements), and will duly assign and transfer to such Pledgor, such of the Pledged Collateral that may be in the possession of the Agent and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. Any execution and delivery of documents pursuant to this Section 6.15 shall be without recourse to or warranty by the Agent. In connection with any release pursuant to this Section 6.15, the Pledgors shall be permitted to take any action in connection therewith consistent with such release including, without limitation, the filing of Uniform Commercial Code termination statements. Upon the receipt of any necessary or proper instruments of termination, satisfaction or release prepared by the Borrower pursuant to this Section 6.15, the Agent shall execute, deliver or acknowledge such instruments or releases (forms of which shall be reasonably acceptable to the Agent), to evidence the release of any Collateral permitted to be released pursuant to this Agreement. The Pledgors agree to pay all reasonable and documented out-of-pocket expenses incurred by the Agent (and its representatives and counsel) in connection with the execution and delivery of such release documents or instruments.
SECTION 6.16. Additional Subsidiaries . Upon execution and delivery by any Subsidiary that is required or permitted to become a party hereto by Section 5.10 or the Collateral and Guarantee Requirement of the Credit Agreement or by any Other First Lien Agreement of an instrument substantially in the form of Exhibit I hereto (or another instrument reasonably satisfactory to the Agent and the Borrower), subject to applicable Requirements of Law (including Gaming Laws), such Subsidiary shall become a Subsidiary Party hereunder with the same force and effect as if originally named as a Subsidiary Party herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Agreement. The rights and obligations of each party to this Agreement shall remain in full force and effect notwithstanding the addition of any new party to this Agreement.
33
SECTION 6.17. Compliance with Gaming Laws . Notwithstanding anything to the contrary set forth in this Agreement, any other Loan Document or any Other First Lien Agreement, the Agent, on behalf of the Secured Parties, acknowledges and agrees that:
(a) the pledge of the Pledged Stock of any Pledgor that is a licensee or registered holding company under the Gaming Laws applicable in the State of Nevada ( Nevada Gaming Laws ) (any such entity, a Nevada Licensee ), pursuant to this Agreement, any other Loan Document or any Other First Lien Agreement, will not be effective without the prior approval of the Gaming Authorities having jurisdiction in Nevada (the Nevada Gaming Authorities ), and no certificates evidencing any such Pledged Stock may be delivered to the Agent until such approval has been obtained. Furthermore, no amendment of this Agreement shall be effective until any approvals required from the Nevada Gaming Authorities under the Nevada Gaming Laws have been obtained;
(b) in the event that Agent exercises one or more of the remedies set forth in this Agreement with respect to the Pledged Stock of any Nevada Licensee, including, without limitation, the foreclosure, transfer, sale, distribution or other disposition of any interest therein (except back to the applicable Pledgor), the exercise of voting and consensual rights, and any other resort to or enforcement of the security interest in such Pledged Stock, such action will require the separate and prior approval of the Nevada Gaming Authorities or the licensing or finding of suitability of the Agent or any transferee thereof unless such licensing or suitability requirement is waived thereby;
(c) the Agent, and any custodial agent of Agent in the State of Nevada, will be required to comply with the conditions, if any, imposed by the Nevada Gaming Authorities in connection with their approval of the pledge granted hereunder, including, without limitation, requirements that the Agent or its custodial agent maintain the certificates evidencing the Pledged Stock of Nevada Licensees at a location in Nevada (notice of which the Agent or its custodial agent shall provide to the Nevada Gaming Authorities), and that the Agent or its custodial agent permit agents or employees of the Nevada Gaming Authorities to inspect such certificates upon request;
(d) neither the Agent nor any custodial agent of the Agent will be permitted to surrender possession of any Pledged Stock of Nevada Licensees to any person other than the applicable Pledgor thereof without the prior approval of the Nevada Gaming Authorities or as otherwise permitted by the Gaming Laws;
(e) any approval of the Nevada Gaming Authorities of this Agreement, or any amendment hereto, does not constitute approval, either express or implied, of the Agent to take any actions provided for in this Agreement, for which separate approval by the Nevada Gaming Authorities may be required by the Gaming Laws;
(f) the Agent, the Secured Parties and their respective successors and assigns are subject to being called forward by the Nevada Gaming Authorities in their sole and absolute discretion, for licensing or a finding of suitability in order to remain entitled to the benefits of this Agreement, any other Loan Documents and any Other First Lien Agreement; and
34
(g) in the event the Agent, on behalf of the Secured Parties, exercises one or more of the remedies set forth in this Agreement with respect to Article 9 Collateral consisting of gaming devices, mobile gaming systems, interactive gaming systems, cashless wagering systems and associated equipment (as those terms are defined in the Gaming Laws), including, but not limited to, the foreclosure, transfer, sale, distribution or other disposition of such Collateral, such exercise of remedies may require the separate and prior approval of the Nevada Gaming Authorities or the licensing of the Agent or any transferee thereof pursuant to the Gaming Laws.
SECTION 6.18. Subject to Any Applicable Intercreditor Agreement . Notwithstanding anything herein to the contrary, (i) the Liens and security interests granted to the Agent for the benefit of the Secured Parties pursuant to this Agreement are expressly subject to any applicable Intercreditor Agreement to the extent provided therein and (ii) the exercise of any right or remedy by the Agent hereunder or the application of proceeds (including insurance and condemnation proceeds) of any Collateral are subject to any applicable Intercreditor Agreement to the extent provided therein. In the event of any conflict between the terms of such applicable Intercreditor Agreement and the terms of this Agreement, the terms of such applicable Intercreditor Agreement shall govern.
SECTION 6.19. Other First Lien Obligations . On or after the date hereof and so long as such obligations are not prohibited to be incurred under the Credit Agreement and any Other First Lien Agreement then in effect, the Borrower may from time to time designate obligations in respect of Indebtedness to be secured (except with respect to any applicable Specified Excluded Collateral) on a pari passu basis with the then outstanding Secured Obligations as Other First Lien Obligations hereunder by delivering to the Agent and each Authorized Representative (a) a certificate signed by a Responsible Officer of the Borrower, (i) identifying the obligations so designated and the initial aggregate principal amount or face amount thereof, (ii) stating that such obligations are designated as Other First Lien Obligations for purposes hereof, (iii) representing that such designation of such obligations as Other First Lien Obligations are not prohibited by the terms of the Credit Agreement and any Other First Lien Agreement then in effect and (iv) specifying the name and address of the Authorized Representative for such obligations, (b) a fully executed Other First Lien Secured Party Consent and (c) if not already in effect, execute and deliver the First Lien Intercreditor Agreement (or a joinder thereto in the form (and to the extent, if any) required thereby to the extent such First Lien Intercreditor Agreement is then in effect). The Agent and each Authorized Representative agree that upon the satisfaction of all conditions set forth in the preceding sentence, (x) the Agent shall act as agent under and subject to the terms of the Security Documents for the benefit of all Secured Parties, including without limitation, any Secured Parties that hold any such Other First Lien Obligations, and (y) the Agent and each Authorized Representative agree to the appointment, and acceptance of the appointment, of the Agent as agent for the holders of such Other First Lien Obligations as set forth in each Other First Lien Secured Party Consent and agree, on behalf of itself and each Secured Party it represents, to be bound by this Agreement and the First Lien Intercreditor Agreement. The rights and obligations of each party to this Agreement shall remain in full force and effect notwithstanding the addition of any new Secured Obligations to this Agreement.
35
SECTION 6.20. Person Serving as Agent
On the Closing Date, the Agent hereunder is the same person that is the Administrative Agent under (and as defined in) the Credit Agreement. Written notice of resignation by the Administrative Agent under (and as defined in) the Credit Agreement pursuant to the Credit Agreement shall also constitute notice of resignation as the Agent under this Agreement. Upon the acceptance of any appointment as the Administrative Agent under (and as defined in) the Credit Agreement by a successor, that successor shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent pursuant hereto. Immediately upon the occurrence of the Discharge (as such term or equivalent term is defined in the First Lien Intercreditor Agreement) of Credit Agreement Loan Obligations, if any other Series of Secured Obligations is then outstanding, the Authorized Representative of such Series (or, if more than one such Series is outstanding, the applicable Authorized Representative determined pursuant to the terms of (and as defined in) the applicable Intercreditor Agreement) shall be deemed the Agent for all purposes under this Agreement. The Agent immediately prior to any change in Agent pursuant to this Section 6.20 (the Prior Agent ) shall be deemed to have assigned all of its rights, powers and duties hereunder to the successor Agent determined in accordance with this Section 6.20 (the Successor Agent ) and the Successor Agent shall be deemed to have accepted, assumed and succeeded to such rights, powers and duties. The Prior Agent shall cooperate with the Pledgors and such Successor Agent to ensure that all actions are taken that are necessary or reasonably requested by the Successor Agent to vest in such Successor Agent the rights granted to the Prior Agent hereunder with respect to the Collateral, including (a) the filing of amended financing statements in the appropriate filing offices, (b) to the extent that the Prior Agent holds, or a third party holds on its behalf, physical possession of or control (as defined in the New York UCC or the Uniform Commercial Code of any other applicable jurisdiction) over Collateral pursuant to this Agreement or any other Security Document, the delivery to the Successor Agent of the Collateral in its possession or control together with any necessary endorsements to the extent required by this Agreement, and (c) the execution and delivery of any further documents, financing statements or agreements and the taking of all such further action that may be required under any applicable law, or that the Successor Agent may reasonably request, all without recourse to, or representation or warranty by, the Agent, and at the sole cost and expense of the Pledgors. In addition, the Agent hereunder shall at all times be the same person that is the Collateral Agent under the First Lien Intercreditor Agreement. Written notice of resignation by the Collateral Agent pursuant to the First Lien Intercreditor Agreement shall also constitute notice of resignation as the Agent under this Agreement. Upon the acceptance of any appointment as the Collateral Agent under the First Lien Intercreditor Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent pursuant hereto.
SECTION 6.21. General Authority of the Agent
(a) By acceptance of the benefits of this Agreement and any other Security Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (i) to consent to the appointment of the Agent as its agent hereunder and under such other Security Documents, (ii) to confirm that the Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provision of this Agreement and such other Security Documents against any Pledgor, the exercise of remedies hereunder or thereunder and the
36
giving or withholding of any consent or approval hereunder thereunder relating to any Collateral or any Pledgors obligations with respect thereto, (iii) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Security Document against any Pledgor, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Security Document and (iv) to agree to be bound by the terms of this Agreement, any other Security Documents and any Intercreditor Agreement then in effect.
(b) Each Pledgor acknowledges that the rights and responsibilities of the Agent under this Agreement with respect to any action taken by the Agent or the exercise or non-exercise by the Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Agent and the Secured Parties, be governed by the Credit Agreement, any Other First Lien Agreement and such other agreements with respect thereto as may exist from time to time among them, but, as between the Agent and the Pledgors, the Agent shall be conclusively presumed to be acting as agent for the applicable Secured Parties with full and valid authority so to act or refrain from acting, and no Pledgor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 6.22. Application of Gaming Laws . Notwithstanding anything herein to the contrary, this Agreement and any Other First Lien Agreement are subject to the applicable Gaming Laws. Without limiting the foregoing, the Secured Parties acknowledge that (i) they are subject to the jurisdiction of the Gaming Authorities, in their discretion, for licensing, qualification or findings of suitability or to file or provide other information, and (ii) all rights, remedies and powers in or under this Agreement and the Other First Lien Agreements, including with respect to the Collateral (including the pledge and delivery of the Pledged Collateral), the Mortgaged Properties and the transportation, ownership and operation of gaming machines and/or facilities may be subject to the jurisdiction of the Gaming Authorities, and may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Laws and only to the extent that required approvals (including prior approvals), if any, are obtained from the relevant Gaming Authorities.
[Signature Pages Follow]
37
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
AP GAMING I, LLC, as Borrower | ||
By: | /s/ Robert Miodunski | |
Name: Robert Miodunski | ||
Title: Authorized Signatory |
[Signature Page to Collateral Agreement]
AP GAMING II, INC., AP GAMING ACQUISITION, LLC, each as a Subsidiary Party |
||
By: | /s/ Robert Miodunski | |
Name: Robert Miodunski Title: Authorized Signatory |
AGS CAPITAL, LLC, AGS LLC, AGS PARTNERS, LLC, AGS ILLINOIS, LLLP, AP GAMING NV, LLC each as a Subsidiary Party |
||
By: | /s/ Robert Miodunski | |
Name: Robert Miodunski Title: Chief Executive Officer |
[Signature Page to Collateral Agreement]
CITICORP NORTH AMERICA, INC., as Agent | ||
By: | /s/ Matthew Burke | |
Name: Matthew Burke Title: Vice President |
[ Signature Page to Collateral Agreement ]
Schedule I
to the Collateral Agreement
Subsidiary Parties
Legal Name |
Type of Entity |
Jurisdiction of Organization | ||
AP GAMING II, INC. |
Corporation | Delaware | ||
AP GAMING ACQUISITION, LLC |
Limited liability company | Delaware | ||
AGS CAPITAL, LLC |
Limited liability company | Delaware | ||
AGS LLC |
Limited liability company | Delaware | ||
AGS PARTNERS, LLC |
Limited liability company | Delaware | ||
AGS ILLINOIS, LLLP |
Limited liability limited partnership | Illinois | ||
AP GAMING NV, LLC |
Limited liability company | Delaware |
Schedule II
to the Collateral Agreement
Commercial Tort Claims
None.
Schedule III
to the Collateral Agreement
Pledged Stock; Pledged Debt
Pledged Stock
Issuer |
Record Owner |
Certificate No. |
Percentage of Issued and Outstanding Equity Interests Owned |
Percent Pledged |
||||
1. AP Gaming I, LLC |
AP Gaming Holdings, LLC | N/A | 100% | 100% | ||||
2. AP Gaming II, Inc. |
AP Gaming I, LLC | 1 | 100% | 100% | ||||
3. AP Gaming Acquisition, LLC |
AP Gaming II, Inc. | N/A | 100% | 100% | ||||
4. American Gaming Systems Canada ULC |
AP Gaming II, Inc. | #7-726 Shares | 100% | 65% of voting equity and 100% of non-voting equity (if any) | ||||
#8-374 Shares | ||||||||
5. AGS Capital, LLC |
AP Gaming Acquisition, LLC | N/A | 100% | 100% | ||||
6. AGS LLC |
AGS Capital, LLC | 1 | 100% | 100% | ||||
7. AGS Partners, LLC |
AGS Capital, LLC | 1 | 100% | 100% | ||||
8. AGS Illinois, LLLP |
AGS LLC | N/A | General Partner | 100% | ||||
AGS Partners, LLC | N/A | 100% of the Partnership Interests |
Pledged Debt
Entity |
Principal Amount |
Date of
Issuance |
Interest Rate | Maturity Date | Pledged [Y/N] | |||||
Global Intercompany Note among the Borrower and its Subsidiaries |
All amounts outstanding from time to time | Closing Date |
As agreed
from time to time |
On demand | Y |
Schedule IV
to the Collateral Agreement
Intellectual Property
Trademarks
1. | See Schedule I to the Trademark Security Agreement, dated as of the date hereof, made by AGS LLC in favor of the Agent. |
Patents
1. | See Schedule I to the Patent Security Agreement, dated as of the date hereof, made by AGS LLC in favor of the Agent. |
Copyrights
[None.]
Exhibit I
to the Collateral Agreement
SUPPLEMENT NO. dated as of (this Supplement ), to the Collateral Agreement dated as of December 20, 2013 (as heretofore amended and/or supplemented, the Collateral Agreement ), among (a) AP GAMING I, LLC (the Borrower ), each Subsidiary Loan Party (as defined in the Credit Agreement (as defined below)) listed on Schedule I to the Collateral Agreement and each Subsidiary of the Borrower that becomes a party hereto (each, a Subsidiary Party ) and CITICORP NORTH AMERICA, INC., as Collateral Agent (in such capacity, the Agent ) for the Secured Parties (as defined therein).
A. Reference is made to the First Lien Credit Agreement, dated as of December 20, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement ), among the Borrower, the Lenders party thereto from time to time, the Agent, as administrative agent (together with its successors and assigns in such capacity, the Credit Agreement Agent ), and the other parties party thereto.
B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement or the Collateral Agreement, as applicable.
C. The Pledgors have entered into the Collateral Agreement in order to induce the Lenders to make Loans, each Issuing Bank to issue Letters of Credit and the holders of any other Other First Lien Obligations to make extensions of credit under the applicable Other First Lien Agreements, as applicable. Section 6.16 of the Collateral Agreement provides that additional Subsidiaries of the Borrower may become Subsidiary Parties under the Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the New Subsidiary ) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Party under the Collateral Agreement.
Accordingly, the New Subsidiary agrees as follows:
SECTION 1. In accordance with Section 6.16 of the Collateral Agreement, the New Subsidiary by its signature below becomes a Subsidiary Party and a Pledgor under the Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Party and a Pledgor, and the New Subsidiary hereby (a) agrees to all the terms and provisions of the Collateral Agreement applicable to it as a Subsidiary Party and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Pledgor thereunder are true and correct in all material respects on and as of the date hereof. In furtherance of the foregoing, subject to any approvals required under Gaming Laws, the New Subsidiary, as security for the payment and performance in full of the Secured Obligations, does hereby create and grant to the Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns, a security interest in and Lien on all of the New Subsidiarys right, title and interest in and to the Collateral (as defined in the Collateral Agreement) of the New Subsidiary. Each reference to a Subsidiary Party or a Pledgor in the Collateral Agreement shall be deemed to include the New Subsidiary (except as otherwise provided in clause (iii) of the definition of Pledgor to the extent applicable). The Collateral Agreement is hereby incorporated herein by reference.
Exhibit I - 1
SECTION 2. The New Subsidiary represents and warrants to the Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.
SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when the Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary. Delivery of an executed signature page to this Supplement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.
SECTION 4. The New Subsidiary hereby represents and warrants that, as of the date hereof, (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Stock and Pledged Debt of the New Subsidiary, (b) set forth on Schedule II attached hereto is a true and correct schedule of all Intellectual Property now owned by the New Subsidiary constituting United States registered Trademarks, Patents and Copyrights, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims in excess of $3,000,000 held by the New Subsidiary and (d) set forth under its signature hereto, is the true and correct legal name of the New Subsidiary, its jurisdiction of organization and organizational identification number.
SECTION 5. Except as expressly supplemented hereby, the Collateral Agreement shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE NEW SUBSIDIARY UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
Exhibit I - 2
SECTION 8. All communications and notices hereunder shall (except as otherwise expressly permitted by the Collateral Agreement) be in writing and given as provided in Section 6.01 of the Collateral Agreement.
SECTION 9. The New Subsidiary agrees to reimburse the Agent for its reasonable and documented out-of-pocket expenses in connection with this Supplement, including the reasonable and documented fees, disbursements and other charges of counsel for the Agent.
[Signature Page Follows.]
Exhibit I - 3
IN WITNESS WHEREOF, the New Subsidiary and the Agent have duly executed this Supplement to the Collateral Agreement as of the date first above written.
[Name of New Subsidiary] | ||
By: | ||
Name: Title: |
||
Legal Name: | ||
Jurisdiction of Formation: |
Schedule I
to Supplement No. to the
Collateral Agreement
Pledged Collateral of the New Subsidiary
PLEDGED STOCK
Number of Issuer Certificate |
Registered Owner |
Number and Class of
Equity Interests |
Percentage of
Equity Interests |
PLEDGED DEBT
Issuer |
Principal Amount | Date of Note | Maturity Date |
OTHER PROPERTY
Schedule II
to Supplement No. to the
Collateral Agreement
Intellectual Property of the New Subsidiary
Exhibit II
to the Collateral Agreement
Form of Perfection Certificate
See Attached
Exhibit II-1
Exhibit III
to Collateral Agreement
[Form of]
OTHER FIRST LIEN SECURED PARTY CONSENT
[Name of Authorized Representative for the New Secured Parties]
[Address of Authorized Representative]
[Date]
[Name of Agent]
[Address of Agent]
The undersigned is the Authorized Representative for persons wishing to become Secured Parties (the New Secured Parties ) under the Collateral Agreement dated as of December 20, 2013 (as heretofore amended and/or supplemented, the Collateral Agreement (terms used without definition herein have the meanings assigned to such term by the Collateral Agreement)) among (a) AP GAMING I, LLC (the Borrower ), each Subsidiary Party thereto (each, a Subsidiary Party ) and CITICORP NORTH AMERICA, INC., as Collateral Agent (in such capacity, the Agent ) for the Secured Parties (as defined therein).
In consideration of the foregoing, the undersigned hereby:
(i) represents that the Authorized Representative has been duly authorized by the New Secured Parties to become a party to the Collateral Agreement, each other Security Document and the First Lien Intercreditor Agreement on behalf of the New Secured Parties under that [DESCRIBE OPERATIVE AGREEMENT] (the New Secured Obligation ) and to act as the Authorized Representative for the New Secured Parties;
(ii) acknowledges that the Authorized Representative received a copy of the Security Documents and each Intercreditor Agreement;
(iii) appoints and authorizes the Agent to take such action as agent on its behalf and on behalf of all other Secured Parties and to exercise such powers under the Security Documents and First Lien Intercreditor Agreement as are delegated to the Agent by the terms thereof, together with all such powers as are reasonably incidental thereto;
(iv) accepts and acknowledges the terms of the First Lien Intercreditor Agreement applicable to it and the New Secured Parties and agrees to serve as Authorized Representative for the New Secured Parties with respect to the New Secured Obligations and agrees on its own behalf and on behalf of the New Secured Parties to be bound by the terms thereof applicable to holders of Other First Lien Obligations, with all the rights and
Exhibit III-1
obligations of a Secured Party thereunder and bound by all the provisions thereof (including, without limitation, Section 2.02(b) thereof) as fully as if it had been a Secured Party on the effective date of the Collateral Agreement and each Intercreditor Agreement and agrees that its address for receiving notices pursuant to the Security Documents and each applicable Intercreditor Agreement shall be as follows:
[Address]
(v) confirms the authority of the Agent to enter into such agreements on its behalf and on behalf of the New Secured Parties and agrees on its own behalf and on behalf of the New Secured Parties to be bound by the terms thereof applicable to it and the New Secured Parties as fully as if it had been a party to each such agreement on behalf of itself and the New Secured Parties.
The Agent, by acknowledging and agreeing to this Other First Lien Secured Party Consent, accepts the appointment set forth in clause (iii) above.
THIS OTHER FIRST LIEN SECURED PARTY CONSENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[Signature Pages Follow.]
Exhibit III-2
IN WITNESS WHEREOF, the undersigned has caused this Other First Lien Secured Party Consent to be duly executed by its authorized officer as of the date first above written.
[AUTHORIZED REPRESENTATIVE] | ||
By: | ||
Name: Title: |
Acknowledged and Agreed:
[AGENT] |
||
By: | ||
Name: Title: |
Acknowledged and Agreed:
[BORROWER], for itself and on behalf of the other Pledgors |
||
By: | ||
Name: Title: |
Exhibit IV
to the Collateral Agreement
Form of Intellectual Property Security Agreement
See Attached
Exhibit IV-1
Form of Intellectual Property Security Agreement
[FORM OF] [COPYRIGHT] [PATENT] [TRADEMARK] SECURITY AGREEMENT dated as of [DATE] (this Agreement ), made by [], a [] [] (the Pledgor ), in favor of Citicorp North America, Inc., as Collateral Agent (as defined below).
Reference is made to the Collateral Agreement dated as of December 20, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the Collateral Agreement ), among AP GAMING I, LLC (the Borrower ), each subsidiary of the Borrower identified therein and CITICORP NORTH AMERICA, INC., as collateral agent (together with its successors and assigns in such capacity, the Agent ) for the Secured Parties (as defined therein). The parties hereto agree as follows:
SECTION 1. Terms . Capitalized terms used in this Agreement and not otherwise defined herein have the meanings specified in the Collateral Agreement. The rules of construction specified in Section 1.01(b) of the Collateral Agreement also apply to this Agreement.
SECTION 2. Grant of Security Interest . As security for the payment and performance when due, as the case may be, in full of the Secured Obligations, the Pledgor pursuant to the Collateral Agreement did, and hereby does, grant to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, a security interest in all of such Pledgors right, title and interest in or to any and all of the following assets now owned or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, but excluding any Excluded Property, the IP Collateral ):
[(i) | all Patents of the United States, including those listed on Schedule I ;] |
[(ii) | all Copyrights of the United States, including those listed on Schedule II ;] |
[(iii) | all Trademarks of the United States, including those listed on Schedule III ; |
provided , however , that the foregoing pledge, assignment and grant of security interest will not cover any intent-to-use applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) or 1(d) of the Lanham Act has been filed, to the extent, if any, that any assignment of an intent-to-use application prior to such filing would violate the Lanham Act.]
SECTION 3. Collateral Agreement . The security interests granted to the Agent herein are granted in furtherance, and not in limitation of, the security interests granted to the Agent pursuant to the Collateral Agreement. Each Pledgor hereby acknowledges and affirms that the rights and remedies of the Agent with respect to the IP Collateral are more fully set forth in the Collateral Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein. In the event of any conflict between the terms of this Agreement and the Collateral Agreement, the terms of the Collateral Agreement shall govern.
Exhibit IV-2
SECTION 4. Counterparts . This Agreement may be executed in two or more counterparts, including by facsimile or other electronic means, each of which shall constitute an original and all of which shall together constitute one and the same document.
SECTION 5. Governing Law . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
[Signature Pages Follow]
Exhibit IV - 3
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
[Name of Pledgor] | ||
By: | ||
Name: Title: |
Exhibit IV- 4
CITICORP NORTH AMERICA, INC., as Collateral Agent |
||
By: | ||
Name: | ||
Title: | ||
By: | ||
Name: |
||
Title: |
Exhibit IV - 5
Exhibit 10.20
HOLDINGS GUARANTEE AND PLEDGE AGREEMENT
dated and effective as of
December 20, 2013
between
AP GAMING HOLDINGS, LLC,
as Holdings
and
CITICORP NORTH AMERICA, INC. ,
as Agent
TABLE OF CONTENTS
Page | ||||
ARTICLE I DEFINITIONS |
1 | |||
SECTION 1.01. Credit Agreement |
1 | |||
SECTION 1.02. Other Defined Terms |
2 | |||
ARTICLE II GUARANTEE |
5 | |||
SECTION 2.01. The Guarantee |
5 | |||
ARTICLE III PLEDGE OF EQUITY INTERESTS |
7 | |||
SECTION 3.01. Pledge |
7 | |||
SECTION 3.02. Delivery of Pledged Collateral |
9 | |||
SECTION 3.03. Representations and Warranties |
9 | |||
SECTION 3.04. Covenants |
10 | |||
SECTION 3.05. Registration in Nominee Name; Denominations |
11 | |||
SECTION 3.06. Financing Statements |
11 | |||
SECTION 3.07. Certification of Pledged Borrower Stock |
12 | |||
SECTION 3.08. Voting Rights; Dividends and Interest, Etc |
12 | |||
SECTION 3.09. Powers Coupled with an Interest |
14 | |||
ARTICLE IV [RESERVED] |
14 | |||
ARTICLE V REMEDIES |
14 | |||
SECTION 5.01. Remedies Upon Default |
14 | |||
SECTION 5.02. Application of Proceeds |
15 | |||
SECTION 5.03. Securities Act, Etc |
16 | |||
ARTICLE VI MISCELLANEOUS |
17 | |||
SECTION 6.01. Notices |
17 | |||
SECTION 6.02. Security Interest Absolute |
17 | |||
SECTION 6.03. Limitation by Law |
17 | |||
SECTION 6.04. Binding Effect; Several Agreement |
17 | |||
SECTION 6.05. Successors and Assigns |
17 | |||
SECTION 6.06. Agents Fees and Expenses |
18 | |||
SECTION 6.07. Agent Appointed Attorney-in-Fact |
18 | |||
SECTION 6.08. GOVERNING LAW |
19 | |||
SECTION 6.09. Waivers; Amendment; Extension of Time |
19 | |||
SECTION 6.10. WAIVER OF JURY TRIAL |
20 | |||
SECTION 6.11. Severability |
20 | |||
SECTION 6.12. Counterparts |
20 | |||
SECTION 6.13. Headings |
20 | |||
SECTION 6.14. Jurisdiction; Consent to Service of Process |
20 | |||
SECTION 6.15. Termination or Release |
21 | |||
SECTION 6.16. Compliance with Gaming Laws |
22 | |||
SECTION 6.17. Subject to Any Applicable Intercreditor Agreement |
23 |
i
TABLE OF CONTENTS
(Continued)
Page | ||||
SECTION 6.18. Other First Lien Obligations |
23 | |||
SECTION 6.19. Person Serving as Agent |
24 | |||
SECTION 6.20. General Authority of the Agent |
25 | |||
SECTION 6.21. Application of Gaming Laws |
25 |
Schedules |
||
Schedule I Description of Pledged Borrower Stock |
||
Exhibits |
||
Exhibit I Form of Other First Lien Secured Party Consent |
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This HOLDINGS GUARANTEE AND PLEDGE AGREEMENT, dated and effective as of December 20, 2013, is between AP GAMING HOLDINGS, LLC, a Delaware limited liability company ( Holdings ), and CITICORP NORTH AMERICA, INC., as collateral agent (together with its successors and permitted assigns in such capacity, the Agent ) for the benefit of the Secured Parties (as defined below).
W I T N E S S E T H :
WHEREAS, pursuant to the First Lien Credit Agreement, dated as of the date hereof (as amended, restated, supplemented, waived or otherwise modified from time to time, the Credit Agreement ), among Holdings, AP Gaming I, LLC, a Delaware limited liability company and a Subsidiary of Holdings (together with its successors, the Borrower ), the Lenders party thereto from time to time, Citicorp North America, Inc., as administrative agent (together with its successors and assigns in such capacity, the Credit Agreement Agent ), and the other parties thereto, the Lenders and the Issuing Banks have agreed to extend credit to the Borrower upon the terms and subject to the conditions set forth therein, including the execution and delivery of this Agreement;
WHEREAS, Holdings is the legal and beneficial owner of the Pledged Collateral (as hereinafter defined) issued by the Borrower and will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement; and
WHEREAS, Holdings is willing to execute and deliver this Agreement in order to induce the Lenders and the Issuing Banks to extend such credit under the Credit Agreement and to induce the holders of any other Other First Lien Obligations to make extensions of credit under the applicable Other First Lien Agreements, as applicable.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Credit Agreement .
(a) Capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement. All terms referred to herein that are defined in Article 9 of the New York UCC (as defined herein) and not defined in this Agreement or the Credit Agreement have the meanings specified in Article 9 of the New York UCC. The term instrument shall have the meaning specified in Article 9 of the New York UCC.
(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.
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SECTION 1.02. Other Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
Agent has the meaning assigned to such term in the introductory paragraph of this Agreement.
Agreement means this Holdings and Guarantee and Pledge Agreement, as amended, restated, supplemented, waived or otherwise modified from time to time.
Applicable First Lien Representative means the Applicable Authorized Representative as defined in the First Lien Intercreditor Agreement upon and during the effectiveness thereof. The Applicable First Lien Representative shall be the Credit Agreement Agent unless and until another person is designated as the Applicable First Lien Representative pursuant to the First Lien Intercreditor Agreement.
Authorized Representative means (i) the Credit Agreement Agent with respect to the Credit Agreement and (ii) with respect to any Series of Other First Lien Obligations, the duly authorized representative of the Secured Parties of such Series of Other First Lien Obligations designated as Authorized Representative for such Secured Parties in the related Other First Lien Secured Party Consent delivered to the Agent.
Borrower has the meaning assigned to such term in the recitals of this Agreement.
Credit Agreement has the meaning assigned to such term in the recitals of this Agreement.
Credit Agreement Agent has the meaning assigned to such term in the recitals of this Agreement.
Credit Agreement Loan Obligations means the Loan Obligations as defined in the Credit Agreement.
Credit Agreement Secured Obligations means the Obligations as defined in the Credit Agreement.
Credit Agreement Secured Parties means the Secured Parties as defined in the Credit Agreement.
Event of Default means an Event of Default under and as defined in the Credit Agreement or any Other First Lien Agreement.
Federal Securities Laws has the meaning assigned to such term in Section 5.03.
First Lien Intercreditor Agreement means a Permitted Pari Passu Intercreditor Agreement as defined in the Credit Agreement (as amended, restated, supplemented or otherwise modified from time to time).
Guaranteed Obligations has the meaning assigned to such term in Section 2.01.
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Holdings has the meaning assigned to such term in the introductory paragraph of this Agreement.
Intercreditor Agreement means a First Lien Intercreditor Agreement (upon and during the effectiveness thereof) or a Permitted Junior Intercreditor Agreement (upon and during the effectiveness thereof), as the case may be.
Loan Documents means (a) the Credit Agreement, (b) all Other First Lien Agreements, (c) the Security Documents and (d) for purposes of Section 5.02 and Section 6.06 only, the First Lien Intercreditor Agreement (upon and during the effectiveness thereof).
Nevada Gaming Authority has the meaning assigned to such term in Section 6.16(a).
Nevada Gaming Laws has the meaning assigned to such term in Section 6.16(a).
New York UCC means the Uniform Commercial Code as from time to time in effect in the State of New York.
Other First Lien Agreement means any indenture, credit agreement (excluding the Credit Agreement) or other agreement, document or instrument, pursuant to which any Loan Party has or will incur Other First Lien Obligations; provided that, in each case, the Indebtedness thereunder has been designated as Other First Lien Obligations pursuant to and in accordance with Section 6.18.
Other First Lien Obligations means (a) the due and punctual payment by any Loan Party of (i) the unpaid principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable as a claim in such proceeding) on Indebtedness under any Other First Lien Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations of such Loan Party to any Secured Party under any Other First Lien Agreement, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable as a claim in such proceeding), (b) the due and punctual performance of all other obligations of such Loan Party under or pursuant to any Other First Lien Agreement and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to any Other First Lien Agreement.
Other First Lien Secured Parties means, collectively, the holders of Other First Lien Obligations and any Authorized Representative with respect thereto.
Other First Lien Secured Party Consent means a consent substantially in the form of Exhibit I to this Agreement (or such other form as the Agent may agree) executed by the Authorized Representative of any holders of Other First Lien Obligations pursuant to Section 6.18.
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Permitted Liens means Liens that are (a) permitted by Article VIA of the Credit Agreement and (b) not prohibited by any Other First Lien Agreement.
Pledged Borrower Stock has the meaning assigned to such term in Section 3.01.
Pledged Collateral has the meaning assigned to such term in Section 3.01.
Pledged Securities means any promissory notes, stock certificates or other certificated securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.
Prior Agent has the meaning assigned to such term in Section 6.19.
Regulation S-X Excluded Collateral has the meaning assigned to such term in Section 3.01.
Requirement of Law means, as to any person, any law, treaty, rule, regulation, statute, order, ordinance, decree, judgment, consent decree, writ, injunction, settlement agreement or governmental requirement enacted, promulgated or imposed or entered into or agreed by any Governmental Authority or Gaming Authority (including Gaming Laws), in each case applicable to or binding upon such person or any of its property or assets or to which such person or any of its property or assets is subject.
Rule 3-16 has the meaning assigned to such term in Section 3.01.
Secured Obligations means, collectively, the Credit Agreement Secured Obligations and any Other First Lien Obligations, or any of the foregoing (but, excluding, in each case, any Excluded Swap Obligations).
Secured Parties means the persons holding any Secured Obligations and in any event including (i) all Credit Agreement Secured Parties and (ii) all Other First Lien Secured Parties.
Security Documents has the meaning assigned to such term in the Credit Agreement and any analogous term in any Other First Lien Agreement (but, with respect to the Secured Obligations of any Series, the term Security Documents shall not include any document which by its terms is solely for the benefit of the holders of one or more other Series of Secured Obligations and not such Series of Secured Obligations)
Series means (a) with respect to the Secured Parties, each of (i) the Credit Agreement Secured Parties (in their capacities as such) and (ii) the Other First Lien Secured Parties that become subject to this Agreement and the First Lien Intercreditor Agreement after the date hereof that are represented by a common Authorized Representative (in its capacity as such for such Other First Lien Secured Parties) and (b) with respect to any Secured Obligations, each of (i) the Credit Agreement Secured Obligations and (ii) the Other First Lien Obligations incurred pursuant to any Other First Lien Agreement, which pursuant to any Other First Lien Secured Party Consent, are to be represented hereunder by a common Authorized Representative (in its capacity as such for such Other First Lien Obligations).
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Specified Excluded Collateral means, solely with respect to any Series of Other First Lien Obligations, any asset that is not intended to be collateral with respect to such Series pursuant to the terms of the Other First Lien Agreement governing such Series (including the Regulation S-X Excluded Collateral to the extent applicable to such Series in accordance with the last paragraph of Section 3.01).
Successor Agent has the meaning assigned to such term in Section 6.19.
Termination Date means the Termination Date as defined in the Credit Agreement.
ARTICLE II
Guarantee
SECTION 2.01. The Guarantee .
(a) Guarantee of Secured Obligations . Holdings unconditionally guarantees to the Agent, jointly and severally with the other Guarantors, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Secured Obligations (such guarantee obligations of Holdings, the Guaranteed Obligations ) for the benefit of the Secured Parties. Holdings further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligation. Holdings waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.
(b) Guarantee of Payment . Holdings further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Agent or any other Secured Party to any security held for the payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Agent or any other Secured Party in favor of the Borrower or any other person.
(c) No Limitations . Except for termination or release of Holdings obligations hereunder as expressly provided for in Section 6.15 and subject to the limitations set forth in clause (h) of this Section 2.01, the obligations of Holdings hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise (other than defense of payment or performance). Without limiting the generality of the foregoing, the obligations of Holdings hereunder, to the fullest extent permitted by applicable law, shall not be discharged or impaired or otherwise affected by: (i) the failure of the Agent or any other Secured Party to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or
5
any release from any of the terms or provisions of, any Loan Document or any other agreement; (iii) the failure to perfect any security interest in, or the exchange, substitution, release or any impairment of, any security held by the Agent or any other Secured Party for the Guaranteed Obligations; (iv) any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations; (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the payment in full in cash in immediately available funds of all the Guaranteed Obligations); (vi) any illegality, lack of validity or enforceability of any Guaranteed Obligation; (vii) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any Guaranteed Obligation (other than the payment in full in cash in immediately available funds of all the Guaranteed Obligations); (viii) the existence of any claim, set-off or other rights that Holdings may have at any time against the Borrower, the Agent, or any other corporation or person, whether in connection herewith or any unrelated transactions; provided , that nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim; and (ix) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent that might otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower or any other Loan Party or any other guarantor or surety (other than defense of payment or performance).
Holdings expressly authorizes the Agent, on behalf of the Secured Parties, to take and hold security for the payment and performance of the Guaranteed Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed Obligations, all without affecting the obligations of Holdings hereunder.
To the fullest extent permitted by applicable law, Holdings waives any defense based on or arising out of any defense of any other Guarantor or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Guarantor, other than the payment in full in cash in immediately available funds of all the Guaranteed Obligations. The Agent may, at its election, foreclose on any security held by it by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or remedy available to it against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of Holdings hereunder, except to the extent the Guaranteed Obligations have been paid in full in cash in immediately available funds. To the fullest extent permitted by applicable law, Holdings waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of Holdings against any other Guarantor, as the case may be, or any security.
6
(d) Reinstatement . Notwithstanding the provisions of Section 6.15, Holdings agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored or returned by the Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any other Loan Party, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any other Loan Party or any substantial part of its property, or otherwise, all as though such payment had not been made.
(e) Agreement To Pay . In furtherance of the foregoing and not in limitation of any other right that the Agent or any other Secured Party has at law or in equity against Holdings by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, Holdings hereby promises to and will forthwith pay, or cause to be paid, to the Agent for distribution to the applicable Secured Party in cash in immediately available funds the amount of such unpaid Guaranteed Obligation.
(f) Information . Holdings assumes all responsibility for being and keeping itself informed of the Borrowers and each other Loan Partys financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that Holdings assumes and incurs hereunder, and agrees that neither the Agent nor any other Secured Party will have any duty to advise Holdings of information known to it or any of them regarding such circumstances or risks.
(g) Maximum Liability . Holdings, and by its acceptance of this Agreement, the Agent and each Secured Party, hereby confirm that it is the intention of all such persons that this Agreement and the Guaranteed Obligations not constitute a fraudulent transfer or conveyance for purposes of the U.S. Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Agreement and the Guaranteed Obligations. To effectuate the foregoing intention, the Agent, the Secured Parties and Holdings hereby irrevocably agree that the Guaranteed Obligations at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations not constituting a fraudulent transfer or conveyance.
(h) Limited Recourse . Notwithstanding anything herein or in the Credit Agreement, any other Loan Document or any Other First Lien Agreement to the contrary, the Guaranteed Obligations are limited recourse obligations payable solely from the Pledged Collateral pledged by Holdings hereunder and, following realization of the Pledged Collateral pledged by Holdings (whether through sale, foreclosure or otherwise) and the application thereof in accordance with this Agreement, such Guaranteed Obligations shall be extinguished and shall not revive.
ARTICLE III
Pledge of Equity Interests
SECTION 3.01. Pledge . As security for the payment or performance, as the case may be, in full of the Guaranteed Obligations, Holdings hereby assigns and pledges to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, and hereby grants to the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, a security interest in all of Holdings right, title and interest in, to and under:
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(a) the Equity Interests of the Borrower directly owned by Holdings (which such Equity Interests as of the Closing Date shall be listed on Schedule I ) and any certificates representing all such Equity Interests (collectively, the Pledged Borrower Stock );
(b) subject to Section 3.08, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other proceeds received in respect of, the Pledged Borrower Stock;
(c) subject to Section 3.08, all rights and privileges of Holdings with respect to the Pledged Borrower Stock and other property referred to in clause (b) above; and
(d) all proceeds of any of the foregoing (the items referred to in clauses (a) through this clause (d) being collectively referred to as the Pledged Collateral ); provided that the Pledged Collateral shall not include any Excluded Property.
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Agent, its successors and permitted assigns, for the benefit of the Secured Parties, forever; subject , however , to the terms, covenants and conditions hereinafter set forth.
Notwithstanding anything else to the contrary, in the event that Rule 3-16 of Regulation S-X under the Securities Act (as such Rule 3-16 may be amended, modified or interpreted by the SEC, Rule 3-16 ) would require (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would require) the filing with the SEC (or any other Governmental Authority) of separate financial statements of the Borrower due to the fact that the Pledged Borrower Stock secures any Series of the Other First Lien Obligations affected thereby, then the Pledged Borrower Stock (the Regulation S-X Excluded Collateral ) will automatically be deemed not to be part of the Pledged Collateral securing such Series of Other First Lien Obligations affected thereby, but only to the extent necessary to not be subject to such requirement and only for so long as required to not be subject to such requirement. In such event, this Agreement may be amended or modified, without the consent of any Secured Party, to the extent necessary to release the Lien on the Regulation S-X Excluded Collateral in favor of the Agent with respect only to the relevant Series of Other First Lien Obligations. In the event that Rule 3-16 is amended, modified or interpreted by the SEC to permit (or is replaced with another rule or regulation, or any other law, rule or regulation is adopted, which would permit) any Regulation S-X Excluded Collateral to secure the Other First Lien Obligations in excess of the amount then pledged without the filing with the SEC (or any other Governmental Authority) of separate financial statements of the Borrower, then the Pledged Borrower Stock will automatically be deemed to be a part of the Pledged Collateral for the relevant Series of Other First Lien Obligations. For the avoidance of doubt and notwithstanding anything to the contrary in this Agreement, nothing in this paragraph shall limit the pledge of such Pledged Borrower Stock and other securities from securing the Secured Obligations (other than the relevant Series of Other First Lien Obligations) at all relevant times
8
or from securing any Other First Lien Obligations that are not in respect of securities subject to regulation by the SEC. To the extent any proceeds of any collection or sale of Pledged Borrower Stock deemed by this paragraph to no longer constitute part of the Pledged Collateral for the relevant Series of Other First Lien Obligations are to be applied by the Agent in accordance with Section 5.02 hereof, such proceeds shall, notwithstanding the terms of Section 5.02 and the First Lien Intercreditor Agreement, not be applied to the payment of such Series of Other First Lien Obligations.
SECTION 3.02. Delivery of Pledged Collateral .
(a) Subject to the provisions of Section 6.16, Holdings agrees promptly (and in any event within 45 days after the acquisition or such longer time as the Applicable First Lien Representative shall permit in its reasonable discretion) to deliver or cause to be delivered to the Agent, for the benefit of the Secured Parties, any and all Pledged Securities.
(b) Subject to the provisions of Section 6.16, upon delivery to the Agent within the time period set forth in clause (a) above, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraph (a) of this Section 3.02 shall be accompanied by stock powers, duly executed in blank or other instruments of transfer reasonably satisfactory to the Agent and by such other instruments and documents as the Agent may reasonably request and (ii) all other property comprising part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied to the extent necessary to perfect the security interest in or allow realization on the Pledged Collateral by proper instruments of assignment duly executed by Holdings and such other instruments or documents as the Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule I (or a supplement to Schedule I, as applicable) and made a part hereof; provided, that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Collateral. Each schedule so delivered shall be deemed to supplement any prior schedules so delivered.
SECTION 3.03. Representations and Warranties . Holdings represents and warrants to the Agent, for the benefit of the Secured Parties:
(a) the Pledged Borrower Stock listed on Schedule I (as such Schedule may be updated from time to time) constitutes all of the issued and outstanding Equity Interests of the Borrower issued to Holdings;
(b) the Pledged Borrower Stock has been duly and validly authorized and issued and are fully paid;
(c) Holdings is the direct record and beneficial owner of, and has good title to, the Pledged Borrower Stock listed on Schedule I (as such Schedule may be updated from time to time) owned by Holdings, free of any and all Liens except Permitted Liens; and
(d) other than as set forth in the Credit Agreement or the schedules thereto or, after the termination of the Credit Agreement, in any Other First Lien Agreement, and except for restrictions and limitations imposed by the Loan Documents and any Other First Lien Agreement then in effect, Gaming Laws or securities laws generally or otherwise not prohibited by the Loan Documents and any Other First Lien
9
Agreement then in effect, the Pledged Borrower Stock is and will continue to be freely transferable and assignable, and none of the Pledged Borrower Stock is or will be subject to any option, right of first refusal, shareholders agreement, charter, by-law, memorandum of association or articles of association provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of the Pledged Collateral hereunder, the Disposition thereof pursuant hereto or the exercise by the Agent of rights and remedies hereunder other than under applicable Requirements of Law (including Gaming Laws);
(e) Holdings has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;
(f) other than as set forth in the Credit Agreement or the schedules thereto or in the other Loan Documents or as required under Gaming Laws, as of the Closing Date, no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);
(g) by virtue of the execution and delivery by Holdings of this Agreement, when the Pledged Securities are delivered to the Agent, for the benefit of the Secured Parties, in accordance with this Agreement, and a Uniform Commercial Code financing statement naming the Agent as the secured party and covering the Pledged Collateral is filed in the appropriate filing office, the Agent will obtain, for the benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Collateral, subject only to Permitted Liens, as security for the payment of the Guaranteed Obligations, to the extent such perfection is governed by the Uniform Commercial Code.
SECTION 3.04. Covenants . Holdings covenants and agrees with the Agent and the Secured Parties, that, from and after the date of this Agreement until the date of its termination pursuant to Section 6.15(a):
(a) Holdings agrees to pay, and to save the Agent and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Pledged Collateral or in connection with any of the transactions contemplated by this Agreement all in accordance with all of the terms, covenants and agreements that Section 2.17 of the Credit Agreement requires Holdings to perform or observe, subject to the qualifications set forth therein.
(b) Holdings agrees to furnish to the Agent prompt written notice of any change in (i) its organization name, (ii) its identity or organizational structure, (iii) its organizational identification number, (iv) its jurisdiction of organization or (v) the location of its chief executive office if it is not a registered organization; provided that Holdings agrees not to effect or permit any such change unless all filings have been made, or will have been made within any applicable statutory period following such change, under the Uniform Commercial Code or otherwise that are required in order for the Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Pledged Collateral in which a security interest may be perfected by such filing, for the benefit of the Secured Parties.
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(c) Holdings agrees it will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, and will not Dispose of any other Pledged Collateral, in each case other than pursuant to a transaction not prohibited by any Loan Document and any Other First Lien Agreement then in effect and other than Permitted Liens.
(d) Subject to the rights of Holdings under the Loan Documents and each Other First Lien Agreement then in effect to Dispose of Pledged Collateral, Holdings shall, at its own expense, use commercially reasonable efforts to defend its title to the Pledged Collateral against all persons and to defend the security interest of the Agent, for the benefit of the Secured Parties, in the Pledged Collateral and the priority thereof against any Lien that is not a Permitted Lien.
(e) Holdings agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Agents security interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement and the granting of the security interest and the filing of any financing statements or other documents in connection herewith or therewith.
SECTION 3.05. Registration in Nominee Name; Denominations . The Agent, on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of Holdings, endorsed or assigned in blank or in favor of the Agent or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Following the occurrence and during the continuance of an Event of Default, Holdings will promptly give to the Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of Holdings. If an Event of Default shall have occurred and be continuing, the Agent shall have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. Holdings shall use its commercially reasonable efforts to cause any Subsidiary of the Borrower that is not a party to this Agreement to comply with a request by the Agent, pursuant to this Section 3.05, to exchange certificates representing Pledged Securities of such Subsidiary for certificates of smaller or larger denominations.
SECTION 3.06. Financing Statements . Holdings hereby irrevocably authorizes the Agent at any time and from time to time to file in any relevant jurisdiction any initial financing statements with respect to the Pledged Collateral or any part thereof and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (i) whether Holdings is an organization, the type of organization and any organizational identification number issued to Holdings and (ii) a description of collateral that describes such property in any other manner as the Agent may reasonably determine is necessary or advisable to ensure the perfection of the security interest in the Pledged Collateral.
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SECTION 3.07. Certification of Pledged Borrower Stock . Holdings hereby represents and warrants to the Agent for the benefit of the Secured Parties that as of the Closing Date none of the Pledged Borrower Stock is a security (within the meaning of Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction) and covenants that Holdings shall at no time elect to treat any of the Pledged Borrower Stock as a security or issue any certificate representing such interest unless Holdings provides the Agent notification thereof and delivers any such certificate to the Agent pursuant to Section 3.02(a).
SECTION 3.08. Voting Rights; Dividends and Interest, Etc .
(a) Unless and until an Event of Default shall have occurred and be continuing and the Agent shall have given written notice to Holdings of the Agents intention to exercise its rights hereunder:
(i) Holdings shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Collateral or any part thereof for any purpose not prohibited by the terms of this Agreement, the Credit Agreement and each Other First Lien Agreement then in effect; provided that, except as not prohibited by the Credit Agreement, any other Loan Documents and each Other First Lien Agreement then in effect, such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights and remedies of the Agent or any other Secured Party under this Agreement, the Credit Agreement, any other Loan Documents or any Other First Lien Agreement or the ability of the Secured Parties to exercise the same.
(ii) The Agent shall promptly execute and deliver to Holdings, or cause to be executed and delivered to Holdings, all such proxies, powers of attorney and other instruments as Holdings may reasonably request for the purpose of enabling Holdings to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.
(iii) Holdings shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are not prohibited by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, any other Loan Documents and each Other First Lien Agreement then in effect and applicable laws; provided that any noncash dividends, interest, principal or other distributions that would constitute Pledged Borrower Stock, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the Borrower, received in exchange for Pledged Borrower Stock or any part thereof, or in redemption thereof or as a result of any merger, consolidation, acquisition or other exchange of assets to which the Borrower may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by Holdings, shall be promptly (and in any event within 45 days following their receipt (or such longer time as the Applicable First Lien Representative shall permit in its reasonable discretion)) delivered to the Agent, for the benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Agent).
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(b) Upon the occurrence and during the continuance of an Event of Default and upon written notice by the Agent to Holdings of the Agents intention to exercise its rights hereunder, all rights of Holdings to receive dividends, interest, principal or other distributions with respect to the Pledged Securities that Holdings is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.08 shall cease, and all such rights shall thereupon become vested, for the benefit of the Secured Parties, in the Agent, which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions ; provided that, notwithstanding the occurrence and continuation of an Event of Default, Holdings may continue to receive dividends and distributions made pursuant to subclause (i), subclause (iii) and subclause (v) of Section 6.06(b) of the Credit Agreement. All dividends, interest, principal or other distributions received by Holdings contrary to the provisions of this Section 3.08 shall not be commingled by Holdings with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Agent, for the benefit of the Secured Parties, and shall be forthwith delivered to the Agent, for the benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Agent). Any and all money and other property paid over to or received by the Agent pursuant to the provisions of this paragraph (b) shall be retained by the Agent in an account to be established by the Agent upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02. After all Events of Default have been cured or waived and the Borrower has delivered to the Agent a certificate to that effect, the Agent shall promptly repay to Holdings (without interest) all dividends, interest, principal or other distributions that Holdings would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.08 and that remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default and after written notice by the Agent to Holdings of the Agents intention to exercise its rights hereunder, subject to applicable Gaming Laws, all rights of Holdings to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.08, and the obligations of the Agent under paragraph (a)(ii) of this Section 3.08, shall cease, and all such rights shall thereupon become vested in the Agent, for the benefit of the Secured Parties, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that, unless otherwise directed by the Applicable First Lien Representative, the Agent shall have the right from time to time following and during the continuance of an Event of Default to permit Holdings to exercise such rights. After all Events of Default have been cured or waived and the Borrower has delivered to the Agent a certificate to that effect, all rights of Holdings to exercise the voting and/or other consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.08 shall continue and all such rights shall no longer be vested in the Agent for the benefit of the Secured Parties, and the obligations of the Agent under paragraph (a)(ii) of this Section 3.08 shall be reinstated,
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(d) Any notice given by the Agent to Holdings suspending Holdings rights under paragraph (a)(i) of this Section 3.08 may be given by telephone if promptly confirmed in writing and (ii) may suspend the rights of Holdings under paragraph (a)(i) or paragraph (a)(iii) of this Section 3.08 in part without suspending all such rights (as specified by the Agent in its sole and absolute discretion) and without waiving or otherwise affecting the Agents rights to give additional notices from time to time suspending other rights so long as an Event of Default has occurred and is continuing.
SECTION 3.09. Powers Coupled with an Interest . All authorizations and agencies herein contained with respect to the Pledged Collateral are irrevocable and powers coupled with an interest.
ARTICLE IV
[Reserved]
ARTICLE V
Remedies
SECTION 5.01. Remedies Upon Default . In accordance with, and to the extent consistent with, the terms of any applicable Intercreditor Agreement and applicable Requirements of Law (including Gaming Laws), the Agent may take any action specified in this Section 5.01. If an Event of Default shall occur and be continuing and the Agent shall have given notice of its intent to exercise its rights hereunder to Holdings, the Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the New York UCC or applicable law. Without limiting the generality of the foregoing, the Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below and any notice referred to in the preceding sentence) to or upon Holdings, the Borrower, or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Pledged Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise Dispose of and deliver the Pledged Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange or brokers board or office of the Agent or any Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Agent shall give Holdings 10 days written notice (which Holdings agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Agents intention to make any Disposition of Pledged Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a brokers board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Agent may fix and state in the notice (if any) of such sale. At any such sale, the Pledged Collateral, or the portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Agent may
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(in its sole and absolute discretion) determine. The Agent shall not be obligated to make any sale of any Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Pledged Collateral shall have been given. The Agent or any Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Pledged Collateral so sold, free of any right or equity of redemption in Holdings, which right or equity is hereby waived or released.
SECTION 5.02. Application of Proceeds . The Agent shall, subject to any applicable Intercreditor Agreement, promptly apply the proceeds, moneys or balances of any collection or sale of Pledged Collateral realized through the exercise by the Agent of its remedies hereunder, as well as any Pledged Collateral consisting of cash at any time when remedies are being exercised hereunder, as follows:
FIRST, to the payment of all out-of-pocket costs and expenses incurred by the Agent in connection with such collection or sale or otherwise in connection with this Agreement, any other Loan Document, any Other First Lien Agreement or any of the Guaranteed Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Agent hereunder or under any other Loan Document or any Other First Lien Agreement on behalf of Holdings, any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Loan Document or any Other First Lien Agreement, and other fees, indemnities and other amounts owing or reimbursable to the Agent under any Loan Document or any Other First Lien Agreement in its capacity as such;
SECOND, to the payment in full of the Guaranteed Obligations secured by such Pledged Collateral (the amounts so applied to be distributed among the Series of Secured Obligations pro rata based on the respective amounts of such Secured Obligations owed to the applicable Secured Parties in respect of each Series on the date of any such distribution (or in accordance with such other method of distribution as may be set forth in any applicable Intercreditor Agreement), with (x) the portion thereof distributed to the Credit Agreement Secured Parties to be further distributed in accordance with the order of priority set forth in Section 7.02 of the Credit Agreement and (y) the portion thereof distributed to the Secured Parties of any other Series to be further distributed in accordance with the applicable provisions of the Other First Lien Agreements governing such Series); and
THIRD, to Holdings, its successors or assigns, or as a court of competent jurisdiction may otherwise direct;
provided , that in no event shall the proceeds of any collection or sale of any Specified Excluded Collateral be applied to the relevant Series of Secured Obligations under any Other First Lien Agreement.
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The Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon the request of the Agent prior to any distribution under this Section 5.02, each Authorized Representative shall provide to the Agent certificates, in form and substance reasonably satisfactory to the Agent, setting forth the respective amounts referred to in this Section 5.02 that each applicable Secured Party or its Authorized Representative believes it is entitled to receive, and the Agent shall be fully entitled to rely on such certificates. Upon any sale of Pledged Collateral by the Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Pledged Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Agent or such officer or be answerable in any way for the misapplication thereof.
SECTION 5.03. Securities Act, Etc . In view of the position of Holdings in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act, or any similar federal statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the Federal Securities Laws ) with respect to any Disposition of the Pledged Collateral permitted hereunder. Holdings understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Agent if the Agent were to attempt to Dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could Dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Agent in any attempt to Dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Holdings acknowledges and agrees that in light of such restrictions and limitations, the Agent, subject to any applicable Intercreditor Agreement, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws or, to the extent applicable, Blue Sky or other state securities laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Holdings acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Agent, subject to any applicable Intercreditor Agreement, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.03 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Agent sells.
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ARTICLE VI
Miscellaneous
SECTION 6.01. Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement (whether or not then in effect), and all notices to any holder of obligations under any Other First Lien Agreements shall be given at its address set forth in the Other First Lien Secured Party Consent or in the First Lien Intercreditor Agreement (upon and during the effectiveness thereof), in each case of the foregoing, as such address may be changed by written notice to the Agent and Holdings.
SECTION 6.02. Security Interest Absolute . To the extent not prohibited by applicable law and subject to Section 2.01(h), all rights of the Agent hereunder, the security interest in the Pledged Collateral and all obligations of Holdings hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of any Loan Document, any other agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, Holdings in respect of the Secured Obligations or this Agreement (other than a defense of payment or performance).
SECTION 6.03. Limitation by Law . All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable Requirement of Law (including any Gaming Law), and all the provisions of this Agreement are intended to be subject to all applicable Requirements of Law (including any Gaming Law) that may be controlling and to be limited to the extent necessary so that they shall not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable Requirement of Law (including any Gaming Law).
SECTION 6.04. Binding Effect; Several Agreement . This Agreement shall become effective as to any party to this Agreement when a counterpart hereof executed on behalf of such party shall have been delivered to the Agent and a counterpart hereof shall have been executed on behalf of the Agent, and thereafter shall be binding upon such party and the Agent and their respective permitted successors and assigns, and shall inure to the benefit of such party, the Agent and the other Secured Parties and their respective permitted successors and assigns, except that no party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Pledged Collateral (and any such assignment or transfer shall be void) except as not prohibited by this Agreement or the Credit Agreement or, after the termination of the Credit Agreement, any Other First Lien Agreement. This Agreement shall be construed as a separate agreement with respect to each party and may be amended, modified, supplemented, waived or released in accordance with Section 6.09 or 6.15, as applicable.
SECTION 6.05. Successors and Assigns . Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party; and all covenants, promises and agreements by or on behalf of Holdings or the Agent that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns.
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SECTION 6.06. Agents Fees and Expenses .
(a) The parties hereto agree that the Agent shall be entitled to reimbursement of its expenses incurred hereunder by Holdings, and the Agent and other Indemnitees shall be indemnified by Holdings, in each case of this clause (a), mutatis mutandis , as provided in Section 9.05 of the Credit Agreement and the equivalent provision of any Other First Lien Agreement.
(b) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. The provisions of this Section 6.06 shall remain operative and in full force and effect regardless of the termination of this Agreement, any other Loan Document or any Other First Lien Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Secured Obligations, the invalidity or unenforceability of any term or provision of this Agreement, any other Loan Document or any Other First Lien Agreement, or any investigation made by or on behalf of the Agent or any other Secured Party. All amounts due under this Section 6.06 shall be payable within fifteen days (or such longer period as the Agent may agree) of written demand therefor, accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.
(c) The agreements in this Section 6.06 shall survive the resignation of the Agent and the termination of this Agreement.
SECTION 6.07. Agent Appointed Attorney-in-Fact . Holdings hereby appoints the Agent the attorney-in-fact of Holdings for the purpose of carrying out the provisions of this Agreement and, upon the occurrence and during the continuance of an Event of Default, taking any action and executing any instrument that the Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, subject to any applicable Requirements of Law (including Gaming Laws) and any applicable Intercreditor Agreement, the Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Agents name or in the name of Holdings, (a) to receive, endorse, assign or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Pledged Collateral or any part thereof; (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Pledged Collateral; (c) to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Pledged Collateral; (d) to sign the name of Holdings on any invoice or bill of lading relating to any of the Pledged Collateral; (e) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Pledged Collateral or to enforce any rights in respect of any Pledged Collateral; (f) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Pledged Collateral; and (g) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Pledged Collateral, and to do all other acts and things necessary to
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carry out the purposes of this Agreement, as fully and completely as though the Agent were the absolute owner of the Pledged Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Agent, or to present or file any claim or notice, or to take any action with respect to the Pledged Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to Holdings for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.
SECTION 6.08. GOVERNING LAW . THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6.09. Waivers; Amendment; Extension of Time .
(a) No failure or delay by the Agent, any Issuing Bank, any Lender or any other Secured Party in exercising any right, power or remedy hereunder or under any other Loan Document or any Other First Lien Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of the Agent, any Issuing Bank, the Lenders or any other Secured Party hereunder and under the other Loan Documents and any Other First Lien Agreement are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by Holdings therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 6.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan, the increase of any Other First Lien Obligations or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Agent, any Lender, any Issuing Bank or any other Secured Party may have had notice or knowledge of such Default or Event of Default at the time. No notice or demand on Holdings in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Agent and Holdings, subject to any consent required in accordance with Section 9.08 of the Credit Agreement and any equivalent provision in each applicable Other First Lien Agreement and, by each other Authorized Representative to the extent required by (and in accordance with) such applicable Other First Lien Agreement, or, in each case, as otherwise provided in any applicable Intercreditor Agreement. The Agent may conclusively rely on a certificate of an officer of the Borrower as to whether any amendment contemplated by this Section 6.09(b) is permitted.
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(c) Notwithstanding anything to the contrary contained herein, the Agent may grant extensions of time or waivers of the requirement for the creation or perfection of security interests in or the obtaining of insurance (including title insurance) or surveys with respect to particular assets (including extensions beyond the date hereof for the perfection of security interests in the assets of Holdings on such date) where it reasonably determines, in consultation with the Borrower, that perfection or obtaining of such items cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement, any other Loan Documents or any Other First Lien Agreement.
SECTION 6.10. WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN DOCUMENTS OR ANY OTHER FIRST LIEN AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.
SECTION 6.11. Severability . In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 6.12. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 6.04. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.
SECTION 6.13. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
SECTION 6.14. Jurisdiction; Consent to Service of Process .
(a) Subject to the final sentence of this clause (a), each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding
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arising out of or relating to this Agreement, any other Loan Document, any Other First Lien Agreement or the transactions relating hereto or thereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement, any other Loan Document or any Other First Lien Agreement shall affect any right that the Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement, any other Loan Document or any Other First Lien Agreement against Holdings or or its properties in the courts of any jurisdiction.
(b) Each party to this Agreement hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, any other Loan Document or any Other First Lien Agreement in any New York State or federal court of the United States of America sitting in New York County, and any appellate court from any thereof. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.01. Nothing in this Agreement, any other Loan Document or any Other First Lien Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
SECTION 6.15. Termination or Release .
(a) This Agreement, the pledges and guarantees made herein, the Liens in the Pledged Collateral created hereby and all other security interests granted hereby, shall automatically terminate and/or be released (i) upon the occurrence of the Termination Date or, if any Other First Lien Obligations secured by the Lien granted hereby are outstanding on the Termination Date, the date after the Termination Date when all such Other First Lien Obligations (other than contingent or unliquidated obligations or liabilities not then due and any other obligations that, by the terms of any Other First Lien Agreements, are not required to be paid in full prior to termination and release of the Pledged Collateral) have been paid in full and the Secured Parties have no further commitment to extend credit under any such Other First Lien Agreement, or (ii) otherwise in accordance with Section 9.18 of the Credit Agreement and the equivalent provision of any applicable Other First Lien Agreement.
(b) The security interest in the Pledged Collateral shall be automatically released, all without delivery of any instrument or performance of any act by any party, (i) upon any sale or other transfer by Holdings of any Pledged Collateral that is permitted by the Credit Agreement and each Other First Lien Agreement then in effect to any person that is not Holdings or a Pledgor (as defined in the Collateral Agreement), (ii) upon the effectiveness of any written consent to the release of the security interest granted hereby in any Pledged Collateral pursuant to Section 9.08 of the Credit Agreement and any equivalent provision of each applicable Other First Lien Agreement (in each case, to the extent required thereby), or (iii) as otherwise may be provided in any applicable Intercreditor Agreement.
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(c) In connection with any termination or release pursuant to this Section 6.15, the Agent shall execute and deliver to Holdings, at Holdings expense, all documents (forms of which shall be reasonably acceptable to the Agent) that Holdings shall reasonably request to evidence such termination or release (including Uniform Commercial Code termination statements), and will duly assign and transfer to Holdings, such of the Pledged Collateral that may be in the possession of the Agent and has not theretofore been sold or otherwise applied or released pursuant to this Agreement. Any execution and delivery of documents pursuant to this Section 6.15 shall be without recourse to or warranty by the Agent. In connection with any release pursuant to this Section 6.15, Holdings shall be permitted to take any action in connection therewith consistent with such release including, without limitation, the filing of Uniform Commercial Code termination statements. Upon the receipt of any necessary or proper instruments of termination, satisfaction or release prepared by the Borrower pursuant to this Section 6.15, the Agent shall execute, deliver or acknowledge such instruments or releases (forms of which shall be reasonable acceptable to the Agent) to evidence the release of any Pledged Collateral permitted to be released pursuant to this Agreement. Holdings agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Agent (and its representatives and counsel) in connection with the execution and delivery of such release documents or instruments.
SECTION 6.16. Compliance with Gaming Laws . Notwithstanding anything to the contrary set forth in this Agreement, any other Loan Document or any Other First Lien Agreement, the Agent, on behalf of the Secured Parties, acknowledges and agrees that:
(a) the pledge of the Pledged Borrower Stock, pursuant to this Agreement, any other Loan Document or any Other First Lien Agreement, will not be effective without the prior approval of the Gaming Authorities having jurisdiction in Nevada (the Nevada Gaming Authorities ), and no certificates evidencing any such Pledged Borrower Stock may be delivered to the Agent until such approval has been obtained. Furthermore, no amendment of this Agreement shall be effective until any approvals required from the Nevada Gaming Authorities under the Gaming Laws applicable in the State of Nevada ( Nevada Gaming Laws ) have been obtained;
(b) in the event that Agent exercises one or more of the remedies set forth in this Agreement with respect to the Pledged Borrower Stock, including, without limitation, the foreclosure, transfer, sale, distribution or other disposition of any interest therein (except back to Holdings), the exercise of voting and consensual rights, and any other resort to or enforcement of the security interest in such Pledged Borrower Stock, such action will require the separate and prior approval of the Nevada Gaming Authorities or the licensing or finding of suitability of the Agent or any transferee thereof unless such licensing or suitability requirement is waived thereby;
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(c) the Agent, and any custodial agent of Agent in the State of Nevada, will be required to comply with the conditions, if any, imposed by the Nevada Gaming Authorities in connection with their approval of the pledge granted hereunder, including, without limitation, requirements that the Agent or its custodial agent maintain the certificates evidencing the Pledged Borrower Stock at a location in Nevada (notice of which the Agent or its custodial agent shall provide to the Nevada Gaming Authorities) and that the Agent or its custodial agent permit agents or employees of the Nevada Gaming Authorities to inspect such certificates upon request;
(d) neither the Agent nor any custodial agent of the Agent will be permitted to surrender possession of any Pledged Borrower Stock to any person other than Holdings without the prior approval of the Nevada Gaming Authorities or as otherwise permitted by the Gaming Laws;
(e) any approval of the Nevada Gaming Authorities of this Agreement, or any amendment hereto, does not constitute approval, either express or implied, of the Agent to take any actions provided for in this Agreement, for which separate approval by the Nevada Gaming Authorities may be required by the Gaming Laws; and
(f) the Agent, the Secured Parties and their respective successors and assigns are subject to being called forward by the Nevada Gaming Authorities in their sole and absolute discretion, for licensing or a finding of suitability in order to remain entitled to the benefits of this Agreement, any other Loan Documents and any Other First Lien Agreement.
SECTION 6.17. Subject to Any Applicable Intercreditor Agreement . Notwithstanding anything herein to the contrary, (i) the Liens and security interests granted to the Agent for the benefit of the Secured Parties pursuant to this Agreement are expressly subject to any applicable Intercreditor Agreement to the extent provided therein and (ii) the exercise of any right or remedy by the Agent hereunder or the application of proceeds (including insurance and condemnation proceeds) of any Pledged Collateral are subject to any applicable Intercreditor Agreement to the extent provided therein. In the event of any conflict between the terms of such applicable Intercreditor Agreement and the terms of this Agreement, the terms of such applicable Intercreditor Agreement shall govern.
SECTION 6.18. Other First Lien Obligations . On or after the date hereof and so long as such obligations are not prohibited by the Credit Agreement and any Other First Lien Agreement then in effect, the Borrower may from time to time designate obligations in respect of Indebtedness to be secured (except with respect to any applicable Specified Excluded Collateral) on a pari passu basis with then outstanding Secured Obligations as Other First Lien Obligations hereunder by delivering to the Agent and each Authorized Representative (a) a certificate signed by a Responsible Officer of the Borrower (i) identifying the obligations so designated and the initial aggregate principal amount or face amount thereof, (ii) stating that such obligations are designated as Other First Lien Obligations for purposes hereof, (iii) representing that such designation of such obligations as Other First Lien Obligations is not prohibited by the terms of the Credit Agreement and any Other First Lien Agreement then in effect and (iv) specifying the name and address of the Authorized Representative for such obligations, (b) a fully executed Other First Lien Secured Party Consent and (c) if not already in effect, execute and deliver the First Lien Intercreditor Agreement (or a joinder thereto in the form (and to the extent, if any) required thereby to the extent such First Lien Intercreditor Agreement is then in effect). The
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Agent and each Authorized Representative agree that upon the satisfaction of all conditions set forth in the preceding sentence, (x) the Agent shall act as agent under and subject to the terms of the Security Documents for the benefit of all Secured Parties, including without limitation, any Secured Parties that hold any such Other First Lien Obligations, and (y) the Agent and each Authorized Representative agrees to the appointment, and acceptance of the appointment, of the Agent as agent for the holders of such Other First Lien Obligations as set forth in each Other First Lien Secured Party Consent and agree, on behalf of itself and each Secured Party it represents, to be bound by this Agreement and the First Lien Intercreditor Agreement. The rights and obligations of each party to this Agreement shall remain in full force and effect notwithstanding the addition of any new Secured Obligations to this Agreement.
SECTION 6.19. Person Serving as Agent . On the Closing Date, the Agent hereunder is the same person that is the Credit Agreement Agent. Written notice of resignation by the Credit Agreement Agent pursuant to the Credit Agreement shall also constitute notice of resignation as the Agent under this Agreement. Upon the acceptance of any appointment as the Administrative Agent under (and as defined in) the Credit Agreement by a successor, that successor shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent pursuant hereto. Immediately upon the occurrence of the Discharge (as such term or equivalent term is defined in the First Lien Intercreditor Agreement) of Credit Agreement Loan Obligations, if any other Series of Secured Obligations is then outstanding, the Authorized Representative of such Series (or, if more than one such Series is outstanding, the applicable Authorized Representative determined pursuant to the terms of (and as defined in) the applicable Intercreditor Agreement) shall be deemed the Agent for all purposes under this Agreement. The Agent immediately prior to any change in Agent pursuant to this Section 6.19 (the Prior Agent ) shall be deemed to have assigned all of its rights, powers and duties hereunder to the successor Agent determined in accordance with this Section 6.19 (the Successor Agent ) and the Successor Agent shall be deemed to have accepted, assumed and succeeded to such rights, powers and duties. The Prior Agent shall cooperate with Holdings and such Successor Agent to ensure that all actions are taken that are necessary or reasonably requested by the Successor Agent to vest in such Successor Agent the rights granted to the Prior Agent hereunder with respect to the Pledged Collateral, including (a) the filing of amended financing statements in the appropriate filing offices, (b) to the extent that the Prior Agent holds, or a third party holds on its behalf, physical possession of or control (as defined in the New York UCC or the Uniform Commercial Code of any other applicable jurisdiction) over Pledged Collateral pursuant to this Agreement or any other Security Document, the delivery to the Successor Agent of the Pledged Collateral in its possession or control together with any necessary endorsements to the extent required by this Agreement, and (c) the execution and delivery of any further documents, financing statements or agreements and the taking of all such further action that may be required under any applicable law, or that the Successor Agent may reasonably request, all without recourse to, or representation or warranty by, the Agent, and at the sole cost and expense of Holdings. The Agent hereunder shall at all times be the same person that is the Collateral Agent under the First Lien Intercreditor Agreement. Written notice of resignation by the Collateral Agent pursuant to the First Lien Intercreditor Agreement shall also constitute notice of resignation as the Agent under this Agreement. Upon the acceptance of any appointment as the Collateral Agent under the First Lien Intercreditor Agreement by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent pursuant hereto.
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SECTION 6.20. General Authority of the Agent .
(a) By acceptance of the benefits of this Agreement and any other Security Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (i) to consent to the appointment of the Agent as its agent hereunder and under such other Security Documents, (ii) to confirm that the Agent shall have the authority to act as the exclusive agent of such Secured Party for the enforcement of any provision of this Agreement and such other Security Documents against Holdings, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder thereunder relating to any Pledged Collateral or Holdings obligations with respect thereto, (iii) to agree that it shall not take any action to enforce any provisions of this Agreement or any other Security Document against Holdings, to exercise any remedy hereunder or thereunder or to give any consents or approvals hereunder or thereunder except as expressly provided in this Agreement or any other Security Document and (iv) to agree to be bound by the terms of this Agreement, any other Security Documents and any Intercreditor Agreement then in effect.
(b) Holdings acknowledges that the rights and responsibilities of the Agent under this Agreement with respect to any action taken by the Agent or the exercise or non-exercise by the Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Agent and the Secured Parties, be governed by the Credit Agreement, any Other First Lien Agreement and such other agreements with respect thereto as may exist from time to time among them, but, as between the Agent and Holdings, the Agent shall be conclusively presumed to be acting as agent for the applicable Secured Parties with full and valid authority so to act or refrain from acting, and Holdings shall not be under any obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 6.21. Application of Gaming Laws . Notwithstanding anything herein to the contrary, this Agreement and any Other First Lien Agreements are subject to the applicable Gaming Laws. Without limiting the foregoing, the Secured Parties acknowledge that (i) they are subject to the jurisdiction of the Gaming Authorities, in their discretion, for licensing, qualification or findings of suitability or to file or provide other information, and (ii) all rights, remedies and powers in or under this Agreement and the Other First Lien Agreements, including with respect to the Pledged Collateral (including the pledge and delivery of Pledged Collateral) and the transportation, ownership and operation of gaming machines and/or facilities may be subject to the jurisdiction of the Gaming Authorities, and may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Laws and only to the extent that required approvals (including prior approvals), if any, are obtained from the relevant Gaming Authorities.
[ Signature Pages Follow ]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
AP GAMING HOLDINGS, LLC, | ||
as Holdings | ||
By: |
/s/ Robert Miodunski | |
Name: Robert Miodunski | ||
Title: Authorized Signatory |
[Holdings Guarantee and Pledge Agreement]
CITICORP NORTH AMERICA, INC., |
||
as Agent | ||
By: | /s/ Matthew Burke | |
Name: Matthew Burke | ||
Title: Vice President |
[Holdings Guarantee and Pledge Agreement]
Schedule I
to Holdings Guarantee and Pledge Agreement
DESCRIPTION OF PLEDGED BORROWER STOCK
Pledgor |
Issuer |
Certificate
No. |
Percentage of
Issued Equity Interests |
|||||||
AP Gaming Holdings, LLC |
AP Gaming I, LLC | N/A | 100 | % |
Exhibit I
to Holdings Guarantee and Pledge Agreement
[Form of]
OTHER FIRST LIEN SECURED PARTY CONSENT
[Name of Other First Lien Secured
Party] [Address of Other First
Lien Secured Party]
[Date]
The undersigned is the Authorized Representative for Persons wishing to become Secured Parties (the New Secured Parties ) under the Holdings Guarantee and Pledge Agreement, dated as of December 20, 2013 (as heretofore amended and/or supplemented, the Guarantee and Pledge Agreement (terms used without definition herein have the meanings assigned to such term in the Guarantee and Pledge Agreement)), between AP GAMING HOLDINGS, LLC and CITICORP NORTH AMERICA, INC., as collateral agent (the Agent ).
In consideration of the foregoing, the undersigned hereby:
(i) represents that the Authorized Representative has been duly authorized by the New Secured Parties to become a party to the Guarantee and Pledge Agreement and the First Lien Intercreditor Agreement on behalf of the New Secured Parties under that [DESCRIBE OPERATIVE AGREEMENT] (the New Secured Obligation ) and to act as the Authorized Representative for the New Secured Parties;
(ii) acknowledges that the Authorized Representative has received a copy of the Guarantee and Pledge Agreement and the First Lien Intercreditor Agreement;
(iii) appoints and authorizes the Agent to take such action as agent on its behalf and on behalf of all other Secured Parties and to exercise such powers under the Guarantee and Pledge Agreement and First Lien Intercreditor Agreement as are delegated to the Agent by the terms thereof, together with all such powers as are reasonably incidental thereto;
(iv) accepts and acknowledges the terms of the First Lien Intercreditor Agreement applicable to it and the New Secured Parties and agrees to serve as Authorized Representative for the New Secured Parties with respect to the New Secured Obligations and agrees on its own behalf and on behalf of the New Secured
Parties to be bound by the terms thereof applicable to holders of Other First Lien Obligations, with all the rights and obligations of a Secured Party thereunder and bound by all the provisions thereof (including, without limitation, Section 2.02(b) thereof) as fully as if it had been a Secured Party on the effective date of the Guarantee and Pledge Agreement and the First Lien Intercreditor Agreement and agrees that its address for receiving notices pursuant to the Guarantee and Pledge Agreement and the First Lien Intercreditor Agreement shall be as follows:
[Address]
(v) confirms the authority of the Agent to enter into such agreements on its behalf and on behalf of the New Secured Parties and agrees on its own behalf and on behalf of the New Secured Parties to be bound by the terms thereof applicable to it and the New Secured Parties as fully as if it had been a party to each such agreement on behalf of itself and the New Secured Parties.
The Agent, by acknowledging and agreeing to this Other First Lien Secured Party Consent, accepts the appointment set forth in clause (iii) above.
THIS OTHER FIRST LIEN SECURED PARTY CONSENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Exhibit 10.21
SUBSIDIARY GUARANTEE
This SUBSIDIARY GUARANTEE dated and effective as of December 20, 2013 (as amended, restated, supplemented or otherwise modified from time to time, this Guaranty ) by and among each Subsidiary listed on the signature page hereof and each other Subsidiary that becomes a party hereto after the date hereof (each a Subsidiary Guarantor and, collectively, the Subsidiary Guarantors ) and CITICORP NORTH AMERICA, INC., as collateral agent (together with its successors and permitted assigns in such capacity, the Agent ) for the Secured Parties (as defined below).
WITNESSETH:
WHEREAS , pursuant to the First Lien Credit Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement ), among AP Gaming Holdings, LLC, a Delaware limited liability company ( Holdings ), AP Gaming I, LLC, a Delaware limited liability company and a Subsidiary of Holdings (the Borrower ), the Lenders party thereto from time to time, the Agent, as administrative agent, and the other parties thereto, the Lenders and the Issuing Banks have agreed to extend credit to the Borrower upon the terms and subject to the conditions set forth therein;
WHEREAS, the Lenders and the Issuing Banks have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders and the Issuing Banks to extend such credit are conditioned upon, among other things, the execution and delivery of this Guaranty. The Subsidiary Guarantors, as affiliates of the Borrower, will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement. The Subsidiary Guarantors are willing to execute and deliver this Guaranty in order to induce the Lenders and the Issuing Banks to extend such credit under the Credit Agreement.
Accordingly, the parties hereto agree as follows:
1. DEFINITIONS
(a) Credit Agreement .
(i) Capitalized terms used in this Guaranty and not otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement.
(ii) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Guaranty.
(b) Other Defined Terms. As used in this Guaranty, the following terms have the meanings specified below:
Agent has the meaning assigned to such term in the preliminary statement of this Guaranty.
Borrower has the meaning assigned to such term in the introductory paragraph of this Guaranty.
Claiming Guarantor has the meaning assigned to such term in Section 6(b).
Contributing Guarantor has the meaning assigned to such term in Section 6(b).
Credit Agreement has the meaning assigned to such term in the preliminary statement of this Guaranty.
Guaranteed Obligations has the meaning assigned to such term in Section 2(a).
Holdings has the meaning assigned to such term in the preliminary statement of this Guaranty.
Subsidiary Guarantor has the meaning assigned to such term in the preliminary statement of this Guaranty.
2. THE GUARANTY
(a) Guaranty of Guaranteed Obligations . Each Subsidiary Guarantor unconditionally guarantees to the Agent, jointly and severally with the other Guarantors, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations (the Guaranteed Obligations ) for the benefit of the Secured Parties. Each Subsidiary Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Guaranteed Obligation. Each Subsidiary Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.
(b) Guaranty of Payment . Each Subsidiary Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Agent or any other Secured Party to any security held for the payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of the Agent or any other Secured Party in favor of the Borrower or any other person.
(c) No Limitations . Except for termination or release of a Subsidiary Guarantors obligations hereunder as expressly provided for in Section 5(g)(i), the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity,
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illegality or unenforceability of the Guaranteed Obligations or otherwise (other than defense of payment or performance). Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor hereunder, to the fullest extent permitted by applicable law, shall not be discharged or impaired or otherwise affected by: (i) the failure of the Agent or any other Secured Party to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise; (ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Subsidiary Guarantor under this Guaranty; (iii) the failure to perfect any security interest in, or the exchange, substitution, release or any impairment of, any security held by the Agent or any other Secured Party for the Guaranteed Obligations; (iv) any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations; (v) any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the payment in full in cash in immediately available funds of all the Guaranteed Obligations); (vi) any illegality, lack of validity or enforceability of any Guaranteed Obligation; (vii) any change in the corporate existence, structure or ownership of the Borrower, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any Guaranteed Obligation (other than the payment in full in cash in immediately available funds of all the Guaranteed Obligations); (viii) the existence of any claim, set-off or other rights that such Subsidiary Guarantor may have at any time against the Borrower, the Agent, or any other corporation or person, whether in connection herewith or any unrelated transactions; provided , that nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim; and (ix) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Agent that might otherwise constitute a defense to, or a legal or equitable discharge of, the Borrower or any other Loan Party or any other guarantor or surety (other than defense of payment or performance). Each Subsidiary Guarantor expressly authorizes the Secured Parties (or the Agent on behalf of the Secured Parties) to take and hold security for the payment and performance of the Guaranteed Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Guaranteed Obligations, all without affecting the obligations of any Subsidiary Guarantor hereunder. To the fullest extent permitted by applicable law, each Subsidiary Guarantor waives any defense based on or arising out of any defense of any other Guarantor or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Guarantor, other than the payment in full in cash in immediately available funds of all the Guaranteed Obligations. The Agent and the other Secured Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with the Borrower or any other Loan Party or exercise any other right or
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remedy available to them against the Borrower or any other Loan Party, without affecting or impairing in any way the liability of any Subsidiary Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full in cash in immediately available funds. To the fullest extent permitted by applicable law, each Subsidiary Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Subsidiary Guarantor against any other Guarantor, as the case may be, or any security.
(d) Reinstatement . Notwithstanding the provisions of Section 5(g), each Subsidiary Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Guaranteed Obligation is rescinded or must otherwise be restored or returned by the Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any other Loan Party, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any other Loan Party or any substantial part of its property, or otherwise, all as though such payment had not been made.
(e) Agreement To Pay; Subrogation . In furtherance of the foregoing and not in limitation of any other right that the Agent or any other Secured Party has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Subsidiary Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Agent for distribution to the applicable Secured Party in cash in immediately available funds the amount of such unpaid Guaranteed Obligation. Upon payment by any Subsidiary Guarantor of any sums to the Agent as provided above, all rights of such Subsidiary Guarantor against the Borrower or any other Loan Party arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Section 6.
(f) Information . Each Subsidiary Guarantor assumes all responsibility for being and keeping itself informed of the Borrowers and each other Loan Partys financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that such Subsidiary Guarantor assumes and incurs hereunder, and agrees that neither the Agent nor any other Secured Party will have any duty to advise such Subsidiary Guarantor of information known to it or any of them regarding such circumstances or risks.
(g) Maximum Liability . Each Subsidiary Guarantor, and by its acceptance of this Guaranty, the Agent and each Secured Party hereby confirms that it is the intention of all such persons that this Guaranty and the Guaranteed Obligations of each Subsidiary Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of the U.S. Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, the Uniform Fraudulent Conveyance Act, the Uniform
4
Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Guaranteed Obligations of each Subsidiary Guarantor hereunder. To effectuate the foregoing intention, the Agent, the Secured Parties and the Subsidiary Guarantors hereby irrevocably agree that the Guaranty Obligations of each Subsidiary Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Guaranteed Obligations of such Subsidiary Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance.
(h) Representations and Warranties . Each Subsidiary Guarantor acknowledges and agrees that it is familiar with the Credit Agreement and the representations and warranties applicable to it thereunder. Each Subsidiary Guarantor also agrees that the representations and warranties contained in Article III of the Credit Agreement, insofar as the representations and warranties contained therein are applicable to any Subsidiary Guarantor and its properties, are true and correct in all material respects on each date on which such representations and warranties are repeated in accordance with the Loan Documents (except to the extent they relate to any earlier date in which case they shall be true and correct in all material respects as of such earlier date), each representation and warranty set forth in Article III of the Credit Agreement (insofar as applicable as aforesaid) and all other terms of the Credit Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated into this Guaranty by this reference as though specifically set forth in this Section 2(h).
(i) Covenants . Each Subsidiary Guarantor acknowledges and agrees that it is familiar with the Credit Agreement and the covenants applicable to it thereunder. Each Subsidiary Guarantor covenants and agrees that, at all times prior to the termination of this Guaranty in accordance with Section 5(g), it will be bound by all of the agreements, covenants and obligations contained in Articles V and VI of the Credit Agreement, to the extent applicable to such Subsidiary Guarantor, each such agreement, covenant and obligation contained in Articles V and VI of the Credit Agreement, together with all related definitions and ancillary provisions, being hereby incorporated into this Guaranty by this reference as though specifically set forth in this Section 2(i).
3. FURTHER ASSURANCES
Each Subsidiary Guarantor agrees, upon the written request of the Agent, to execute and deliver to the Agent, from time to time, any additional instruments or documents reasonably considered necessary by the Agent to cause this Guaranty to be, become or remain valid and effective in accordance with its terms.
4. PAYMENTS FREE AND CLEAR OF TAXES
Each Subsidiary Guarantor agrees that it will perform or observe all of the terms, covenants and agreements that Section 2.17 of the Credit Agreement requires such Subsidiary Guarantor to perform or observe, subject to the qualifications set forth therein.
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5. OTHER TERMS
(a) Entire Agreement . This Guaranty, together with the other Loan Documents, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements relating to a guaranty of the Loans under the Loan Documents.
(b) Headings . The headings in this Guaranty are for convenience of reference only, are not part of this Guaranty and are not to affect the construction of, or to be taken into consideration in interpreting, this Guaranty.
(c) Severability . In the event any one or more of the provisions contained in this Guaranty should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
(d) Notices . All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Guarantor shall be given to it in care of the Borrower, with such notice to be given as provided in Section 9.01 of the Credit Agreement.
(e) Successors and Assigns . Whenever in this Guaranty any Guarantor is referred to, such reference shall be deemed to include the permitted successors and assigns of such party in accordance with the terms of the Credit Agreement; and all covenants, promises and agreements by any Subsidiary Guarantor that are contained in this Guaranty shall bind and inure to the benefit of its permitted successors and assigns.
(f) Waivers; Amendment; Extension of Time .
(i) No failure or delay by the Agent, any Issuing Bank, any Lender or any other Secured Party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of the Agent, any Issuing Bank, the Lenders or any other Secured Party hereunder are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Guaranty or consent to any departure by any Subsidiary Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (ii) of this Section 5(f), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Agent, any Lender, any Issuing Bank or any other Secured Party may have had notice or knowledge of such Default or Event of Default at the time. No notice or
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demand on any Guarantor in any case shall entitle any Subsidiary Guarantor to any other or further notice or demand in similar or other circumstances. When making any demand hereunder against any of the Guarantors, the Agent or any other Secured Party may, but shall be under no obligation to, make a similar demand on the Borrower or any other Guarantor or guarantor, and any failure by the Agent or any other Secured Party to make any such demand or to collect any payments from the Borrower or any other Guarantor or guarantor or any release of the Borrower or any other Guarantor or guarantor shall not relieve any of the Subsidiary Guarantors in respect of which a demand or collection is not made or any of the Subsidiary Guarantors not so released of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Agent or any other Secured Party against any of the Subsidiary Guarantors. For the purposes hereof demand shall include the commencement and continuance of any legal proceedings.
(ii) Neither this Guaranty nor any provision hereof may be waived, amended or modified (other than termination or release of this Guaranty pursuant to Section 5(g)) except pursuant to an agreement or agreements in writing entered into by the Agent and the Subsidiary Guarantor or Subsidiary Guarantors with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement.
(g) Termination or Release .
(i) This Guaranty and each Subsidiary Guarantors obligations hereunder shall automatically terminate and/or be released (x) upon the occurrence of the Termination Date, or (y) otherwise in accordance with Section 9.18 of the Credit Agreement.
(ii) In connection with any termination or release pursuant to this Section 5(g), the Agent shall execute and deliver to the Borrower, at the Borrowers expense, all documents that the Borrower shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section 5(g) shall be made without recourse to or warranty by the Agent. The Borrower agrees to pay all reasonable and documented out-of-pocket expenses incurred by the Agent (and its representatives and counsel) in connection with the execution and delivery of such release documents or instruments.
(h) Counterparts . This Guaranty may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract. Delivery of an executed counterpart to this Guaranty by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.
(i) Survival of Representations and Warranties . All representations and warranties made hereunder and in any other Loan Document shall survive the execution and delivery of this Guaranty and the other Loan Documents and any increase in Commitments under the Credit Agreement.
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6. INDEMNITY; SUBROGATION AND SUBORDINATION
(a) Indemnity and Subrogation . In addition to all such rights of indemnity and subrogation as the Subsidiary Guarantors may have under applicable law (but subject to Section 6(c)), the Borrower agrees that (i) in the event a payment shall be made by any Subsidiary Guarantor under this Guaranty in respect of any Guaranteed Obligation of the Borrower, the Borrower shall indemnify such Subsidiary Guarantor for the full amount of such payment and such Subsidiary Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (ii) in the event any assets of any Subsidiary Guarantor shall be sold pursuant to any Security Document to satisfy in whole or in part a Guaranteed Obligation of the Borrower, the Borrower shall indemnify such Subsidiary Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.
(b) Contribution and Subrogation . Each Subsidiary Guarantor (a Contributing Guarantor ) agrees (subject to Section 6(c)) that, in the event a payment shall be made by any other Subsidiary Guarantor hereunder in respect of any Guaranteed Obligation or assets of any other Subsidiary Guarantor shall be sold pursuant to any Security Document to satisfy any Guaranteed Obligation owed to any Secured Party and such other Subsidiary Guarantor (the Claiming Guarantor ) shall not have been fully indemnified by the Borrower as provided in Section 6(a) hereof, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of such Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Subsidiary Guarantors on the date hereof (or, in the case of any Subsidiary Guarantor becoming a party hereto pursuant to Section 5.10 of the First Lien Credit Agreement, the date of the supplement hereto executed and delivered by such Subsidiary Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6(b) shall be subrogated to the rights of such Claiming Guarantor under Section 6(a) hereof to the extent of such payment. The provisions of this Section 6(b) shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Agent and the other Secured Parties, and each Subsidiary Guarantor shall remain liable to the Agent and the other Secured Parties for the full amount guaranteed by such Subsidiary Guarantor hereunder.
(c) Subordination . Notwithstanding any provision of this Guaranty to the contrary, all rights of the Subsidiary Guarantors under Sections 6(a) and 6(b) and all other rights of indemnity, contribution or subrogation of any Subsidiary Guarantor under applicable law or otherwise shall be fully subordinated to the Guaranteed Obligations until the occurrence of the Termination Date. Notwithstanding any payment or payments made by any of the Subsidiary Guarantors hereunder or any set-off or appropriation or application of funds of any of the Subsidiary Guarantors by any Secured Party, no Subsidiary Guarantor shall be entitled to be subrogated to any of the rights of the Agent or any other Secured Party against the Borrower or any other Guarantor or any collateral security or guarantee or right of set-off held by any Secured Party for the payment of the Guaranteed Obligations until the Termination Date shall have occurred, nor shall any
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Subsidiary Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Subsidiary Guarantor hereunder until the Termination Date shall have occurred. If any amount shall be paid to any Subsidiary Guarantor on account of such subrogation rights at any time prior to the Termination Date of the Guaranteed Obligations, such amount shall be held by such Subsidiary Guarantor in trust for the Agent and the other Secured Parties, segregated from other funds of such Subsidiary Guarantor, and shall, forthwith upon receipt by such Subsidiary Guarantor, be paid to the Agent to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the First Lien Credit Agreement. No failure on the part of the Borrower or any Subsidiary Guarantor to make the payments required by Sections 6(a) and 6(b) (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Subsidiary Guarantor with respect to its obligations hereunder, and each Subsidiary Guarantor shall remain liable for the full amount of the obligations of such Subsidiary Guarantor hereunder.
7. GOVERNING LAW
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
8. JURISDICTION; CONSENT TO SERVICE OF PROCESS
(a) Each Subsidiary Guarantor irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Agent, any other Secured Party, or any Affiliate of the foregoing, in any way relating to this Guaranty or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto hereby irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty shall affect any right that the Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Guaranty against any Subsidiary Guarantor or its properties in the courts of any jurisdiction.
(b) Each party to this Guaranty hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
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(c) Each party to this Guaranty irrevocably consents to service of process in the manner provided for notices in Section 5(d). Nothing in this Guaranty will affect the right of any party to this Guaranty to serve process in any other manner permitted by law.
9. WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.
10. RIGHT OF SET-OFF
If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender to or for the credit or the account of any Subsidiary Guarantor against any of and all the obligations of such Subsidiary Guarantor now or hereafter existing under this Guaranty owed to such Lender, irrespective of whether or not such Lender shall have made any demand under this Guaranty and although such obligations may be unmatured; provided , however, that any Defaulting Lenders set-off right hereunder shall be subject to Section 9.06 of the Credit Agreement. Notwithstanding anything to the contrary contained herein, no Lender or any of its respective Affiliates shall have a right to set off and apply any deposits held by, or other Indebtedness owing by, such Lender or any of its Affiliates to or for the credit or the account of any subsidiary of a Loan Party that (i) is not a United States person within the meaning of Section 7701(a)(30) of the Code or (ii) is a subsidiary of a person described in clause (i), unless (in either case) such subsidiary is not a direct or indirect Subsidiary of the Borrower. Each Lender agrees promptly to notify the Borrower and the Agent after any such set off and application made by such Lender; provided , that the failure to give such notice shall not affect the validity of such set off and application. The rights of each Lender under this Section 10 are in addition to other rights and remedies (including other rights of set off) that such Lender may have.
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11. ADDITIONAL SUBSIDIARIES
Upon execution and delivery by any Subsidiary of the Borrower that is required or permitted to become a party hereto by Section 5.10(c) of the Credit Agreement (or that is referred to in clause (ii) of the definition of Subsidiary Loan Party) of an instrument substantially in the form of Exhibit A hereto (or another instrument reasonably satisfactory to the Agent and the Borrower), subject to the applicable Requirements of Law (including Gaming Laws), such Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and effect as if originally named as a Subsidiary Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Guaranty. The rights and obligations of each party to this Guaranty shall remain in full force and effect notwithstanding the addition of any new party to this Guaranty. Each reference to Subsidiary Guarantor or Guarantor in this Guaranty shall be deemed to include such Subsidiary.
12. AGENCY OF BORROWER FOR SUBSIDIARY GUARANTORS
Each of the Subsidiary Guarantors hereby appoints the Borrower as its agent for all purposes relevant to this Guaranty and the other Loan Documents, including the giving and receipt of notices and the execution and delivery of all documents, instruments and certificates contemplated herein and therein and all modifications hereto and thereto.
[ remainder of page intentionally left blank; signature pages follow ]
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IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed and delivered as of the date first above written.
AP GAMING II, INC. | ||
AP GAMING ACQUISITION, LLC | ||
each as a Subsidiary Guarantor | ||
By: |
/s/ Robert Miodunski |
|
Name: Robert Miodunski | ||
Title: Authorized Signatory | ||
AGS CAPITAL, LLC | ||
AGS, LLC | ||
AGS PARTNERS, LLC | ||
AGS ILLINOIS, LLLP | ||
AP GAMING NV, LLC each as a Subsidiary Guarantor |
||
By: |
/s/ Robert Miodunski |
|
Name: Robert Miodunski | ||
Title: Chief Executive Officer |
[Signature Page to Subsidiary Guarantee]
Accepted and Agreed to: | ||
CITICORP NORTH AMERICA, INC., | ||
as Collateral Agent | ||
By: |
/s/ Matthew Burke |
|
Name: Matthew Burke | ||
Title: Vice President |
[Signature Page to Subsidiary Guarantee]
Exhibit A
to the Subsidiary Guarantee
SUPPLEMENT NO. [ ]
TO SUBSIDIARY GUARANTEE
SUPPLEMENT NO. [ ], dated as of [], 20[] (as amended, restated, supplemented or otherwise modified from time to time, this Supplement ), to the Subsidiary Guarantee, dated as of December 20, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the Guaranty ), among each Subsidiary listed on the signature pages thereof (each a Existing Subsidiary Guarantor and collectively, the Existing Subsidiary Guarantors ) and CITICORP NORTH AMERICA, INC., as collateral agent (in such capacity, the Agent ) for the benefit of the Secured Parties.
A. Reference is made to the First Lien Credit Agreement dated as of December 20, 2013 (as amended, supplemented, waived or otherwise modified from time to time, the Credit Agreement ), by and among AP Gaming Holdings, LLC, a Delaware corporation ( Holdings ), AP Gaming I, LLC, a Delaware limited liability company (the Borrower ), the Lenders party thereto from time to time and the Agent, in its capacity as the administrative agent.
B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
C. Each Existing Subsidiary Guarantor has entered into the Guaranty in order to induce the Lenders to make Loans. Section 11 of the Guaranty provides that additional Subsidiaries may become Subsidiary Guarantors (as defined in the Guaranty) under the Guaranty by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the New Subsidiary ) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Guarantor under the Guaranty in order to induce the Lenders to maintain and/or make additional Loans, and as consideration for Loans previously made.
Accordingly, the New Subsidiary agrees as follows:
SECTION 1. In accordance with Section 11 of the Guaranty, the New Subsidiary by its signature below becomes a Subsidiary Guarantor under the Guaranty with the same force and effect as if originally named therein as a Subsidiary Guarantor and the New Subsidiary hereby agrees to all the terms and provisions of the Guaranty applicable to it as a Subsidiary Guarantor thereunder. In furtherance of the foregoing, the New Subsidiary does hereby guarantee to the Agent the due and punctual payment of the Guaranteed Obligations (as defined in the Guaranty) as set forth in the Guaranty. Each reference to a Subsidiary Guarantor or a Guarantor in the Guaranty and in this Supplement shall be deemed to include the New Subsidiary. The Guaranty is hereby incorporated herein by reference.
SECTION 2. The New Subsidiary represents and warrants to the Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.
SECTION 3. This Supplement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract. This Supplement shall become effective when the Agent shall have received a counterpart of this Supplement that bears the signature of the New Subsidiary. Delivery of an executed counterpart to this Supplement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.
SECTION 4. Except as expressly supplemented hereby, the Guaranty shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 5(d) of the Guaranty.
SECTION 8. The New Subsidiary agrees to reimburse the Agent for its reasonable and documented out-of-pocket expenses in connection with this Supplement, including the reasonable and documented fees, disbursements and other charges of counsel to the Agent.
[ remainder of page intentionally left blank; signature page follows ]
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IN WITNESS WHEREOF, the New Subsidiary has duly executed this Supplement to the Guaranty as of the day and year first above written.
[Name of New Subsidiary] | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to Supplement to Subsidiary Guarantee]